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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.

    Read more.
  • Certain UK Brexit Regulations Updated and Amended
    07/16/2019

    The draft U.K. Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019 have been published.

    Read more.
  • Recommended Legal Action Plan for Transition from EONIA to €STR
    07/16/2019

    Following its consultation earlier this year, the working group charged with implementing the European market's move away from EONIA, has published a recommended legal action plan for new and legacy contracts referencing EONIA. The implementation of the recommended legal measures is intended to address issues arising from the transition from EONIA to the euro short-term rate (known as €STR). €STR is a risk-free rate and, with a fixed spread, will replace EONIA as a reference rate in a variety of euro-denominated financial contracts, including derivatives, collateral remuneration for derivatives and cash products such as commercial paper, repurchase agreements and default interest payable under syndicated loans.

    Read more.
  • UK Proposes Rules to Implement France's Large Exposure Limit for Highly Indebted Corporates
    07/16/2019

    The U.K. Prudential Regulation Authority has published a consultation on proposals to reciprocate the French measure on large exposures, following a recommendation by the European Systemic Risk Board. In July 2018, France's Haut Conseil de stabilité financière (HCSF) imposed a measure under the Capital Requirements Regulation that lowers the large exposure limit, from 25% to 5% of a firm's eligible capital, for French G-SIIs and French O-SIIs for their exposures to French NFCs that are 'highly indebted'.

    The PRA is proposing to apply the same 5% large exposure limit for exposures to certain French NFCs through amendments to the Large Exposures part of the PRA Rulebook. The proposals would apply to Global Systemically Important Institutions and Other Systemically Important Institutions from January 1, 2020.

    Responses to the consultation should be submitted to the PRA by September 6, 2019.

    View the consultation paper.
  • EU Consultation on Performance Fees for Retail Funds
    07/16/2019

    The European Securities and Markets Authority has launched a consultation on proposed guidelines on performance fees in Undertakings for Collective Investment in Transferable Securities. The consultation closes on October 31, 2019 and ESMA will publish its final guidelines once it has considered all of the feedback.

    Read more.
    TOPIC: Funds
  • European Commission Highlights Areas for Further Analysis in Basel III Reforms
    07/15/2019

    The Director General for Financial Stability, Financial Services and Capital Markets Union of the European Commission has written to the European Banking Authority highlighting areas where further analysis is required on the impact and implementation of the Basel III reforms in the EU. The EBA is in the process of finalizing its advice to the European Commission on the impact within the EU of the implementation of the Basel III reforms to credit risk, operational risk, output floor and securities financing transactions.

    Read more.
  • EU Consultation on Guidelines on Compliance Function Requirements under MiFID II
    07/15/2019

    The European Securities and Markets Authority has published a consultation paper on proposed guidelines on the compliance function requirements that are set out in the revised Markets in Financial Instruments package. The consultation closes on October 15, 2019 and ESMA intends to publish its final guidelines in Q2 2020. The final guidelines will replace ESMA's guidelines that were issued in 2012 under MiFID I because some of the 2012 guidelines are now set out in MiFID II or its secondary legislation and so reflect the enhanced role of the compliance function under MiFID II.

    Read more.
    TOPIC: MiFID II
  • European Banking Authority Provides Guidance to Aide Convergent Implementation of the Liquidity Coverage Ratio in the EU
    07/12/2019

    The European Banking Authority has published its first report on its monitoring of the Liquidity Coverage Ratio implementation in the EU. The LCR has applied as a 100% minimum binding standard across the EU since January 1, 2018, ahead of the Basel implementation date of January 1, 2019. The LCR requirements are set out in the Capital Requirements Regulation and the Capital Requirements Directive, supplemented by the LCR Delegated Regulation (Commission Delegated Regulation (EU) 2015/61). The LCR Delegated Regulation allows national regulators some discretion when implementing the LCR requirements. The EBA's report sets out its observations on the implementation of the LCR, focusing on the level of divergence of implementation of the LCR across the EU. To enhance a more convergent implementation of the LCR, the EBA also provides some guidance for national regulators and banks on operational deposits, retail deposits excluded from outflows and notifications on additional liquidity outflows.

    The EBA intends to continue monitoring implementation of the LCR, including the extent to which national regulators and banks apply its guidance incorporated in the report and will assess whether any more formal guidance is needed.

    View the EBA's report.
  • European Securities and Markets Authority Publishes Report on the Licensing of FinTech Business Models
    07/12/2019

    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 Securities and Markets Authority has published a report on the licensing of FinTech business models. The report sets out the key conclusions identified from the information collected from national regulators through two surveys that ESMA conducted in the last two years, and some of the actions that have been taken to address the emerging challenges. The report does not make any recommendations, but instead refers to previous advice and reports that make recommendations for an EU-level response to the issues.

    Read more.
    TOPICS: FinTechSecurities
  • EU Legislative Package for Cross-Border Distribution of Investment Funds Published
    07/12/2019

    A Regulation and a Directive aimed at facilitating the cross-border distribution of investment funds have been published in the Official Journal of the European Union. The Directive amends the Directive on Undertakings for Collective Investment in Transferable Securities and the Alternative Investment Fund Managers Directive by introducing new provisions and amending certain existing provisions of those pieces of legislation. The new Regulation aims to increase transparency on the rules and procedures applicable to cross-border marketing of investment funds and regulatory fees and charges levied by national regulators. Member states are required to transpose the Directive into national laws by, and apply those laws from, August 2, 2021. Certain provisions of the Regulation will apply directly across the EU from 1 August 2019, with the remaining provisions applying from August 2, 2021.

    Read more.
    TOPIC: Funds
  • European Securities and Markets Authority Launches Consultation on Disclosure Guidelines Under EU Prospectus Regulation
    07/12/2019

    The European Securities and Markets Authority has launched a consultation on its proposed guidelines on compliance with disclosure requirements under the new EU Prospectus Regulation. The Consultation Paper may be of particular interest to investors, issuers, offerors or persons asking for admission to trading on a regulated market and any market participant who is affected by the new Prospectus Regulation. Responses to the consultation should be submitted by October 4, 2019. ESMA intends to publish a final summary of all consultation responses and a final version of the guidelines in Q2 2020.

    Read more.
  • EU Evaluates MiFID II's Success in Improving Trade Data Quality, Availability and Costs
    07/12/2019

    The European Securities and Markets Authority has launched a consultation on the development of pre- and post-trade transparency data and the functioning of the consolidated tape for equity instruments under the revised Markets in Financial Instruments package. The consultation paper sets out ESMA's initial views, taking into account feedback received during earlier roundtables and questionnaires. Responses to the consultation should be provided by September 6, 2019. ESMA will consider the feedback it receives in preparing its final report, which it intends to submit to the European Commission in December 2019. The final report will assist the Commission in preparing its review reports to the European Parliament and Council of the European Union, which are expected to be published in 2020.

    Read more.
    TOPIC: MiFID II
  • EMIR Refit: EU Clarification on Derivatives Trading and Clearing Obligations
    07/12/2019

    The European Securities and Markets Authority has issued a Statement clarifying the application and interaction of the EU derivatives clearing and trading obligations following the entry into force of the revised European Market Infrastructure Regulation, known as EMIR Refit.

    EMIR Refit has, subject to limited exceptions, applied directly across the EU since June 17, 2019. EMIR Refit amended the definition of a Financial Counterparty, bringing central securities depositories authorized under the EU Central Securities Depositories Regulation within scope and categorizing all Alternative Investment Funds as FCs (or, for non-EU funds, as third-country entities equivalent to FCs). It also introduced a clearing threshold for FCs, meaning that small FCs are exempt from the clearing obligation. In addition, Non-Financial Counterparties that meet the clearing threshold no longer must clear all derivatives that they enter that are subject to the clearing obligation, but only those derivatives in the asset class for which they have exceeded the threshold.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Payment Systems Regulator Launches Consultation on Supply of Card-Acquiring Services
    07/11/2019

    The U.K. Payment Systems Regulator has launched a consultation on the PSR's proposed approach to assessing the profitability of card-acquiring service providers for U.K. merchants and consumers. The Consultation Paper may be of particular interest to providers of card-acquiring services, merchant trade bodies and merchants, as well as card scheme operators and issuers. Responses to the consultation should be submitted by August 1, 2019. Following the consultation, the PSR intends to publish a report setting out its interim conclusions on the supply of card-acquiring services.

    Read more.
  • Firms Criticized for Non-Compliance with the EU Contracts For Difference Product Intervention Measures
    07/11/2019

    The European Securities and Markets Authority has published a Statement cautioning contracts for difference providers to comply with its temporary product intervention measure restricting the marketing, distribution or sale of CfDs to retail clients. The measure is due to expire at the end of the day on July 31, 2019, unless ESMA again renews it.

    In its Statement, ESMA states that it has noticed and is concerned that certain firms are not complying with the temporary CfD restriction or any similar permanent national measure. ESMA reminds firms that the temporary CfD restriction does not apply to eligible counterparties or professional clients, including to retail clients who opt to being treated as professional clients, as defined in the revised Markets in Financial Instruments Directive. However, firms must comply with the MiFID II requirements when dealing with a retail client that requests to opt up to being treated as a professional client, including by alerting clients to the loss of protection afforded by the temporary CfD restriction. ESMA also reminds firms that they should not incentivize a retail client to become a professional client by using language that promotes the status or benefits of professional clients.

    Read more.
  • UK Conduct Regulator Publishes Final Prospectus Regulation Rules
    07/11/2019

    The Prospectus Regulation Rules Instrument 2019 has been published, setting out the new FCA Prospectus Regulation Rules sourcebook. The Instrument also makes amendments to certain other sections of the FCA Handbook as well as to the FCA's Enforcement Guide and Perimeter Guidance manual. The new rules aim to align the U.K. rules with the EU Prospectus Regulation and will take effect from July 21, 2019.

    Any prospectus approved by the FCA before July 21, 2019 will be governed by national law under the old Prospectus Directive regime until either: (i) the end of the prospectus' validity; or (ii) July 21, 2020. Prospectuses submitted for approval on or after July 21, 2019 must be in line with the EU Prospectus Regulation and the FCA's new Prospectus Regulation Rules sourcebook.

    View the Prospectus Regulation Rules Instrument 2019.

    View details of the FCA Policy Statement on the Prospectus Regulation Rules sourcebook.
  • UK Conduct Regulator Publishes New Measure of Market Cleanliness
    07/09/2019

    The U.K.'s Financial Conduct Authority has published details of its Abnormal Trading Volume ratio, a new metric by which the FCA intends to measure "market cleanliness". Market cleanliness refers to the level of market abuse activities, such as insider dealing or market manipulation, affecting transactions in the market. The FCA currently monitors market abuse using a variety of tools, including the mandatory submission of suspicious transaction and order reports by those involved in executing certain types of financial market transactions.

    Read more.
  • UK Conduct Regulator Publishes Annual Report
    07/09/2019

    The U.K. Financial Conduct Authority has published its Annual Report and Accounts for the year ended March 31, 2019. The report considers topics including: (i) key highlights from 2018/2019; (ii) the U.K.'s withdrawal from the EU and the FCA's proposed approach to regulation in the wake of Brexit; (iii) the FCA's cross-sector and sector priorities; and (iv) perimeter issues. The report follows the publication of the FCA's first Annual Perimeter Report in June 2019, which provides a review of the FCA's regulatory perimeter.

    Read more.
  • US Regulators Clarify Position on Broker-Dealer Custody of Digital Asset Securities
    07/08/2019

    The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority have issued a joint statement clarifying how their traditional regulatory approaches would apply to how broker-dealers handle their customers' digital asset securities and transactions. Specifically, the statement focuses on how certain SEC and FINRA rules apply to broker-dealers that wish to take custody of digital asset securities or perform other noncustodial activities involving such assets.

    The SEC and FINRA staffs (collectively, the "Staffs") said that a number of firms have applied to FINRA to engage in broker-activities involving digital asset securities, and a number of registered broker-dealers have also submitted applications to expand their businesses to include digital asset securities services. Many of these applications cover proposed business models that would involve the applicant taking custody of digital asset securities, while others would involve certain noncustodial activities.

    Read more.
    TOPICS: FinTechSecurities
  • European Banking Authority Publishes Report on FinTech's Impact on Payment and Electronic Money Institutions' Business Models
    07/08/2019

    The European Banking Authority has published a report on the impact of financial technology on the business models of payment and electronic money institutions. The report aims to provide an overview of the current FinTech landscape and raise awareness of the main trends affecting business models. It follows major developments in the industry including the introduction of the revised Payment Services Directive (known as PSD2), the emergence of new market entrants offering innovative products and the growth of instant and mobile payment methods.

    Read more.
  • HM Treasury Publishes Report on Activities of Anti-Money Laundering and Counter-Terrorist Financing Supervisory Bodies
    07/08/2019

    HM Treasury has published a report on the activities undertaken by the U.K.'s anti-money laundering and counter-terrorist financing supervisory bodies in 2017-2018. The report follows the publication of the Financial Action Task Force's Mutual Evaluation Report, published in December 2018. The Mutual Evaluation Report found that the U.K.'s AML/CTF regime was the strongest of all the countries assessed by the FATF. However, the report still identified shortcomings in regulated firms' compliance with the Money Laundering Regulations 2017 and the performance of supervisory bodies responsible for overseeing AML/CTF activity.

    Read more.
  • EU Seeks Feedback on Taxonomy for Sustainable Economic Activities
    07/04/2019

    The European Commission's Technical Expert Group on sustainable finance has launched a call for feedback on the taxonomy for sustainable economic activities. The TEG's Report on Taxonomy was published on June 18, 2019, alongside the Commission's Guidelines on reporting climate-related information, an interim TEG report on EU climate benchmarks and a TEG report on an EU green bond standard. The Report on Taxonomy links to the EU's proposed Regulation on the establishment of a framework to facilitate sustainable investment.

    Feedback on the TEG's Report on Taxonomy should be submitted by September 13, 2019.

    View the Report on Taxonomy.

    View further details on the call for feedback.

    View the Commission's Guidelines on reporting climate-related information.
  • UK Conduct Regulator Presses Non-Bank Payment Service Providers for Compliance with Safeguarding of Customer Funds Requirements
    07/04/2019

    The U.K. Financial Conduct Authority has published the outcome of its multi-firm review into the safeguarding arrangements of customer funds by non-bank payment service providers. The FCA assessed how 11 non-bank PSPs complied with the requirements for safekeeping of customer funds under the U.K.'s Payment Services Regulations 2017 and Electronic Money Regulations 2011. These Regulations require authorized payment institutions and e-money institutions to take measures to safeguard their customers' funds, including segregating relevant funds and performing reconciliations, to ensure that in the event of the insolvency of the firm, the client's funds can be returned in a timely and orderly way. The FCA has provided guidance on complying with the requirements in the relevant Approach Document. Customer funds held by these types of institutions are not protected by the Financial Services Compensation Scheme.

    Read more.
  • European Central Bank Requests Benchmark Transition Plans from Large Eurozone Banks
    07/03/2019

    The Chair of the Supervisory Board of the European Central Bank, Andrea Enria, has written a "Dear CEO" letter to the larger Eurozone banks on their preparation for the transition from interest rate benchmarks to risk-free-rates. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism. The ECB is seeking assurance from these banks that they have plans in place to address the transition from interest rate benchmarks to risk-free-rates, focusing on the transition from the Euro overnight index average, EONIA, to the Euro short-term rate - €STR - as a euro risk-free rate. EONIA will be calculated as €STR plus a fixed spread, from October 2, 2019, which is when €STR will be launched. EONIA is due to cease entirely from the beginning of 2022.

    The ECB is requesting the significant Eurozone banks to provide: (i) a summary of the key risks to the reform of benchmarks; (ii) a detailed action plan on how to address those risks and pricing issues as well as implement process changes; and (iii) contact details for those at the firm overseeing the transition.

    View the letter.

    View details of the new EONIA methodology.
  • Eurozone Resolution Board Publishes Approach to Public Interest Assessment
    07/03/2019

    The Single Resolution Board has published a paper setting out its approach to the Public Interest Assessment under the resolution framework for Eurozone banks. The SRB is the resolution authority for all banking groups and entities as well as cross-border groups that are subject to direct prudential supervision by the European Central Bank (i.e., for banks within the Eurozone Banking Union). Under the resolution framework, an assessment is undertaken as to whether it would be in the public interest for a failing bank or a bank that is likely to fail to be resolved. The assessment is based on the objectives of maintaining financial stability, protecting covered depositors and safeguarding public funds. Where resolution is not appropriate, a bank would instead be subject to national insolvency procedures.

    The SRB's paper outlines the factors that it would take into account when carrying out the public interest assessment and how it applies the legal criteria. The paper also includes examples of how the SRB has conducted the assessment in practice by reference to recent resolutions involving banks such as Banco Popular Español S.A., Banca Popolare di Vicenza S.p.A, Veneto Banca S.p.A. and ABLV Group.

    View the SRB paper.
  • UK Conduct Regulator Proposes Banning the Sale to Retail Clients of Derivatives Referencing Crypto-Assets
    07/03/2019

    The U.K. Financial Conduct Authority has launched a consultation proposing to restrict the sale, marketing and distribution of derivatives and exchange-traded notes that reference certain types of unregulated, transferable crypto-asset to all retail clients by firms in, or from, the U.K. The FCA consultation follows the final report of the U.K. Crypto-Assets Task Force in October 2018. The FCA's view is that although the U.K.'s market in crypto-assets is relatively small, there is still a consumer protection issue that needs to be addressed.

    Read more.
  • UK Government Publishes Green Finance Strategy
    07/02/2019

    The U.K. Government has published a Green Finance Strategy for transforming finance for a greener future. The Green Finance Strategy has two objectives: to align private sector financial flows with clean, environmentally sustainable and resilient growth, supported by Government action and to strengthen the competitiveness of the U.K. financial sector. The Strategy document states that these objectives will be met by:
     
    1. Greening finance: ensuring current and future financial risks and opportunities from climate and environmental factors are integrated into mainstream financial decision-making, and that markets for green financial products are robust in nature. Some of the action committed to by the Government includes: (i) announcing an expectation for all listed companies and large asset owners to disclose by 2022 (as per the recommendations of the Financial Stability Board's Taskforce on Climate-related Financial Disclosures); (ii) establishing a joint taskforce with U.K. regulators, chaired by Government, to examine the most effective way to approach disclosure and exploring the appropriateness of mandatory reporting; (iii) clarifying responsibilities for the Prudential Regulation Authority, the Financial Conduct Authority and the Financial Policy Committee to have regard to the Paris Agreement when carrying out their duties. The Government states that it will publish an interim report by the end of 2020, which will include an assessment of these steps.
    Read more.
  • UK Regulator Justifies Ignoring EU Opinion on CfD Rules
    07/02/2019

    The U.K. Financial Conduct Authority has published a statement setting out its reasons for failing to act in accordance with the European Securities and Markets Authority's Opinion on the FCA's measures restricting the sale of Contracts for Difference and CfD-like options to retail customers. Where a national regulator takes product intervention measures under the Markets in Financial Instruments Regulation, ESMA must adopt an opinion on whether those measures are justified and proportionate. If ESMA's opinion states that the measures are not justified and proportionate and a national regulator declines to take action on the basis of ESMA's opinion, the national regulator must immediately publish a statement on its website explaining why it has adopted that course of action.

    Read more.
    TOPICS: MiFID IISecurities
  • UK Conduct Regulator Publishes Arrangements for Sharing Personal Data with Non-EEA Authorities
    07/02/2019

    The U.K. Financial Conduct Authority has published its signed Administrative Arrangement agreement dictating the circumstances in which it, as an EEA authority, may share the personal data that it holds with non-EEA authorities. The agreement is a standard form of agreement which will be signed by relevant EEA and non-EEA authorities and is designed to safeguard personal data transfers between authorities in light of new requirements imposed by the General Data Protection Regulation. The agreement includes, among other things, provisions restricting the circumstances in which relevant authorities may transfer data (including that it may only be transferred for the purpose of assisting the authority to fulfil its regulatory mandate and that it will only transfer data that are adequate, relevant and limited to what is necessary for the purposes for which they are transferred) and the processes the authority will establish to review their own policies and procedures on transfers of personal data.
     
    View the FCA's signed Administrative Agreement.
  • Financial Stability Board Reports on Implementation of the TLAC Standard
    07/02/2019

    The Financial Stability Board has published a report on the Review of the Technical Implementation of the Total Loss-Absorbing Capacity (TLAC) Standard. The FSB conducted a review of implementation of the TLAC Standard by jurisdictions that covered the Global Systemically Important Banks to which the TLAC Standard applied as at January 1, 2019 and the home and material host jurisdictions of those G-SIBs. The focus of the review was assessing whether implementation aligns with the timelines and objectives set out in the TLAC Standard.

    Read more.
  • UK Competition Authority To Review Retail Banking Market Investigation Rules
    07/01/2019

    The U.K. Competition and Markets Authority has announced its decision to review Part 6 of the Retail Banking Market Investigation Order 2017. Part 6 requires providers of personal current account services to establish a system of alerts to their customers notifying them of specified information, including that the customer's account has exceeded a pre-agreed credit limit.

    Read more.
    TOPIC: Competition
  • EU to Lift Temporary Ban on the Sale of Binary Options to Retail Clients in Wake of National Measures
    07/01/2019

    The European Securities and Markets Authority has ended its temporary prohibition on the marketing, distribution or sale of binary options to retail clients. 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.

    Read more.
  • UK Regulator Publishes Rules Restricting Sale of Contracts for Difference and Related Options
    07/01/2019

    The U.K. Financial Conduct Authority has published the Conduct of Business (Contracts for Difference) Instrument 2019, implementing product intervention measures designed to restrict the sale, marketing and distribution of contracts for difference and contract for difference-like options to retail consumers. The rules will affect: (i) retail clients who invest, or may invest, in CFDs and CFD-like options; (ii) investment firms caught by the provisions of the Markets in Financial Instruments Directive (including those caught by the Capital Requirements Directive, where appropriate) that are involved in marketing, distributing or selling CFDs and CFD-like options in, or from, the U.K. to retail clients; and (iii) U.K. branches of third-country investment firms that are involved in marketing, distributing or selling CFDs or CFD-like options to retail clients.

    Read more.
  • Bank for International Settlements to Establish Innovation Hub for Central Bank Financial Technology
    06/30/2019

    The Bank for International Settlements has announced it will establish an innovation Hub to encourage international collaboration on innovative financial technology for central banks. The Hub's purpose will be to: (i) identify trends in technology affecting central banks; (ii) develop "public goods" in the technology space aimed at improving the functioning of the global financial system; and (iii) act as a focal point for central bank innovation.

    Read more.
    TOPIC: FinTech
  • UK Financial Conduct Authority Issues Response to EU Opinion on Strong Customer Authentication
    06/28/2019

    The U.K. Financial Conduct Authority has issued a statement confirming its intended approach to enforcing firms' compliance with EU "strong customer authentication" rules that will apply across the EU from September 14, 2019.

    Read more.
  • Global Financial Innovation Network Publishes Progress Report
    06/28/2019

    The Global Financial Innovation Network, the group of financial regulators established in 2018 to support international financial innovation, has published a report on the progress made during its first year. The group is made up of 35 global regulators from 21 jurisdictions that work together to share knowledge and market experiences and enable innovative firms to interact with a network of regulators.

    Read more.
  • Commodity Futures Trading Commission Launches LabCFTC Accelerator
    06/27/2019

    The Commodity Futures Trading Commission has announced two new programs as part of its LabCFTC initiative. The first is LabCFTC Accelerator, which will provide the agency with a number of tools to drive its understanding and potential adoption of emerging technologies. The second is the CFTC's second annual FinTech Forward conference, which will take place on October 24, 2019 and bring together a variety of stakeholders in the FinTech ecosystem to explore the latest developments in the space.

    As part of the LabCFTC Accelerator program, the agency seeks to better understand emerging technologies through the use of tools such as internal pilots and tests, market research and innovation competitions. The topic for the upcoming innovation competition will be announced at the FinTech Forward 2019 conference.

    FinTech Forward 2019 will bring together innovators, regulators, market participants, thought-leaders and the general public to cover a number of areas in the FinTech space, including digital assets, commodities and platforms, machine learning and AI, RegTech and algorithmic trading. The agency also said it expects there to be a greater focus on international FinTech, as the event will coincide with the CFTC's Office of International Affairs' International Regulators Symposium. Registration for the FinTech Forward 2019 conference will be open to the public early this fall.

    View the CFTC's announcement.

    View details of the CFTC LabCFTC initiative.
    TOPIC: FinTech
  • UK Payment Systems Regulator Publishes Progress Report on Access to and Governance of Payment Systems
    06/27/2019

    The U.K. Payment Systems Regulator has published its fourth report on developments in access to payment systems and the governance of those systems.

    Read more.
  • UK Regulator Secures Insider Dealing Conviction
    06/27/2019

    The U.K. Financial Conduct Authority has secured convictions against two individuals accused of insider dealing. Fabiana Abdel-Malek, a former senior compliance officer at the London office of a major European headquartered bank, and Walid Anis Choucair, her family friend, were both sentenced to three years' imprisonment for insider dealing.

    Read more.
  • Basel Committee on Banking Supervision Publishes Revisions to Leverage Ratio Requirements
    06/26/2019

    The Basel Committee on Banking Supervision has published revisions to its standards for leverage ratio capital requirements. The revisions relate to: (i) calculations of leverage ratios for "client-cleared" derivatives; and (ii) disclosure requirements for leverage ratios.

    Read more.
  • UK Conduct Regulator Publishes Consultation on Regulation of Proxy Advisors under Revised Shareholder Rights Directive
    06/26/2019

    The U.K. Financial Conduct Authority has published a consultation on proposed changes to its Decision Making and Penalties Manual and Enforcement Guide to incorporate its new responsibility for regulation of proxy advisors. The proposals will be of interest to those falling within the Proxy Advisors (Shareholders' Rights) Regulations 2019 and anyone who uses the services of proxy advisors. Responses to the consultation should be submitted by July 26, 2019.

    Read more.
  • UK Secondary Legislation Published to Implement the Prospectus Regulation
    06/25/2019

    The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019 have been formally published and will come into force on July 21, 2019.

    Read more.
    TOPIC: Securities
  • US and UK Regulators Issue Joint Statement on Credit Derivatives Markets
    06/24/2019

    The U.S. Commodity Futures Trading Commission, U.S. Securities and Exchange Commission and the U.K. Financial Conduct Authority have issued a joint statement regarding the use of "opportunistic strategies" in the credit derivatives markets, including but not limited to so-called "manufactured credit events." The agencies expressed concern that the use of such strategies could adversely affect the integrity and confidence of these markets, as well as markets more generally, due to issues related to securities, derivatives conduct and antifraud laws, along with public policy concerns.

    Read more.
    TOPIC: Derivatives
  • Basel Committee on Banking Supervision Publishes Overview of Pillar 2 Practices and Approaches
    06/21/2019

    The Basel Committee on Banking Supervision has published an overview report on the Pillar 2 supervisory review process and on the different practices that regulators and legislators in Basel member jurisdictions have adopted in relation to it.

    Read more.
  • International Organization for Securities Commissions Publishes Report on Liquidity in Corporate Bond Markets Under Stressed Conditions
    06/21/2019

    The International Organization for Securities Commissions has published a report studying the effect of stressed market conditions on liquidity in corporate bond markets. The report arose out of concerns about liquidity in the corporate bond market in the years since the global financial crisis and, in particular, the possibility that a significant sell-off could trigger price volatility and temporarily depress prices. The report is based upon a review of existing studies of corporate bond markets, an examination of historic periods of market stress and discussions with industry stakeholders.

    Read more.
    TOPIC: Securities
  • Final EU Secondary Legislation Under the Prospectus Regulation Published
    06/21/2019

    Two Commission Delegated Regulations supplementing the EU Prospectus Regulation have been published in the Official Journal of the European Union. The first Regulation is on the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. It will supplement the requirements in the Prospectus Regulation on: (i) the review, approval and filing of the universal registration document and any amendments; (ii) the format of the prospectus, the base prospectus and the final terms; (iii) the specific information to be included in a prospectus, the minimum information to be included in the universal registration document and the reduced information to be included under the simplified disclosure regime for secondary issuances; (iv) the reduced content, standardized format and the sequence of the EU Growth prospectus; (v) the reduced content and standardized format of the specific summary; and (vi) the review and approval of prospectuses by national regulators. The Regulation also repeals, from July 21, 2019, the existing Implementing Regulation under the existing Prospectus Directive on the form and content of prospectuses.

    Read more.
    TOPIC: Securities
  • Financial Action Task Force Publishes Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers
    06/21/2019

    The Financial Action Task Force has published the outcomes of its third and last Plenary meeting under the U.S. Presidency in Orlando on June 19-21, 2019. The FATF considered key issues such as strategic initiatives, mutual evaluations and the upcoming focus areas under the Chinese Presidency.

    Read more.
  • European Banking Authority Publishes Opinion on Strong Customer Authentication Under Payment Services Directive
    06/21/2019

    The European Banking Authority has published an Opinion on market approaches to payment authentication that will be deemed compliant with the new rules on strong customer authentication coming into force later this year.

    Read more.
  • European Commission Publishes Commission Delegated Regulation Amending Registration Conditions for SME Growth Markets
    06/21/2019

    An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/565) on requirements for participants in SME growth markets has been published in the Official Journal of the European Union. Regulation 2017/565 supplements related provisions under the Markets in Financial Instruments Directive, which establishes "SME growth markets" as a new type of trading venue for small and medium sized enterprises.

    Read more.
  • European Commission Publishes Report on Implementation of Wire Transfer Regulation
    06/20/2019

    The European Commission has published a report detailing: (i) the extent to which Member States have implemented the sanctions and monitoring sections of the EU Wire Transfer Regulation; and (ii) the particular sanctioning activities that national regulators have adopted under the Regulation. The Commission was obliged to provide the report to the European Parliament and Council of the European Union under the Wire Transfer Regulation. Although Member States are not obliged to take specific steps in response to the report's findings, the Commission concludes the report by stating its intention to continue to support Member States in their implementation of the Wire Transfer Regulation and reserves the right to take further measures to ensure the Regulation is correctly implemented by all Member States.

    Read more.
  • Bank of England Publishes Report on the Future of the UK Financial System and the Bank's Priorities for the Future
    06/20/2019

    Huw van Steenis, the Bank of England financier appointed by the BoE in 2018 to review the future of the U.K. financial system, has published his "Future of Finance" report, setting out a vision for the medium-term future of the U.K. financial system and the BoE's role in supporting that. The report was based on consultations with entrepreneurs, financiers, tech firms, global investors, consumer groups, charities, policymakers and business leaders across the U.K. and overseas. In response, the BoE has published a document which sets out the actions it intends to take to deal with the challenges and opportunities identified in the report.

    Read more.
  • UK FICC Markets Standards Board Announces Consultation on Draft Statement of Good Practice
    06/20/2019

    The U.K. FICC Markets Standards Board has published a Transparency Draft of its new Statement of Good Practice on Conflicts of Interest. The Statement aims to provide guidance for participants in the fixed income, currencies and commodities markets on ways to identify and manage risks arising from conflicts of interest in the FICC markets. The guidance is particularly targeted at firms operating in Europe and the conflicts that may arise from the sale and trading of publicly listed or over-the-counter securities or financial instruments. 

    Read more.
  • European Commission Publishes Commission Delegated Regulation Extending Exemption from EU Transparency Requirements to the People's Bank of China
    06/20/2019

    An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/1799), which specifies that third-country central banks may be exempted from certain transparency requirements under the Markets in Financial Infrastructure Regulation, has been published in the Official Journal of the European Union. The amendment means that the People's Bank of China will be added to the list of counterparty institutions whose transactions will not be subject to trade transparency requirements under MiFIR to the extent that those transactions are in pursuit of monetary, foreign exchange or financial stability policy. The amending Delegated Regulation will come into force and apply directly across the EU from July 10, 2019.
     
    View the amending Commission Delegated Regulation.
     
    View Commission Delegated Regulation 2017/1799.
  • Basel Committee on Banking Supervision Discusses Supervisory Initiatives and Approves Implementation Reports
    06/20/2019

    Central bankers and banking supervisors of the Basel Committee on Banking Supervision met this week to discuss a range of policy and supervisory initiatives. 

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

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

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

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

    Read more.
  • UK Law Commission Makes Recommendations to Improve Anti-Money Laundering Regime
    06/18/2019

    The U.K.'s Law Commission has published a report, entitled "Anti-money Laundering: the SARS Regime", setting out recommendations to improve the prevention, detection and prosecution of money laundering and terrorism financing in the U.K. The Law Commission began a review in 2017 into the U.K. anti-money laundering regime, focusing on the suspicious activity reporting (SAR) process and taking into account EU and U.K. anti-money laundering legislation and related legislation, such as the General Data Protection Regulation. Following the consultation, the Commission has decided not to recommend amendments to the primary legislation, but instead that more detailed guidance should be issued. As a result, and for example, new exceptions from the reporting regime will not be proposed, as has been argued by some aspects of industry for reports on low-value transactions or reports on issues which are already in the public domain. The Commission is making several recommendations to improve the existing system, including:
    1. The establishment of a new Advisory Board to supervise the development of guidance and to advise the Secretary of State on potential improvements to the regime, including in relation to emerging threats.
    2. A new online SAR report that is easier to use with the aim of ensuring more consistent data is provided to the U.K. Financial Intelligence Unit through these reports.
    3. Creating an obligation for the Government to issue statutory guidance on key legal concepts within the framework so as to improve certainty around the obligation to report suspicious activities.

    View the report.
  • International Cyber Task Force Reports on Cyber Regulation
    06/18/2019

    The International Organization of Securities Commissions has published the final report of its Cyber Task Force on cyber regulation. The report sets out how IOSCO member jurisdictions apply three recognized cyber frameworks - the CPMI-IOSCO Guidance on Cyber Resilience for Financial Market Infrastructures; the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity; and the International Organization for Standardization 27000 series standards. The Cyber Task Force does not propose that IOSCO issues any further guidance on this topic, as this could lead to duplication. The report is instead intended to be a resource for financial market regulators and firms, to raise awareness of existing cyber guidance and to encourage the adoption of good practices. The Cyber Task Force recommends that IOSCO's member jurisdictions use these standards to close any gaps in their existing cyber frameworks and that further work is undertaken to establish where those gaps are.

    View the report.
  • New EU Guidelines on Disclosure of Climate-Related Information
    06/18/2019

    The European Commission has published new, non-binding Guidelines on reporting climate-related information. The new Guidelines are supplementary to the guidelines issued by the Commission in 2017 on reporting non-financial information. The new Guidelines are intended to assist large public entities (with over 500 employees) to report climate-related information under the EU Non-Financial Reporting Directive. The new Guidelines incorporate the recommendations of the Financial Stability Board's taskforce on climate-related financial disclosures, taking into account the EU's forthcoming taxonomy on sustainable activities. The new Guidelines include guidance on reporting of climate-related information related to business models, key performance indicators, risks and their management. Further guidelines for banks and insurance companies are set out in the annex.

    Read more.
  • UK Secondary Legislation Published to Implement Changes under EMIR REFIT
    06/17/2019

    The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 have been made and will come into force on July 9, 2019.

    Read more.
  • European Securities and Markets Authority Postpones Review of Transparency Requirements under MiFIR
    06/17/2019

    The European Securities and Markets Authority has postponed its review of the operation of transparency requirements laid out under Regulatory Technical Standards issued under the Markets in Financial Instruments Regulation. MiFIR's transparency regime obliges those providing investment services in the EU to disclose details of their transactions in bonds, structured finance products, emission allowances and derivatives both prior to, and following, trades. The detail of how participants should comply with this transparency regime is set out in the related delegated acts and technical standards published under MiFIR. Under the MiFIR RTS, ESMA is obliged to submit a report on the operation of thresholds for the liquidity and trade percentiles of certain financial instruments by July 30 each year. However, given the continuing uncertainties over Brexit, ESMA considers it would be inappropriate to perform the review by the usual deadline, particularly as the results of its review may lead to a tightening of the relevant rules. No new deadline for performing the review has yet been established.

    View ESMA's letter.

    View the transparency RTS.
  • UK Conduct Regulator Publishes Dear CEO Letter on its Wealth Management and Stockbroking Supervision Strategy
    06/13/2019

    The U.K. Financial Conduct Authority has published a "Dear CEO" letter addressed to wealth management and stockbroking firms, identifying the key areas of focus for its two-year Wealth Management and Stockbroking supervision strategy. In the letter, the FCA identifies the four key types of harm for customers in this sector as: (i) reductions in savings and investments due to fraud, investment scams and inadequate client money or assets controls; (ii) loss of confidence in the industry due to mismanagement of conflicts of interest and market abuse; (iii) reductions in savings and investments due to substandard order handling procedures and execution processes; and (iv) inability to understand the costs of services provided by firms as a result of insufficient or inaccurate disclosure.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Read more.
  • Final Investment Consultancy and Fiduciary Management Market Investigation Order Published
    06/10/2019

    The U.K. Competition and Markets Authority has published the final Investment Consultancy and Fiduciary Management Market Investigation Order 2019. The Order imposes legal obligations on pension scheme trustees, investment consultancy firms and fiduciary management providers, implementing the CMA's remedies to its finding of an adverse effect on competition in both the investment consultancy and fiduciary management markets. On February 11, 2019, the CMA published a draft Order for comment, and the responses to the draft Order have been published alongside the Order.

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

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

    Read more.
  • EU Capital Requirements Directive V and Capital Requirements Regulation II Finalized
    06/07/2019

    The legislative amendments to the EU's Capital Requirements Regulation and the Capital Requirements Directive, widely referred to as "CRD5" or "CRR2", have been published in the Official Journal of the European Union. Subject to certain exceptions, the Regulation amending CRR will apply directly across the EU from June 28, 2021. EU Member States are required to transpose the Directive amending CRD into their national laws and to apply those provisions from December 29, 2020, subject to certain exceptions.

    Read more.
  • European Securities and Markets Authority Chair Queries EMIR REFIT Clearing Threshold Calculation for Certain Financial Counterparties
    06/07/2019

    The Chair of the European Securities and Markets Authority, Steven Maijoor, has requested clarity from the European Commission on the methodology for calculating the clearing threshold of a Financial Counterparty that is part of a non-financial group under the revised European Market Infrastructure Regulation (known as EMIR REFIT).

    Read more.
  • Revisions to EU Bank Recovery and Resolution Directive Finalized
    06/07/2019

    A new Directive amending the EU's Bank Recovery and Resolution Directive, widely referred to as "BRRD2", has been published in the Official Journal of the European Union.

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

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

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

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

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

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

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

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

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

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

    View the press release.
    TOPIC: People
  • UK Regulator Publishes Findings from LIBOR Review
    06/05/2019

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

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

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

    Read more.
  • International Task Force Report Shows Further Progress Needed for Climate-Related Financial Disclosures
    06/05/2019

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

    Read more.
  • European Systemic Risk Board Committee Publishes Report on Regulatory Complexity Risks
    06/04/2019

    The European Systemic Risk Board's Advisory Scientific Committee has published a report on the risks of excessive regulatory complexity. The report considers the key drivers of regulatory complexity, the risks it entails and sets out seven principles designed to prioritize regulatory robustness, upon which it argues the design and reform of financial regulation should be based.

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

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

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

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

    Read more.
  • European Securities and Markets Authority Launches Common Supervisory Action on MiFID II Appropriateness Rules
    06/03/2019

    The European Securities and Markets Authority has announced that it will launch a common supervisory action in the second half of 2019 on the application of the appropriateness requirements under the revised Markets in Financial Instruments Directive. The action will be undertaken as part of ESMA's mandate to build a culture of common supervision among EU national regulators.

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

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

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

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

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

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

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

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

    Read more.
  • Financial Stability Board Reports on Progress to Address Correspondent Banking Declines
    05/29/2019

    The Financial Stability Board has published two reports as an update on the work to address correspondent banking declines - the "FSB Action Plan to Assess and Address the Decline in Correspondent Banking - Progress Report" and "Remittance Service Providers' Access to Banking Services: Monitoring of the FSB's Recommendations".

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

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

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

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

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

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

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

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

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

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

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

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

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

    Read more.
    TOPIC: Securities
  • European Banking Authority Confirms 2019 Focus
    05/29/2019

    The European Banking Authority has published its annual report for 2018, setting out details of the work it undertook in 2018 and its focus areas in 2019. The EBA will, in 2019, focus on: (i) finalizing the guidelines on loan origination as part of its contribution to tackling non-performing loans in the EU; (ii) implementing the changes arising from the revised Capital Requirements Regulation, which was published in the Official Journal of the European Union on June 7, 2019; (iii) implementing the new Investment Firm Regulation and Directive by preparing various technical standards, guidelines and reports; (iv) preparing technical standards and guidelines, as required under the EU Securitization Regulation, that facilitate the use of internal models for banks investing in securitization positions; (v) assisting with the EU's implementation of Basel IV; (vi) the impact of FinTech, in particular, on payment institutions' and e-money institutions' business models; (vii) identifying regulatory and supervisory areas affected by the use of big data and developing best practices and principles for the application and implementation of data analytics by institutions; (viii) continuing to assess the risks of crypto-assets; (ix) supporting the European Commission's work on sustainable finance; and (x) improving the supervision of anti-money laundering and counter terrorism financing.

    View the EBA's annual report 2018.
  • European Central Bank Consults on European Mechanism for Issuance and Distribution of Debt Securities
    05/28/2019

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

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

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

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

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

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

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

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

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

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

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

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

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

    View the consultation paper.
  • European Securities and Markets Authority Consults on EMIR 2.2 Technical Advice
    05/28/2019

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

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

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

    Read more.
  • Financial Conduct Authority Publishes Progress Report on Conduct Questions for Wholesale Banks
    05/28/2019

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

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

    The European Securities and Markets Authority has published a consultation paper proposing guidelines for reporting of securities financing transactions under the Securities Financing Transactions Regulation. SFTs involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy backs. The SFTR requires, amongst other things, that all securities financing transactions be reported to EU recognized trade repositories. Such reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies, and will be phased-in according to type of entity:
    • banks and investment firms from April 11, 2020;
    • CCPs and central securities depositories from July 11, 2020;
    • other Financial Counterparties from October 11, 2020; and
    • Non-Financial Counterparties from January 11, 2021.
    Read more.
  • EU Authority Asks for Feedback on the MiFID II Position Limits Regime for Commodity Derivatives
    05/24/2019

    The European Securities and Markets Authority has published a Call for Evidence on position limits and position management in commodity derivatives introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA has been asked to provide the Commission with advice regarding this new regime to support the Commission's preparation of the report.

    Read more.
    TOPICS: DerivativesMiFID II
  • EU Consultation on Proposed Amendments to Technical Standards Under the Capital Requirements Regulation
    05/24/2019

    The European Securities and Markets Authority has published a consultation paper in which it proposes amending the Implementing Technical Standards that specify the main indices and recognized exchanges for the purpose of the Capital Requirements Regulation (Commission Implementing Regulation (EU) 2016/1646). CRR requires a bank to hold sufficient capital to cover the risks associated with its business and prescribes how the credit risks of collateral should be treated. Securities that will be regarded as eligible as collateral are equities and convertible bonds that are constituents of a main index and debt securities that are listed on a recognized exchange. ESMA's consultation relates to the ITS setting out the main indices and recognized exchanges.

    Read more.
  • Financial Stability Board Consults on Impact of the Too-Big-To-Fail Reforms
    05/23/2019

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

    View the summary terms of reference.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Read more.
  • European Commission Seeks Advice from European Securities and Markets Authority on Review of the Market Abuse Regulation
    05/15/2019

    The European Commission has issued a formal request for advice to the European Securities and Markets Authority on the appropriateness of certain provisions under the Market Abuse Regulation. The Commission will use ESMA's feedback to inform a report it is mandated to submit to the European Parliament and Council by July 3, 2019. The Commission will also consider proposing further legislative amendments beyond the provisions it is mandated to review and has included these in its formal request for ESMA's advice. The Commission has requested ESMA to submit its contribution by December 31, 2019 to allow time for adoption of the report by the relevant institutions.

    Read more.
  • EONIA Working Group Seeks Feedback on Implementation of Euro Risk-Free Rates
    05/15/2019

    The working group charged with implementing the European market's move away from EONIA, the current reference rate used in euro-denominated financial contracts, has published a consultation paper setting out its "Legal Action Plan" for transitioning to the chosen new euro short-term rate. The current consultation paper focuses on how the new rate should be incorporated into both new and existing financial contracts so as to ensure a swift and smooth transition from EONIA. The paper seeks feedback from market participants on its proposals. Responses should be sent by June 12, 2019.

    Read more.
  • New EU Regulatory Technical Standards under the Money Laundering Directive
    05/14/2019

    An EU Delegated Regulation under the Fourth Money Laundering Directive has been published in the Official Journal of the European Union.  The Delegated Regulation sets out Regulatory Technical Standards specifying the measures that EU credit and financial institutions subject to the Fourth Money Laundering Directive should take to handle money laundering and terrorist financing risks arising where a majority-owned subsidiary or branch established in a non-EU country is prohibited from implementing policies its EU parent has put in place to comply with EU regulations. 

    Read more.
  • European Commission Responds to Uncertainty Regarding Scope of PRIIPs Regulation
    05/14/2019

    The European Commission has issued a response to concerns raised by the European Supervisory Authorities about the market impact of uncertainty around the scope of the Packaged Retail and Insurance-based Investment Products Regulation. In a letter to the Director General of the European Commission dated July 19, 2018, the heads of the ESAs raised the difficulties that manufacturers of financial products face in determining whether their products fall within the requirements of the PRIIPs Regulation. The letter describes the broader market impact that this uncertainty has caused, which includes a reduction in the availability of corporate bonds to retail investors, a reduction in the number and volume of low denomination issuances by non-financial corporates and greater difficulties for retail investors wishing to trade their bonds. In its response, issued on May 14, 2019, the European Commission refused to pass judgement on whether certain categories of products should be deemed to fall within or outside the scope of the PRIIPs Regulation and stressed that the determination of whether an instrument is a packaged retail investment product should be undertaken on a case-by-case basis.

    Read more.
  • UK Consultation on Legal Uncertainty in the Application of English Private Law to Cryptoassets, Distributed Ledger Technology and Smart Contracts
    05/09/2019

    The UK Jurisdiction Taskforce has published a consultation paper on key issues of legal uncertainty regarding cryptoassets, distributed ledger technology and smart contracts. The UKJT is involved in preparing an authoritative legal statement on the status of cryptoassets and smart contracts under English private law. The final statement will consider whether English private law sufficiently covers cryptoassets, DLT and smart contracts and where legal uncertainty may arise. The issues in the consultation are limited to English private law and do not include any issues on regulatory characterization, taxation, criminal law, partnership law, data protection, consumer protection, settlement finality, regulatory capital, anti-money laundering or counter-terrorist financing.

    UKJT is part of the LawTech Delivery Panel, which was established in 2018, with the aim of identifying barriers and opportunities for growth. The consultation closes on June 21, 2019.

    View the consultation paper.
  • Consultation and Draft Direction on Confirmation of Payee System Issued by UK's Payment Systems Regulator
    05/09/2019

    The Payment Systems Regulator, the regulatory body responsible for monitoring the payment systems industry in the U.K., has published a second consultation paper requesting feedback on its proposals for a mandatory "Confirmation of Payee" service, together with a draft direction setting out deadlines by which the six largest payment services providers should provide such services. The Confirmation of Payee service is being developed to assist in the PSR's fight against "Authorised Push Payment" scams - involving theft of money via fraudulent payment requests made to individuals and businesses - and accidental misdirected payments, which together cause millions of pounds in losses to individuals and businesses annually. Certain payment service providers have committed to introducing a Confirmation of Payee process. However, the PSR considers that progress on doing so has been too slow. The consultation closes on June 05, 2019.

    Read more.
  • European Commission Investigates Anti-Competitive EU Loan Syndication
    05/05/2019

    A report examining competition within the European syndicated loan market has been published, following a call by the European Commission for an examination of the sector. The report was prepared at the request of the Commission by consultancy firm Europe Economics with input from boutique competition law firm Euclid Law.

    Read more.
  • Guidance on Post-Brexit Counter-Terrorism Regulations Issued by UK Government
    05/03/2019

    The Foreign and Commonwealth Office has issued guidance on the Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019, the proposed U.K. regulations that will govern the U.K.'s application of international sanctions following the U.K.'s withdrawal from the EU. The Regulations will apply within the U.K. and relate to the conduct of U.K. persons (i.e. British nationals and legal entities incorporated in the U.K.), wherever those persons may be situated in the world (including branches of U.K. companies operating overseas).

    Read more.
  • José Manuel Campa Takes on New Role as European Banking Authority Chairperson
    05/03/2019

    José Manuel Campa, the former Global Head of Regulatory Affairs at Santander, commenced his new role as Chairperson of the European Banking Authority. He will retain the role for a renewable term of five years.

    Mr Campa has confirmed he is "committed to continuing the work started by my predecessor Andrea Enria to build a single supervisory and regulatory framework for the entire banking sector in the EU, and to ensure a stable and safe Single Market that benefits and protects consumers, businesses and the wider community."

    View the EBA's announcement.
    TOPIC: People
  • EU Technical Advice on Incorporating Sustainability Factors Into EU Regulation
    05/03/2019

    The European Securities and Markets Authority has published its final report and technical advice to the European Commission on incorporating sustainability risks and factors into European regulation. The European Commission sought advice from ESMA and the European Insurance and Occupational Pensions Authority in July 2018 on the introduction of environmental, social and governance considerations into the Markets in Financial Instruments Directive II, the Insurance Distribution Directive, the Alternative Investment Fund Managers Directive, the Undertakings for Collective Investment in Transferable Securities Directive and the Solvency II Directive. The introduction of sustainability considerations into European regulation sits against the backdrop of the European Commission's Sustainability Action Plan, which aims to encourage sustainable investment and mitigate climate change risk in line with the 2016 Paris Agreement and UN 2030 Agenda for Sustainable Development. In response, ESMA opened consultations seeking input from stakeholders, which closed on February 19, 2019.

    Read more.
  • European Banking Authority Launches Consultation on Technical Standards for Counterparty Credit Risk
    05/02/2019
    The European Banking Authority has launched a consultation on the Regulatory Technical Standards that it is developing to govern certain aspects of counterparty credit risk in derivatives transactions. The EBA has been mandated to produce the RTS under the current draft of the Capital Requirements Regulation 2. The consultation runs until August 2, 2019. A public hearing will also take place at the EBA premises in Paris on June 17, 2019 from 15:00 - 17:00 CET. Parties interested in attending should register by May 28, 2019.

    Read more.
  • EU Equivalence Decision for Japan for Uncleared Derivatives
    05/02/2019

    A Commission Implementing Decision declaring equivalence of the Japanese legal, supervisory and enforcement arrangements for risk mitigation techniques and exchange of collateral has been published in the Official Journal of the European Union. The European Market Infrastructure Regulation requires counterparties to uncleared derivatives to comply with requirements on timely confirmation, portfolio compression, procedures for reconciliation of disputes and the exchange of collateral, collectively known as the risk mitigation techniques. The European Commission is empowered to adopt an equivalence decision declaring that the requirements of a third country are equivalent to the EMIR requirements on risk mitigation. The USA has also benefited from such a decision in respect of its risk mitigation arrangements.

    Read more.
  • US Federal Reserve Proposes Broadened Application of US Netting Provisions
    05/02/2019

    The Board of Governors of the Federal Reserve System has proposed amendments to Regulation EE, which implements the netting provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991.  The proposed amendments would expand the definition of “financial institution” for purposes of the netting provisions to more clearly cover certain categories of entities and would clarify how the activities-based test under Regulation EE applies following the consolidation of legal entities.

    Read more.
  • UK Prudential Regulation Authority Sets Out 2019 Systemic Risk Buffer Rates
    05/01/2019

    The Prudential Regulation Authority has released its first systemic risk buffer rates, which will apply from August 1, 2019. The rates determine the amount of additional regulatory capital which must be held by "systemic risk buffer institutions" (i.e. U.K. financial institutions which have been deemed to be systemically important). In scope firms are the so-called "ring-fenced bodies" within the meaning in the Financial Services and Markets Act 2000 and include large building societies holding more than £25bn in deposits. The buffer applicable to each institution is intended to reflect the relative costs to the U.K. economy if the institution in question were to fall into distress.

    Read more.
  • Financial Conduct Authority Calls for Input on its Review of UK Financial Advice Market
    05/01/2019

    The Financial Conduct Authority is seeking input on its evaluation of the Retail Distribution Review and Financial Advice Market Review, two initiatives introduced in 2006 and 2015, respectively, which aimed to enhance the outcomes for retail consumers from financial advice and guidance given by institutions. The evaluation has been launched in line with a commitment by the FCA to conduct a review of the initiatives in 2019. Responses should be submitted by June 3, 2019.

    Read more.
  • Further Extension of the EU Contracts for Difference Product Intervention Measures
    04/30/2019

    The European Securities and Markets Authority has issued a Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients. This has now been published in the Official Journal of the European Union. ESMA announced on March 27, 2019, that the existing restriction would be extended on the same terms as the previously implemented temporary restrictions. The CfD Decision applies directly across the EU from May 1, 2019, for a period of three months.

    View the decision.
  • EU Legislation Extends the Clearing Obligation Exemption for Certain Intragroup Derivatives Transactions
    04/29/2019

    A Commission Delegated Regulation extending the exemption from the clearing obligation for intragroup transactions with a third-country group entity has been published in the Official Journal of the European Union. There are currently three sets of Regulatory Technical Standards made under the European Market Infrastructure Regulation that impose the clearing obligation for certain interest rate derivatives and credit derivatives. Each of these three RTS exempts from the clearing obligation certain intragroup derivatives transactions where one of the counterparties is a third-country group entity and there is no relevant equivalence decision in respect of the third country in which it is situated. An equivalence decision would enable parties that are subject to both the EU and a third country's clearing obligation to comply only with one jurisdiction's requirements, but no equivalence decisions have been made to date. Each of the three RTS sets a different expiry date for the intra-group exemption, which fall between December 21, 2018 and July 9, 2019.

    The Delegated Regulation, which is substantively the same as ESMA's final draft submitted to the European Commission in September 2018, amends each of the RTS by extending the exemption period to one unified expiry date of December 21, 2020. The Delegated Regulation enters into force on April 29, 2019 and is directly applicable across the EU.

    View the Delegated Regulation.
    TOPIC: Derivatives
  • UK Regulator Delays Final Product Intervention Measures on Contracts for Difference
    04/26/2019

    The Financial Conduct Authority has published a statement on the delay to publication of final rules for contracts for difference products and CfD-like options. The FCA has consulted on its proposals to make European Securities and Markets Authority's temporary product intervention measures permanent in the U.K. The FCA's proposed interventions are the same in substance as ESMA's, although it is also proposing to apply its rules to closely substitutable products and on extending these measures to exchange-traded derivatives. The consultation closed on February 7, 2019.

    Read more.
  • New EU Requirements On Minimum Loan Loss Coverage For Newly Originated Loans
    04/25/2019

    An EU Regulation amending the Capital Requirements Regulation introducing a statutory prudential backstop, and requiring banks to have minimum loan loss coverage for newly originated loans, has been published in the Official Journal of the European Union. The Amending Regulation is part of the package of legislative and non-legislative measures proposed by the European Commission in March 2018 to address remaining and future non-performing loans in the EU.

    The Amending Regulation builds on existing CRR provisions, requiring a deduction from own funds where non-performing exposures are not sufficiently covered. The Amending Regulation establishes a set of conditions for the classification of NPLs, which builds on the existing framework in the existing Implementing Technical Standards on Supervisory Reporting. It also makes provision for different levels of stringency depending on whether an exposure is collateralized or not and on the reason for the classification of an exposure as non-performing. National regulators will be able to use their supervisory powers under the Capital Requirements Directive to address situations in which a bank's NPLs are insufficiently covered by the backstop.

    Read more.
  • UK Regulator Publishes Final Mission Approach Documents for Supervision and Enforcement
    04/24/2019

    The U.K. Financial Conduct Authority has published its finalized Approach to Supervision and Approach to Enforcement, following feedback to its consultation between March 21 and June 21, 2018 on drafts of the two approach documents. The documents should be read alongside the FCA's Mission document which was first published in October 2016 and most recently updated in November 2017. The documents form part of a series of formal approach documents explaining the FCA's approach to regulation in more depth.

    Read more.
  • Evaluation of Bank of England's Stress Testing Program
    04/24/2019

    The Independent Evaluation Office (the Bank of England's independent review body) has published its evaluation of the BoE's approach to concurrent stress testing of the U.K. banking system. It concluded that overall the BoE has delivered on its stated approach and that the tests are valued highly by policymakers. The IEO has, however, outlined opportunities for refinement in three key areas, which the BoE has confirmed it is committed to implementing.

    In the wake of the global financial crisis, the BoE reviewed its stress testing policy for the U.K. banking system and in 2015 published its approach to "concurrent" stress testing (the practice of simultaneously testing the entire balance sheets of several banks) up to 2018. The BoE's approach includes two scenarios: the annual cyclical scenario, a countercyclical scenario in which the severity of the scenario increases as risks build, and the biennial exploratory scenario, probing risks not linked to the financial cycle.

    Read more.
  • EU Opinion on the Nature of Passports of Payment and Electronic Money Institutions Using Agents and Distributors
    04/24/2019

    The European Banking Authority has published an opinion on the nature of passport notifications for agents and distributors under the revised Payment Services Directive, the Electronic Money Directive and the Fourth Money Laundering Directive. The Opinion is addressed to national regulators in the EU of payment institutions and electronic money institutions but is also useful for PIs and EMIs providing services on a cross-border basis within the EU.

    Read more.
  • EU FOREX Broker Faces Proceedings in Czech Courts Brought by "Consumer" Client Following EU Opinion
    04/24/2019

    Individuals who act outside their trade or profession when instructing brokers to execute FOREX contracts on their behalf must be regarded as "consumers" for the purposes of the Recast Brussels Regulation, according to a recent opinion issued by the Advocate General of the Court of Justice of the European Union. This applies regardless of the expertise of the individual or their active involvement in placing orders. Under the Recast Brussels Regulation (which governs jurisdiction between EU member states), "consumers" are entitled to bring proceedings before the court of the Member State in which they are domiciled, as opposed to being obliged to rely on the courts of the respondent counterparty's Member State.

    In this case, the claimant, a student domiciled in the Czech Republic, had entered into an agreement for the execution of contracts for difference in the FOREX market via Cypriot brokerage company FIBO Group Holdings Ltd. The agreement was expressly subject to the jurisdiction of the Cypriot courts. The claimant brought a claim in the Czech court, alleging that FIBO had been unjustly enriched when the claimant's instructions to close out a position in U.S. dollars were not acted on promptly. The time delay meant exchange rates had changed before the trade was executed, significantly reducing her profit.

    Read more.
  • UK Conduct Regulator Further Examining Duty of Care Owed by Firms to Consumers
    04/23/2019

    The Financial Conduct Authority has published a Feedback Statement to its July 2018 discussion paper, "A duty of care and potential alternative approaches". In the discussion paper, the FCA raised the possibility of introducing a new duty of care for all financial services firms.

    Read more.
  • UK Regulator Sets Out Strategy to Manage Risk of Harm from Wholesale Brokers
    04/18/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to wholesale market broking firms highlighting its view of the key risks of harm that such brokerage firms pose for their clients and markets and the FCA's strategy for mitigating those risks. Firms are expected to consider the issues raised and take steps to mitigate risks where applicable.

    The key drivers of harm have been identified as commission-based compensation packages (the "eat what you kill" model), inadequate governance arrangements, potential conflict of interest or compliance issues arising from the variety of workflows performed by such brokerages and risks of market abuse and financial crime, all of which may be linked to cultural issues. In the FCA's view, certain brokers in wholesale markets have failed to keep pace with legislative and regulatory developments and lag behind other sectors in embedding a culture of good conduct.

    Read more.
  • US Authority Settles Charges Against Peer-to-Peer Virtual Currency Exchanger for Violating Registration and AML Requirements
    04/18/2019

    The U.S. Treasury Department's Financial Crimes Enforcement Network has announced that it has settled charges against Eric Powers, a peer-to-peer exchanger of convertible virtual currency, for violating the registration, program and reporting requirements of the Bank Secrecy Act. This marks FinCEN's first enforcement action filed against a peer-to-peer exchanger of virtual currency and represents the first time that FinCEN has disciplined an exchanger of virtual currency for failure to report currency transactions, as required under the Bank Secrecy Act.

    Read more.
  • UK's Exit from EU Postponed to October 31, 2019
    04/11/2019

    The EU and the U.K. have agreed to postpone the date on which the U.K. will leave the EU from April 12, 2019 to October 31, 2019. The U.K. notified the EU under Article 50 of the Treaty on the European Union on March 29, 2017 that it would leave the EU. That notification set the date for the U.K.'s exit as March 29, 2019, unless an agreement was reached between the U.K. and the EU. That date was amended by agreement to April 12, 2019 on March 22, 2019. This is the second postponement.

    The EU has implemented the postponement in European Council Decision (EU) 2019/584 taken in agreement with the United Kingdom of 11 April 2019 extending the period under Article 50(3) TEU. The U.K. implemented the extension through the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019, which amended the European Union (Withdrawal) Act 2018.

    View the Council's Decision.

    View the U.K. Regulations.
  • Financial Action Task Force Reports to G20
    04/08/2019

    The Financial Action Task Force has published a Report to G20 Finance Ministers and Central Bank Governors on its ongoing work to fight money laundering and terrorist financing. The report summarizes the FATF's work priorities under the U.S. presidency and sets out areas in which the FATF will work in the near future. These include:
    • Work on virtual assets: the FATF continues to closely monitor risks involving virtual assets (the FATF uses this term to cover both virtual currencies and crypto assets). In this area, by June 2019, the FATF intends to address the challenges that arise in investigations and confiscation and update its 2015 Risk-based Approach Guidance on Virtual Currencies. The FATF will also review and consider the scope of the activities and operations that are covered by its Recommendations and Glossary.
    • Improving transparency and availability of beneficial ownership information: the FATF intends to improve transparency and availability of beneficial ownership information through its mutual evaluation framework and will continue its work, initiated in February 2019, on identifying best practices on beneficial ownership to ensure legal entities are not misused for money laundering or terrorist financing and beneficial ownership information is freely available to national authorities. The work in this area is expected to be finalized by October 2019.

    View the report.
  • US Commodity Futures Trading Commission Issues No-Action Letters to Ensure Continued Relief and Substituted Compliance for U.K. Firms Post-Brexit
    04/05/2019

    The Commodity Futures Trading Commission has issued two no-action letters to ensure that existing regulatory relief and substituted compliance measures for EU firms will continue to apply to U.K. firms following the U.K.’s departure from the EU.  The CFTC said that the no-action letters will bring greater clarity to the market in light of Brexit and reflect the CFTC’s commitment to ensuring that Brexit will not create regulatory uncertainty in global derivatives markets.  The relief is intended to cover both “no-deal” and “soft” Brexit scenarios.  The relief would apply upon the departure of the U.K. (and would thus take effect at the end of the most recent extension of the departure date to October 31, 2019).

    CFTC Letter 19-08 extends to U.K. entities substituted compliance measures originally issued for EU entities.  These measures include comparability determinations for certain entity-level, transaction-level and uncleared margin requirements (the EU Comparability Determinations), along with an exemption for EU-authorized multilateral trading facilities and organised trading facilities from the CFTC’s swap execution facility registration requirements.

    Read more.
  • European Securities and Markets Authority Publishes Supervisory Briefing on MiFID II Appropriateness Rules
    04/04/2019

    The European Securities and Markets Authority has published an updated version of its supervisory briefing on appropriateness. The original appropriateness briefing was published in December 2012 to provide guidance to EU national regulators on the appropriateness requirements under the original Markets in Financial Instruments Directive. The updated appropriateness briefing reflects the amended requirements introduced by the revised Directive or MiFID II and takes into account the new version of ESMA's suitability guidelines published in May 2018 to the extent they are relevant to the appropriateness rules.

    Read more.
  • UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
    03/29/2019

    Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.

    Read more.
  • Final EU Guidelines on Disclosure of Risk Factors in Prospectuses
    03/29/2019

    The European Securities and Markets Authority has published final guidelines on how national regulators should review risk factors as required by the new Prospectus Regulation. The guidelines aim to encourage more appropriate, focused and streamlined risk factor disclosures for securities. The purpose of including risk factors in a prospectus is to ensure that investors can assess the risks related to their investment, therefore allowing them to make informed investment decisions. 

    Read more.
    TOPIC: Securities
  • EU Contracts for Difference Product Intervention Measures to be Extended
    03/27/2019

    The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.

    View ESMA's announcement.

    View details of the existing decision.
  • EU Product Intervention Measures for Binary Options Extended
    03/27/2019

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.

    View the decision.

    View ESMA's notification.
  • US Regulators Offer Margin Relief for Legacy Swaps No Deal Brexit Scenario
    03/25/2019

    The Commodity Futures Trading Commission has unanimously approved an interim final rule that will allow swap dealers and major swap participants to, in the event of a no-deal Brexit scenario, transfer legacy swaps entered into before the compliance date of the CFTC's margin requirements for uncleared swaps to an affiliate without triggering such requirements. The CFTC's interim final rule is substantively identical to an interim final rule adopted by the U.S. Prudential Regulators, which provides the same relief for legacy swaps entered into before the compliance date of their margin requirements for uncleared swaps.

    Both interim final rules apply only to legacy swaps that are transferred solely for relocation purposes. They do not cover economic changes to legacy swaps, such as amendments that modify payment amount calculation methods, maturity date or notional amount of the uncleared swap.

    The interim final rules are each effective immediately upon their respective publication in the Federal Register, and the transfer relief will apply for a period of one year following the U.K.'s withdrawal from the EU in the event of a no deal Brexit.

    Read more.
  • EU Securities Financing Transaction Reporting Obligation Phased-In from April 2020
    03/22/2019

    A Commission Delegated Regulation and Commission Implementing Regulation setting out technical standards on the reporting of securities financing transactions have been published in the Official Journal of the European Union. These technical standards supplement the EU Securities Financing Transactions Regulation, which requires, amongst other things, all SFTs to be reported to EU-recognized trade repositories. Relevant reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies. While various parts of the SFTR came into effect on January 12, 2016, the new reporting obligation is brought into force by these new technical standards.

    Read more.
  • ​No-Deal Brexit Changes to UK Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules
    03/22/2019

    The Financial Conduct Authority has published a market bulletin that advises issuers and stakeholders of key changes to the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules that will apply in the event of a no-deal Brexit.

    In the event of a no-deal Brexit, the U.K.’s primary market regime will apply to all issuers that have securities admitted to trading, or have applied for admission to trading, on a U.K.-regulated market or admitted to listing in the U.K., or that are making a public offer in the U.K. The rules will apply regardless of the country an issuer is incorporated in.

    Read more.
  • EU Statement on the Impact of a No-Deal Brexit on the Share Trading Obligation
    03/19/2019

    May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.

    The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.

    Read more.
  • Working Group on Sterling Risk-Free Rates Publishes Discussion Paper on SONIA Referencing Conventions
    03/18/2019

    The Working Group on Sterling Risk-Free Rates has published a discussion paper aimed at raising awareness for market participants of the conventions for referencing SONIA in new financial contracts. The paper focuses on the most significant conventions for contracts that reference SONIA directly. The paper concludes with a series of questions for market participants, who should submit responses by April 30, 2019.

    Read more.
  • European Commission Communication on Progress on Building the Capital Markets Union
    03/15/2019

    The European Commission has published its latest progress report on building of the Capital Markets Union. The CMU is an EU initiative which aims to deepen and further integrate the capital markets of Member States, further safeguard financial stability, strengthen the international role of the euro and diversify sources of finances for small and medium enterprises. The CMU aims to allow consumers to buy cheaper and better investment products, and enable financial services providers to scale up by offering services in other Member States.

    The progress report notes that the CMU is an important Single Market project that will give increased access to capital for both companies and citizens, especially in smaller countries. A well-developed CMU increases the EU’s attractiveness to foreign investment and complements the EU’s agenda of free and fair trade. Broadly, the Commission has delivered measures that it had committed to take forwards at the beginning of the mandate and put in place certain "building blocks" of the CMU. However, the report notes that it may take time for the impact of the Commission’s actions to be realized.

    Read more.
  • European Commission Adopts New Technical Standards under the Prospectus Regulation
    03/14/2019

    The European Commission has adopted a draft Delegated Regulation containing Regulatory Technical Standards on requirements for:
    • key financial information to be set out in the summary of a prospectus;
    • the publication of a prospectus;
    • the classification of prospectuses and practical arrangements to ensure machine readability of the classifications;
    • advertisements and their dissemination;
    • situations where the publication of a supplement to the prospectus is required; and
    • technical arrangements necessary for the functioning of the notification portal.

    The adopted RTS will repeal Commission Delegated Regulation (EU) No 382/2014 on the publication of supplements to a prospectus and Commission Delegated Regulation (EU) 2016/301 on the approval and publication of the prospectus and dissemination of advertisements.

    The adopted RTS will enter into force 20 days after they are published in the Official Journal of the European Union, which will take place once it is approved by the European Parliament and the Council of the European Union. The adopted RTS will apply directly across the EU from July 21, 2019, which is when the remainder of the Prospectus Regulation applies.

    View the adopted RTS.

    View the annexes to the adopted RTS.
    TOPIC: Securities
  • European Commission Adopts Draft Regulation on the Format, Content, Scrutiny and Approval of a Prospectus
    03/14/2019

    The European Commission has adopted a draft Delegated Regulation on the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The draft Delegated Regulation is based on the technical advice provided to the Commission by the European Securities and Markets Authority in April 2018. The draft Regulation will repeal the existing Implementing Regulation under the existing Prospectus Directive (which will be finally repealed in July 2019) on the form and content of prospectuses.

    Read more.
    TOPIC: Securities
  • Commodity Futures Trading Commission Chairman Maps Agency's Approach to FinTech Regulation
    03/13/2019

    While speaking before the D.C. Blockchain Summit, Commodity Futures Trading Commission Chairman J. Christopher Giancarlo discussed the relationship between technology, regulation and markets, and described the steps the CFTC has taken to stay in step with innovations that have posed regulatory challenges.

    Chairman Giancarlo touted the potential for such technological innovations, including blockchain and digital ledger technology, to transform the way that regulators gather information and lower operational costs for financial institutions. Interestingly, Chairman Giancarlo argued that blockchain and DLT could have helped regulators gather real-time trading data during the 2008 financial crisis, which he believes at a minimum could have prompted "better-informed" and "more calibrated regulatory intervention."

    Read more.
    TOPIC: FinTech
  • UK Regulators Host the First Meeting of the New Climate Financial Risk Forum
    03/13/2019

    The Financial Conduct Authority and the Prudential Regulation Authority have published press releases following the first meeting of the Climate Financial Risk Forum on March 8, 2019. The CFRF is a joint forum established by the PRA and FCA in late 2018. The CFRF aims to encourage financial sector approaches towards managing the financial risks from climate change as well as supporting green finance. The CFRF will develop practical tools and approaches to reduce the barriers for firms looking to adopt a strategy for minimizing financial risks from climate change. The regulators are concerned with both the impact of climate change itself and the transition to supporting a low carbon economy. Both the FCA and the PRA consulted in late 2018 on the impact of climate change. The PRA consulted on a draft Supervisory Statement on managing the financial risks from climate change and the FCA consulted on climate change and green finance and the potential changes to its regulatory approach to these issues. The FCA consultation set out specific actions that the FCA intends to take in the short term in four areas - capital markets disclosures, public reporting requirements, green finance and pensions.

    Read more.
  • UK Regulator Wants Stronger Wind-Down Plans for Loan-Based Crowdfunding Platforms
    03/07/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

    Read more.
  • Further EU Clarification For Financial Services Firms in a No Deal Brexit
    03/07/2019

    The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.

    Read more.
  • Report of the Technical Expert Group Subgroup of the European Commission on Green Bond Standard: Proposal for an EU Green Bond Standard
    03/06/2019

    In its Interim Report on green bonds, the Technical Expert Group has made a proposal for an EU Green Bond Standard. Green bonds are bonds specifically earmarked to be used for climate-related and environmental projects. The aim of the consultation was, in light of the European Commission’s Action Plan on Financing Sustainable Growth published in March 2018, to create a standard that would further improve the credibility of green bonds and help the EU market mature.

    Read more.
  • International Bodies Issue Statement on Margin Requirements for Uncleared Derivatives
    03/05/2019

    The Basel Committee on Banking Supervision and the International Organization of Securities Commissions have published a joint statement on the final implementation of the margin requirements for derivatives not cleared through a CCP. 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 the phase-in period for the obligations relating to both initial margin and variation margin and were aimed at harmonizing the key principles across jurisdictions.

    Read more.
    TOPIC: Derivatives
  • Final EU Technical Standards For Eligibility For Simplified Obligations Under The Bank Recovery And Resolution Directive
    03/04/2019

    An EU Delegated Regulation under the Bank Recovery and Resolution Directive has been published in the Official Journal of the European Union. The Delegated Regulation sets out Regulatory Technical Standards specifying the criteria for assessing the impact of a bank or investment firm's failure on financial markets, on other institutions and on funding conditions.

    Under the BRRD, where a national regulator or resolution authority is determining whether to grant simplified obligations to a bank or investment firm, it must assess the impact that the failure of the institution could have by reference to a number of factors specified in the BRRD. The Delegated Regulation sets out a two-stage test based on quantitative and qualitative criteria to determine whether an institution is eligible for simplified obligations. Different criteria apply depending on whether the institution is a bank or an investment firm. Institutions meeting quantitative criteria at stage one must then meet qualitative criteria at stage two to be assessed as eligible.
    Only institutions that meet the quantitative criteria (i.e., the impact of their failure is not assessed as requiring the full obligations to apply) will proceed to the second stage.

    The Delegated Regulation will be directly applicable across the EU from March 24, 2019.

    View the Delegated Regulation.
  • Basel Committee on Banking Supervision Announces Forthcoming Statements on Various Issues of Concern
    02/28/2019

    On February 27-28th, the Basel Committee on Banking Supervision met to discuss policy and supervisory issues, and the extent to which members had implemented post-financial crisis reforms.

    The Committee noted the implementation status of margin requirements for uncleared derivatives and it will publish in March a joint statement with the International Organization of Securities Commissions on certain implementation aspects of margin requirements.

    Read more.
  • European Banking Authority Publishes Revised Guidelines on Outsourcing Arrangements
    02/25/2019

    The European Banking Authority has published revised Guidelines on outsourcing arrangements. The guidelines are intended to update and replace outsourcing guidelines issued in 2006 (by the EBA's predecessor, the Committee of European Banking Supervisors) on outsourcing by credit institutions. The EBA Guidelines have a wider scope, applying to all financial institutions that are within the scope of the EBA's mandate, namely credit institutions and investment firms subject to the Capital Requirements Directive, as well as payment institutions and electronic money institutions. The investment firms within scope, provided that the new Investment Firm Regulation and Directive and related changes to CRD and the Capital Requirements Regulation have entered into force, will only be the largest investment firms (Class 1 Investment Firms). The Guidelines also integrate the recommendation on outsourcing to cloud service providers that was published by the EBA in December 2017. Both the 2006 guidelines and the December 2017 recommendations will be repealed when these new Guidelines enter into force.

    Read more.
  • EU Handbook on Valuation for Purposes of Resolution
    02/22/2019

    Following a consultation process in November 2018, the European Banking Authority has published a Handbook on valuation for purposes of resolution. The Handbook, which is addressed to national and EU resolution authorities, aims at fostering the convergence and consistency of valuation practices as well as the interaction with independent valuers across the EU.

    The Handbook is the result of close cooperation with national resolution authorities and the Single Resolution Board. It is intended to bridge the resolution regulatory approach with valuation practices, by: (i) providing concrete guidance on the practical steps of the valuation process and the specific valuation criteria applicable to the various resolution tools; and (ii) with a view to facilitating the adoption of an informed decision by the resolution authority, indicating the content that is expected to be included in the valuation report. The Handbook focuses on valuations before resolution and as such supports resolution decisions, which immediately impact shareholders and creditors. However, it also covers valuations after resolution, aimed to determine the "no creditor worse off" principle, which provides that no creditor or shareholder shall incur greater losses than they would have incurred if the institution had been wound up under normal insolvency proceedings.

    View the Handbook on valuation for resolution.
  • UK Financial Conduct Authority on Onshoring the EU Temporary Product Intervention Measures
    02/22/2019

    The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.

    In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.

    Read more.
  • Financial Action Task Force Publishes Outcomes Of Its February 2019 Plenary Meeting
    02/22/2019

    The Financial Action Task Force has published the outcomes from its Plenary meeting that took place in Paris on February 20-22, 2019. The FATF considered key issues such as the operations and streamlining of the FATF, major and other strategic initiatives and mutual evaluations.

    One of the major strategic initiatives covered by the Plenary was the FATF's work on mitigating money laundering and terrorist financing risks associated with virtual asset activities. The FATF published an amended Recommendation 15 in October 2018, clarifying that its standards apply to exchanges, wallet providers and providers of financial services for Initial Coin Offerings. The FATF has now published a draft Interpretative Note to Recommendation 15 to further clarify how the FATF Standards apply to activities involving virtual assets. The Interpretative Note has been finalized except for one section, which will be the subject of a public consultation in May this year. That section concerns the duty of virtual asset service providers to obtain and hold originator and beneficiary information on virtual asset transfers and submit such information to beneficiary service providers and counterparts (if any) as well as provide it on request to appropriate authorities. Following the consultation, the FATF intends to fully finalize the Interpretative Note and adopt it in June 2019.

    Read more.
  • US Conference of State Bank Supervisors Endorses FinTech Recommendations
    02/21/2019

    The U.S. Conference of State Bank Supervisors (CSBS), the nationwide organization of financial regulators from all fifty U.S. states, the District of Columbia, Guam, Puerto Rico, American Samoa, and the U.S. Virgin Islands, has released a series of action items to implement recommendations received from the CSBS Fintech Industry Advisory Panel. The panel was established in 2017 to help streamline multistate regulation of FinTech businesses and other nonbanks, and comprises thirty-three companies, including FinTech firms like SoFi, Ripple, and Circle. The panel also contains two subgroups: one focused on the lending industry; and the other focused on the payments industry.

    Read more.
    TOPIC: FinTech
  • HM Treasury Publishes Guidance On Pension Scheme Arrangements and the EMIR Clearing Obligation In A No Deal Brexit Scenario
    02/21/2019

    HM Treasury has published guidance on the availability of the exemption from the clearing obligation for Pension Scheme Arrangements under the European Market Infrastructure Regulation in a post-Brexit no deal scenario. The U.K. government has been publishing statutory instruments (U.K. secondary legislation) onshoring and amending EU regulations for Brexit. This is being done under the European Union (Withdrawal) Act 2018, so as to ensure a workable U.K. statute book after Brexit. The U.K.'s onshoring legislation has been drafted so as to come into operation on exit day if there is a "no deal" scenario where the U.K. leaves the EU without a ratified withdrawal agreement. The onshoring legislation includes various statutory instruments to onshore the EU EMIR.

    Read more.
  • European Banking Authority Board Nominates New Chair
    02/19/2019

    The Board of Supervisors of the European Banking Authority has nominated José Manuel Campa (Global Head of Regulatory Affairs at Santander) as the new Chair of the EBA. Subject to any objection by the European Parliament within one month, José Manuel Campa will succeed Andrea Enria as the new Chair of EBA for a renewable term of five years.

    View the EBA announcement.
    TOPIC: People
  • EU Product Intervention Measures for Binary Options to be Further Extended
    02/18/2019

    The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.

    View ESMA's announcement.

    View details of the existing product intervention measure for binary options.
  • EU to Recognize Three UK CCPs in a No-Deal Brexit Scenario
    02/18/2019

    The European Securities and Markets Authority has announced that in the event of a no-deal Brexit, it will recognize three U.K.-established CCPs for the purposes of providing services in the EU, namely - LCH Limited, ICE Clear Europe Limited and LME Clear Limited. ESMA has adopted recognition decisions for each of the U.K. CCPs, which will take effect on the day after the U.K. leaves the EU. This follows the European Commission's earlier determination of U.K. equivalence for CCPs.

    View ESMA's announcement.
  • Financial Stability Board Outlines Potential Effects of FinTech on Financial Stability
    02/14/2019

    The Financial Stability Board has issued a report assessing the potential impacts of certain FinTech market developments on financial stability. Specifically, the report examines the potential implications of: (i) FinTech firms competing with traditional financial services providers; (ii) the provision of financial services by some of the world's largest technology companies (referred to as "BigTech" firms); and (iii) reliance on third-party providers for cloud services.

    Although the report finds that the relationship between FinTech firms and financial institutions has been mostly complementary to this point, it also shows that FinTech firms have started to chip away at financial institutions' market share in certain industries, such as credit provision and payments. Further, the report posits that the entry of BigTech firms into the financial services space could also have significant competitive impacts, as such firms often have large, established customer bases, brand recognition, strong financial positions and access to low-cost capital, which could allow them to quickly achieve scale in the space. While this could lead to greater competition in the short-term, the FSB hypothesizes that cross-subsidization could allow BigTech firms to operate with lower margins and gain greater market share, which could in the long run lead to a less competitive market (e.g. China, where two firms account for 94% of the mobile payments market). Additionally, according to the report, increased competition over time could also press incumbent financial institutions to take on additional risk in order to maintain margins and profitability, which could have subsequent effects on financial stability.

    Read more.
    TOPIC: FinTech
  • UK Competition Authority Consults on Draft Investment Consultancy and Fiduciary Management Market Investigation Order 2019
    02/11/2019

    The U.K. Competition and Markets Authority has published for consultation a draft Investment Consultancy and Fiduciary Management Market Investigation Order 2019. The draft Order is intended to implement the remedies proposed by the CMA in its Final Report on the Investment Consultancy and Fiduciary Management Market Investigation, published on December 12, 2018. Any feedback on the draft Order should be provided by March 13, 2019.

    View the draft Order.

    View the explanatory note to the draft Order.

    View the notice of an intention to make an Order.

    View details of the CMA's Final Report.
    TOPICS: CompetitionFunds
  • European Supervisory Authorities Recommend Further Risk Warnings for Retail Investors
    02/08/2019

    The Joint Committee of European Supervisory Authorities has published a Final Report following their consultation on targeted amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products. Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts, until December 31, 2019, management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. This is because the UCITS Directive separately requires these entities to provide investors with a Key Investor Information Document, with different but broadly similar contents requirements. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs proposed amending the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

    Read more.
  • New EU Prospectus Regulation: List of Thresholds Below Which Prospectus is Not Required
    02/08/2019

    The European Securities and Markets Authority has published a revised list of thresholds below which an offer of securities to the public will not need a prospectus in EU member states. The Prospectus Regulation introduced a new threshold of €1 million, below which an offer does not require a prospectus. A Member State may decide to raise the threshold to a maximum of €8 million, provided that the offer cannot be passported to another Member State. ESMA has drawn up this list to create transparency across the various regimes adopted in the EU.

    Read more.
    TOPIC: Securities
  • EU-Wide Listing Thresholds Report
    02/08/2019

    The European Securities and Markets Authority published a document listing the thresholds below which an offer of securities to the public does not need a prospectus in the various Member States of the EU. The document contains information, provided by national regulators, setting out: (i) a short description of the national thresholds below which no prospectus is required; (ii) a summary of any national rules that apply to offers below that threshold; and (iii) hyperlinks to the relevant national legislation and rules. 

    View the report.
    TOPIC: Securities
  • European Commission Requests Report on Potential Undue Short-Term Pressure by Financial Service Participants on Corporations
    02/06/2019

    The European Commission issued a call for advice to each of the European Supervisory Authorities requesting evidence and possible advice on potential undue short-term pressure by financial service participants on corporations. The call for advice relates to Action 10 of the EU's Sustainable Finance Action Plan, which aims to foster transparency and long-termism in financial and economic activity by exploring possible drivers of undue short-termism. The Commission wants the ESA's report to: (i) provide evidence of any short-termism and, if any, the consequences thereof; (ii) assess the drivers of such short-termism, including the effects of regulation on financial market participants, for example, the guidance on remuneration practices; (iii) identify existing regulations that either mitigate or exacerbate short-term pressures; and (iv) evaluate the need for regulatory or policy action and propose specific areas where action is needed.

    The Commission considers that pressure of this kind could lead corporations to overlook long-term risks and opportunities, such as those related to climate change and other factors related to sustainability. Companies facing short-term pressure could, as a result, forgo investment in areas important for a successful transition towards a sustainable economy. The ESAs are due to publish their report in December 2019.

    View the call for advice.
  • EU Agrees Final EMIR Refit
    02/05/2019

    On February 5, 2019, the Council of the European Union and the European Parliament reached a preliminary agreement on the draft Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1. The final text is likely to be published in the Official Journal of the European Union in April or May this year. Subject to a few exceptions, the changes will apply directly in all EU member states 20 days from that publication date. There may be minor drafting changes as the text is vetted by technicians and translated prior to its publication, but the legal position should be unaffected by this.

    Read more.
  • European Securities and Markets Authority Consults on Stress Tests for Investment Funds
    02/05/2019

    The European Securities and Markets Authority has published a consultation paper on its proposed guidelines for liquidity stress testing in Alternative Investment Funds and Undertakings for Collective Investment in Transferable Securities. The paper has been published in response to the European System Risk Board's 2018 Recommendation on mitigating liquidity and leverage risks in investment funds, which requires that ESMA produces guidance on the practice to be followed by managers for the stress testing of liquidity risk for AIFs and UCITS. 

    Read more.
    TOPIC: Funds
  • EU Contracts for Difference Product Intervention Measures Extended Again
    01/31/2019

    The European Securities and Markets Authority Decision renewing the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients has been published in the Official Journal of the European Union. ESMA announced on December 19, 2018, that the existing restriction would be extended. The CfD Decision applies directly across the EU from February 1, 2019, for a period of three months.

    View the decision.

    View ESMA's announcement.
  • US Securities and Exchange Commission Grants and Extends Certain Exemptions for Security-Based Swaps
    01/31/2019

    The Securities and Exchange Commission has extended certain exemptions under the Securities Exchange Act of 1934 (Exchange Act) for security-based swap transactions. The relief, which is intended to facilitate the implementation of the security-based swaps regulatory regime under the Dodd-Frank Act, was originally offered by the SEC in 2011 and has been extended four times prior, most recently in 2018.

    Through this order, the Commission granted an extension of certain temporary relief provided by the SEC to address the fact that the Dodd-Frank Act revised the definition of “security” in the Exchange Act to include security-based swaps.  The relief, which was previously set to expire on February 5, 2019, will be extended until February 5, 2020.

    Read more.
    TOPIC: Derivatives
  • EU Authority Calls For Non-Enforcement of Impending Clearing Obligation for Small Financial Counterparties and of the Backloading Requirement
    01/31/2019

    The European Securities and Markets Authority has published a statement on the impending clearing and trading obligations for small financial counterparties and the reporting backloading requirement. Under the European Market Infrastructure Regulation, small FCs in Category 3 – FCs with less than €8 billion in aggregate month-end average of outstanding gross notional amount of uncleared derivatives at group level – are due to start clearing interest rate and credit derivatives subject to the clearing obligation on June 21, 2019. Once the clearing obligation is triggered, the related trading obligation under the Markets in Financial Instruments Regulation may also be triggered. In addition, the reporting backloading requirement is due to come into effect on February 12, 2019. However, it is foreseen that, under the EU's proposals to make technical changes to EMIR, known as EMIR Refit or EMIR 2.1, Category 3 FCs below the clearing threshold will be exempt from the clearing obligation and the backloading requirement will be deleted. The final text of EMIR Refit is now available, although it remains to be translated and published in the Official Journal.  Whilst EMIR Refit remains not in force, these obligations would technically arise, only to be eliminated shortly afterwards with the passage of this new legislation. In its statement, ESMA confirms that it does not expect national regulators to focus on any non-compliance by small FCs with the clearing obligation or by market participants with the backloading requirements.

    View ESMA's statement.
    TOPIC: Derivatives
  • UK Regulator Consults on Proposed Changes to Handbook to Implement EU Shareholder Rights Directive II
    01/30/2019

    The Financial Conduct Authority has launched a consultation on proposed revisions to the Handbook to implement changes made to the EU Revised Shareholder Rights Directive. The Directive aims to promote shareholder engagement, effective stewardship and long-term investment decision-making through enhancing the transparency of engagement policies and investment strategies across the institutional investment community.

    Read more.
  • UK Regulators Discussion Paper on Building a Framework for Effective Stewardship
    01/30/2019

    The Financial Conduct Authority and the Financial Reporting Council have published a discussion paper which calls for input on how best to encourage the capital markets community to engage more actively in stewardship of the assets in which they invest. The aim of the paper is to advance debate about what is meant by effective stewardship, what minimum expectations investors have of the financial services firms which invest on their behalf and what higher standards the U.K. should aspire to.

    Read more.
  • UK Financial Conduct Authority Consults on Proposed Changes to Handbook for Implementing the EU Prospectus Regulation
    01/28/2019

    The Financial Conduct Authority has published for consultation proposed changes to the Handbook. The changes are to align the Prospectus Rules sourcebook within the Handbook to ensure it is consistent with the new EU Prospectus Regulation that came into force on July 20, 2017.

    The EU Prospectus Regulation sets out information that companies need to disclose to investors and potential investors in a prospectus when raising capital. Even though certain provisions of the EU Prospectus Regulation were anticipated to come into effect after the U.K.’s anticipated exit from the EU on March 29, 2019, the EU Prospectus Regulation will still be applicable during any Brexit transition or implementation period.

    Read more.
  • UK Conduct Regulator Consults on Guidance on Crypto-Assets and the UK Regulatory Perimeter
    01/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.

    The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.

    Read more.
  • International Body Issues Statement on Disclosure of Environmental, Social and Governance Matters
    01/18/2019

    The International Organization of Securities Commissions has issued a statement on the importance of issuers including environmental, social and governance matters when disclosing information material to investors’ decisions.

    Read more.
    TOPIC: Securities
  • No Revision Needed to International Liquidity Risk Management Principles
    01/17/2019

    The Basel Committee on Banking Supervision has completed the review of its 2008 Principles for sound liquidity risk management and supervision. The Basel Committee has concluded that the Principles do not require revision. The Committee expects both supervisors and banks to remain attentive to liquidity risks in the financial markets. Banks should take into account developments since 2008 that may impact their liquidity risk management considerations. These developments include, for example, increasing digitisation of finance and payment systems, an increased use of central clearing of derivatives and margining and the increasing significance of cyber-attacks.

    View the announcement.

    View the 2008 Principles.
  • UK to Adopt EU Equivalence Decisions for Exchanges and Bank Exposures in No Deal Brexit
    01/17/2019

    HM Treasury has laid before Parliament a draft of the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019. The draft Regulations grant HM Treasury temporary powers to make equivalence determinations in relation to any EEA state for EU legislation that is being onshored. The retained EU law includes the Benchmark Regulation, the Capital Requirements Regulation, the European Market Infrastructure Regulation, the Markets in Financial Instruments Regulation, the Credit Rating Agencies Regulation, the Prospectus Directive, the Transparency Directive, the Securities Financing Transaction Regulation, the Short Selling Regulation and Solvency 2. The powers will enable HM Treasury to make equivalence decisions before Brexit that come into force on exit day in a no deal scenario. These powers are distinct from the powers granted to HM Treasury to make equivalence decisions post-Brexit under the specific sectoral onshored legislation and apply in parallel to relevant temporary permissions or registration regimes. The temporary powers would expire 12 months after exit day.

    Read more.
  • EU Report on Accepted Market Practices in Accordance with the Market Abuse Regulation
    01/16/2019

    The European Securities and Markets Authority has published its annual report to the European Commission on the application of accepted market practices under the EU Market Abuse Regulation. The Market Abuse Regulation provides certain prohibitions against market manipulation. Accepted market practices, which are established by national regulators and notified to ESMA, provide a defense against any allegations of market manipulation. In particular, a dealing on a financial market which was carried out for legitimate reasons and in line with an established AMP, will not be found to constitute market manipulation. In the report, ESMA identifies AMPs which were established before the Market Abuse Regulation came into force, or which became effective after that date. 

    Read more.
  • Basel Committee on Banking Standards Finalizes Basel Market Risk Framework
    01/14/2019

    Following its consultation from March to June last year, the Basel Committee on Banking Standards has announced the final revisions to the Basel III market risk capital framework. At the same time, it has also announced its 2019 priorities.

    The objective of the Basel market risk framework is to ensure that banks hold enough regulatory capital to protect against losses arising from movements in market prices of instruments held in their trading book. Certain changes to the 2016 market risk framework are to:
     
    1. Clarify the scope of application. The Committee has provided further guidance on the regulatory book to which instruments should be assigned in circumstances where instruments could go into more than one book and has revised the treatment of structural foreign currency positions. The revised framework also allows equity investments in funds to be allocated to the trading book, provided that a bank: (i) is able to "look through" to the fund's underlying assets; or (ii) has access both to daily price quotes and to the information contained in the mandate of the fund.
    2. Revise the internal model approach to address implementation challenges, in particular, by amending the profit and loss attribution (PLA) test metric and failure consequence.
    3. Amend the standardized model approach. The approach to measuring risk factor losses was too high in relation to the actual risk and there was unnecessary operational burden. The changes in the standardized approach include widening the scope of currency pairs that are considered liquid in the FX risk class to ensure more currency pairs are subject to lower risk weights and introducing new "index" buckets for equity and credit spread risks so that each underlying position in an index does not need to be identified.
    Read more.
  • New UK Economic Crime Strategic Board
    01/14/2019

    The U.K. Government has announced the establishment of a new government taskforce to fight against financial crime. The new taskforce, the Economic Crime Strategic Board, is part of the Government's Serious and Organised Crime Strategy. It will set priorities, direct resources and scrutinise performance against the economic crime threat. The Board includes chief executives from Barclays, Lloyds and Santander and senior representatives from UK Finance, the National Crime Agency and the Solicitors Regulation Authority, Accountants Affinity Group and National Association of Estate Agents.

    View the announcement.
  • UK Regulator Launches Consultation on Eligibility of Financial Collateral Under Capital Requirements Regulation
    01/10/2019

    The U.K. Prudential Regulation Authority has launched a consultation on proposed amendments to its Supervisory Statement on credit risk mitigation to clarify its expectations around the eligibility of financial collateral. The consultation paper is relevant for banks, building societies and PRA-designated U.K. investment firms that are subject to the Capital Requirements Regulation. The consultation closes on April 10, 2019.

    Read more.
  • European Securities and Markets Authority Publishes Recommendations on Crypto-Assets and Initial Coin Offerings
    01/09/2019

    The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.

    ESMA's report focuses on the legal qualification of crypto-assets under EU financial securities laws and highlights that this may differ across EU member states because it will be subject to the national laws implementing EU legislation. ESMA notes that there is currently no legal definition of crypto-assets and that a key consideration is whether a crypto-asset qualifies as a financial instrument under the revised Markets in Financial Instruments package. Where a crypto-asset qualifies as a MiFID financial instrument, the full requirements under various securities legislation may apply, subject to any applicable exemptions.  According to ESMA, the rules in the Prospectus Directive would apply to an issue of crypto-assets offered to the public, including through an ICO, where the instruments are transferable securities. 

    Read more.
  • European Banking Authority Reports on EU Regulatory Perimeter for Crypto-Assets
    01/09/2019

    The European Banking Authority has published a report on the application and suitability of the EU bank regulatory framework for crypto-assets. The report is in response to the European Commission's request in its FinTech Action Plan 2018. The report confirms that EU activities related to crypto-assets are fairly low and do not present any financial stability risks. The European Securities and Markets Authority also published a similar report covering Initial Coin Offerings issues within its remit on the same day.

    The EBA's report sets out the EBA's findings, the issues arising from the results, the EBA's advice to the Commission and the steps that the EBA intends to take in 2019. The EBA mapped the applicability to crypto-assets and crypto-asset activities of the EU Anti-Money Laundering Directive, the Capital Requirements Directive and Regulation, the second Electronic Money Directive and the second Payment Services Directive.

    Read more.
  • UK Conduct Regulator Warns Firms About Misleading Financial Promotions
    01/09/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated firms. In the letter, the FCA highlights its concerns over the practice engaged in by some firms of issuing financial promotions which suggest or imply that all of the activities or investments undertaken by the firm are regulated by the FCA and/or Prudential Regulation Authority, when they are not.

    Some regulated firms undertake both regulated and unregulated business. The FCA has identified that some of these firms are issuing financial promotions which do not make clear which aspects of its business are not regulated by the FCA and/or PRA. This breaches the requirement that all financial promotions are fair, clear and not misleading and that a firm cannot indicate or imply that it is regulated or otherwise supervised by the FCA for its unregulated business. The FCA encourages all firms to reflect on the letter and ensure that their actions comply with the FCA's rules relating to financial promotions.

    View the letter
  • EU Report on Regulatory Sandboxes and Innovation Hubs
    01/07/2019

    Fulfilling the mandate in the European Commission's March 2018 FinTech Action Plan, the Joint Committee of the European Supervisory Authorities has published a report on regulatory sandboxes and innovation hubs, together referred to as innovation facilitators. Innovation hubs are a dedicated point of contact for firms raising queries with national regulators on FinTech-related issues. Regulatory sandboxes enable firms to test innovative financial products, services or business models under the supervision of a national regulator.

    The ESAs' report states that most EU member states have one or both forms of these innovation facilitators. The facilitators operate at national level and the ESAs identify this as a potential challenge to the EU objective of scaling-up FinTech. For example, national regulators are likely to adopt different approaches to the same innovation which can hinder opportunities for extending an innovation across the EU as well as present regulatory arbitrage risks. The potential absence of passporting innovative products throughout the EU can raise issues for their users.

    Read more.
    TOPIC: FinTech
  • UK Draft Directions for EEA Funds and Fund Managers Wanting to Continue to Market in the UK Post-Brexit
    01/07/2019

    The U.K. Financial Conduct Authority has published two draft Directives relating to Brexit under the: (1) draft Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019; and (2) Alternative Investment Fund Managers Regulations 2013, as amended by the draft Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2019. These draft regulations will establish a Temporary Permissions Regime enabling EEA funds that currently market in the U.K. under an EEA passport to continue to do so for three years after the U.K. exits the EU.

    Read more.
  • New UK Financial Policy Committee Appointments
    01/03/2019

    The U.K. Chancellor of the Exchequer announced the appointment of two external members to the Bank of England's Financial Policy Committee, namely Dame Colette Bowe and Dame Jayne-Anne Gadhia. They will replace Richard Sharp and Martin Taylor, who are stepping down at the end of Q1 2019 and Q2 2019, respectively.

    The FPC, established in 2013, seeks to identify, monitor and take action to remove or reduce systemic risk in the U.K. financial system, while simultaneously protecting and enhancing its resilience. The FPC consists of six BoE staff and five external members selected for their experience and expertise in financial services.

    Dame Jayne-Anne and Dame Colette will start their three years of service before the FPC's Q2 and Q3 meetings, respectively.

    View the announcement.
    TOPIC: People
  • EU Product Intervention Measure Banning the Sale of Binary Options is Extended
    12/27/2018

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. This has been published in the Official Journal of the European Union. ESMA announced in November 2018 that the existing restriction would be extended. The binary options Decision applies directly across the EU from January 2, 2019 for a period of three months.

    View the Decision.

    View ESMA's notification.
  • EU Guidelines on Commodity Derivatives Definition Published
    12/21/2018

    The European Securities and Markets Authority has published amended Guidelines on definitions of commodity derivatives and their classification. The amended Guidelines, which are an update to the guidelines originally adopted under the previous Markets in Financial Instruments Directive (MiFID I), have been adapted to the new MiFID II regulatory framework without amending their substance.

    Read more.
    TOPIC: MiFID II
  • EU Contracts for Difference Product Intervention Measures to be Extended Again
    12/19/2018

    The European Securities and Markets Authority has published a statement announcing that its various restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from February 1, 2019, for a further three months. ESMA has powers under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the European Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire, and it would then fall to member states to impose similar restrictions at a national level, if they so wish.

    ESMA considers that a significant investor protection concern in relation to retail clients still exists. Its statement confirms that the existing restriction, implemented on November 1, 2018, will be extended from February 1, 2019 for a further three months.

    View ESMA's statement.

    View details of the existing CfD restrictions.
  • US Securities and Exchange Commission Finalizes Rule of Practice 194
    12/19/2018

    The Securities and Exchange Commission has adopted, by a 3-2 vote, Rule of Practice 194, which establishes the process for a registered security-based swap dealer or major security-based swap participant (collectively, SBS Entities) to apply to the SEC for a waiver that would allow a statutorily disqualified natural person to effect or be involved in effecting security-based swaps on behalf of the SBS Entity, subject to certain conditions.  The final rule, which was first proposed in 2015, represents a continuation of the agency’s efforts to implement its security-based swap regulations pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and will become relevant when the SEC begins requiring registration of SBS Entities.

    Read more.
    TOPIC: Derivatives
  • European Commission Adopts Measures in Preparation for a No Deal Brexit
    12/19/2018

    The European Commission has published a Communication on Implementing the Commission's Contingency Action Plan for a no deal Brexit and has adopted all the legislative proposals and delegated acts announced in its November 2018 Contingency Plan. The actions relevant to the derivatives industry are the adoption by the Commission of:
     
    1. A temporary and conditional equivalence decision for CCPs already established and authorized in the U.K. CCPs established in third countries (which the U.K. will become on exit day) whose supervisory and legal regimes have been deemed to be equivalent to the EU regime may provide clearing services to clearing members or trading venues established in the EU. Such a CCP must be recognized by the European Securities and Markets Authority in accordance with the processes outlined in the European Market Infrastructure Regulation. The adopted decision would grant equivalence to the regulatory and legal regimes of the U.K. and Northern Ireland in relation to CCPs. The Commission's equivalence decision would apply for 12 months from exit day. ESMA remains to designate various U.K. CCPs.

    Read more.
  • UK Regulators Consult on the Resolvability Assessment Framework for Banks
    12/18/2018

    The Bank of England and Prudential Regulation Authority have launched a package of consultations on proposals for the U.K.'s resolvability assessment framework for banks, with the aim of meeting the BoE's commitment to ensure that all banks are resolvable by 2022. The PRA consultation is relevant for U.K. banks and building societies with £50 billion or more in retail deposits on an individual or consolidated basis. The BoE's consultation is wider in scope and affects all firms with bail-in or partial-transfer resolution strategies and material U.K. subsidiaries of an overseas-based banking group. Responses to the consultations should be submitted by April 5, 2019.

    Read more.
  • US Securities and Exchange Commission Proposes Risk Mitigation Requirements for Uncleared Security-Based Swaps
    12/18/2018

    The Securities and Exchange Commission has proposed rules that would establish risk mitigation requirements with respect to a registered security-based swap dealer’s or major security-based swap participant’s (collectively, SBS Entities’) portfolio of uncleared security-based swaps.  The proposed rules would establish requirements for SBS Entities in respect of security-based swap portfolio reconciliation, portfolio compression and trading relationship documentation, and will become relevant when the SEC commences requiring registration of SBS Entities.  The proposal continues the agency’s ongoing efforts to implement its security-based swap regulations pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act and is intended to harmonize the SEC’s requirements with those of the Commodity Futures Trading Commission, which adopted similar risk mitigation requirements for uncleared swaps in 2012.

    Read more.
    TOPIC: Derivatives
  • European Commission Adopts Legislation to Promote Small and Mid-sized Enterprises Growth Markets
    12/13/2018

    Following its consultation earlier this year on a proposed regulation, the European Commission has adopted a Delegated Regulation regarding certain registration conditions to promote the use of SME Growth Markets for the purposes of the revised Markets in Financial Instruments package, known as MiFID II. SME Growth Markets are a new sub-category of multilateral trading facility introduced by MiFID II in January 2018 to facilitate access to capital for SMEs. The adopted Delegated Regulation will amend existing delegated legislation under MiFID II to address regulatory barriers to the take-up of SME Growth Markets.

    Read more.
  • US Consumer Financial Protection Bureau Proposes Regulatory Sandbox and Revisions to No-Action Letter Policy
    12/13/2018

    The Consumer Financial Protection Bureau has proposed revisions to the agency’s No-Action Letter policy and floated the idea of a federal regulatory sandbox. The proposed NAL policy would simplify and clarify the agency’s existing procedures for obtaining a NAL, while the sandbox would streamline the process for firms that seek regulatory relief when they roll out innovative products or services.

    The CFPB’s proposed NAL policy would supplant the agency’s existing policy, which was implemented in 2016. Under the current policy, the CFPB has only provided one NAL. To encourage more applications for NALs, the CFPB is proposing to streamline the NAL application and review processes by eliminating several redundant or overly burdensome requirements, such as data-sharing requirements. The updated NAL policy would also eliminate assumed time-period limitations on NALs and place an emphasis on coordination with other regulators that offer NALs or similar forms of relief.

    Read more.
    TOPIC: FinTech
  • Final EU Guidelines on Simple, Transparent and Standardized Criteria for Securitizations
    12/12/2018

    The European Banking Authority has published two sets of finalized guidelines under the Securitization Regulation which, along with targeted amendments to the Capital Requirements Regulation, forms part of the new EU Securitization Framework for simple, transparent and standardized securitizations from January 2019. Originators and sponsors will be required to notify the European Securities and Markets Authority of any securitization that meets the STS criteria to be able to use the "STS" designation. ESMA will maintain a list of all such securitizations on its website.

    Read more.
  • UK Competition Authority Publishes Final Report on the Investment Consultants Market Investigation
    12/12/2018

    The U.K. Competition and Markets Authority has published its Final Report on the Investment Consultants Market Investigation. The Investigation assessed the supply and acquisition of investment consultancy services and fiduciary management services. In its Provisional Decision Report, published on July 18, 2018, the CMA concluded that there is an adverse effect on competition which may result in material detriment to customers in both the investment consultancy and fiduciary management markets, although there are more concerns with the fiduciary management market. This finding is confirmed in the Final Report.

    In investment consultancy, the CMA considers that there is a low level of engagement by some customers in choosing and monitoring their provider. In addition, some customers may have difficulty in accessing and assessing the information needed to evaluate the quality of their existing investment consultant and identifying whether it would be to their advantage to use an alternative provider.

    Read more.
    TOPICS: CompetitionFunds
  • European Commission Adopts Amendments to Technical Standards On Systematic Internalisers' Quote Rules
    12/12/2018

    The European Commission has adopted a Delegated Regulation amending and correcting the Regulatory Technical Standards under the Markets in Financial Instruments Regulation on the equity transparency obligations of trading venues and investment firms. The RTS, known as RTS 1, is set out in Commission Delegated Regulation (EU) 2017/587, supplementing MiFIR. Under MiFIR, Systematic Internalisers must make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent to 10% of the standard market size for the quoted instrument; (ii) include both a bid and an offer price for a size that could be up to market size; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity."

    Read more.
    TOPIC: MiFID II
  • UK Financial Conduct Authority Publishes Its Final Approach to Authorization
    12/12/2018

    The Financial Conduct Authority has published its final document, entitled "FCA Mission: Approach to Authorisation," explaining the purpose of authorization and the FCA's approach to it. The paper sets out details of the FCA's approach to: (i) evaluating whether firms meet the requisite Threshold Conditions and assessing whether individuals are "fit and proper"; (ii) how the FCA uses authorization to promote competition; and (iii) revoking authorization.

    Read more.
  • US Commodity Futures Trading Commission Consults on Ether and the Potential Introduction of Ether Derivatives Contracts
    12/11/2018

    To further its understanding of Ether and its use on the Ethereum Network, the Commodity Futures Trading Commission has issued a request for input on several topics related to the virtual currency. The RFI poses a number of questions on Ether, including, among other things, its functionality, underlying technology, governance, markets, cybersecurity and custody. In addition, the CFTC asks several questions regarding Ether's susceptibility to market manipulation and the potential introduction of Ether derivatives contracts.

    The CFTC stated that the requested feedback will inform the work of the CFTC and its LabCFTC initiative to enhance the agency's oversight of virtual currency markets and develop regulatory policy. The CFTC also noted that it hopes to gain a greater understanding of the similarities and differences between Ether and bitcoin, along with potential risks and opportunities uniquely posed by Ether.

    Read more.
    TOPICS: DerivativesFinTech
  • EU Court Rules That the UK Can Unilaterally Revoke its Brexit Notice
    12/10/2018

    The Court of Justice of the European Union has ruled that the U.K. is able to unilaterally revoke its notice of intention to withdraw from the EU. Any such revocation could only be made before the draft Withdrawal Agreement entered into force or, if there is no agreement, expiration of the two-year period since the withdrawal notification was made or any extension of that two-year period in accordance with Article 50 of the Treaty on the European Union. The revocation could also only be made after a revocation decision was made by the U.K. according to its constitutional requirements.

    The CJEU decision means that the U.K. Parliament has three options to consider on Brexit: remain in the EU, accept the draft withdrawal agreement negotiated by the U.K. Government or leave the EU on March 29, 2019, without an agreement (known as a "hard Brexit").

    Read more.
  • UK Conduct Authority Consults on Permanent Product Intervention Measures
    12/07/2018

    The U.K. Financial Conduct Authority has launched two consultations proposing to prohibit the sale, marketing and distribution of binary options to retail consumers and to restrict the sale, marketing and distribution of contracts for difference and similar products to retail customers. Both CFDs and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000, allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The proposed rules would be permanent and would replace the temporary measures introduced, and subsequently renewed, by the European Securities and Markets Authority earlier this year.

    Read more.
  • ​Further UK Legislation in Preparation for Brexit Comes Into Force
    12/06/2018

    Three pieces of U.K. legislation to onshore EU laws in preparation for Brexit have been made. These are:
     
    1. The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1318).

    A number of technical changes have been made as a result of the consultation process, but these do not affect the fundamental intention and scope of the legislation. The Regulations come into force on December 7, 2018, except for the provisions amending the European Market Infrastructure Regulation, which will come in force on exit day. Advance applications for registration of a trade repository must be submitted to the Financial Conduct Authority between December 7, 2018 and immediately before exit day, instead of on exit day.

    These Regulations establish: (i) a temporary registration regime to enable U.K. and EU trade repositories to benefit - on complying with certain requirements - from temporary registration while the FCA considers their application; and (ii) a conversion regime that will allow U.K. trade repositories that are currently registered with the European Securities and Markets Authority to be registered as authorized U.K. trade repositories by the FCA from exit day.

    Read more.
  • UK Ring-Fencing Order Brings Full Regime Into Force From January 2019
    12/05/2018

    The U.K. Financial Services (Banking Reform) Act 2013 (Commencement No. 12) Order 2018 has been made. The Order brings into force, from January 1, 2019, those provisions of the Financial Services (Banking Reform) Act 2013 on ring-fencing that are not already in force, including the prohibition on ring-fenced bodies to carry on excluded activities and provisions on group restructuring. The U.K. ring-fencing laws require U.K. banks which hold more than £25 billion in core deposits and banking groups whose members hold an average core deposit of more than £25 billion to separate their core retail banking business from their investment banking business. Restrictions will limit the products that a ring-fenced bank can offer and where it can conduct business. In particular, a ring-fenced bank will not be able to own a banking subsidiary or branch which is established outside of the EEA.

    View the Order
  • UK Regulations Implementing the EU Securitization Regulation Made
    12/04/2018

    The U.K. Securitization Regulations 2018 have been laid before Parliament and will come into force on January 1, 2019. The Regulations implement the EU Securitization Regulation (also known as the STS Regulation) into U.K. law.

    The EU Securitization Regulation provides the criteria for identifying which securitizations will be designated as simple, transparent and standardized securitizations, a system to monitor the application of those criteria and common requirements on risk retention, due diligence and disclosure. It also allows (but does not require) originators, sponsors and securitization special purpose entities to use third-party firms to assess whether a securitization meets the STS criteria, provided that those firms are authorized by the relevant national regulator. Originators, sponsors or original lenders of a securitization will be required to retain on an ongoing basis a material net economic interest in the securitization of at least 5%. Related amendments to the Capital Requirements Regulation set out preferential regulatory treatment for investors, in particular, for bank investors, of their exposures to securitizations that are deemed to be STS securitizations.

    Read more.
  • UK Draft Regulations on Credit Ratings in Preparation for Brexit
    11/30/2018

    HM Treasury has laid before Parliament the draft Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019 to onshore the EU Credit Rating Agencies Regulation for Brexit. This follows the publication of related explanatory information on October 8, 2018.

    The EU CRA Regulation regulates CRAs established in the EU. The European Securities and Markets Authority directly supervises EU CRAs registered with it under the CRA Regulation. The 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 ESMA; (ii) a third-country CRA under the endorsement regime; or (iii) a third-country CRA under the equivalence/certification regime. Endorsement allows credit ratings issued by a third-country CRA to be used for regulatory purposes in the EU, provided that the rating has been endorsed by an EU CRA. The equivalence/certification regime allows credit ratings issued by a third-country CRA in relation to a third-country entity or financial instrument to be used in the EU for regulatory purposes. It does not cover ratings issued by a third-country CRA for an EU entity or a financial instrument issued in the EU.

    Read more.
  • European Supervisory Authorities Advocate Proportional Approach to Compliance With Certain Aspects of the Securitization Regulation
    11/30/2018

    The European Supervisory Authorities have issued a joint statement addressing two issues arising from the Securitization Regulation. The Securitization Regulation will apply directly across the EU from January 1, 2019 to securities issued under securitizations on or after January 1, 2019. Securitizations issued before that date may be referred to as STS securitizations, provided that they meet certain conditions.

    The first issue addressed in the joint statement relates to disclosure requirements for EU securitizations. The Securitization Regulation requires originators and sponsors to notify ESMA of any securitization that meets the "Simple, Transparent and Standardized" criteria. ESMA will maintain a list of all such securitizations on its website. Securitization special purpose entities, originators and sponsors of a securitization will be required to make certain information available via a securitization repository to holders of a securitization position, to the national regulators and, upon request, to potential investors. The European Securities and Markets Authority and the European Commission still have to address a number of market concerns on the proposed ESMA disclosure templates (that will be introduced as Technical Standards under the Regulation) as part of these transparency requirements. This is a process that will not be concluded by January 1, 2019.

    Read more.
  • Draft UK Legislation to Onshore the EU Reorganization and Winding Up Directives Published in Preparation for Brexit
    11/30/2018

    HM Treasury has published a draft statutory instrument to onshore further EU financial services legislation in preparation for Brexit - the draft Credit Institutions and Insurance Undertakings Reorganization and Winding Up (Amendment) (EU Exit) Regulations 2018. An explanatory memorandum has also been published. HM Treasury has prepared the draft SI using powers granted to it under the EU Withdrawal Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the U.K. leaving the EU.

    The draft SI will onshore the EU Credit Institutions (Reorganisation and Winding Up) Directive and certain aspects of Solvency II. These Directives establish EEA frameworks for the reorganization and winding up of EEA banks, building societies, credit unions and insurers. They were transposed into U.K. law in the Insurers (Reorganization and Winding Up) Regulations 2004 (S.I. 2004/353), the Credit Institutions (Reorganization and Winding Up) Regulations 2004 (S.I. 2004/1045), and the Insurers (Reorganization and Winding Up) (Lloyd's) Regulations 2005 (S.I. 2005/1998).

    Read more.
  • UK Draft Regulations Governing Financial Market Infrastructure in Preparation for Brexit
    11/30/2018

    HM Treasury has published a new draft statutory instrument, the draft Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2018. The draft instrument is part of its work to ensure that the U.K.'s financial services laws are operative on exit day. The related explanatory information was published on November 22, 2018.  The draft Regulations amend relevant parts of the Financial Services and Markets Act 2000 and the Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories Regulations 2001/995.

    Read more.
  • Proposed Exemption From EU Margin Obligations for OTC Derivatives Novated to EU Counterparties in Preparation for a "No Deal" Brexit
    11/29/2018

    The Joint Committee of the European Supervisory Authorities has published a final report and final draft Regulatory Technical Standards to amend the existing RTS on margin requirements for uncleared OTC derivative contracts. The ESAs are proposing the introduction of a 12-month exemption from the margin exchange obligations to facilitate the novation of uncleared OTC derivative contracts to EU counterparties in the event of a "no deal" Brexit. The European Market Infrastructure Regulation requires counterparties to uncleared OTC derivative transactions to implement risk mitigation techniques to reduce counterparty credit risk. The RTS prescribe required margin amounts to be posted and collected and the methodologies by which the minimum amount of initial margin and variation margin should be calculated, as well as listing securities eligible as collateral, such as sovereign bonds, covered bonds, some securitization instruments, corporate bonds, gold and some equities. The variation margin requirements have applied to all counterparties since March 1, 2017.

    Read more.
  • European Commission Publishes Commission Delegated Regulation on the Electronic Central Register Under Payment Services Directive
    11/29/2018

    The European Commission has adopted Regulatory Technical Standards on the development, operation and maintenance of the electronic central register and access to the information it contains under the Payment Services Directive 2015, known as PSD2. The register will contain details of authorized payment institutions, certain exempt persons and their agents and it will identify the payment services for which each payment institution is authorized or exempt person is registered. PSD2 took effect on January 13, 2018. The electronic central register established by these RTS will be the responsibility of the European Banking Authority. It is intended that these RTS, once published in the Official Journal of the European Union, will be binding and directly applicable in all Member States from twenty days after publication.

    View the Commission Delegated Regulation.
  • UK Payment Systems Regulator Consults on Brexit-Related Changes to Onshore Regulatory Technical Standards Under the Interchange Fees Regulation
    11/29/2018

    The U.K. Payment Systems Regulator has launched a consultation on its proposals to onshore the Regulatory Technical Standards supplementing the EU Interchange Fee Regulation to ensure the RTS can still operate effectively once the U.K. has left the EU. The consultation will primarily be relevant for card schemes subject to the IFR, parties contracting with card schemes and/or processing entities (e.g. issuers, acquirers) and third-party card payment processors.
     
    The PSR is empowered by HM Treasury, under the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018, to correct deficiencies in the RTS and to maintain them after exit day. The RTS set out detailed requirements for payment card schemes and processing entities, to ensure there is the requisite level of independence in accounting, organization and decision-making processes. The PSR proposes to amend the RTS in line with the draft Interchange Fee (Amendment) (EU Exit) Regulations 2018, published by HM Treasury on November 16, 2018 to onshore the IFR. The PSR's consultation paper includes a draft of the Technical Standards (Interchange Fee Regulation) (EU Exit) instrument 2019.
     
    Comments on the consultation are invited by December 17, 2018. The PSR intends that the finalized version of the EU Exit instrument will take effect on exit day in the event of a no deal scenario.
     
    View the consultation paper (PSR CP 18/3).
     
    View details of the draft Interchange Fee (Amendment) (EU Exit) Regulations 2018.
     
  • Basel Committee on Banking Supervision Agrees Next Steps for Basel Standards
    11/29/2018

    Central bankers and banking supervisors from over eighty jurisdictions met this week in Abu Dhabi, United Arab Emirates to discuss a range of policy and supervisory topics.

    On November 26-27, 2018 there was a meeting of the Basel Committee on Banking Supervision at which it was agreed that a consultation would take place next year to discuss a framework to consolidate the Committee's standards into a single integrated structure. Moreover, a number of items were agreed:
    • A set of targeted revisions to the market risk framework which is due to be implemented by January 1, 2022.
    • A consultation on potential enhanced disclosures to reduce bank window-dressing behaviour related to leverage ratio will be pursued. The Basel Committee issued a statement in October declaring unacceptable the alleged tendency in banks to engage in so-called window-dressing by temporarily reducing transaction volumes around key reference dates, which has supposedly the effect of allowing banks to report and publicly disclose better leverage ratios.
    • A set of revisions to the Pillar 3 disclosure framework will be published in December.
    • A report will be published in December setting out the range of bank, regulatory and supervisory cyber-resilience practices across jurisdictions.

    View the press release.

    View details of the Basel Committee's consultation on the revised market risk framework.
  • UK Treasury Policy on "In Flight" EU Legislation in Preparation for a "No Deal" Brexit
    11/28/2018

    Following the introduction to Parliament on November 22, 2018 of the Financial Services (Implementation of Legislation) Bill, HM Treasury has published a Policy Note on the Bill. The Bill gives HM Treasury, in a Brexit no deal scenario, powers to implement and make amendments to a specified list of "in flight" financial services legislation. The Bill covers EU financial services legislation which is proposed or published but that is out of scope of the European Union (Withdrawal) Act 2018 because it will not be operative on or before exit day. Only legislation with an implementation date falling in the two years after exit is covered. The Bill sets out a list of the legislation that is covered, namely:
    • the settlement discipline regime under the Central Securities Depositories Regulation (Articles 6 and 7);
    • the Delegated Cash Penalties Regulation;
    Read more.
  • UK Financial Conduct Authority Reports on Cyber Security Resilience in Financial Services
    11/27/2018

    The Financial Conduct Authority has published a report entitled "Cyber and Technology Resilience: Themes from cross-sector survey 2017-2018." The FCA compiled the report by requesting 296 firms during 2017 and 2018 to provide a self-assessment of their cyber and technological capabilities, focusing on governance, delivery of change management, managing third-party risks and the effectiveness of cyber defenses. The FCA analyzed the responses and considered data from firm's responses to recent operational incidents to produce the report.

    Read more.
  • UK Conduct Regulator Publishes Second Consultation on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
    11/26/2018

    The U.K. Financial Conduct Authority has published a second consultation on proposed changes to the FCA Handbook and guidance to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect on exit day if the U.K. enters into a transitional period.

    The consultation includes the FCA's further proposals in relation to those Binding Technical Standards that it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterwards. Since the FCA's first consultation on Brexit-related Handbook changes in October 2018, HM Treasury has published further policy notes and/or financial services "onshoring" statutory instruments with proposed amendments to retained EU law. Many of the FCA's proposals on the BTS are consequential in nature and follow the amendments proposed in the statutory instruments.

    Read more.
  • Financial Stability Board Appoints new Chair and Vice Chair
    11/26/2018

    The Financial Stability Board has announced the appointment of Randal K. Quarles (Governor and Vice Chairman for Supervision at the U.S. Federal Reserve System) as its new Chair and Klaas Knot (President of De Nederlandsche Bank) as its Vice Chair for a three-year term starting on December 2, 2018.  Klass Knot will succeed Randal K. Quarles as Chair on December 2, 2021 for the next three-year term.

    The current FSB Chair, Mark Carney, will step down on December 1, 2018 after seven years of leadership. 

    View the press release
    TOPIC: People
  • UK Parliamentary Committee Launches Inquiry Into Operational Resilience in the Financial Services Sector
    11/23/2018

    The U.K. Treasury Committee has announced the launch of a new Inquiry into IT failures in the financial services sector. The Inquiry has been launched in response to recent IT failures at a number of financial institutions that have led to consumers being unable to access their bank accounts or becoming subject to fraud.

    The Committee will assess the causes and consequences of these recent IT failures. Among other things, the Committee will consider the extent to which such incidents are becoming more frequent, sources of concentration risk in the financial sector, the impact of legacy IT systems, the effect of outsourcing on operational resilience, best practices in responding to operational incidents and whether the U.K. regulators are able to regulate firms' capabilities for responding to such incidents.

    Written submissions can be made to the Committee by January 18, 2019. The Committee will also appoint a special advisor to provide policy advice to the Committee on the issues. Individuals interested in the role should respond to the call for Expressions of Interest.

    View the announcement.
  • European Supervisory Authority Public Statement on Post-Brexit Temporary Recognition for UK CCPs if No UK-EU Deal
    11/23/2018

    The European Securities and Markets Authority has issued a public statement entitled "Managing risks of a no-deal Brexit in the area of central clearing."  In the statement, ESMA confirms that its Board of Supervisors supports continued access to U.K. CCPs by EU market participants, to limit the risk of disruption in central clearing and to avoid negatively impacting EU financial market stability following the U.K.'s exit from the EU. This would appear likely to take effect pursuant to a temporary or interim equivalence and/or Qualifying CCP determination under European Market Infrastructure Regulation and the Capital Requirements Directive in respect of the U.K. and its CCPs, effective on Brexit.

    Read more.
  • UK Draft Legislation to Onshore EU Packaged Retail and Insurance-Based Investment Products for Brexit
    11/22/2018

    HM Treasury has published a draft version of the Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019. The EU PRIIPS Regulation requires a standardized disclosure document (called a Key Information Document or KID) to be provided when packaged investment or insurance-based investment products are sold to retail investors.

    The draft Regulations correct deficiencies in the U.K. Packaged Retail and Insurance-based Investment Products Regulations 2017 and in the directly applicable EU PRIIPS Regulation (and its secondary legislation) to be retained on Brexit. The draft Regulations will primarily be relevant for firms that manufacture, sell or advise on retail investment products that fall within the scope of the PRIIPs Regulation. This includes, but is not limited to, asset managers, insurers and investment advisors.

    Read more.
  • UK Prudential Regulator Proposes Minor Policy Change for Systemic Risk Buffer
    11/22/2018

    The U.K. Prudential Regulation Authority has published a consultation paper entitled "The systemic risk buffer: Updates to the Statement of Policy," proposing minor updates to its Statement of Policy, "The PRA’s approach to the systemic risk buffer." The consultation is relevant to "SRB institutions," which are: (i) ring-fenced bodies within the meaning in the Financial Services and Markets Act 2000; or (ii) large building societies that hold more than £25 billion in deposits (where one or more of the account holders is a small business) and shares (excluding deferred shares).
     
    The PRA proposes to amend the Statement of Policy to:
     
    • remove the statement that the PRA’s approach to reviewing the SoP every two years is mandated by the SRB regulations;
    • replace references to the PRA's April 2018 consultation, "The PRA’s methodologies for setting Pillar 2 capital," with references to the finalized Statement of Policy that was subsequently published; and
    • include references to the PRA's Supervisory Statement, "UK leverage ratio framework," that was recently updated to apply an additional leverage ratio buffer rate to SRB institutions.
     
    As the proposals are of only a minor nature, the consultation period is short and comments on the consultation paper are invited by December 6, 2018.
     
    View the consultation paper (PRA CP 29/18).
     
    Return to main website.
  • First EU Blockchain Industry Roundtable
    11/21/2018

    The European Commission has published a press release on the outcome of the first EU Blockchain Industry Roundtable, which took place on November 20, 2018. The press release notes the establishment of the "International Association for Trusted Blockchain Applications" that will be open to any firm that wishes to contribute to the use of blockchain and distributed ledger technologies in the EU. This new Association will work with the European Commission and EEA states that are part of the European Blockchain Partnership to support interoperability, develop specifications and promote standards and regulatory convergence in this area. The European Blockchain Partnership was established earlier this year and has been signed up to by Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the U.K.

    View the press release.

    View details of the European Blockchain Partnership.
    TOPIC: FinTech
  • UK Sanctions and Anti-Money Laundering Act 2018 Sanctions Provisions Brought Into Force
    11/21/2018

    The Sanctions and Anti-Money Laundering Act 2018 (Commencement No.1) Regulations 2018  were made on November 21, 2018, bringing into force the majority of the sanctions provisions of the Act with effect from November 22, 2018.

    The Act's provisions empower the U.K. Government to make sanctions regulations to be imposed, where appropriate, to comply with United Nations obligations or other international obligations, to further the prevention of terrorism, for the purposes of national security or international peace and security, or to further foreign policy objectives. The Act also empowers the U.K. Government to create, amend and update regulations for the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system.

    The Act received Royal Assent and came partly into force on May 23, 2018. Provisions in force from November 22, 2018 are:
    • sections 1 to 31;  
    • sections 33 to 48;  
    • sections 57 and 58;
    • section 59(4) (to the extent that it relates to Schedule 3, paragraphs 1 to 7 and sub-paragraphs 8(1) to 8(3)); and
    • Schedule 1.

    The remaining Provisions of the Act that will be brought into force at a later date include the provisions related to anti-money laundering.

    View the Commencement Regulations (SI 2018/1213).

    View the Sanctions and Anti-Money Laundering Act 2018.
  • UK Government Publishes Guidance on Proposals to Onshore Primary Markets Legislation for Brexit
    11/21/2018

    HM Treasury has published explanatory guidance on a draft statutory instrument, the Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will amend Brexit-related onshoring deficiencies in the U.K. legislation that implemented the EU Prospectus Directive, the Transparency Directive and the Consolidated Admissions and Reporting Directive, which together make up the EU legal framework for primary markets. No deficiencies have been identified for the CARD. 

    Read more.
  • UK Government Publishes Guidance on Proposals to Onshore EU Market Abuse Regulation for Brexit
    11/21/2018

    HM Treasury has published explanatory information on a draft statutory instrument, the Market Abuse (Amendment) (EU Exit) Regulations 2018. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will affect the Financial Conduct Authority and all natural and legal persons which issue or trade in financial instruments admitted to trading or traded on an U.K. or an EU trading venue, including legal firms, professional service firms and any legal person that obtains access to the inside information of an issuer.

    Read more.
  • UK Government Refused Challenge of Ability of Court of Justice of the European Union to Rule on Whether Brexit Notification Can Be Revoked
    11/20/2018

    The U.K. Supreme Court has announced that it has refused the permission to appeal application of the Secretary of State for Exiting the European Union. The application had been made to stop the reference by the Inner House of the Court of Session in Scotland to the European Court of Justice for a preliminary ruling on whether the U.K. can unilaterally revoke its notice of withdrawal from the EU. The court's referral to the CJEU was discussed in our previous post. The Court of Session opined on September 21, 2018 that a reference should be made to the CJEU - Wightman v Secretary of State for Exiting the European Union [2018] CSIH 62.

    The U.K. Department for Exiting the EU has also published a statement on the reference to the CJEU confirming that it has submitted written observations to the CJEU. The Government's position is that the reference to the CJEU is inadmissible on the basis that the CJEU does not answer hypothetical questions or provide advisory opinions.

    An oral hearing before the CJEU is scheduled for November 27, 2018.

    View the Supreme Court's announcement.

    View the DxEU statement.

    View details of the Court of Session Opinion.
  • Final Report on Incentives to Clear OTC Derivatives Published by Global Standard Setting Bodies
    11/19/2018

    A final joint report on the incentives to clear OTC derivatives has been published by the Financial Stability Board, the International Organization of Securities Commissions, the Basel Committee on Banking Supervision and the Committee on Payments and Market Infrastructures. The report is part of the FSB's post-implementation evaluation of the effects of the G20 financial regulatory reforms.

    The report sets out the results of an evaluation of the reforms that have been implemented to incentivize central clearing of OTC derivatives and outlines areas for further consideration by the global standard setting bodies. The reforms considered include mandatory clearing requirements, capital, liquidity and margin requirements, as well as the reforms to CCP resilience, recovery and resolution.

    Read more.
  • Bank of England Guidance to Firms on Valuation Capabilities to Support Resolvability
    11/19/2018

    The Bank of England has published the "Dear CFO" letter sent by its Resolution Directorate to the Chief Financial Officers of relevant entities in financial groups within the remit of the BoE's principles-based "Statement of Policy on Valuation Capabilities to Support Resolvability." The SoP was published in June 2018 and sets out the BoE's expectations on the minimum standard of valuation capabilities that firms should have in place to ensure that their valuations are sufficiently timely and robust to support the effective resolution of the firm. Firms within the remit of the SoP will need to ensure that suitable capabilities are in place by January 1, 2021.

    Read more.
  • UK Legislation Made for Onshoring the EU SEPA Regulation
    11/19/2018

    The Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018 were made on November 19, 2018 and will enter into force on the day the U.K. exits the EU. The Regulations are relevant for all Payment Service Providers – banks, payment institutions, e-money institutions and registered Account Information Service Providers.

    Read more.
  • UK Legislation Published to Onshore the European Long-Term Investment Funds Regulation For Brexit
    11/19/2018

    HM Treasury has published a draft version of the Long-term Investment Funds (Amendment) (EU Exit) Regulations 2018. The draft Regulations correct deficiencies in the directly applicable European Long-term Investment Funds Regulation to be retained on Brexit, which governs funds that invest into infrastructure and other long-term projects. The draft Regulations will primarily affect fund managers operating ELTIFs registered in the UK.

    Read more
  • UK Competition Authority Opens Investigation Into Possible Anti-Competitive Practices
    11/16/2018

    The U.K. Competition and Markets Authority has announced that it opened an investigation into suspected anti-competitive practices in the financial services sector on November 13, 2018. The investigation is at a very early phase, and the CMA does not consider that at this stage a statement of objections can be issued to any of the parties under investigation. Between now and August 2019 the CMA will be gathering information on the suspected infringement of the Competition Act 1998.

    View the announcement.
    TOPIC: Competition
  • 2018 List of Globally Systemically Important Banks Published
    11/16/2018

    The Financial Stability Board has published the 2018 list of global systemically important banks. Alongside the 2018 G-SIB list, the Basel Committee on Banking Supervision has published further information relating to its 2018 assessment of G-SIBs, including:
    • a list of all the banks in the assessment sample;
    • the denominators of each of the 12 high-level indicators used to calculate the banks' scores;
    • the 12 high-level indicators for each bank in the sample used to calculate these denominators;
    • the cut-off score used to identify G-SIBs in the updated list and the thresholds used to allocate G-SIBs to buckets for the purpose of calculating the specific higher loss absorbency requirements; and
    • links to disclosures of all banks in the assessment sample.

    The Basel Committee assessment was based on its 2013 methodology for identifying G-SIBs. The revised 2018 assessment methodology will apply from 2021, based on end-2020 data and the corresponding higher loss absorbency requirements will apply from January 1, 2023.

    View the 2018 G-SIB list.

    View details of the revised assessment framework for G-SIBs.
  • Draft UK Legislation Published to Onshore the EU Interchange Fee Regulation for Brexit
    11/16/2018

    HM Treasury has published a draft version of the Interchange Fee (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will primarily affect payment system operators, payment service providers (including banks and building societies) and the businesses and individuals who rely on card payment systems. The Payment Systems Regulator will consult separately on consequential changes to its guidance on the IFR once the draft Regulations are made. The PSR will also be responsible for correcting deficiencies in the Binding Technical Standards made under the IFR.

    The draft Regulations amend the EU Interchange Fee Regulation that will be retained on Brexit and the Payment Card Interchange Fee Regulations 2015. The changes are designed to ensure that current laws on interchange fees continues to operate effectively in the U.K. once the U.K. has left the EU.

    Read more.
  • EU Final Draft Technical Standards on Estimating and Identifying an Economic Downturn in IRB Modelling
    11/16/2018

    The European Banking Authority has published final draft Regulatory Technical Standards on the specification of the nature, severity and duration of an economic downturn in accordance with the Capital Requirements Regulation. The aim of the RTS is to ensure that institutions using the Internal Ratings-Based approach to calculating capital requirements can use a well-defined and common specification of the nature, duration and severity of an economic downturn for portfolios relating to comparable types of exposure.

    The nature of the economic downturn is defined as a set of relevant economic factors and its severity is specified via the most severe values observed on the relevant economic factors over a given historical period. The duration of an economic downturn is specified using the concept of a "downturn period," namely the period of time where the peaks or troughs, which relate to the most severe values of one or several economic factors, are observed.

    Read more.
  • Financial Stability Board Progress Report on Addressing Correspondent Banking Decline
    11/16/2018

    The Financial Stability Board has published a progress report addressed to the G20 Finance Ministers and Central Bank Governors on the FSB's four-point action plan to assess and address the decline in correspondent banking relationships. The progress report is accompanied by an update to the Correspondent Banking Data Report published by the FSB March 2018. The updated data report includes additional data from July - December 2017 derived from information provided by SWIFT to the FSB, through the intermediation of the National Bank of Belgium. The data report shows a further decline in active correspondent banking relationships in 2017.

    Read more.
  • EU Legislation Published for Relocation of the European Banking Authority Post-Brexit
    11/16/2018

    A Regulation amending the founding Regulation of the European Banking Authority has been published in the Official Journal of the European Union. The Amending Regulation amends the EBA Regulation to change the seat of the EBA from London to Paris.

    The Amending Regulation enters into force on November 16, 2018 and will take effect on March 30, 2019.

    View the Amending Regulation (EU) 2018/1717.
  • European Central Bank Publishes Final First Chapter of Its Guide to Internal Models
    11/15/2018

    The European Central Bank has published the final first chapter of its guide to internal models. The Capital Requirements Regulation requires the ECB to assess and grant permission for banks directly supervised by the ECB to use internal models for credit risk, counterparty credit risk and market risk. The ECB's guide sets out how the ECB intends to approach the assessment of whether a firm meets the necessary requirements for the permission to be granted. This chapter is on general topics, comprising overarching principles for internal models, implementation of the internal ratings-based approach, internal model governance, internal validation and audit, model use, change management and third-party involvement. The ECB recently consulted on model-specific chapters, including for credit, market and counterparty credit risks.

    The ECB notes that the guide may need to be amended if the European Commission adopts a different version of the European Banking Authority's final Draft Regulatory Technical Standards on assessment methodology for the IRB approach.

    View the guide.

    View the feedback statement.
  • Three Central Banks Explore Advantages of Wholesale Central Bank Digital Currencies
    11/15/2018

    The Bank of England, the Bank of Canada and the Monetary Authority of Singapore have published a joint report entitled, "Cross-Border Interbank Payments and Settlements." Referring to current industry projects to address existing problems in cross-border payments affecting end-users, commercial banks and central banks, the report analyzes these issues and discusses proposed new models for processing cross-border transactions. The report sets out three models for cross-border payments and settlements and discusses the key considerations and dependencies of each model. Each model is then assessed against the existing identified challenges in cross-border payments.

    Model 1 is based on existing plans to enhance the current systems within and across jurisdictions, which is considered to be the baseline for discussions. Model 2 is based on an expanded role for domestic real-time gross settlement infrastructure, which would be "super-correspondents" in settling cross-border payments and would replace existing correspondent banks. Model 3 has three variations, all of which are based on cross-border payments between banks being settled with wholesale central bank digital currencies (W-CBDCs). The three variations are: (i) W-CBDCs that can be held and exchanged only in their home jurisdiction; (ii) W-CBDCs held and exchanged within and beyond their home jurisdictions; and (iii) a single universal W-CBDC backed by a basket of currencies issued by participating central banks.

    Read more.
  • UK Prudential Regulator Finalizes Supervisory Approach for New EU Securitization Framework
    11/15/2018

    The U.K. Prudential Regulation Authority has published a Policy Statement setting out its approach to supervision under the new EU securitization framework that will take effect from January 1, 2019. The PRA consulted on its proposals in May 2018. The incoming EU framework consists of: (i) the Securitization Regulation, which imposes general requirements for all EU securitization activity and outlines the criteria and process for designating certain securitizations as "Simple, Transparent and Standardised"; and (ii) revisions to the banking securitization capital framework within the Capital Requirements Regulation. Respondents to the PRA's consultation on its approach were largely supportive. The PRA has made some changes (outlined in the Policy Statement) to its consultation text in line with comments received.

    Read more.
  • Bank of England Writes to UK Firms on Upcoming Obligations for Internalized Settlement Reporting
    11/15/2018

    The Bank of England has published a letter sent by its Financial Market Infrastructure Directive to compliance officers of U.K. firms that may be affected by forthcoming obligations under the EU Central Securities Depositories Regulation to report internalized settlements from July 2019.

    The BoE considers that the firms likely to be subject to the CSDR's obligations are those with the regulatory permissions for safeguarding and administration of assets or arranging the same. Within this subset of regulated firms, an institution will be considered a settlement internalizer if it settles transfer orders on behalf of clients on its own account rather than through a Central Securities Depository. Settlement internalizers must submit reports to the BoE.

    Read more.
  • Financial Stability Board Publishes Upcoming Resolution Priorities for Banks, Insurers and CCPs
    11/15/2018

    The Financial Stability Board has published its 2018 resolution report, entitled "Keeping the pressure up," setting out: (i) the progress in implementing the FSB's resolution policies for CCPs and in the banking and insurance sectors; (ii) the next steps in monitoring and evaluating the effects of resolution reforms; and (iii) the actions and timelines for 2019 and beyond. The FSB highlights that, although substantial progress has been made, firms need to continue work to improve their resolvability, and authorities and lawmakers need to complete the reforms and implement them fully.

    The FSB report describes the priority areas for global systemically important banks, including the implementation of technical and operational capabilities to ensure that a resolution plan can be timely and effectively executed, if needed. Another key area is implementation of the total loss absorbing capacity (TLAC) requirements, in particular, internal TLAC. In June 2018, the FSB launched a call for feedback on the technical implementation of TLAC for G-SIBS to assess whether implementation aligns with the timelines and objectives set out in the TLAC Standard. The FSB will report on the outcomes of that review during 2019. Work will also be required to ensure (i) cross-border recognition of temporary stays on early termination rights in financial contracts; and (ii) continuity of access to financial market infrastructures and FMI intermediaries.

    Read more.
  • Financial Stability Board Discusses Financial Resources for CCP Resolution
    11/15/2018

    The Financial Stability Board has published a discussion paper on financial resources to support CCP resolution and the treatment of CCP equity in resolution. The FSB considers that further evidenced-based guidance is needed on this topic and the discussion paper is the first step in developing such guidance by the end of 2020. The FSB intends to use the practical experience of resolution planning that resolution authorities and Crisis Management Groups have gained to develop the guidance. The discussion paper outlines: (i) relevant considerations for evaluating whether a CCP's existing financial resources and tools are satisfactory for implementing the individual CCPs' resolution strategy, including a proposed five-step process and CCP-specific factors that warrant assessment; and (ii) factors that could steer authorities in their approaches to the treatment of CCP equity in resolution, including consideration of whether different ownership structures are relevant.

    Responses to the discussion paper should be submitted by February 1, 2019. The FSB notes that responses to the discussion paper will be used to develop proposed guidance which will be consulted on at the appropriate time.

    View the discussion paper.
  • UK Prudential Regulator Finalizes Changes to the Leverage Ratio Rules for Ring-Fenced Banks
    11/14/2018

    The U.K. Prudential Regulation Authority has published a Policy Statement on applying the U.K. leverage ratio to systemic Ring-fenced Bodies and reflecting the Systemic Risk Buffer. The SRB is one of the elements of the overall capital framework for U.K. banks and building societies. It will be applied by the PRA to individual institutions and introduced at the same time that ring-fencing comes into force in 2019. RFBs are banks that hold more than £25 billion in core deposits. They must separate their core retail banking business from their investment banking business by January 1, 2019.

    Read more.
  • UK Conduct Regulator Wants Improvements to Banks' Whistleblowing Arrangements
    11/14/2018

    The U.K. Financial Conduct Authority has published the outcome of its review of firms' whistleblowing arrangements. The FCA has reviewed how retail and wholesale banks have implemented its whistleblowing rules by looking at firms' policies and procedures, the role of the whistleblowers' champion, firms' whistleblowing annual reports and the relevant training arrangements.

    Both the FCA and the Prudential Regulation Authority published their whistleblowing rules in 2015 and the FCA extended certain of the requirements to U.K. branches of overseas banks in early 2017.

    The FCA has published its findings, including areas of good practices, areas for improvement and the FCA's expectations of firms' whistleblowing arrangements. The FCA urges firms to consider its findings and whether they need to take action to improve their whistleblowing arrangements.

    View the FCA's review webpage.
  • Draft EU-UK Withdrawal Agreement Published
    11/14/2018

    The European Commission and the U.K. government published a draft Withdrawal Agreement and an Outline Political Declaration on the framework for the future relationship between the EU and the U.K. The draft Withdrawal Agreement has been agreed between the negotiators and must still be ratified by the U.K. and EU27 leaders. The full Political Declaration on the future relationship is expected by the end of November 2018, provided the draft Withdrawal Agreement is ratified.

    The draft Withdrawal Agreement outlines how the U.K. will leave the EU and provides for the previously agreed transition period that would run from March 30, 2019 until December 31, 2020. It also provides for the agreements concerning the future relationship to be negotiated expeditiously with the objective of ensuring that the agreements apply from the end of the transition period. This timeframe is reiterated in the Outline Political Declaration. The negotiators have committed to report regularly on progress made on concluding the agreements governing the future relationship between the EU and the U.K.

    The Outline Political Declaration briefly sets out the principles agreed by the negotiators for the future relationship. The Outline confirms that the basis of the future relationship in financial services will be decision-making autonomy and equivalence. The EU and the U.K. are to strive to conclude equivalence assessments before the end of June 2020. The documentation is silent on whether there will be any changes to the processes around equivalency or any expansion to the categories of equivalences under U.K. or EU laws.

    Read more
  • Financial Stability Board Progress Report on Reforming Major Interest Rate Benchmarks
    11/14/2018

    The Financial Stability Board has published a progress report on ongoing reforms to major interest rate benchmarks. The FSB has been co-ordinating international reform work, through its Official Sector Steering Group, since 2014, when it made several recommendations aimed at addressing cases of attempted manipulation in relation to key IBORs and the decline in liquidity in certain interbank unsecured funding markets. The OSSG launched a third major initiative in 2016, to improve contract robustness to address risks of discontinuation of widely-used interest rate benchmarks. That initiative is being led by the International Swaps and Derivatives Association, which launched a consultation on fallback rates in July 2018.

    The progress report provides an update since the FSB's progress report in October 2017 and covers:
     
    1. Developments in Interbank Offered Rates, including discussion of the future of LIBOR.
    2. Identification of and transition to risk-free rates, where appropriate, for transactions denominated in USD, EUR, JPY, GBP, CHF, AUD, BRL, CAD, HKD, MXN, SGD and ZAR.
    3. The development of fallback rates to enhance contractual robustness.

    The FSB proposes to publish a further progress report in late 2019.

    View the progress report.

    View details of the October 2017 progress report.

    View details of ISDA's July 2018 consultation on fallback rates.

    View FSB statement welcoming ISDA's July 2018 consultation.
  • International Body Proposes Framework for Assessing Fund Leverage
    11/14/2018

    The International Organization of Securities Commissions has launched a consultation on a proposed framework to help assess leverage used by investment funds. The consultation follows a recommendation to IOSCO from the Financial Stability Board in its January 2017 report, "Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities." The FSB recommended, among other things, that IOSCO should identify and/or develop consistent measures of leverage in funds to facilitate more meaningful monitoring of leverage for financial stability purposes and help enable direct comparisons across funds and at a global level.

    Read more.
    TOPICS: FundsShadow Banking
  • European Commission Publishes Aspects of Contingency Plans For No Deal Brexit
    11/13/2018

    The European Commission has published a Communication establishing certain contingency action plans in preparation for a "no deal" Brexit. The Communication sets out certain actions that the EU is or is proposing to take in the event of a "hard" Brexit. In relation to financial services, the Commission states that it will adopt temporary and conditional equivalence decisions to avoid disruption to derivatives clearing and depositaries services. The decisions would "complement" recognition of U.K. financial market infrastructures. The Commission has also urged these entities to apply in advance for recognition from the European Securities and Markets Authority.

    The Commission reiterates that uncleared OTC derivatives contracts should remain valid and executable until maturity although, where one counterparty is based in the U.K., certain life-cycle events may trigger the need for an authorization or exemption.

    In the Communication, the European Commission further notes that the risks presented to financial services by a "no deal" Brexit have decreased significantly over time because of the action taken by firms to establish new entities or relocate entities and to transfer contracts. In particular, the Commission observes that insurance firms have taken steps to ensure that they can continue to provide services to their clients, including transferring contracts, setting up branches or subsidiaries and merging with firms established in the EU27.

    The Commission also encourages the European Supervisory Authorities to begin preparing cooperation arrangements with the U.K. financial regulators to provide for the exchange of information and supervisory cooperation.

    View the Communication.
  • EU Supervisory Authority Consults on Proposed Guidelines on Money Market Fund Reporting Requirements
    11/13/2018

    The European Securities and Markets Authority has launched a consultation on proposed Guidelines for Money Market Fund Managers, to assist them in complying with their obligations, under the Money Market Funds Regulation, to report information to the relevant national regulator of each MMF they manage. The reporting obligation applies on at least a quarterly basis (or annually for MMFs with total assets under management not exceeding Euro 100 million). The European Commission adopted Implementing Technical Standards in April 2018, which specify the content of a reporting template that will be developed for the information. The ITS have applied since July 21, 2018 and MMF managers must begin submitting reports under the MMF Regulation in the first quarter of 2020.

    Read more.
    TOPICS: FundsShadow Banking
  • EU Supervisory Authority Issues Updated Supervisory Briefing on MiFID II Suitability
    11/13/2018

    The European Securities and Markets Authority has published an updated version of its supervisory briefing on suitability. The original suitability briefing was published in December 2012 to provide guidance to EU national regulators on the suitability requirements under the original Markets in Financial Instruments Directive. The updated suitability briefing reflects the amended requirements introduced by the revised Markets in Financial Instruments Directive and takes into account the new version of ESMA's Suitability Guidelines that was published in May 2018.

    While the updated briefing is primarily aimed at national regulators, it should also assist market participants by providing indications of compliant implementation of the MiFID II suitability provisions.

    Read more.
    TOPIC: MiFID II
  • UK Legislation Published to Onshore Anti-Money Laundering and Counter-Terrorism Financing Legislation for Brexit
    11/13/2018

    HM Treasury has published a draft of the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will primarily be relevant for payment service providers, anti-money laundering/counter-terrorism financing supervisory authorities and firms that are regulated through the U.K.'s AML/CTF regime. The draft Regulations introduce no material policy changes. Their purpose is to correct deficiencies in U.K. law and retained EU law to ensure that the U.K. AML/CTF regime continues to function effectively after the U.K.'s withdrawal from the EU.

    The draft Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), which transposed into U.K. law the provisions of the EU Fourth Money Laundering Directive (4MLD). The draft Regulations also amend the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 and the revised EU Funds Transfer Regulation (Regulation (EU) 2015/847). This EU Regulation gives legal effect to Financial Action Task Force Recommendation 16, on the information accompanying electronic transfers of funds. Additionally, the draft Regulations revoke Commission Delegated Regulation (EU) 2018/1108, which sets out Regulatory Technical Standards for central contact points under 4MLD.

    Read more.
  • EU Final Draft Technical Standards and Technical Advice Published Governing Securitization Repositories and Data Access
    11/12/2018

    On November 12, 2018, ESMA published a series of documents delivering on some of its outstanding mandates to provide draft technical standards and technical advice to supplement the Securitization Regulation. The Securitization Regulation will apply directly across the EU from January 1, 2019. ESMA has been mandated to provide draft regulatory and implementing technical standards and technical advice to supplement a number of the Regulation’s provisions. ESMA has also published a statement on its near-term implementation of the Securitization Regulation, to assist market participants in understanding ESMA’s role and its progress on its deliverables.

    View ESMA's Final Report on securitization.

    View ESMA's Final Report on technical advice.
    TOPIC: Securities
  • EU Final Draft Technical Standards and Technical Advice Published Governing Securitization Repositories and Data Access
    11/12/2018

    The European Securities and Markets Authority has published a series of documents delivering on some of its outstanding mandates to provide draft technical standards and technical advice to supplement the Securitization Regulation (also known as the STS Regulation). The Securitization Regulation will apply directly across the EU from January 1, 2019. ESMA has been mandated to provide draft regulatory and implementing technical standards and technical advice to supplement a number of the Regulation's provisions. ESMA has also published a statement on its near-term implementation of the Securitization Regulation, to assist market participants in understanding ESMA's role and its progress on its deliverables.

    Read more.
    TOPIC: Securities
  • Eurozone's Single Resolution Board Publishes 2019 Work Programme
    11/12/2018

    The EU Single Resolution Board has published its 2019 Work Programme, setting out its priorities and principal tasks for the next year. The SRB is the resolution authority for all banking groups and entities as well as cross-border groups that are subject to direct prudential supervision by the European Central Bank (i.e., for banks within the Eurozone Banking Union).

    The SRB's work in 2019 will include, among other things, the following:
    • increasing the scope of banks with developed resolution plans and enhancing existing resolution plans to reflect the development of new or updated SRB policies;
    • the adoption of more than 100 group-level decisions on minimum requirement for own funds and eligible liabilities (MREL) and the determination of over 530 MREL targets for individual entities;
    • enhancing the analysis of potential impediments to resolvability of banks;
    • the development of better ICT solutions for crisis management, including establishing a dedicated team to assist individual Crisis Management Teams in implementing the improvements; and
    • the adoption of several new and updated SRB policies covering, for example, MREL decisions, resolvability assessments and operational continuity.

    The SRB expects a significant increase of the number of resolution plans for less significant institutions, the development of which falls within the remit of the Eurozone national regulators.

    View the SRB's 2019 Work Programme.
  • European Money Markets Institute Launches Second Consultation on Hybrid Methodology for Euribor
    11/12/2018

    The European Money Markets Institute has published a second consultation paper (dated October 17, 2018) on its proposals to introduce a hybrid determination methodology for the Euro Interbank Offered Rate (Euribor). EMMI is the administrator for Euribor, a major euro interest reference rate for unsecured interbank short-term lending and borrowing. Euribor was classed as a critical benchmark of systemic importance for financial stability by the European Commission in 2016.

    The consultation paper sets out a summary of EMMI's findings during the testing phase for the newly proposed hybrid methodology, which took place between May and July 2018, and provides details on EMMI's proposals for the different methodological parameters that were yet to be specified when EMMI's first consultation was issued in March 2018. The consultation paper seeks feedback from market participants on a number of questions on aspects of the proposed methodology.

    Read more.
  • Financial Stability Board Publishes Cyber Lexicon
    11/12/2018

    The Financial Stability Board has published the final Cyber Lexicon of terms related to cyber security and cyber resilience. The Lexicon is intended to assist the FSB, other international standard setting bodies (such as the Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions), authorities and the private sector to address threats to cyber security and adopt cyber resilience measures. The FSB has also published an overview of responses to the public consultation, summarizing the main issues that emerged during the FSB's consultation on a draft lexicon and the changes adopted to address them.

    Read more.
  • European Central Bank Publishes Final Guides for Capital and Liquidity Management
    11/12/2018

    The European Central Bank has published two finalized Guides, one on the internal capital adequacy assessment process (ICAAP) and the other on the internal liquidity adequacy assessment process (ILAAP). The ECB consulted on draft versions of the Guides between March and May 2018. The Guides, which are relevant to institutions within the Single Supervisory Mechanism, are designed to assist institutions in strengthening their ICAAPs and ILAAPs and encourage the use of best practices by explaining in greater detail the ECB's expectations.

    The ICAAP and ILAAP Guides each set out seven principles that have been derived from the relevant provisions of the Capital Requirements Directive and that will be considered, among other things, by the ECB in the assessment of each institution's ICAAP or ILAAP as part of the Supervisory Review and Evaluation Process. Frequently Asked Questions have also been published alongside the Guides, along with consultation responses received and a feedback statement.

    The ECB intends to use the guides to assess significant institutions' ICAAPs and ILAAPs from January 1, 2019.

    View the ICAAP Guide.

    View the ILAAP Guide.

    View the FAQs.

    View the consultation responses.

    View the feedback statement.
  • EU Countering Money Laundering By Criminal Law Directive Will Apply From December 2020
    11/12/2018

    The EU Countering Money Laundering by Criminal Law Directive has been published in the Official Journal of the European Union. The Directive will complement the Fifth Money Laundering Directive, which was adopted in May 2018.

    The U.K., Ireland and Denmark have not adopted the new Directive. In the U.K., this mirrors the approach taken by the U.K. in relation to EU criminal sanctions for market manipulation where it has implemented its own national regime.

    The new Directive will enter into force on December 3, 2018. EU member states that have adopted the Directive must transpose the new provisions into national law by December 3, 2020.

    Read more.
  • EU Legislation Published to Update Supervisory Reporting Requirements
    11/09/2018

    A Commission Implementing Regulation supplementing the Capital Requirements Regulation has been published in the Official Journal of the European Union. The Implementing Regulation amends the existing Implementing Regulation ((EU) No 680/2014) to reflect the gradual supplementation and amendment of elements of the CRR reporting requirements by the adoption of further Regulatory Technical Standards. The Amending Regulation was adopted by the European Commission on October 9, 2018. It amends the existing Implementing Regulation to set out:
    • additional requirements relating to prudent valuation adjustments of fair-valued positions;
    • additional requirements to accommodate the reporting on securitization positions subject to the revised securitization framework; and
    • minor changes to the reporting requirements on the geographical distribution of exposures.

    The Amending Regulation will enter into force on November 29, 2018 and will apply directly across the EU from December 1, 2018.

    View Commission Implementing Regulation (EU) 2018/1627.
  • Statement by EU Supervisory Authority Confirms No EU Transitional Measures For UK Credit Rating Agencies and Trade Repositories on a Hard Brexit
    11/09/2018

    The European Securities and Markets Authority has issued a public statement urging customers of credit rating agencies and trade repositories to prepare for a "no deal" Brexit. The European Market Infrastructure Regulation requires derivatives subject to the reporting obligation to be reported to either a registered trade repository established in the EU or a recognized third-country trade repository. The 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 ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. Without the EU putting in place a temporary regime (as the U.K. is doing), U.K. CRAs and trade repositories will lose their EU registration when the U.K. leaves the EU on a "hard Brexit." ESMA reiterates that all market participants must ensure that they continue to comply with their obligations under EMIR, the CRA Regulation and other EU legislation and should monitor the Brexit-related public statements issued by CRAs and trade repositories.

    Read more.
  • UK Financial Conduct Authority Issues Direction For Post-Brexit Temporary Permissions Regime
    11/09/2018

    The U.K. Financial Conduct Authority has issued a Direction detailing how an EEA firm currently passporting into the U.K. should notify it of the firm's intention to benefit from the Temporary Permissions Regime in the event of a "no deal" Brexit. The Direction was made under the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (made on November 6, 2018). The Regulations provide for a Temporary Permissions Regime for firms that are currently authorized to carry on a regulated activity in the U.K. under an EEA passporting right that have either applied for U.K. authorization prior to the U.K. withdrawal date or have notified the relevant U.K. regulator of their intention to continue carrying on passported activities. Temporary permissions would deem firms within the regime as authorized for their current activities for a maximum of three years, subject to a power for HM Treasury to extend the regime's duration by increments of 12 months.

    As with the PRA's Direction (issued on November 7, 2018), the FCA requires firms to submit the Temporary Permission Notification Form using Connect between January 7, 2019 and March 28, 2019.

    View the FCA's Direction.

    View details of the PRA's Direction.
  • EU Supervisory Authority Issues Call for Evidence on Periodic Auctions for Equity Instruments
    11/09/2018

    The European Securities and Markets Authority has published a call for evidence on periodic auctions for equity instruments. ESMA wishes to gather more information on the functioning of so-called frequent batch auction trading systems. Frequent batch auctions for equities have rapidly gained market share since the introduction of the Double Volume Cap mechanism under the revised Markets in Financial Instruments package. This has given rise to concerns that this trading may be used as alternative to trading under the DVC waivers and/or as a way to avoid the pre-trade transparency requirements of systematic internalisers. ESMA has conducted a stock-take, assessing seven frequent batch auction systems operating in the EU and sets out its findings in the call for evidence.

    In the call for evidence, ESMA distinguishes conventional periodic auctions from frequent batch auctions and outlines the key characteristics of frequent batch auction systems operating in the EU. ESMA sets out its observation of a rising market share for equity trading on frequent batch auctions and considers developments in equity trading since the application of MiFID II. It seeks input on a range of questions focused on these issues.

    Responses to the call for evidence are invited by January 11, 2019. The call for evidence will be of particular interest to trading venues and investment firms trading in equity instruments, but ESMA also welcomes responses from any other market participants including trade associations and industry bodies, institutional and retail investors.

    ESMA will use the feedback to the call for evidence to assess whether and to what extent frequent batch auction systems can be used to circumvent the MiFID II transparency requirements and will develop appropriate policy measures if necessary.

    View the call for evidence.
    TOPIC: MiFID II
  • EU Supervisory Authority Will Extend Binary Options Ban Into 2019
    11/09/2018

    The European Securities and Markets Authority has announced that it proposes to renew the prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. 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 is renewing the prohibition on binary options because it considers that a significant investor protection concern remains. The measure will be renewed on the same terms as the previous renewal decision that has applied from October 2, 2018 and that will expire on January 1, 2019.

    ESMA's Board of Supervisors agreed on the renewal of intervention measures on November 7, 2018. ESMA will publish an official notice on its website in the coming weeks. The new Decision will then be published in the Official Journal of the European Union and will start to apply from January 2, 2019 for a period of three months.

    View ESMA's announcement.

    View details of the prohibition expiring on January 1, 2019.
  • EU Proposals Aim to Avoid Duplicative Information Requirements on Investment Managers
    11/08/2018

    The Joint Committee of the European Supervisory Authorities have launched a consultation on amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products.

    Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts until December 31, 2019 management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. The UCITS Directive requires these entities to provide investors with a Key Investor Information Document. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs are proposing to amend the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

    Read more.
  • Draft EU Guidelines on Supervisory Cooperation on Anti-Money Laundering and Countering the Financing of Terrorism
    11/08/2018

    The Joint Committee of the European Supervisory Authorities have launched a consultation on draft joint guidelines on the cooperation and information exchange between national regulators supervising banks and other financial institutions for compliance with Anti-Money Laundering and Countering the Financing of Terrorism rules. The Fourth Money Laundering Directive requires that EU member states allow, without undue restriction, the exchange of information and provision of assistance between national regulators. The ESA's proposed guidelines aim to set out how that can be achieved in practice. The ESAs are proposing that a college of supervisors should be established where a financial institution is supervised in three or more EU member states. The draft guidelines set out rules on the establishment and operation of the colleges. For firms that do not require a college but which operate in two member states, the ESAs propose a process for the bilateral exchange of information between national regulators.

    The consultation closes on February 8, 2019.

    View the consultation paper.
  • US Securities and Exchange Commission Charges Digital Asset Trading Platform Founder for Operating Unregistered Exchange
    11/08/2018

    The Securities and Exchange Commission has accused the founder of a digital asset trading platform of failing to register as a national securities exchange. Without admitting or denying the charges, the founder agreed to pay $300,000 in disgorgement and a $75,000 penalty, and to cease and desist from future violations of Section 5 of the Securities Exchange Act of 1934.

    The SEC said that the trading platform facilitated secondary market trading of ERC20 tokens, which are a type of digital asset issued and distributed on the Ethereum blockchain. The platform provided a marketplace that matched buyers and sellers of digital assets through the use of its order book, using smart contracts to validate, confirm and execute orders.

    Read more.
    TOPICS: EnforcementFinTech
  • Proposed Exemption From the EU Clearing Obligation for OTC Derivatives Novated to EU Counterparties in Preparation For a "No Deal" Brexit
    11/08/2018

    The European Securities and Markets Authority has proposed the introduction of a 12-month exemption from the clearing obligation to facilitate the novation of uncleared OTC derivative contracts to EU counterparties in the event of a "no deal" Brexit. The European Market Infrastructure Regulation imposes a clearing obligation on EU firms that are counterparties to certain OTC derivatives contracts. The clearing obligation applies to Interest Rate Swaps denominated in seven currencies (EUR, GBP, JPY, USD, NOK, PLN and SEK) and to two classes of credit default swap indices (iTraxx Europe Main and iTraxx Europe Crossover). The obligation to clear OTC IRS denominated in all seven currencies is in force for clearing members of EU CCPs as well as large financial counterparties and alternative investment funds. The IRS clearing obligation will apply to small financial counterparties and AIFs from June 21, 2019 and to non-financial counterparties from December 21, 2018 for IRS denominated in the G4 currencies, and from August 9, 2019 for IRS denominated in CZK, DKK, HUF, NOK, SEK and PLN. The CDS clearing obligation is in force for clearing members of EU CCPs, large financial counterparties and AIFs. It applies to non-financial counterparties from May 9, 2019 and to small financial counterparties and AIFs from June 21, 2019.

    Read more.
  • UK Legislation Published for Brexit on Bank of England's Functions
    11/07/2018

    HM Treasury has laid before Parliament the draft Bank of England (Amendment) (EU Exit) Regulations 2018, together with a draft explanatory memorandum.

    The draft Regulations make amendments to the Bank of England Act 1998, the Financial Services Act 2012 and related secondary legislation to ensure that the constitution, responsibilities and functions of the Bank of England continue to be clearly defined after exit day, including in a "no-deal" scenario. In the explanatory memorandum accompanying the draft Regulations, HM Treasury confirms that the draft Regulations make only technical changes to existing legislation to ensure that it continues to operate effectively once the U.K. leaves the EU. This includes amendments to information sharing and notification requirements and amendments to certain definitions so that they work in the U.K. after exit day. Amendments to secondary legislation include necessary adjustments to provisions on capital buffers and amounts of cash ratio deposits that certain financial services firms must hold with the BoE.

    Read more.
  • EU Legislation to Update Technical Standards for Resolution Reporting
    11/07/2018

    A Commission Implementing Regulation supplementing the EU Bank Recovery and Resolution Directive has been published in the Official Journal of the European Union. The Implementing Regulation sets out Implementing Technical Standards on the information to be provided to resolution authorities to enable them to draw up and implement resolution plans for credit institutions or investment firms. Reflecting experience gained by resolution authorities in resolution planning, the Implementing Regulation repeals and replaces the existing Implementing Technical Standards set out in Regulation (EU) 2016/1066, which specifies the procedure and introduced a minimum set of templates for the provision of information to resolution authorities.

    The Implementing Regulation introduces a single data point model, as is the practice in supervisory reporting, and introduces common validation rules to safeguard the quality, consistency and accuracy of the data items reported by institutions. Detailed common validation rules will be published electronically by the European Banking Authority on its website.

    Read more.
  • UK Prudential Regulation Authority Issues Direction for Temporary Permissions Regime
    11/07/2018

    The Prudential Regulation Authority has issued a Direction setting out how an EEA firm currently passporting into the U.K. should notify the PRA if the firm wants to benefit from the Temporary Permissions Regime in the event of a "no deal" Brexit. The Direction was made under the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (made on November 6, 2018). The Regulations provide for a Temporary Permissions Regime for firms that are currently authorized to carry on a regulated activity in the U.K. under an EEA passporting right that have either applied for U.K. authorization prior to the U.K. withdrawal date or have notified the relevant U.K. regulator of their intention to continue carrying on passported activities. Temporary permission would deem firms within the regime as authorized for their current activities for a maximum of three years, subject to a power for HM Treasury to extend the regime's duration by increments of 12 months.

    The PRA Direction requires firms to submit the Temporary Permission Notification Form using Connect between January 7, 2019 and March 28, 2019.

    View the PRA's Direction.

    View the EEA Passport Rights Regulations 2018.
  • UK Prudential Regulator Fines Senior Managers For Failing to be Open and Cooperative
    11/07/2018

    The Prudential Regulation Authority has announced that it has imposed financial penalties on two senior managers for failing to be open and cooperative about an enforcement action into the U.K. subsidiary of a Japanese bank by the New York Department of Financial Services in 2014. The PRA's enforcement action follows the financial penalties that it imposed in 2017 on this entity and an affiliate for breaching Fundamental Rules 6 and 7 of the PRA Rulebook in that the firms had (i) failed to communicate relevant information about the settlement with the DFS; and (ii) failed to inform the PRA of the potential implications of the DFS matter for certain senior managers.

    The latest fines have been imposed on the former Chair and a former Non-Executive Director for failing to inform the PRA that a senior manager might be restricted from conducting U.S. banking activities as a result of the action by the DFS. The PRA only learnt about the issue after publication of the DFS consent order. This meant that the PRA could not assess the implications or supervise any contingency planning.

    Read more.
  • Bank of England Provides Further Guidance on Settlement Finality Designation Post-Brexit
    11/06/2018

    The Bank of England has published the "Dear CEO" letter that it has sent to the Chief Executive Officers of EU CCPs, central securities depositaries and payment systems that are currently designated under the EU Settlement Finality Directive. The designation of these systems is automatically recognized in the U.K. under the SFD framework for automatic recognition, but the U.K. will fall outside the EU framework upon Brexit.

    The "Dear CEO" letter follows an earlier letter issued by the BoE in July 2018 and the publication, by HM Treasury, of a draft of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2018 on October 31, 2018. The draft Regulations will, once in force, empower the BoE to grant permanent designation to non-U.K. (including EU) systems that are not governed by U.K. law. They also establish a temporary designation regime for EU systems that are currently designated under the SFD.

    In the letter, the BoE sets out further details of the permanent designation of non-U.K. systems post-Brexit. It also sets out how EU systems can go about applying to enter the temporary designation regime in a "no deal" scenario (where the U.K. exits the EU without a ratified Withdrawal Agreement) in order to continue to benefit from U.K. SFD protection until the permanent designation process is complete.

    Read more.
  • EU National Regulators To Confirm If They Intend to Comply With MiFID II Suitability Guidelines
    11/06/2018

    The European Securities and Markets Authority has published on its website the official translations of its revised Guidelines on aspects of the suitability requirements under the revised Markets in Financial Instruments Directive.

    ESMA published the finalized Guidelines in May 2018, following a consultation between July and December 2017. The finalized Guidelines largely confirm ESMA's previous 2012 Guidelines on MiFID I, but have a broader scope and ESMA has added clarifications and refinements where necessary.

    Now that the Guidelines have been translated into the official EU languages and published on ESMA's website, national regulators will have a two-month period (expiring on January 6, 2019) in which to notify ESMA whether they comply or intend to comply with the guidelines. National regulators should state their reasons for non-compliance where they do not comply or do not intend to comply.

    Read more.
    TOPIC: MiFID II
  • Brexit Legislation Published Establishing a Temporary Permissions Regime for EEA Firms Passporting into the UK
    11/06/2018

    The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 were made on November 6, 2018. The Regulations provide, among other things, for a Temporary Permissions Regime for firms that are currently authorized to carry on a regulated activity in the U.K. under an EEA passporting right that have either applied for U.K. authorization prior to the U.K. withdrawal date or have notified the relevant U.K. regulator of their intention to continue carrying on passported activities. The Regulations come into force on November 7, 2018 except for the following provisions, which come into force on exit day:
    • Regulation 2 (Repeal of passport rights, etc);
    • Regulation 3 (Consequential amendments);
    • Regulation 4 (Saving provision: tax); and
    • Regulation 24 (Financial Services Compensation Scheme - modifications of Part 15 of the Financial Services and Markets Act 2000).

    View the EEA Passport Rights Regulations 2018.

    View details of the draft regulations.
  • Technical Standards Under the EU Benchmarks Regulation to Apply From January 2019
    11/05/2018

    A series of ten Commission Delegated Regulations, comprising all of the Regulatory Technical Standards to supplement the EU Benchmarks Regulation, has been published in the Official Journal of the European Union.

    The Benchmarks Regulation, which took effect directly across the EU in January 2018, sets out the authorization and registration requirements for benchmark administrators, including third-country entities, and the requirements for governance and control of administrators. It provides for different categories of benchmarks depending on the risks involved, imposes additional requirements on benchmarks considered to be "critical" and gives powers to national regulators to mandate, under certain conditions, contributions to or the administration of critical benchmarks. The RTS outline the behaviors and standards expected of administrators of and contributors to benchmarks. Draft Commission Delegated Regulations setting out the RTS were adopted by the European Commission in July 2018.

    All of the Commission Delegated Regulations will enter into force on November 25, 2018 and they will apply directly across the EU from January 25, 2019.

    Read more.
    TOPIC: Securities
  • US Commodity Futures Trading Commission Adopts Permanent $8 Billion Swap Dealer De Minimis Registration Threshold
    11/05/2018

    The Commodity Futures Trading Commission has unanimously voted to adopt a final rule that would permanently set the swap dealer de minimis registration threshold at $8 billion. Absent further action by the CFTC, the de minimis threshold was previously scheduled to drop to $3 billion on December 31, 2019.

    Under the final rule, as under current requirements, firms with swap dealing activity below the aggregate gross notional amount (AGNA) threshold of $8 billion over the previous 12 months would be exempt from the CFTC's swap dealer registration requirements. The CFTC said its analysis concluded that the $8 billion threshold subjects approximately 98% of swap transactions to swap dealer regulations. In the CFTC's determination, a $3 billion threshold would only subject a small number of additional swap transactions to such regulation, but would likely decrease swap market liquidity.

    The CFTC had also previously proposed several other measures in respect of the de minimis threshold, such as excluding swaps of insured depository institutions made in connection with loans from a firm's AGNA calculation. Although the CFTC did not adopt any of these additional proposals in the final rule, CFTC Chairman J. Christopher Giancarlo said he will direct CFTC staff to continue their analysis of these measures and other issues raised in comments on the rule.

    View the final rule.

    View the CFTC's fact sheet on the final rule.

    View CFTC Chairman Giancarlo's statement.

    View CFTC Commissioner Dan Berkovitz's statement.
    TOPIC: Derivatives
  • UK Competition and Markets Authority Consults on Draft Definitions in Investment Consultants Market Investigation
    11/02/2018

    The U.K. Competition and Markets Authority has published a consultation entitled "Draft definitions of Investment Consultancy services and Fiduciary Management for the purposes of potential remedies," under its Market Investigation into these sectors. The CMA is in the process of reviewing the submissions made in response to the Provisional Decision Report it published in July 2018.

    The consultation paper contains working draft definitions of "investment consultancy services" and "fiduciary management services" for the purposes of the remedies that the CMA may impose in any Order following the publication of its final report. The CMA seeks only high-level comments on the draft decisions. It proposes to consult separately in due course on any draft Order it may make.

    Comments on the consultation are invited by November 9, 2018.

    The CMA's final report on its Market Investigation is currently scheduled for publication in December 2018.

    View the consultation paper.

    View details of the July 2018 Provisional Decision Report.
    TOPIC: Competition
  • UK Regulator Highlights Role of Remuneration Committee Chair As a Senior Manager
    11/01/2018

    The U.K. Financial Conduct Authority has published a letter (dated August 20, 2018) addressed to the Chair of the Remuneration Committee of banks and large investment firms (investment firms with total assets over £50 billion). The letter informs the Chair of how the FCA intends to assess the remuneration policies and practices of firms in 2018/19. Moreover, it sets out the impact of that approach for the Chair of the Remuneration Committee as a Senior Manager under the Senior Managers and Certification Regimes. The Chair of the Remuneration Committee of in-scope firms holds FCA Senior Manager Function 12. The FCA notes that its supervisors will be interacting with the Chair of the Remuneration Committee to ascertain how the Chair has determined that their firm's policies and practices promote the right behavior. The discussions will include an assessment of how any issues from the 2017/18 remuneration round have been addressed. The FCA also highlights that a Chair of the Remuneration Committee should be satisfied that the level of ex post adjustments are appropriate and be capable of providing reasons for these adjustments. In addition, the FCA is adopting the same approach as the Prudential Regulation Authority and will no longer provide a non-objection statement to the proposed communication or distribution of variable remuneration awards by banks and large investment firms.

    View the letter.

    View details of the PRA's approach to the latest remuneration round.
  • UK Conduct Regulator Bans Former LIBOR Submitter From Performing Any Regulated Activity
    11/01/2018

    The U.K. Financial Conduct Authority has published the Final Notice (dated October 30, 2018) that it issued to a former employee of a major international bank, prohibiting him from performing any function relating to any regulated activity carried on by any authorized or exempt person, or exempt professional firm. The individual was convicted in June 2016 of conspiracy to defraud for manipulation of the U.S. Dollar LIBOR and sentenced to four years' imprisonment. The conviction related to misconduct between 2005 and 2007.

    The FCA has concluded that the individual's criminal conviction for an offense of dishonesty, involving financial crime and market manipulation, demonstrates that he is not fit and proper to perform functions related to regulated activities. It considers that, while the misconduct occurred over ten years ago, its seriousness and the severity of the risk which the individual poses to consumers and to confidence in the financial system are such that it is appropriate to impose a prohibition order.

    View the Final Notice.
    TOPIC: Enforcement
  • UK Legislation Published to Preserve Settlement Finality Designation Post-Brexit
    10/31/2018

    HM Treasury has published a draft of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2018. These draft Regulations introduce changes across various pieces of legislation relevant to financial market infrastructure to implement Brexit, namely the Settlement Finality Regulations, the Companies Act 1989, the Financial Collateral Arrangements (No.2) Regulations and the Banking Act 2009, so that U.K. domestic law concerning financial market infrastructure insolvency can continue to operate effectively after the U.K. leaves the EU.

    The draft Regulations are designed to maintain legal certainty for EU systems that conduct business with U.K. participants, by providing for the continuation of U.K. settlement finality protections currently provided under the Settlement Finality Directive.

    Read more.
  • EU Authority Calls for Non-Enforcement of Impending Clearing Obligation for Intragroup Transactions and Non-Financial Counterparties
    10/31/2018

    The European Securities and Markets Authority has issued a statement on the impending clearing obligation under the European Market Infrastructure Regulation. The statement is also relevant to the trading obligation under the Markets in Financial Instruments Regulation which is triggered by the EMIR clearing obligation.

    EMIR provides an exemption from the clearing obligation for intragroup transactions with a third-country group entity where one of the counterparties is a third-country group entity and there is an equivalence decision in respect of the third country in which it is situated. An equivalence decision would enable parties that are subject to both the EU and a third country's clearing obligation to comply only with one jurisdiction's requirements, but no equivalence decisions have been made to date for these purposes.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Prudential Regulator Publishes Information Pack on Ring-fencing Reporting Requirements
    10/31/2018

    The U.K. Prudential Regulation Authority has published an information document entitled "Ring-fencing: Summary of regulatory reporting requirements." The document summarizes the regulatory reporting and reporting system requirements for ring-fencing that will apply to U.K. banking groups within the scope of the U.K.'s structural reform requirements coming into force on January 1, 2019. The information document is designed to assist firms that must submit ring-fencing regulatory returns.

    The PRA states that the information document is not intended to supersede the PRA Rulebook, the regulatory reporting and the structural reform sections of the Bank of England website and relevant and applicable published PRA policy. Affected firms should also continue to refer to these sources to determine their regulatory obligations.

    View the information document.
  • US Securities and Exchange Commission Issues Non-Enforcement Position Regarding Security-Based Swap Business Conduct Rules
    10/31/2018

    The Securities and Exchange Commission has issued a non-enforcement position providing market participants, for a five-year period, with alternative means of compliance with certain business conduct standards for security-based swap dealers and major security-based swap participants (SBS Entities).

    Although the SEC has adopted a set of business conduct standards for SBS Entities, compliance with those rules is not yet required, pending finalization of certain other rules and implementation of registration of SBS Entities. The SEC issued the statement, in advance of implementation, to address market participants' concerns regarding compliance difficulties presented by differences between the SEC's business conduct standards and those of the Commodity Futures Trading Commission, which are applicable to swap transactions with swap dealers.

    Read more.
    TOPIC: Derivatives
  • UK Post-Brexit Legislation Published to Onshore the EU Payment Accounts Directive for Brexit
    10/31/2018

    HM Treasury has published a draft of the Payment Accounts (Amendment) (EU Exit) Regulations 2018, along with explanatory information.

    The draft Regulations will amend the U.K. Payment Accounts Regulations 2015, which implemented the EU Payment Accounts Directive in the U.K., to remove references to EU institutions and to remove requirements which were intended to improve the functioning of the EU's internal market.

    The draft Regulations will affect all Payments Service Providers that offer payment accounts, and, in particular, the U.K.'s nine designated providers of basic bank accounts. Consumers of payment accounts will also be affected, in particular those who hold basic bank accounts. HM Treasury states that it expects the changes for payment account providers and consumers to be minimal.

    Read more.
  • UK Legislation Published to Onshore the EU Venture Capital Funds and Social Entrepreneurship Funds Regulations for Brexit
    10/31/2018

    HM Treasury has published the draft Venture Capital Funds (Amendment) (EU Exit) Regulations 2018 and the draft Social Entrepreneurship Funds (Amendment) (EU Exit) Regulations 2018, along with explanatory information. HM Treasury is also preparing draft Long-term Investment Funds (Amendment) (EU Exit) Regulations 2018 and will publish these in due course.

    These draft "onshoring" statutory instruments will amend deficiencies in the retained versions of the following directly applicable EU Regulations:
    • the European Venture Capital Funds (EuVECA) Regulation, which governs funds that invest into small and medium-sized enterprises;
    • the European Social Entrepreneurship Funds (EuSEF) Regulation, which governs funds that invest into social investments; and
    • the European Long-term Investment Funds (ELTIF) Regulation, which governs funds that invest into infrastructure and other long-term projects.
    Read more.
  • European Banking Authority Final Guidelines on Managing Non-Performing and Forborne Exposures
    10/31/2018

    The European Banking Authority has published a final report setting out finalized Guidelines on management of non-performing exposures (NPEs) and forborne exposures (FBEs). The EBA consulted on a draft of the Guidelines in March 2018. The aim of the Guidelines is to help to reduce NPEs on banks' balance sheets by providing supervisory guidance to ensure that credit institutions effectively manage NPEs and forborne exposures (FBEs) on their balance sheets.

    The final Guidelines cover: (i) key elements for developing and implementing an NPE strategy; (ii) the key elements of governance and operations in relation to an NPE workout framework; (iii) governance and operations in relation to FBEs; (iv) governance and operations for NPE recognition; (v) NPE impairment measurement and write-offs; (vi) collateral valuation of immovable and movable property; and (vii) supervisory evaluation of management of NPEs and FBEs.

    The Guidelines will apply from June 30, 2019. Credit institutions should calculate their NPL ratios using the reference date of December 31, 2018.

    View the final report.

    View details of the EBA's consultation on the Guidelines.
  • UK Prudential Regulator Updates Approach Document on Banking Supervision
    10/31/2018

    The U.K. Prudential Regulation Authority has published an updated version of its document entitled "The Prudential Regulatory Authority's approach to banking supervision." The document replaces the previous version that was dated March 2016.

    In the latest update, the PRA has removed duplicative information and replaced some text with links to information contained in legislation or other material on the PRA's or Bank of England's website. The update includes a new foreword by the PRA's Chief Executive Officer, Sam Woods.

    The update includes two new chapters, on identifying the risks to the PRA's objectives and on how the PRA tailors its supervisory approach. A number of new sections to existing chapters have also been added, covering safety and soundness and the stability of the financial system, the PRA's regulatory principles and operational resilience. Further detail in areas such as capital and resolvability is also added.

    View the Updated Approach Document.
  • EU Contracts for Differences Product Intervention Measures Extended
    10/31/2018

    The European Securities and Markets Authority Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients has been published in the Official Journal of the European Union. ESMA announced on September 28, 2018 that the existing restriction would be extended and would include an additional reduced character risk warning because CFD providers have experienced technical difficulties in using the risk warnings due to the character limitations imposed by third-party marketing providers. The CFD Decision applies directly across the EU from November 1, 2018 for three months.

    ESMA extended the temporary product intervention prohibiting the marketing, distribution and sale of binary options to retail investors for a further three months from October 2, 2018, although certain types of binary options were excluded from the scope of the prohibition because ESMA considers that those binary options are less likely to present a significant investor protection concern. Both of ESMA's product intervention measures are made using powers under the Markets in Financial Instruments Regulation.

    View the Decision.

    View details of the extension of the ban relating to binary options.
  • UK Crypto-Assets Task Force Outlines the Path to Crypto-Asset Regulation
    10/30/2018

    The U.K. Crypto-Assets Task Force has published its Final Report. Established in March 2018 by the U.K. Chancellor of the Exchequer as part of the U.K. government's FinTech Sector Strategy, the Task Force comprises representatives from HM Treasury, the U.K. Financial Conduct Authority and the Bank of England.

    The Task Force engaged with over 60 firms and other stakeholders to seek their views on topics including: the trajectory of the industry, the risks, benefits and underlying economic value of crypto-assets and the U.K.'s future regulatory approach. Stakeholders were of the view that there is a lack of regulatory clarity in the U.K. and that regulation should be introduced to support the legitimate players in the crypto-assets market. It is also crucial in mitigating risks. There were also calls for regulatory and tax frameworks to be aligned.

    Read more.
    TOPIC: FinTech
  • EU Amending Legislation Published for Liquidity Coverage Requirement
    10/30/2018

    An Amending Regulation supplementing the Capital Requirements Regulation has been published in the Official Journal of the European Union, following its adoption in July 2018 by the European Commission. The Amending Regulation, which relates to the Liquidity Coverage Requirement for credit institutions, makes changes to the existing Delegated Regulation on the LCR with the objective of improving its practical application. The existing Delegated Regulation sets out detailed requirements on the LCR and specifies which assets are to be considered as liquid (so-called high quality liquid assets) and how the expected cash outflows and inflows over a 30-day stressed period are to be calculated.

    The Amending Regulation makes the following changes:
    • full alignment of the calculation of the expected liquidity outflows and inflows on repurchase agreements, reverse repurchase agreements and collateral swaps transactions with the international liquidity standard developed by the Basel Committee on Banking Supervision;
    • treatment of certain reserves held with third-country central banks;
    • waiver of the minimum issue size for certain non-EU liquid assets;
    • the application of the unwind mechanism for the calculation of the liquidity buffer; and
    • integration in the existing Delegated Regulation of the new criteria for simple, transparent and standardized securitizations.

    The Amending Regulation will enter into force on November 19, 2018 and will apply directly across the EU from April 30, 2020.

    View the Amending Regulation.
  • EU Amending Legislation Published on Duties of Third-Party Custodians Safe-Keeping Fund Assets
    10/30/2018

    Amending Delegated Regulations on the safe-keeping duties of depositaries, supplementing the Alternative Investment Fund Managers Directive and the Undertakings for Collective Investment in Transferable Securities Directive, have been published in the Official Journal of the European Union.

    The amending Delegated Regulations were adopted by the European Commission in July 2018. They amend existing delegated regulations under AIFMD and UCITS relating to the safekeeping of AIF and UCITS clients' assets respectively, to ensure a more uniform approach is adopted across the EU. The amendments clarify that where a depositary for an AIF or UCITS delegates safe-keeping functions to a third party custodian, the clients' assets must be segregated at the level of the delegate (i.e. from the delegate's own assets but not from those of its other clients). This should prevent interpretation of the segregation obligations as requiring separate accounts per depositary and per type of fund at each level of the custody chain. The respective Delegated Regulations set out how that obligation should be fulfilled to ensure a clear identification of assets belonging to a particular AIF or UCITS and the protection of assets in the event of the depositary or custodian entering insolvency.

    The amending Delegated Regulations enter into force on November 19, 2018 and will apply directly across the EU from April 1, 2020.

    View the amending Delegated Regulation under AIFMD ((EU) 2018/1618).

    View the amending Delegated Regulation under UCITS ((EU) 2018/1619).
    TOPIC: Funds
  • European Commission Adopts Revised Implementing Standards for Resolution Reporting
    10/29/2018

    The European Banking Authority announced on October 29, 2018 that it acknowledged the European Commission's adoption of a draft Commission Implementing Regulation setting out revised Implementing Technical Standards on the procedures and standard forms and templates to be used to provide information for the resolution plans of credit institutions and investment firms. The Implementing Regulation supplements the Bank Recovery and Resolution Directive and will repeal the existing ITS, reflecting the evolution in the policy and practices applied by authorities in the development of resolution plans for financial institutions. The EBA submitted its final report with final revised draft ITS to the European Commission in April 2018.

    Read more.
  • UK Legislation in Force Empowering Regulators to Amend EU Binding Technical Standards For Brexit
    10/26/2018

    The Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 were made on October 25, 2018 and entered into force on October 26, 2018.

    The Regulations delegate power under the EU (Withdrawal) Act 2018 to the Bank of England, the Prudential Regulation Authority, the Financial Conduct Authority and the Payment Systems Regulator to fix deficiencies in EU Binding Technical Standards and regulators’ rules in advance of exit day, so that the BTS and regulators' rules function effectively after Brexit. The Regulations also establish the statutory basis on which those regulators will continue to maintain the relevant BTS after exit. The Schedule to the Regulations lists all the BTS that will be "onshored" and, for each, allocates joint or individual responsibility among the regulators.

    The version of the Regulations that has entered into force contains only minor changes from the draft version that was published in July 2018.

    View the Regulations (S.I. 2018/1115).

    View the explanatory memorandum.
  • EU Supervisory Authorities Propose Revisions to Implementing Technical Standards for Mapping of External Credit Ratings
    10/26/2018

    The Joint Committee of the European Securities Authorities (that is, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) has published a consultation paper setting out proposed revisions to Implementing Technical Standards on the mapping of External Credit Assessment Institutions' credit assessments under the Capital Requirements Regulation.

    The proposed revisions will amend the existing Implementing Regulation ((EU) 2016/1799), which sets out how ECAIs' credit assessments should be "mapped" to credit quality steps for the purposes of calculating capital requirements. The proposed amendments reflect the result of a monitoring exercise on the adequacy of mappings, which necessitates amendments related to: (i) the re-allocation of the credit quality steps for two ECAIs; and (ii) changes in credit rating scales/types for ten ECAIs. The consultation webpage also contains mapping reports for each of the 11 ECAIs concerned.

    Comments on the consultation are invited by December 31, 2018. Respondents are asked to provide comments via the "Send your comments" button on the EBA's consultation webpage.

    View the consultation paper.

    View the EBA's consultation webpage.
  • Bank of England and UK Prudential Regulator Consult on Approach to Onshoring EU Financial Services Legislation for Brexit
    10/25/2018

    The Bank of England and the U.K. Prudential Regulation Authority have launched a joint consultation paper entitled "The Bank of England’s approach to amending financial services legislation under the European Union (Withdrawal) Act 2018." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the PRA on October 25, 2018.

    Read more.
  • "Dear CEO" Letter From UK Prudential Regulator Updates PRA-Regulated Firms on Brexit
    10/25/2018

    The U.K. Prudential Regulation Authority has published a "Dear CEO" letter that it has sent to the Chief Executive Officers of all firms authorized and regulated by the PRA, as well as EEA firms undertaking cross-border activities into the U.K. from the rest of the European Union by means of a single market passport.

    The letter refers to the publication, on October 25, 2018, of a package of consultations and other communications by the Bank of England that provide more detail on the planned Brexit-related changes to PRA rules and to the onshored Binding Technical Standards within the remit of the PRA and the BOE in their various capacities. The letter builds on the communications released by the government and U.K. regulators in June 2018 on their overall approach to onshoring financial services legislation under the EU (Withdrawal) Act 2018.

    Read more.
  • Financial Action Task Force Publishes Final Guidance on a Risk-Based Approach for the Securities Sector
    10/25/2018

    The Financial Action Task Force has published the finalized version of its Guidance on a Risk-Based Approach for the Securities Sector. The finalized Guidance was adopted at the FATF's plenary meeting held on October 17—19, 2018. The FATF has developed the Guidance in conjunction with the private sector, to assist governments, regulators, Financial Intelligence Units and participants in the securities sector to adopt a risk-based approach to anti-money laundering and countering the financing of terrorism.

    The final Guidance sets out the key principles involved in applying a risk-based approach to AML and CTF. Separate sections provide specific guidance to securities providers and intermediaries and to securities supervisors on the effective implementation of a risk-based approach. Annexes provide examples of supervisory practices that have been adopted and examples of suspicious activity indicators relevant to securities.

    The Guidance is non-binding. It should be read in conjunction with the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation and the 2009 Report on Money Laundering and Terrorist Financing.

    View the final Guidance.

    View details of the consultation on draft Guidance.

    View details of further outcomes of the FATF's October 2018 plenary.
  • Bank of England Updates Non-UK CCPs on Approach to Recognition Post-Brexit
    10/25/2018

    The Bank of England has published a "Dear CEO" letter sent by Sir John Cunliffe, Deputy Governor, Financial Stability, to the Chief Executive Officers of non-U.K. CCPs to provide more detail on the post-Brexit recognition of non-U.K. CCPs and the temporary permissions regime that will give temporary deemed recognized status to eligible non-U.K. CCPs.

    The BoE wrote to the CEOs of non-U.K. CCPs in December 2017, outlining that forthcoming U.K. legislation would give it a new power to recognize non-U.K. CCPs and that it anticipated that, in the period immediately after Brexit, the recognition regime for non-U.K. CCPs would be materially the same as the third country recognition regime under the European Market Infrastructure Regulation, but might be reviewed later. In an update in March 2018, the BoE confirmed that non-U.K. CCPs already providing services in the U.K. should be able to continue to do so until the end of the envisaged transitional, or "implementation" period after Brexit.

    This latest letter to non-U.K. CCPs provides an update following the laying before Parliament, in July 2018, of the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 before Parliament in July 2018. Subject to Parliamentary scrutiny, these Regulations are expected to enter into force during Q4 2018, establishing the post-Brexit framework for non-U.K. CCP recognition. The letter outlines actions non-U.K. CCPs will need to take once the Regulations are in force.

    Read more.
  • European Commission Adopts Technical Standards for Eligibility for Simplified Obligations under the Bank Recovery and Resolution Directive
    10/25/2018

    The European Commission has adopted a draft Delegated Regulation under the Bank Recovery and Resolution Directive, setting out Regulatory Technical Standards specifying the criteria for assessing the impact of an institution's failure on financial markets, on other institutions and on funding conditions.

    Under the BRRD, where a national regulator or resolution authority is determining whether to grant simplified obligations to an institution, it must assess the impact that the failure of the institution could have due to a number of factors specified in the BRRD. The European Banking Authority submitted final draft RTS to the European Commission in December 2017. The RTS adopted by the Commission set out a two-stage test based on quantitative and qualitative criteria to determine whether an institution is eligible for simplified obligations. Institutions meeting quantitative criteria at stage one must then meet qualitative criteria at stage two to be assessed as eligible.

    The draft Delegated Regulation will now be subject to a three-month scrutiny period by the European Parliament and the Council of the European Union. Assuming no objections have been raised by the co-legislators during that period, the Delegated Regulation will then be published in the Official Journal of the European Union and enter into force 20 days later. Once in force, the delegated regulation will have direct effect across the EU and will replace existing EBA Guidelines on simplified obligations.

    View the draft Delegated Regulation and Annexes.

    View details of the EBA's final draft RTS.
  • UK Competition and Markets Authority Consults on Further Working Paper in Investment Consultants Market Investigation
    10/25/2018

    The U.K. Competition and Markets Authority has published an updated working paper on its "market outcomes" analysis, following responses to its July 2018 consultation on its Provisional Decision Report on its Market Investigation into the supply and acquisition of investment consultancy services and fiduciary management services.

    The updated analysis covers: (a) gains from engagement—the impact of engagement on the fees paid by fiduciary management and investment consultancy customers; and (b) the relationship between quality and market success—the relationship between quality of service and market shares for a sample of investment consultancy firms. The CMA has also published a final notice of its intention to operate a confidentiality ring in respect of specified data submitted by respondents to the Provisional Decision Report. Access to the confidentiality ring will be granted to a limited number of approved external legal and/or economic advisers of certain parties. The confidentiality ring will operate from 9:30am on October 29, 2018 until 5:00pm on November 5, 2018.

    Read more.
    TOPIC: Competition
  • Bank of England Updates Non-UK CSDs on Approach to Recognition Post-Brexit
    10/25/2018

    The Bank of England has published a "Dear CEO" letter sent by Sir John Cunliffe, Deputy Governor, Financial Stability, to the Chief Executive Officers of non-U.K. Central Securities Depositories that have been identified as possibly requiring recognition to provide CSD services in the U.K. after Brexit. The Dear CEO letter provides more detail on the post-Brexit recognition of non-U.K. CSDs by the BoE and on the transitional regime that has been set out in the draft Central Securities Depositories (Amendment) (EU Exit) Regulations 2018.

    Read more.
  • Bank of England Consults on Changes to FMI Rules and Onshored Binding Technical Standards for Brexit
    10/25/2018

    The Bank of England has published a consultation paper entitled "UK withdrawal from the EU: Changes to FMI rules and onshored Binding Technical Standards." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the PRA on October 25, 2018.

    The consultation proposals cover:
    • the BoE's proposed fixes to deficiencies in the onshored Binding Technical Standards for which the BoE, as FMI supervisor, has responsibility under the Financial Regulators’ Powers, (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018;
    • the BoE's proposals to amend its FMI rules; and
    • the BoE's proposed approach to non-binding BoE materials after Brexit.

    Read more.
  • Bank of England Launches Consultation Package on EU Withdrawal
    10/25/2018

    The Bank of England has issued a press release providing an update on its regulatory and supervisory approach to Brexit. The press release refers to a package of communications and new consultations published by the BoE on October 25, 2018. Building on previous communications with firms, this package of communications includes four consultation papers:

    1. A joint consultation on the BoE/Prudential Regulation Authority's general approach to making changes to PRA rules and to Binding Technical Standards to implement Brexit. This consultation is to be read in conjunction with the other three consultations.
    2. A PRA consultation on proposed changes to PRA rules and to the onshored BTS within the PRA's remit.
    3. A BoE consultation on changes to Financial Market Infrastructure rules and onshored BTS within the BoE's remit as FMI supervisor, along with a draft Supervisory Statement on the BoE's expectations of FMIs in relation to existing non-binding domestic material.
    4. A BoE consultation on the onshored BTS within the BoE's remit as the U.K. resolution authority.

    Read more.
  • US State Regulators Sue Office of the Comptroller of the Currency Over FinTech Charter
    10/25/2018

    The Conference of State Bank Supervisors has sued the U.S. Office of the Comptroller of the Currency to prevent it from granting charters for special purpose national banks to non-depository FinTech companies. The CSBS is the nationwide organization of state banking regulators in the United States.

    The CSBS filed the lawsuit upon the OCC’s announcement on July 31, 2018 that it would begin accepting these applications. The CSBS previously sued the OCC over its ability to provide SPNB charters in April 2017. The federal district court in D.C., however, dismissed the first suit for lack of subject matter jurisdiction and ripeness, stating that the OCC had not decided whether to grant SPNB charters to FinTech firms at that time.

    Read more.
  • Bank of England Consults on Approach to Resolution Statements of Policy and Onshored Binding Technical Standards for Brexit
    10/25/2018

    The Bank of England has published a consultation paper entitled "UK withdrawal from the EU: The Bank of England’s approach to resolution statements of policy and onshored Binding Technical Standards." The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the Prudential Regulation Authority on October 25, 2018.

    The consultation covers:
    • the BoE’s proposals to fix deficiencies in the onshored Binding Technical Standards under the Bank Recovery and Resolution Directive, for which it is responsible in its capacity as U.K. resolution authority. The PRA has consulted separately on proposals for the BRRD BTS that are within its remit; and
    • the BoE's proposed guidance on how the existing Statements of Policy on resolution should be interpreted after Brexit. These SoPs cover the BoE's: (i) power to direct institutions to address impediments to resolvability; (ii) approach to setting a minimum requirement for own funds and eligible liabilities (MREL) within groups, and further issues; and (iii) policy on valuation capabilities to support resolvability. li >

    The proposals are relevant to all firms that are subject to the BoE's resolution powers, such as banks, larger investment firms and CCPs.

    Read more.
  • UK Prudential Regulator Consults on Rule Changes and Onshoring of Binding Technical Standards for Brexit
    10/25/2018

    The U.K. Prudential Regulation Authority has published a consultation paper entitled "UK withdrawal from the EU: Changes to PRA Rulebook and onshored Binding Technical Standards."  The consultation forms part of a package of consultations, "Dear CEO" letters and other communications published by the BoE and the PRA on October 25, 2018.

    The consultation paper sets out a suite of proposed amendments by the PRA to ensure an operable legal and regulatory framework after the U.K. leaves the EU.

    Read more.
  • European Banking Authority Sets Out Its Work Priorities for 2019
    10/23/2018

    The European Banking Authority has published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
     
    1. Leading the Basel III implementation in the EU.
    2. Understanding risks and opportunities arising from financial innovation.
    3. Collecting, disseminating and analyzing banking data.
    4. Ensuring a smooth relocation of the EBA to Paris.
    5. Fostering the increase of the loss-absorbing capacity of the EU banking system.

    The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the work programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.

    View the EBA's 2019 Work Programme.
  • European Commission Announces Work Plan for 2019
    10/23/2018

    The European Commission has published a Communication, outlining its work plan for 2019. The Communication is addressed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The Communication discusses the ongoing challenges for the EU in the run-up to the European Parliamentary elections and the post-Brexit Summit in Sibiu at which a new multi-annual framework for the EU27 will be finalized.

    Separately published Annexes to the Communication relating to: (i) new initiatives; (ii) REFIT initiatives; (iii) priority pending proposals; (iv) legislative initiatives that have been withdrawn; and (v) a list of envisaged repeals. Priority pending proposals of particular relevance to financial institutions include legislative proposals relating to the forthcoming sustainable finance package, cross-border distribution of collective investment schemes, crowdfunding, amendments to the European Market Infrastructure Regulation, prudential regulation and supervision of investment firms and a proposed amending regulation relating to minimum loss coverage for non-performing exposures.

    Read more.
  • UK Government Publishes Guidance on Proposed Legislation to Onshore EU Legislation on Financial Conglomerates and Groups
    10/22/2018

    HM Treasury has published explanatory information on the draft Financial Conglomerates and Other Financial Groups (Amendment) (EU Exit) Regulations 2018, which it intends to publish in due course. The draft Regulations will amend deficiencies in the U.K. legislation that implemented the EU Financial Conglomerates Directive. FICOD sets out specific solvency requirements designed to prevent different entities in a conglomerate from using the same capital more than once as a buffer against risk. The Directive also sets out requirements for management controls, risk management and for information sharing between relevant regulators of conglomerates. In the U.K., FICOD has been implemented by the Financial Conglomerates and Other Financial Groups Regulations 2004, as well as through provisions in regulatory rulebooks.

    The explanatory information explains that the draft Regulations will amend several deficiencies to ensure the U.K.'s FICOR Regulations remain operative in a U.K.-only context.

    Read more.
  • UK Draft Legislation to Onshore the European Market Infrastructure Regulation Published
    10/22/2018

    HM Treasury has published in draft format the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 – the U.K.'s draft statutory instrument that would implement a post-Brexit EMIR regime, together with explanatory guidance. The draft EMIR Regulations will affect CCPs, clearing members, their clients, Trade Repositories, TR users and U.K. persons entering into derivatives contracts. They will also, like EMIR, have impacts for persons around the world which enter into derivatives with U.K. persons, through U.K. clearing members or that are ultimately held with CCPs that are regulated or recognized in the U.K.

    The draft EMIR Regulations have been prepared to ensure that there continues to be an effective regulatory framework for OTC derivatives, CCPs and TRs in the U.K. after exit day. Onshoring of EMIR has been dealt with in three separate pieces of legislation. The draft EMIR Regulations should be read in conjunction with the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018, which were published in draft form on July 24, 2018 and October 5, 2018 respectively.

    Read more.
  • UK Ring-Fencing Regime to Remain Unchanged in a "No Deal" Brexit Scenario
    10/22/2018

    HM Treasury has published explanatory guidance on potential changes to the U.K.'s laws on ring-fencing in preparation for a "no deal" scenario in which the U.K. leaves the EU on March 29, 2019. The draft Ring-Fenced Bodies (Amendment) (EU Exit) Regulations 2018 have not yet been published. HM Treasury intends to publish the draft Regulations in due course and to lay them before Parliament before exit day.

    Read more.
  • UK Conduct Regulator Evaluates Impact of UK Benchmark Reform Since 2015
    10/22/2018

    The U.K. Financial Conduct Authority has published an evaluation paper on the impact of bringing seven additional benchmarks within the U.K.'s regulatory and supervisory perimeter in April 2015, in response to the recommendations of the Fair and Effective Markets Review.  The necessary changes to the FCA's Handbook and guidance were effected by the Benchmarks (Amendment) Instrument 2015, a legal instrument made by the FCA. In the evaluation paper, the FCA clarifies that this benchmarks-related evaluation does not cover changes due to other policies that affect benchmarks, such as the EU Benchmarks Regulation or principles set by EU or international bodies.

    The evaluation has been conducted in line with the FCA's approach to ex-post evaluation of the impact of its work, which it outlined in a discussion paper in April 2018. The FCA has conducted the benchmarks-related evaluation to understand: (i) the impact of the Benchmarks (Amendment) Instrument 2015 on markets and firms' costs; and (ii) whether the FCA's regulatory intervention met its objective of increasing the robustness of benchmarks and restoring market confidence.

    Read more.
  • Draft UK Post-Brexit Legislation Published to Onshore the EU Central Securities Depositories Regulation
    10/22/2018

    HM Treasury has published a draft of the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018, along with explanatory information. 

    Read more.
  • UK Serious Fraud Office Charges Former Banker With Conspiracy To Defraud For Manipulation of Euro Interbank Offered Rate
    10/21/2018

    The U.K. Serious Fraud Office has charged a former banker with conspiracy to defraud, as part of its investigation into the manipulation of the Euro Interbank Offered Rate.

    The former banker was arrested in Italy in August 2018 after his trip to the country activated a European Arrest Warrant that had been secured by the SFO in 2016. Italian authorities ruled on October 12, 2018 that he should be extradited to the U.K. and he was charged with conspiracy to defraud at Westminster Magistrates’ court on October 20, 2018.

    The next hearing will take place at Southwark Crown Court on October 24, 2018.

    View the SFO's announcement.
  • EU Supervisory Authority Reports on ICO and Crypto-Asset Risks and Potential Regulation
    10/19/2018

    The European Securities and Markets Authority has published an own-initiative report prepared by its Securities and Markets Stakeholder Group. The purpose of the report is to provide advice to ESMA on steps it might take to contain the risks of Initial Coin Offerings and crypto-assets, on top of existing regulation.

    In the report, the term “crypto-assets” is used to refer to coins, tokens, virtual and cryptocurrencies or other digital or virtual assets collectively. The acronym "ICO" is used to refer to an initial offering of any crypto-asset. The report sets out a taxonomy of crypto-assets, based on the distinction between payment tokens, utility tokens, asset tokens and hybrids used by the Swiss Financial Market Supervisory Authority (FINMA).

    Read more.
  • UK Regulator Launches Green FinTech Challenge
    10/19/2018

    The U.K. Financial Conduct Authority has launched the Green FinTech Challenge for firms developing innovative products and services to assist in the U.K.’s transition to a low-carbon economy. The Challenge is part of the FCA's Innovate project. Successful applicants to the challenge will benefit from authorization support, live testing in the regulatory sandbox and FCA guidance. Applications for inclusion in the challenge should be submitted by January 11, 2019 and successful applicants will be notified by the end of Q1 2019. This is the first FinTech challenge run by the FCA and is separate from the FCA's other Innovate services, which should continue to be accessed by firms developing propositions that fall outside the scope of the challenge. Once the challenge is complete, it will consider whether to launch more challenges.

    View the FCA's Green FinTech Challenge webpage.
    TOPIC: FinTech
  • Financial Action Task Force Clarifies Virtual Asset Regulation
    10/19/2018

    The Financial Action Task Force has published the outcomes of its plenary on October 17-19, 2018. The FATF considered key issues such as the operations and streamlining of the FATF, major and other strategic initiatives and mutual evaluations.

    One of the major initiatives covered by the plenary was the regulation of virtual assets. The G20 Finance Ministers & Central Bank Governors communiqué following their July 2018 Buenos Aires meeting called on the FATF to clarify, by October 2018, how its global anti-money laundering and counter-terrorist financing standards apply to crypto assets.  At its October plenary, the FATF adopted amendments to the FATF Recommendations and Glossary at the plenary and issued a statement on the regulation of virtual assets. The FATF has done this to clarify that its standards apply to exchanges, wallet providers and providers of financial services for Initial Coin Offerings. Jurisdictions should therefore ensure that virtual asset service providers are subject to AML/CTF regulations. However, jurisdictions are able to choose which category of regulated entity virtual asset service providers should fall into. 

    Read more.
  • Basel Committee on Banking Supervision Consults on Leverage Ratio Treatment of Client-Cleared Derivatives
    10/18/2018

    The Basel Committee on Banking Supervision has published a consultation paper entitled "Leverage ratio treatment of client-cleared derivatives," seeking views from stakeholders on whether a targeted and limited revision of the leverage ratio exposure measure is warranted with respect to the treatment of client cleared derivatives.

    On the publication of the finalized Basel III framework in December 2017, the Basel Committee stated that it would continue to monitor the impact of the Basel III leverage ratio’s treatment of client-cleared derivative transactions. It confirmed that it would review the impact of the leverage ratio on banks’ provision of clearing services and any consequent impact on the resilience of central counterparty clearing. The Basel Committee has completed its review and is of the view that only a strong evidence-based case would justify making revisions to the current leverage ratio treatment of client cleared derivatives.

    Read more
  • Basel Committee on Banking Supervision Highlights Concerns About Leverage Ratio "Window-Dressing"
    10/18/2018

    The Basel Committee on Banking Supervision has issued a statement on leverage ratio "window-dressing" behavior by banks.

    To comply with the Basel III leverage ratio standard, among other things, banks are required to publicly disclose their leverage ratio, calculated on a quarter-end basis, or more frequently in certain jurisdictions. The Basel Committee has noted what may be a tendency in banks to engage in so-called window-dressing by temporarily reducing transaction volumes around key reference dates, which has the effect of allowing banks to report and publicly disclose higher leverage ratios.

    The Basel Committee states that window dressing is unacceptable as it undermines the policy objectives of the leverage ratio standard and risks disrupting the operations of financial markets. The Basel Committee calls on banks to desist from undertaking transactions for window-dressing purposes and makes several suggestions for actions by supervisors to address these concerns. These include increasing the frequency of reporting and supervisory monitoring, focused supervisory inspections and/or additional public disclosures. The Basel Committee will continue to monitor potential window-dressing behavior and may consider adjusting the Pillar 1 minimum capital requirements and/or Pillar 3 disclosure requirements if necessary.

    View the Basel Committee's Statement.
  • UK Prudential Regulator Issues Update to Level One Firms on Supervising Remuneration Compliance
    10/18/2018

    The U.K. Prudential Regulation Authority has published a "Dear Remuneration Committee Chair" letter that it has sent to Remuneration Committee Chairs of proportionality Level One firms (that is, banks, building societies and PRA-designated investment firms with relevant total assets exceeding £50 billion as at the relevant date) ahead of its annual review of remuneration policies and practices.

    In the letter, the PRA explains that, with effect from the 2018/19 remuneration review, the PRA will no longer provide a non-objection statement to the proposed communication or distribution of variable remuneration awards by Level One firms. The PRA states that its oversight of Level One firms' remuneration practices will increasingly draw on the principles for governance set out in the Senior Managers and Certification Regime, placing more emphasis on how the Chairs of firms Remuneration Committees discharge their responsibilities under the SM&CR and on how Remuneration Committees carry out their role of oversight and independent challenge under the PRA's Remuneration Rules.

    Going forward, Level One firms can continue to expect engagement throughout the year from their PRA supervisors on their remuneration policies, practices and processes and, where needed, feedback on issues the firm should address. Level One firms should submit a remuneration policy statement and quantitative data tables three months ahead of the firm's preferred final feedback date (that is, the date previously referred to as the "non-objection date"), and an update to the figures at least two weeks before the final feedback date.

    View the Letter.
  • US Securities and Exchange Commission Launches Strategic Hub for Innovation and Financial Technology
    10/18/2018

    The Securities and Exchange Commission has launched its Strategic Hub for Innovation and Financial Technology (FinHub), designed to engage investors and market participants on FinTech issues and initiatives.

    Valerie A. Szczepanik, the SEC's Senior Advisor for Digital Assets and Innovation and Associate Director in the SEC's Division of Corporation Finance, will lead FinHub, which will focus on topics such as distributed ledger technology (DLT) and digital assets, automated investment advice, digital marketplace financing, artificial intelligence and machine learning. The SEC's various divisions will assign staff with expertise in the FinTech space. inHub will replace and build on the efforts of several of the SEC's internal FinTech working groups.

    The SEC said that FinHub will provide a platform for market participants to engage directly with SEC staff on innovations and technological developments, publicize the SEC's FinTech-related activity on the FinHub webpage, host FinTech events (including a forum on DLT and digital assets planned for 2019) and act as a resource for SEC staff to acquire and disseminate FinTech-related information within the agency. Further, it will serve as the SEC's liaison to domestic and global regulators in respect of innovations in financial, regulatory and supervisory systems.

    Read more.
    TOPIC: FinTech
  • Basel Committee on Banking Supervision Publishes Updated Stress Testing Principles
    10/17/2018

    The Basel Committee on Banking Supervision has published a final version of its Stress Testing Principles, which replace its 2009 Principles for Stress Testing and Supervision. The Basel Committee conducted a review of the 2009 Principles during 2017 and launched a consultation on proposed revisions in December 2017.

    The new principles reflect the growth in importance of stress testing since the 2009 version was produced and its evolution into a critical element of risk management for banks as well as a core tool for both banking supervisors and macroprudential authorities.

    The new principles are also set at a higher level than the previous version, so that the principles can apply across many banks and jurisdictions and so that they are robust to developments in stress testing practices. The principles focus on the core elements of stress testing frameworks, including the objectives, governance, policies, processes, methodology, resources and documentation that guide stress testing. Each principle is followed by a short description of considerations that are equally relevant for banks and authorities, along with additional considerations for banks or authorities.

    View the Stress Testing Principles.
  • UK Conduct Regulator Issues Feedback Statement on Digital Regulatory Reporting
    10/17/2018

    The U.K. Financial Conduct Authority has published a Feedback Statement on the Digital Regulatory Reporting project it began earlier in 2018. The Feedback Statement summarizes the feedback the FCA received from the call for input it published in January 2018 and sets out the FCA's responses.

    The FCA is working with the Bank of England in the RegTech sphere to explore ways of using technology to link regulation, compliance procedures and firms' policies and standards together with firms' transactional applications and databases. Most respondents to the FCA's call for input agreed in particular that digital regulatory reporting could bring increased efficiency, among other benefits. Some respondents expressed concerns about costs of implementation and called for a period of overlap were digital regulatory reporting to be introduced. Overall, the FCA is encouraged by the feedback.

    The Feedback Statement confirms that participants to a pilot launched in June 2018 to further explore the proof of concept for a move to digital regulatory reporting will publish their findings in a technical paper in Q1 2019. The FCA will continue with workstreams under the project and should a business case be made, it will launch a consultation and a cost benefit analysis. While the FCA is focusing on implementation of digital regulatory reporting in the U.K., it also believes that multinational adoption could bring benefits and is in discussions with its counterparts internationally.

    View the Feedback Statement (FCA FS 18/2).

    View details of the FCA's call for input.

    View details of the terms of reference for the project's pilot phase.
    TOPIC: FinTech
  • US Commissioner Quintenz Speaks on Smart Contract Regulation
    10/16/2018

    Commodity Futures Trading Commission Commissioner Brian Quintenz has given a wide-ranging speech at the GITEX Technology Week Conference in Dubai addressing a number of key issues faced by the CFTC in considering how to regulate smart contracts. While he acknowledged that there are still many questions to be answered on smart contract regulation, Commissioner Quintenz expressed a number of important views that should make market participants pause before assuming that activity in smart contracts will avoid CFTC scrutiny.

    Commissioner Quintenz explained that, in his view, the first step the CFTC should take when considering a smart contract is to understand the basic nature of the contract and whether it is within the CFTC's jurisdiction. For example, is the contract a product that must be traded on an exchange? Does the protocol itself perform the functions of an exchange, which may trigger registration requirements? While the answers will of course be different for every smart contract, Commissioner Quintenz made clear that he believes existing CFTC regulations can and should be applied to such contracts where appropriate.

    Read more.
    TOPIC: FinTech
  • UK Conduct Regulator Publishes Finalized Approach to Competition
    10/15/2018

    The U.K. Financial Conduct Authority has published its finalized Approach to Competition, following feedback to its consultation between December 2017 and March 2018 on a draft of its approach document. The FCA's Approach to Competition should be read alongside the FCA Mission, which was first published in October 2016.

    In the approach document, the FCA outlines its "competition objective" of promoting effective competition in the interests of consumers in particular markets and its "competition duty," which requires it to discharge its general functions in a way that promotes effective competition in the interests of consumers. It then explains how it advances its competition objective by: (i) using market studies to examine market structures and dynamics and imposing rule changes to improve consumer outcomes if necessary; (ii) using its powers under the Competition Act 1998 to investigate anti-competitive behavior under U.K. and EU law; and (iii) implementing regulation with the aim of supporting competition in the interests of consumers.

    Read more.
    TOPIC: Competition
  • UK Conduct Regulator Invites Applications for Cohort Five of Its Regulatory Sandbox
    10/15/2018

    The U.K. Financial Conduct Authority has announced that the application window has opened for cohort five of its regulatory sandbox. The FCA announced the successful applicants to the previous cohort in July 2018.

    The FCA's sandbox is part of the FCA's Project Innovate, which was launched in 2014.  The regulatory sandbox has been in operation since 2016 and provides a controlled environment for firms that satisfy the relevant eligibility criteria to test innovative products and services with real customers.

    The deadline for completed applications for cohort five is November 30, 2018.

    View the FCA webpage.

    View details of the successful applicants to cohort four.
    TOPIC: FinTech
  • UK Regulator Considers Potential Regulatory Refinements for Climate Change
    10/15/2018

    The U.K. Financial Conduct Authority has published a Discussion Paper on climate change and green finance in which it calls for comment on potential changes to its regulatory approach in these areas. The Discussion Paper sets out specific action that the FCA intends to take in the short term in four focus areas - capital markets disclosures, public reporting requirements, green finance and pensions.

    First, the FCA is considering whether the regulatory approach to disclosures by issuers in the capital markets should be amended. In particular, the FCA is asking for comments on: (i) the difficulties that issuers may have in determining materiality of climate-related issues such that a specific disclosure would be warranted; (ii) whether investors would benefit from greater comparability of disclosures; (iii) whether further prescribed requirements on climate-related disclosures should be introduced to facilitate more consistent disclosures by issuers. This final point includes whether the introduction of a "comply or explain" approach to the Task Force on Climate-related Disclosures would facilitate more effective markets.

    Read more.
  • UK Prudential Regulator Consults on Managing Financial Risks from Climate Change
    10/15/2018

    The Prudential Regulation Authority has published a consultation paper on a draft Supervisory Statement on managing the financial risks from climate change. The consultation follows the PRA's publication in September 2018 of its report "Transition in thinking: The impact of climate change on the U.K. banking sector." The consultation paper is relevant to banks, insurers, re-insurers, building societies and PRA-designated investment firms. The PRA wants firms to take a strategic approach to financial risks from climate change by taking into account current and credible risks and identifying actions needed now to mitigate existing and future risks.

    Read more.
  • UK Conduct Regulator Consults on Enforcement Powers under the Securitization Regulation
    10/12/2018

    The U.K. Financial Conduct Authority has published a further consultation on implementation of the EU Securitization Regulation. The Securitization Regulation (also known as the STS Regulation) and a related amendment to the Capital Requirements Regulation came into effect on January 17, 2018. The majority of the provisions of the Securitization Regulation and the related amendment to the CRR will apply directly across the EU from January 1, 2019. While the Securitization Regulation is directly applicable, HM Treasury must make certain legislative amendments to align provisions of U.K. law with the Regulation. The FCA must also align its Handbook and launched a first consultation in August 2018 on its proposals for Handbook amendments.

    In this further consultation, the FCA is consulting on proposed amendments to its Decision Procedure and Penalties manual (DEPP) and to its Enforcement Guide, to reflect the expected provisions of a Statutory Instrument which is expected to be laid before Parliament by HM Treasury in December 2018.

    Read more.
    TOPIC: Securities
  • UK Government's Guidance on Approach to Sanctions in a 'Hard Brexit' Scenario
    10/12/2018

    The U.K. Foreign and Commonwealth Office has published guidance on the U.K. government's approach to implementing sanctions in the event that no deal is agreed between the EU and the U.K. on the U.K.'s exit from the EU. If there is no deal, the U.K. will leave the EU on March 29, 2019.

    The U.K. currently implements sanctions agreed by the UN Security Council, according to international law requirements, and the EU, as provided for in EU legislation and U.K. implementing legislation. In the event of a "hard Brexit," the U.K. would continue to implement sanctions agreed by the UN Security Council and would have the power to adopt other sanctions under the Sanctions and Anti-Money Laundering Act 2018. The FCO would publish the names of individuals and organizations subject to U.K. sanctions.

    Read more.
  • UK Prudential Regulator Proposes Period of Overlap for Transition to New Pillar 2 Reporting Template
    10/12/2018

    The U.K. Prudential Regulation Authority has published a consultation proposing a six-month overlap period following the introduction of the new Pillar 2 Liquidity reporting template (PRA110) from July 1, 2019. The Capital Requirements Directive gives national regulators discretion to set additional Pillar 2 liquidity requirements, to capture those liquidity risks that are either not captured or not fully captured under the Pillar 1 framework. The final element - Pillar 3 - involves public reporting of capital. The PRA published its final Policy Statement on the introduction of its Pillar 2 framework in February 2018. The PRA110 template was scheduled to replace the existing "daily flows" and "enhanced mismatch" liquidity reports (FSA047 and FSA048) from July 1, 2019.

    Since its Policy Statement, the PRA has reassessed the risks from transitioning to the PRA110 template and considers it prudent to delay the termination of FSA047 and FSA048, to ensure data quality and continuity. The PRA proposes that the PRA110 is introduced on July 1, 2019 as planned. However, between then and January 1, 2020, firms should additionally continue to submit liquidity reports using FSA047 and FSA048. The overlap will allow the PRA and firms alike to assess the quality of PRA110 reporting.

    The PRA is inviting comments on the proposal by November 12, 2018. The PRA considers that the short consultation period is justified due to the fact that firms are already reporting using FSA047 and FSA048.

    View the consultation paper (PRA CP22/18).

    View details of the PRA's Pillar 2 Policy Statement.
  • US Securities and Exchange Commission Halts Fraudulent Initial Coin Offering
    10/11/2018

    The Securities and Exchange Commission announced that it halted a planned initial coin offering and related pre-ICO sales by Blockvest LLC and its founder, Reginald Buddy Ringgold, III. In seeking an emergency court order, the SEC alleged that Blockvest had falsely claimed that it and its affiliates received regulatory approval from various agencies, including the SEC and a fake agency called the "Blockchain Exchange Commission." Blockvest and Ringgold also allegedly used the National Futures Association seal in making false claims about their regulated status, even after the NFA sent them a cease-and-desist letter for doing so.

    The SEC also charged that Blockvest and Ringgold violated the antifraud and securities registration provisions of the federal securities law. The SEC sought injunctions, return of ill-gotten gains plus interest and penalties, and a bar against Ringgold participating in any future offering of securities.

    The Chief of the SEC Enforcement Division's Cyber Unit, Robert A. Cohen, said that "the SEC does not endorse investment products and investors should be highly skeptical of any claims suggesting otherwise." In addition, the SEC's Office of Investor Education and Advocacy and the U.S. Commodity Futures Trading Commission's Office of Customer Education and Outreach jointly issued an investor alert on the use of false claims regarding SEC and CFTC endorsements.

    View the SEC's announcement.
    TOPICS: EnforcementFinTech
  • Securities and Exchange Commission Reopens Comment Period on Capital, Margin and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants
    10/11/2018

    The U.S. Securities and Exchange Commission has voted to reopen the comment period and request additional comments on proposals for capital, margin and segregation requirements for security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs) and capital requirements for broker-dealers. The Commission approved the measure by a 4-1 vote, with only Commissioner Robert Jackson Jr. dissenting.

    The Commission initially published in 2012 a proposal on capital and margin requirements for non-bank SBSDs and MSBSPs, and segregation requirements for all SBSDs. The Commission published proposed provisions to establish the cross-border treatment of these rules in 2013 and an additional capital requirement for nonbank SBSDs in 2014. By reopening the comment period, the Commission stated that it is looking to provide market participants with an opportunity to provide comments that account for regulatory and market developments since the initial publication of the proposals, as well as the potential economic effects of the proposals in light of such developments. The Commission has previously indicated that it intends to finalize these rules prior to commencing registration of SBSDs and MSBSPs.

    Read more.
    TOPIC: Derivatives
  • UK Financial Conduct Authority Consults on Guidance Under the Extended Senior Managers Regime
    10/11/2018

    The Financial Conduct Authority has published a consultation paper on proposed guidance on the Statement of Responsibilities (SoR) and Responsibilities Maps required under the Senior Managers and Certification regimes. The extended SM&CR will apply to all firms authorized under the Financial Services and Markets Act 2000 and regulated by the FCA, as well as EEA and third-country (non-EEA) branches. SM&CR will be extended to FCA solo-regulated firms from December 9, 2019.

    Read more.
  • Draft UK Post-Brexit Legislation to Onshore the EU Markets in Financial Instruments Package
    10/11/2018

    HM Treasury has published a draft of the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations are primarily relevant for MiFID II-authorized firms including investment banks, stock and futures exchanges, broker-dealers, investment advisers and investment managers.

    The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The changes set out in the draft Regulations will not take effect if the U.K. enters a transition period.

    Read more.
  • Financial Stability Board Recommends Vigilant Ongoing Monitoring of Crypto-Assets
    10/10/2018

    The Financial Stability Board has published a report entitled "Crypto-asset markets: Potential Channels for future financial stability," in which it outlines its findings following its assessment of the crypto-asset markets in 2018.

    The FSB has considered the primary risks present in crypto-assets markets as low liquidity, volatility, leverage risks, as well as technological and operational risks (including cyber security risks). The FSB considers that crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value or a mainstream unit of account. Based on the available information, the FSB considers that crypto-assets do not pose a material risk to global financial stability at this time. However, the FSB's report highlights that there could be financial stability implications from these primary risks through a variety of transmission channels including: (i) confidence effects; (ii) financial institutions' exposures to crypto-assets, related financial products and entities that are financially impacted by crypto-assets; (iii) the level of market capitalisation of crypto-assets; and (iv) the extent of their use for payments and settlements.

    Read more.
    TOPICS: FinTechSecurities
  • UK Regulator Provides Information on Brexit Process for Credit Rating Agencies, Trade Repositories and Data Reporting Services Providers
    10/10/2018

    The Financial Conduct Authority has published three press releases announcing how entities can register with it as a credit rating agency, a trade repository or apply for temporary authorization as a data reporting services provider in preparation for the U.K. leaving the EU without a deal. The press releases follow the draft legislation and explanatory guidance recently published by HM Treasury and the FCA's first consultation on onshoring the EU technical standards through changes to its rulebook.

    For credit rating agencies, the U.K. intends to establish a conversion regime (for U.K. CRAs and third-country CRAs currently registered or certified by the European Securities and Markets Authority) and a temporary registration regime (for newly established U.K. entities that are part of a group of CRAs with an existing ESMA registration before exit day). The FCA's CRA press release informs CRAs of how they can notify the FCA of their intention to use one of these regimes and provides an indicative timeline for the legislation and regime to be put into place.

    Read more.
  • UK Conduct Regulator Consults on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
    10/10/2018

    The U.K. Financial Conduct Authority has published its first consultation on proposed changes to the FCA Handbook to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect if the U.K. enters into a transitional period after exit day.

    The consultation includes the FCA's proposals in relation to the Binding Technical Standards it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterward. These are the retained EU "Level 2" delegated and implementing regulations that set out regulatory technical standards and implementing technical standards. The consultation also sets out the FCA's proposed approach to non-legislative "Level 3" materials such as guidelines, recommendations and opinions that will also be onshored.

    The FCA states in the consultation that the majority of the proposed changes are consequential in nature and follow the amendments to retained EU law that HM Treasury is proposing, as set out in the series of financial services-related statutory instruments being made under the European Union (Withdrawal) Act 2018.

    Read more.
  • UK Conduct Regulator Consults on Post-Brexit Temporary Permissions Regime for EEA Firms and Funds
    10/10/2018

    The U.K. Financial Conduct Authority has published a consultation on its proposed approach to a Temporary Permissions Regime for EEA firms and investment funds that currently provide services in the U.K. - either via a branch or cross-border - pursuant to a single market passport. The proposed TPR is designed to minimize the potential harm caused by an abrupt loss of the passport in a "no-deal" scenario, in which the U.K. exits the EU without a ratified Withdrawal Agreement, which would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The TPR will enable EEA firms and investment funds to continue to provide services in the U.K. for a limited period following exit day.

    The proposed TPR will take effect on March 29, 2019 in the event of no deal. Should the U.K. and EU negotiations lead to ratification of the Withdrawal Agreement, the TPR will not enter into force. Instead, during the transitional period, firms and investment funds would continue to have access to the same passporting arrangements as they do now.

    Read more.
  • Post-Brexit UK Law to Exclude EU Laws on the European Supervisory Authorities
    10/09/2018

    HM Treasury has published guidance stating that the laws establishing the three European Supervisory Authorities and the European Systemic Risk Board will be revoked in their entirety once the U.K. has left the EU. The ESAs are the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority. These ESAs and the ESRB are part of the EU framework for supervision and regulation of the EU financial services sector. The European Union (Withdrawal) Act 2018 automatically incorporates such EU legislation into U.K. laws when the U.K. leaves the EU.

    At the point of Brexit, the ESAs and the ESRB will no longer perform functions in relation to the U.K. and the EU legislation that established them will be inoperable in U.K. laws. HM Treasury intends to use a statutory instrument to revoke those laws in their entirety so that they do not become applicable on Brexit. Where other EU legislation automatically incorporated into U.K. law refers to the ESAs or ESRB, statutory instruments will either amend the law or revoke it, as appropriate.

    View the guidance.
  • UK Financial Policy Committee Publishes Outcome of its October Meeting
    10/09/2018

    The Financial Policy Committee has published a statement from its meeting held on October 3, 2018 where it reviewed developments since June 19, 2018. The FPC continues to consider that the U.K. banking system is sufficiently robust to withstand the disruption of a "hard Brexit" and that there is no need for additional capital buffers for banks as a result. The FPC is of the view that the banking system would be able to absorb, in addition to a disorderly Brexit, further costs that might arise from trade tensions. However, the FPC is concerned about the lack of action taken by EU authorities to address the risks of disruption in the event of the U.K. leaving the EU without a deal on March 29, 2019. In particular, the FPC would like mitigating action to be taken to address the risks associated with derivatives contracts and the transfer of personal data.

    Aside from the risks presented by Brexit, the FPC considers that domestic risks are still at a standard level overall. However, the FPC is concerned about the swift growth of leveraged lending and intends to: (i) assess the implications for banks in the 2018 stress test; and (ii) review the impact of the increasing role of non-bank lenders and changes in the distribution of corporate debt. The FPC has decided to maintain the U.K. countercyclical capital buffer rate at 1% and will review the rate again at its meeting on November 28, 2018.

    Read more.
  • European Supervisors Announce 2019 Work Priorities
    10/09/2018

    The Joint Committee of the European Supervisory Authorities (that is, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) has published its 2019 Work Programme. EIOPA will Chair the Joint Committee in 2019. The Work Programme provides details of the Joint Committee's key workstreams for 2019.

    Read more.
  • UK Conduct Regulator Consults on Illiquid Assets and Open-Ended Funds
    10/08/2018

    The U.K. Financial Conduct Authority has launched a consultation on illiquid assets and open-ended funds, following responses from stakeholders to a discussion paper it issued early in 2017. After observing the impact of certain temporary fund suspensions following the U.K.'s 2016 referendum on exiting the EU, the FCA considers that open ended funds investing in illiquid assets have a potential structural liquidity mismatch which, under stress, can create a "first mover" advantage that may lead to runs on funds and sales of fund assets at reduced prices.

    The FCA is consulting on a number of proposals to alleviate the risk of poor outcomes to retail investors in open ended funds, specifically non-UCITS retail schemes (NURSs), that invest in illiquid assets. The consultation includes a proposed approach to defining "inherently illiquid assets," examples of which include property or infrastructure investments.

    In addition to the responses received to its discussion paper, the FCA's consultation proposals are also informed by its supervisory work and by the revised version of the Recommendations on Liquidity Risk Management for Collective Investment Schemes published in February 2018 by the International Organization of Securities Commissions.

    Read more.
    TOPIC: Funds
  • UK Government Proposes Temporary Transitional Powers for UK Financial Regulators to Ease Brexit Adjustments
    10/08/2018

    HM Treasury has published an Approach Paper setting out its proposal for a temporary transitional power to be given to the U.K. financial regulators to assist firms to adapt to the post-Brexit regulatory framework in an orderly manner in the event of a "no deal" scenario.

    It is proposed that the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority are granted a temporary power to award transitional relief from regulatory requirements where the requirements have been introduced or have changed as a result of onshoring financial services legislation. The power would relate to regulatory requirements in the PRA and FCA rules, onshored EU technical standards, onshored EU financial services regulations or delegated regulations and relevant U.K. primary or secondary legislation. The regulators would be able to grant transitional relief by issuing a "direction" setting out the terms of the relief, including whether the relief would apply to particular firms, classes of firms or to all firms. The power would not be available where a specific transitional arrangement has already been put in place for firms through regulations made under the European Union (Withdrawal) Act because HM Treasury believes that additional relief would not be necessary.

    Read more.
  • Draft UK Post-Brexit Regulations to Onshore the EU Bank Recovery and Resolution Directive Published
    10/08/2018

    HM Treasury has published draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 to onshore the EU Bank Recovery and Resolution Directive in preparation for the U.K.'s exit from the EU. An explanatory guide to the draft Regulations has also been published. The draft Regulations will make changes to the existing U.K. legislation which transposed the BRRD into U.K. law, which is mainly the Banking Act 2009 and the Bank Recovery and Resolution (No 2) Order 2014, and to certain Delegated Regulations adopted by the European Commission under the BRRD. The aim of the draft Regulations is to ensure that the U.K. Special Resolution Regime is "legally and practically workable on a standalone basis" when the U.K. leaves the EU.

    Read more.
  • Draft UK Post-Brexit Legislation to Onshore Alternative Investment Fund Managers Directive Published
    10/08/2018

    HM Treasury has published a draft of the Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will onshore the Alternative Investment Fund Managers Directive for Brexit.

    The draft Regulations are primarily relevant for Alternative Investment Fund Managers that are already regulated in the U.K. under the Alternative Investment Fund Managers Regulations 2013 and AIFMs currently marketing EEA AIFs in the U.K. They are also relevant for fund managers that market EEA Undertakings for Collective Investment in Transferable Securities (UCITS) into the U.K. HM Treasury has published separately the draft U.K. legislation to onshore EU legislation for UCITS funds for Brexit.

    The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario addressed in the draft Regulations involves no transitional period following Brexit and the U.K. being treated as a third-country under EU law after exit day. The changes set out in the draft Regulations will not take effect on exit day if the U.K. enters a transition period.

    Read more.
  • Draft UK Post-Brexit Legislation to Onshore EU UCITS Directive Published
    10/08/2018

    HM Treasury has published a draft of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will onshore the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive for Brexit.

    The draft Regulations are primarily relevant for EEA fund managers operating UCITS authorized in the U.K., fund managers marketing EEA UCITS into the U.K. and depositaries that provide services to U.K. authorized funds. HM Treasury has also published separately the draft U.K. legislation to onshore EU legislation for Alternative Investment Funds for Brexit.

    The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The changes set out in the draft Regulations will not take effect on exit day if the U.K. enters a transition period.

    Read more
  • UK Plans Transitional Regime for Credit Ratings for Potential "No Deal" Brexit
    10/08/2018

    HM Treasury has published explanatory guidance on a proposed U.K. regulation to onshore EU legislation on credit rating agencies in the event of a "no deal" scenario resulting from the EU-U.K. Brexit negotiations. If no deal is reached, the U.K. exits the EU on March 29, 2019. The draft statutory instrument is still being prepared and the approach as set out in the guidance may change as a result. It is expected that the draft SI will be published and also laid before Parliament before the end of the year.

    Read more
  • European Supervisory Authority Issues Opinion on Position Limits for UK Natural Gas Derivatives
    10/05/2018

    The European Securities and Markets Authority has published an Opinion (dated September 24, 2018) on position limits for U.K. Natural Gas Contracts, for the purposes of the position limit regime established by the revised Markets in Financial Instruments Directive. MiFID II and its secondary legislation establish the position limits regime for commodity derivatives. For illiquid contracts, the position limits are set in the legislation. However, where contracts are liquid, position limits are set by the relevant national regulator and notified to ESMA. Secondary legislation under MiFID II sets out Regulatory Technical Standards for the methodology national regulators should use and the factors they should consider when setting position limits.

    The U.K. Financial Conduct Authority notified ESMA in February 2018 of the position limits the FCA intends to set for U.K. Natural Gas commodity futures and options contracts. In its Opinion, ESMA confirms that the spot month position limit and the other months' position limit are consistent with the objectives of MiFID II and compliant with the methodology established by the relevant RTS.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Office of Financial Sanctions Implementation Publishes First Annual Review
    10/05/2018

    The U.K. Office of Financial Sanctions Implementation has published its Annual Review for the period from April 2017 to March 2018. OFSI was established in March 2016 with the objective of raising awareness of financial sanctions, assessing and addressing suspected sanctions breaches and providing a professional service to the public and industry. The Annual Review provides an overview of:
    • U.N. and EU financial sanction regimes implemented by OFSI;
    • OFSI's work on asset freezing and a breakdown of funds frozen;
    • action taken by OFSI following reports of suspected breaches of financial sanctions;
    • licenses issued by OFSI during the period; and
    • awareness-raising activities.
    The Annual Review also outlines OFSI's forward plans in the above areas. This includes: (i) a plan to improve searchability of OFSI's Consolidated List of financial sanctions targets; (ii) potentially imposing monetary penalties in 2018-19; (iii) further activities to raise awareness, including the publication of more targeted guidance on financial sanctions compliance and on changes to the legal framework for sanctions; and (iv) Brexit preparations.

    View the Annual Report.

  • US FDIC Seeks to Improve Communication, Transparency and Accountability
    10/05/2018

    The U.S. Federal Deposit Insurance Corporation published a notice and request for comment seeking input on how to improve the efficacy, efficiency and transparency of the agency’s communication with insured depository institutions.  The notice outlines current forms of communication, including, regulations, policies, procedures and guidance; news and updates; industry data, educational materials and outreach; general communication; and direct communication.  The notice requests comment with respect to the efficiency, ease of access and content of communications with insured financial institutions.  Comments to the FDIC’s notice are due no later than December 4, 2018.

    Read more.
  • Draft UK Post-Brexit Legislation to Onshore Trade Repositories' Obligations and Establish Temporary Recognition Regime
    10/05/2018

    HM Treasury has published a draft of the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations are primarily relevant for Trade Repositories in both the U.K. and the EU that are currently registered with and supervised by the European Securities and Markets Authority and that are planning to continue servicing the U.K. market after the U.K.'s exit from the EU on March 29, 2019.

    The draft Regulations have been prepared to ensure that the U.K.'s legal framework for reporting of derivatives trades to TRs will continue to operate effectively after exit day. The draft Regulations amend the version of the European Markets Infrastructure Regulation that will be retained on Brexit. The draft Regulations transfer to the Financial Conduct Authority the functions carried out by ESMA for the registration of TRs. They also establish: (i) a temporary registration regime that will enable U.K. and EU TRs that wish to establish a new U.K. legal entity to benefit - on complying with certain requirements - from temporary registration while the FCA considers their application; and (ii) a conversion regime that will allow U.K. TRs that are currently registered with ESMA to be registered as authorized U.K. TRs by the FCA from exit day.

    Read more.
  • Global Foreign Exchange Committee Update and Survey on Adoption of the FX Global Code
    10/04/2018

    The Global Foreign Exchange Committee has published an update on the ongoing work of its four priority working groups: (i) the cover and deal working group; (ii) the disclosures working group; (iii) the buy-side outreach working group; and (iv) the working group on embedding the FX Global Code. The GFXC was established in 2017 as a forum for participants in the wholesale foreign exchange markets and its terms of reference include addressing misconduct in FX markets by facilitating adoption of the global principles of good practice enshrined in the FX Global Code.

    The update refers to the recent launch (on September 28, 2018) of a survey by the working group on embedding the FX Global Code. Completed surveys are requested by October 19, 2018. The aims of the survey are to measure awareness and adoption of the FX Global Code among market participants and to inform the GFXC's further work on embedding and integrating the code into the global FX markets. The survey results will be considered at the GFXC's next meeting, which will be held in November.

    View the survey.

    View the press release.
  • US and Australian Regulators Agree FinTech Information Sharing Arrangement
    10/04/2018

    The Commodity Futures Trading Commission and the Australian Securities and Investments Commission have signed an arrangement designed to support cross-border FinTech innovation through their respective FinTech initiatives, LabCFTC and the ASIC Innovation Hub. The arrangement will facilitate information sharing between the two regulators in respect of emerging trends and developments, regulatory issues pertaining to FinTech innovations and best practices, among other things. It also includes a referral mechanism that will allow the CFTC and ASIC to refer to one another innovators that wish to operate or have questions about operating in the other's jurisdiction. The arrangement further calls for joint proofs of concept, trials and innovation competitions, where permitted, as well as periodic meetings to update each other on FinTech and RegTech trends and developments of common interest.

    Read more.
    TOPIC: FinTech
  • European Supervisory Authority Withdraws Guidelines for Algorithmic Trading Controls
    10/03/2018

    The European Securities and Markets Authority has published a decision (dated September 26, 2018) of its Board of Supervisors to withdraw its existing Guidelines for trading platforms, investment firms and national regulators on systems and controls in an automated trading environment.

    The Guidelines were published by ESMA in 2011 to provide important clarifications to ensure a common, uniform and consistent application of the original Markets in Financial Instruments Directive and its secondary legislation (MiFID I). The content of the Guidelines has now been incorporated within, and consequently superseded by, detailed provisions in the revised Markets in Financial Instruments Directive and its secondary legislation (MiFID II) and the Market Abuse Regulation.

    The Guidelines have been withdrawn effective from September 26, 2018.

    View the ESMA decision.
    TOPIC: MiFID II
  • UK Regulator Finds E-Money Firms Have Effective Anti-Money Laundering Controls
    10/03/2018

    The Financial Conduct Authority has published a report on the outcome of its thematic review into money laundering and terrorist financing risks in the e-money sector. The report focuses on e-money products, including prepaid cards and digital wallets. The FCA assessed the anti-money laundering and counter-terrorist financing controls of 13 authorized Electronic Money Institutions and registered small Electronic Money Institutions. The review included consideration of business models that involve distributing e-money through agents and distributors.

    The FCA's review did not cover activities that are not regulated by the FCA (for instance, gift cards that can be used only within a limited network or prepaid products denominated in a cryptocurrency) or money remittance services provided by the EMIs.

    Read more.
  • US Federal Reserve Board Seeks Comment on Facilitating Faster Payments
    10/03/2018

    The U.S. Board of Governors of the Federal Reserve System published a notice and request for comment with respect to potential measures that could be taken to improve the efficiency and speed of payment services, specifically regarding the facilitation of real-time interbank settlement of “faster payments”—a term generally used to convey a future payment and settlement system that is fast, convenient and accessible.  The notice highlights that while traditional payment methods, such as checks, ACH payments, and credit card transactions have created a payment systems infrastructure that is universal, safe and reliable, this does not necessarily translate into speed and efficiency.  The notice suggests that the current system has resulted in a gap between the speed and efficiency of the payment systems infrastructure and user expectations.  The notice provides background regarding Federal Reserve Board initiatives associated with faster payments, including its Strategies for Improving the U.S. Payment System initiative and Faster Payments Task Force, provides an overview of the faster payments construct, and introduces potential faster payment models, including deferred net settlement of interbank obligations and real-time gross settlement of interbank obligations.  The notice also discusses potential actions that the Federal Reserve Board could undertake to support faster payments, including the development of “24x7x365” real-time interbank settlement and the creation of a liquidly management tool to help promote, support and drive participation in real-time interbank settlement.

    View full text of the request for comments.
  • US Federal Financial Regulatory Agencies Release Joint Statement on Sharing Bank Secrecy Act Resources
    10/03/2018

    The U.S. Board of Governors of the Federal Reserve System, Financial Crimes Enforcement Network, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and National Credit Union Administration released an interagency statement regarding the sharing of Bank Secrecy Act resources among banks through collaborative arrangements intended to improve efficiency, reduce costs, and benefit from specialized expertise by pooling resources among banks.

    Read more.
  • European Parliament Adopts Resolution on Distributed Ledger Technologies
    10/03/2018

    The European Parliament has adopted a non-legislative resolution entitled "distributed ledger technologies and blockchains: building trust with disintermediation." Of particular relevance to the financial services sector, the European Parliament is requesting that the European Commission and other EU authorities take various steps to maximize the potential of this technology in the EU.

    Read more.
  • EU Opinion Attempts to Clarify the Market Size Calculation for Ancillary Activity Exemption under MiFID II
    10/02/2018

    The European Securities and Markets Authority has issued an opinion addressed to EU national regulators on the market size calculation for the ancillary activity exemption under the revised Markets in Financial Instruments Directive.

    MiFID II provides an exemption from the requirement for authorization as an investment firm when dealing on own account, or providing investment services to clients in commodity derivatives, emission allowances or derivatives thereof, provided that the activity is an ancillary activity to their main business at group level and the main business is not the provision of investment services within the meaning of MiFID II or banking activities under the Capital Requirements Directive. Delegated Regulation (EU 2017/592) sets out the criteria for establishing when an activity should be considered as ancillary to the main business at group level, including the rules for calculating the overall market trading activity of a firm.

    ESMA's opinion provides guidance to market participants and national regulators on determining market size figures, since there is no centralized, publicly available record of transactions for commodity derivatives and emission allowances. ESMA acknowledges that the data it has used for the guidance may have limitations in terms of accuracy and completeness and states that national regulators may use alternative data provided by market participants for the calculation.

    View the opinion.
    TOPIC: MiFID II
  • European Supervisory Authorities and European Commission Disagree on Retail Fund Investor Disclosures
    10/01/2018

    The Joint Committee of the European Supervisory Authorities (i.e., the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) has published a letter it has sent to the European Commission, in response to a request from the European Commission on August 10, 2018 for the ESAs to develop guidance on facilitating the production and distribution of information on investment funds.

    Read more.
    TOPIC: Funds
  • UK Prudential Regulator Consults on Changes to Forms for Regulatory Transactions
    10/01/2018

    The U.K. Prudential Regulation Authority has launched a consultation entitled "Regulatory transactions: Changes to notification and application forms." The proposals in the consultation are for the amendment of various PRA forms that are used for applications and notifications for regulatory transactions. The PRA has chosen to combine the proposals into one substantial consultation paper to avoid having to issue multiple separate consultations on the same forms. The affected forms are located in the Passporting, Change in Control, Insurance Special Purpose Vehicles (ISPVs) and Notifications Parts of the PRA Rulebook.

    The consultation proposals are relevant for PRA-authorized firms and any firms that have, or intend to acquire, a qualifying holding in a PRA-authorized firm.

    Comments on the consultation are invited by November 1, 2018. The PRA expects that the proposals will take effect immediately after the publication of its planned Policy Statement.

    View the consultation paper (PRA CP 21/18).
  • European Securities and Markets Authority Recommends Tightening of Third-Country Requirements
    10/01/2018

    The European Securities and Markets Authority has published a letter (dated September 26, 2018) from ESMA Chair Steven Maijoor addressed to Valdis Dombrovskis, the Vice President of the European Commission. The purpose of the letter is to contribute to any further work the Commission may undertake on the investor protection and intermediaries-related requirements under the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation.

    Read more.
  • UK Conduct Regulator Fines Retail Bank for Failures During a Cyber Attack
    10/01/2018

    The U.K. Financial Conduct Authority has published a final notice issued to a U.K. Retail Bank for breaches of Principle 2 of the FCA's Principles for Businesses. Principle 2 requires authorized firms to conduct their business with due skill, care and diligence. The Bank was subjected to a cyber-attack in November 2016, when attackers deployed an algorithm to generate authentic debit card numbers that were then used to make unauthorized transactions. While the attack did not involve loss or theft of customers' personal data, the FCA found that the attack left the Bank's personal current account holders vulnerable to a largely avoidable incident that occurred over 48 hours.

    Read more
  • EU Ban Relating to Binary Options Extended
    10/01/2018

    Following its announcement in August 2018, the European Securities and Markets Authority has published notice of the extension of the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA is extending the ban because the threat to investor protection has not been addressed yet through a change in EU legislation and national regulators have either taken no action or have taken insufficient action to address the potential harm.

    Read more.
  • European Securities and Markets Authority Publishes Its 2019 Priorities
    10/01/2018

    The European Securities and Markets Authority has published its Annual Work Programme for 2019, dated September 26, 2018. ESMA sets out its focus areas for 2019 and provides details of expected outputs within each of the areas. ESMA also indicates that a number of pieces of EU legislation may be reviewed. These include the Market Abuse Regulation and the clearing obligation under the European Market Infrastructure Regulation, in addition to the reviews that have already been announced.

    Read more.
  • Proposed Revisions to EU Guidelines on Stress Testing of Money Market Funds
    09/28/2018

    The European Securities and Markets Authority has opened a consultation on proposed updates to the Guidelines on stress test scenarios for Money Market Funds under the Money Market Fund 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 often regarded as a short-term cash management function alternative to bank deposits.

    The MMF Regulation tasks ESMA with developing Guidelines on common reference parameters of the stress test scenarios to be included in the stress tests that managers of MMFs are required to conduct. ESMA's original Guidelines, published in March 2018, include specifications for the stress tests, including common parameters and scenarios which take into account certain hypothetical risk factors. The Guidelines must be reviewed at least annually and updated for any market developments.

    The consultation paper proposes updating the section in the Guidelines on the establishment of common reference stress test scenarios, the results of which should be included in the reporting template that managers of MMFs are required to use. ESMA is seeking feedback on the methodology, risk factors, data and the calculation of the impact. The calibration of stress test scenarios is not within scope of the consultation. However, feedback on how to calibrate the scenarios would be welcomed by ESMA.

    Responses to the consultation should be submitted by December 1, 2018. ESMA intends to finalize the revised Guidelines in Q1 2019.

    View the consultation paper.
    TOPIC: Funds
  • EU Contracts for Difference Product Intervention Measures to be Extended
    09/28/2018

    The European Securities and Markets Authority has announced that its various restrictions on the sale, distribution and marketing of Contracts for Difference to retail investors will be extended from November 1, 2018 for a further three months.

    ESMA adopted two temporary product intervention Decisions under the Markets in Financial Instruments Regulation in June this year, one relating to binary options and another to CFDs. ESMA has powers under MiFIR to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire and it would then fall to member states to impose similar restrictions at a national level, if they so wish. The U.K. Financial Conduct Authority is expected to consult before the end of the year on whether to make permanent the EU's temporary prohibition on marketing, distribution and sale of binary options to retail investors. The International Organization of Securities Commissions recently published a report on retail OTC leveraged products, alongside a statement warning retail investors of the risks of investing in illegal or fraudulent binary options.

    Read more.
  • UK Brokerage Firm Fined for Inadequate Controls Against Potential Market Abuse
    09/27/2018

    The U.K. Financial Conduct Authority has published a Decision Notice (dated June 7, 2018) imposing a fine of £409,300 on a U.K. brokerage firm for failure to take reasonable care to organize and control its affairs responsibly and effectively with adequate risk management systems in relation to the detection and reporting of potential instances of market abuse. 

    Read more.
  • UK Serious Fraud Office to Recruit New Senior Staff to Management Team
    09/27/2018

    The U.K.'s Serious Fraud Office has announced that it will be restructuring and expanding its management team with two new senior appointments:
     
    1. A new Head of Intelligence to enable the SFO to move to a more proactive approach to sourcing new cases. This appointment will enable the Head of Investigations to focus on advising on investigative strategy and leading the professional development of investigators.
    2. A new Head of Corporate Services to manage the finance, human resources, procurement and facilities management functions. This new appointment will enable the General Counsel to focus on legal matters.

    The recruitment process for the new roles will run concurrently with recruitment of an appropriate replacement for the SFO's current General Counsel, who will be leaving the SFO later in the year after six years.

    View the SFO press release.
    TOPIC: People
  • EU Final Report to Extend Exemption From the Clearing Obligation for Certain Intragroup Derivatives Transactions
    09/27/2018

    The European Securities and Markets Authority has published a final report on the exemption from the clearing obligation for intragroup transactions with a third country group entity. There are currently three sets of Regulatory Technical Standards made under the European Market Infrastructure Regulation that impose the clearing obligation of certain interest rate derivatives and credit derivatives. Each of these three RTS exempts from the clearing obligation certain intragroup derivatives transactions where one of the counterparties is a third-country group entity and there is no relevant equivalence decision in respect of the third country in which it is situated. An equivalence decision would enable parties that are subject to both the EU and a third country's clearing obligation to comply only with one jurisdiction's requirements, but no equivalence decisions have been made to date. Each of the three RTS sets a different expiry date for the intra-group exemption. These dates fall between December 21, 2018 and July 9, 2019.

    Following a consultation launched in July 2018, ESMA's final report contains final draft amending RTS setting out ESMA's proposal to extend the exemption period by amending each of the RTS to have one unified expiry date of December 21, 2020. The final draft amending RTS have been submitted to the European Commission for endorsement.

    View the Final Report.
    TOPIC: Derivatives
  • New Data Completeness Indicators to be Published for EU Trading Venues
    09/27/2018

    The European Securities and Markets Authority has announced that it will publish two new data completeness indicators for trading venues, detailing how venues are performing on the delivery of Double Volume Cap and bond liquidity data in compliance with their obligations under the Markets in Financial Instruments Regulation. ESMA has been working with national regulators to improve the timeliness and completeness of the data underpinning the monthly DVC and quarterly bond liquidity assessment publications. ESMA believes that the new indicators will incentivize trading venues to provide timely and complete data. For both DVC and bond liquidity data, ESMA will introduce the following completeness indicators:
     
    1. The Completeness Ratio, to provide information on the completeness of each particular venue, irrespective of the performance of other venues.
    2. The Completeness Shortfall, which will give an indication of a venue’s performance in terms of completeness compared to other trading venues and reflect the percentage of missing data for which a particular venue is responsible.
    ESMA will publish the DVC completeness indicators on October 8, 2018 with the next DVC update and then on a monthly basis. It will publish bond liquidity completeness indicators from the next bond liquidity quarterly assessment publication by November 1, 2018 and then on a quarterly basis.

    View the ESMA press release.
    TOPIC: MiFID II
  • Prudential Regulator Reports on Climate-Related Financial Risks for the UK Banking Sector
    09/26/2018

    The U.K. Prudential Regulation Authority has published a report entitled "Transition in thinking: The impact of climate change on the U.K. banking sector".

    The purpose of the report is to: (i) examine the financial risks from climate change that impact PRA regulated banks, building societies and designated investment firms; (ii) assess how those entities are responding to and managing the financial risks from climate change; and (iii) assist those entities in understanding the PRA's supervisory approach to the financial risks from climate change. The report will also be used to inform the Bank of England's wider work to assess the system-wide financial risks from climate change.

    Read more.
  • International Task Force Report Shows Momentum Building for Climate-Related Financial Disclosures
    09/26/2018

    The Task Force on Climate-related Financial Disclosures has issued a status report outlining progress on adoption of the TCFD disclosure recommendations issued in June 2017. The TCFD was established by the Financial Stability Board in 2015 and its 2017 recommendations provide a voluntary framework for companies to develop more effective climate-related financial disclosures through their existing reporting processes. The recommendations are structured around four areas: (i) governance; (ii) strategy; (iii) risk management; and (iv) metrics and targets.

    Read more.
  • US Federal Judge Affirms Commodity Futures Trading Commission's Authority to Police Virtual Currency Fraud
    09/26/2018

    The U.S. District Court for the District of Massachusetts issued an order confirming that the Commodity Futures Trading Commission maintains the authority to police virtual currency fraud. The order was issued in response to a motion to dismiss charges against My Big Coin Pay, Inc. and several individuals for operating a fraudulent virtual currency scheme through which they solicited customers to purchase a virtual currency known as My Big Coin (MBC).

    The CFTC's initial enforcement order, filed in January 2018, accused the defendants of operating a fraudulent virtual currency scheme through which they solicited more than $6 million from customers throughout the U.S. by making false and misleading claims that MBC was actively being traded, was backed by gold and could be used anywhere MasterCard credit cards were accepted. The defendants also were alleged to have misrepresented MBC's daily trading price in reports on its website, when no daily trading price existed because MBC was not actively being traded.

    Read more
  • UK Parliamentary Committee Calls For Urgent Regulation of Crypto-Assets
    09/21/2018

    The U.K. House of Commons Treasury Committee has published a report calling for crypto-assets to be regulated in the U.K. as a matter of urgency. The Treasury Committee considers that the current "ambiguity of the UK Government and regulators' position is clearly not sustainable" and is recommending that an amendment be made to the Regulated Activities Order to bring crypto-assets within the U.K. regulatory perimeter, supervised by the Financial Conduct Authority. The Committee does not specify in the report the activity related to crypto-assets that should go into the RAO, but recommends that it should at least include the issuance of crypto-assets through Initial Coin Offerings and the provision of crypto-exchange services. This will, according to the Committee's report, address anti-money laundering risks and consumer protection, aligning investor protections with those adopted in the U.S.

    The Committee is also seeking various actions by the Government and the U.K. regulators.

    Read more
    TOPICS: FinTechSecurities
  • European Central Bank Guide to On-site Inspections and Internal Model Investigations
    09/21/2018

    The European Central Bank has published its finalized Guide to on-site inspections and internal model investigations under the Single Supervisory Mechanism. The ECB is empowered under the SSM Regulation to conduct, with respect to Eurozone entities within its supervisory remit: (i) on-site inspections, which are in-depth investigations of risk, risk controls and governance; and (ii) internal model investigations, which involve in-depth assessments of internal models used for the calculation of own fund requirements.

    The ECB has developed the Guide as a reference document for supervised entities and other legal entities for which the ECB has decided to launch an on-site inspection. It consulted on a draft of the Guide in July 2017 and has published a separate feedback statement on the consultation responses that were received. The Guide applies to ECB inspections of significant institutions, less significant institutions and other legal entities referred to in the SSM Regulation, including third parties to whom credit institutions have outsourced functions.

    The Guide comprises three sections: (i) the general framework for inspections; (ii) the inspection process; and (iii) applicable principles for inspections. The Guide is not a legally binding document and does not replace the legal requirements laid down in the relevant applicable EU law.

    View the Guide.

    View the feedback statement.
  • US Prudential Regulators Amend Swap Margin Rule to Reflect QFC Stay Requirements
    09/21/2018

    The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Farm Credit Administration and the Federal Housing Finance Agency (together, the "Prudential Regulators") have approved amendments to their margin requirements for uncleared swaps and security-based swaps to align with regulations of the Board, FDIC and OCC relating to stays on default remedies for certain qualified financial contracts (QFC Rules). The final amendments conform the definition of "eligible master netting agreement" under the Swap Margin Rule with the "qualifying master netting agreement" definition in the QFC Rules. Therefore, master netting agreements that comply with the limitations on default remedies in the QFC Rules are not excluded from the definition of EMNA for purposes of the Swap Margin Rules. Additionally, any legacy uncleared swaps not subject to the Swap Margin Rule would not become subject to the Swap Margin Rule due solely to amendments to comply with the QFC Rules.

    The final amendments are effective 30 days following their publication in the Federal Register.

    View the final amendments.

    View the Prudential Regulators' joint press release.
    TOPIC: Derivatives
  • Scottish Court Says Court of Justice of the European Union Should Rule on Whether Brexit Notification Can Be Revoked
    09/21/2018

    The Court of Session has delivered an Opinion allowing a reference to be made to the Court of Justice of the European Union for a preliminary ruling on whether the U.K. can unilaterally revoke its notice of withdrawal from the EU - Wightman v Secretary of State for Exiting the European Union [2018] CSIH 62 (21 September 2018).

    Under Article 50 of the Treaty on European Union, the United Kingdom gave notice to the EU Council on March 29, 2017 that it would leave the EU. The notification means that unless an agreement is reached between the U.K. and the EU, and absent any agreement to extend the two-year period, the U.K. will exit the EU on March 29, 2019.

    Read more.
  • US Agencies Issue Multiple Digital Asset-Related Enforcement Orders
    09/20/2018

    The Securities and Exchange Commission and the Financial Industry Regulatory Authority have issued three digital asset-related enforcement orders, and the SEC also suspended trading in two securities that track the value of digital assets. The orders mark an uptick in digital asset enforcement from previous months.

    Crypto Asset Management, LP

    On September 11, 2018, the SEC alleged that hedge fund manager Crypto Asset Management (CAM) had caused its Crypto Asset Fund (CAF) to fail to register as an investment company based on its digital asset investments, marking the first time the SEC has invoked the Investment Company Act of 1940 (the 1940 Act) in an enforcement proceeding against the managing member of a pooled investment vehicle that invests in digital assets.

    Read more.
    TOPICS: EnforcementFinTech
  • Basel Committee on Banking Supervision Provides Brief Update on Various Workstreams
    09/20/2018

    The Basel Committee on Banking Supervision has published a press release summarizing the outcome of its meeting on September 19-20, 2018. The Committee committed to consider Pillar 1 and Pillar 3 measures to prevent banks adjusting their balance sheets around regulatory reporting dates to manipulate reported leverage ratios. In addition, the Committee intends to further analyze banks' exposures to crypto-assets to reach a conclusion on whether action is needed to address the risks that these assets may present.

    The Basel Committee will publish the following before the end of the year:
    • an updated 2018 list of global systemically important banks, along with the high-level indicator values of all the banks that are within the G-SIB assessment exercise;
    • final revisions to the market risk framework (towards the end of the year);
    • a consultation paper (in October 2018) on whether the exposure measure should be revised to alleviate its impact on client clearing, including presenting options for revising this; and
    • the revised Principles on Stress Testing (in October 2018).

    The Basel Committee also published responses to Frequently Asked Questions on the treatment of settled-to-market derivatives under the Liquidity Coverage Ratio and Net Stable Funding Ratio.

    View the press release.

    View the FAQs.
  • Further Amendments to Technical Standards on EU Systematic Internalisers' Quote Rules
    09/20/2018

    The European Securities and Markets Authority has published an Opinion and revised draft amendments to the Regulatory Technical Standard on the equity transparency obligations of trading venues and investment firms. The RTS, known as RTS 1, is set out in Commission Delegated Regulation (EU) 2017/587, supplementing the Markets in Financial Instruments Regulation.

    Read more.
    TOPIC: MiFID II
  • International Standards Body Encourages Regulatory Clampdown on OTC Leveraged Products
    09/19/2018

    The International Organization of Securities Commissions has published a report on retail OTC leveraged products, alongside a statement warning retail investors of the risks of investing in illegal or fraudulent binary options. This step at international level follows the temporary prohibition of the marketing, distribution or sale of binary options and the restrictions on the marketing, distribution or sale of CFDs to retail clients introduced in the EU earlier this year, which the U.K. Financial Conduct Authority fully supported.

    The report covers rolling spot forex contracts, CFDs and binary options offered and sold on a domestic and cross-border basis by intermediaries to retail investors. The report includes three toolkits providing guidance to IOSCO member jurisdictions on methods for mitigating the harm to retail investors investing in these products.

    Read more
  • UK Regulators Ask Large Banks and Insurers for LIBOR Transition Plans
    09/19/2018

    The Prudential Regulation Authority and the Financial Conduct Authority have published letters addressed to the CEOs of the largest banks and insurers supervised in the U.K. asking for confirmation of each firm's preparations for transition from LIBOR to risk-free rates. The regulators are requesting these firms to provide the following by December 14, 2018:
    • A summary of the firm's assessment of key risks relating to LIBOR discontinuation and details of actions the firm intends to take to mitigate those risks, approved by the board; and
    • The names of the Senior Manager(s) responsible for the provision of the firm's response to the letter and for implementing its transition plans.

    The letter relates to the ongoing global benchmark reform effort instigated by the Financial Stability Board, in particular, the transition from LIBOR to alternative rates by the end of 2021. Firms that have not received the letter are not subject to the information request, but the regulators ask those firms to nevertheless consider their LIBOR transition plans, where relevant.

    View the letters.
    TOPIC: Securities
  • New International Guidance Addresses Conflicts of Interest and Conduct Risks in Equity Capital Raisings
    09/18/2018

    The International Organization of Securities Commissions has published a final report setting out Guidance to its members to address the significant potential conflicts of interest arising from the role of intermediaries during key stages of an equity raising. IOSCO consulted on a draft version of the guidance between February and April 2018.

    IOSCO has identified a number of key risks. In the early, pre-offering, phase of an equity raising, conflicts of interest can arise if analysts employed by firms managing the securities offering are at risk of being under pressure to present a positive view of the issuer. During the investor education and price-formation phase, there is a risk that these "connected" analysts may produce conflicted research and conflicts can also be present during the allocation of securities. IOSCO considers that there can be both conflicts of interest and risks of misconduct where staff employed within firms that are managing an equity raising enter into personal transactions related to the capital raising. These issues can damage investor confidence and the effectiveness of the capital markets as route for issuers to raise finance.

    Read more.
  • US-UK Financial Regulatory Working Group Holds Inaugural Meeting
    09/18/2018

    The U.S.-U.K. Financial Regulatory Working Group has issued a statement following its inaugural meeting held on September 12, 2018 in London. Participants discussed the outlook for financial regulatory reforms and future priorities, including possible areas for deeper regulatory cooperation to facilitate further financial services activity between U.S. and U.K. markets. Participants also discussed Brexit-related issues, including: (i)  U.S.-U.K. financial regulatory issues resulting from the U.K.’s exit from the EU;  and (ii) the implications of Brexit for financial stability and cross-border financial regulation, including contractual continuity and potential cliff-edge risks.

    The Working Group was established in April 2018 to serve as a forum for staff from the U.S. Department of the Treasury and HM Treasury and financial regulatory authorities to exchange views on the regulatory relationship between the U.S. and the U.K. Its objectives are to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.

    The next meeting of the Working Group will be held in the first half of 2019 in Washington, D.C.

    View the statement
  • UK Conduct Regulator Consults on its Approach to Technical Standards and Guidelines Under the Revised Payment Services Directive
    09/17/2018

    The U.K. Financial Conduct Authority has launched a consultation on its approach to implementing Regulatory Technical Standards and related Guidelines developed by the European Banking Authority to supplement provisions of the revised Payment Services Directive. The FCA's consultation focuses in particular on the RTS for strong customer authentication and common and secure open standards of communication. These RTS impose obligations on payment service providers to increase the security of customers' payments made by card and other means and also set out requirements on account servicing payment service providers (ASPSPs) relating to the third party providers of Account Information Services (AIS) and Payment Initiation Services (PIS) that were brought within the regulatory regime by PSD2.

    The consultation includes proposals on new fraud reporting requirements reflecting PSD2 fraud reporting guidelines published by the EBA in July 2018. The FCA is also consulting on proposed changes to its Payment Services and E-Money Approach Document to reflect other legislative changes and clarify its expectations.
    The EBA consulted between June and August 2018 on proposed Guidelines on aspects of the RTS. The FCA's proposed implementation approach is premised on the assumption that the final Guidelines will be largely as consulted on and the FCA will adjust its approach if necessary when the finalized Guidelines are published.

    Read more.
  • Bank of England Launches Public Register for the UK Money Markets Code
    09/17/2018

    The Bank of England has announced that its Money Markets Committee has launched a public register to display the statements of commitment from market participants that have agreed to abide by the UK Money Markets Code and would like their statements to be included on the register. The public register is accessible via a dedicated BoE webpage.

    The Code is a voluntary industry code launched in April 2017, written by market participants. It sets out best practice expected from participants in the deposit, repo and securities lending markets and incorporates revised relevant sections of the Non-Investment Products Code, and also a revision and update of the Gilt Repo Code and Securities Borrowing and Lending Code.

    View the public register

    View the Money Markets Code
  • Final Defendant Sentenced in UK Regulator's Prosecution of £2.8m Investment Fraud
    09/17/2018

    The final defendant in an investment fraud case has been sentenced to 11 years' imprisonment following "Operation Tidworth", the U.K. Financial Conduct Authority's largest and one of its most complex fraud investigations to date. Five other defendants received prison sentences on September 4, 2018 for their roles in share fraud carried out through a series of boiler room companies which led to the loss of more than £2.8 million of investors' money. Many of the investors were elderly or vulnerable and lost life-changing sums, which in some cases amounted to their life savings. The six defendants in the fraud have together been sentenced to a total of 28.5 years' imprisonment. The final defendant was considered to be the instigator and main beneficiary of the fraud.

    The final defendant must serve a total of 13 years in prison, having received an additional sentence of 2 years'; imprisonment in a separate prosecution by the Crown Prosecution Service and the City of London Police.

    View the FCA press release.

    View details of the sentences handed down on September 4, 2018
    TOPIC: Enforcement
  • European Central Bank Consults on Part 2 to Guide to Licensing Credit Institutions
    09/14/2018

    The European Central Bank has opened a consultation on a draft Part 2 to its Guide to Assessments of Licence Applications by banks. The ECB published the Guide to Assessment of Licence Applications in March 2018, which applies to all license applications to become a credit institution within the meaning of the Capital Requirements Regulation.  The ECB developed the Guide, which is not legally binding, to promote awareness and enhance the transparency of the assessment criteria and processes for establishing a credit institution within the Single Supervisory Mechanism.

    The consultation on the draft Part 2 of the Guide focuses on assessment criteria for capital requirements and business plans, including initial capital, own funds, location, operations and structural organization, banking group and outsourcing.

    The consultation closes on October 25, 2018.

    View the consultation paper

    View the consultation webpage

    View details of the Guide to Assessments of Licence Applications.
  • UK Regulator Publishes Application Requirements for EEA Market Operators Seeking Recognition
    09/14/2018

    The Financial Conduct Authority has published a direction on how EEA market operators can apply for recognition as an overseas investment exchange in preparation for Brexit. EEA market operators operating a regulated market, a multilateral trading facility or an organised trading facility currently use passports granted under the revised Markets in Financial Instruments Directive to give their U.K.-based members access to their markets. Once the U.K. has left the EU, those passports will no longer be valid and the U.K. Government does not intend to establish a temporary permissions regime in the event of a "no deal" outcome to the EU-U.K. Brexit negotiations or without an agreed implementation period. EEA market operators that engage in regulated activities when providing their U.K. members with access to their markets will need to apply for ROIE status, unless they can rely on the U.K.'s overseas persons exclusion. The FCA's direction sets out the FCA's expectations for EEA market operators.

    View the FCA's statement.

    View the FCA's Direction
  • UK Conduct Regulator Bans Former Trader for Euribor Manipulation
    09/14/2018

    The U.K. Financial Conduct Authority has issued a Final Notice to a former employee of a major EU bank, prohibiting him from performing any function in relation to any regulated financial activity. The individual had been employed to trade interest rate derivative products referenced to benchmarks including the Euro Interbank Offered Rate.

    The FCA had previously issued a Decision Notice to the former trader in April 2017 imposing a prohibition and a fine of £6.5 million, following a finding that, between March 2005 and June 2009, the former trader had been knowingly concerned in a contravention by his employer of Principle 5 of the FCA's Principles for Businesses, which requires firms to observe proper standards of market conduct.

    Read more.
  • US and Singaporean Regulators Sign FinTech Collaboration Agreement
    09/13/2018

    The U.S. Commodity Futures Trading Commission and the Monetary Authority of Singapore today signed a cooperation arrangement on FinTech innovation, which is to be supported by the agencies' respective FinTech initiatives, LabCFTC and the MAS Financial Technology & Innovation Group. The arrangement will facilitate inter-agency cooperation on FinTech innovation and referrals for innovators that wish to enter the other regulator's market. In addition, it will provide an information sharing framework between the agencies focused on FinTech market trends and developments, innovations and best practices within their respective jurisdictions. The arrangement also calls for joint events, proofs of concept, trials and innovation competitions where permitted, along with periodic meetings to discuss FinTech issues of common interest.

    CFTC Chairman J. Christopher Giancarlo in a statement said that he believes this collaboration with the MAS will "enhance global awareness of the critical role of regulators in 21st century digital markets," while Ravi Menon, Managing Director of the MAS, said that he hopes the arrangement will "create more opportunities for firms in both jurisdictions, especially in developing innovative business models for the derivatives market."

    The arrangement follows a similar agreement reached by the CFTC and the U.K. Financial Conduct Authority this past February, and reflects the global nature of FinTech markets and the importance of cross-border collaboration between regulators.

    View the cooperation agreement.

    View the CFTC/FCA agreement.
    TOPIC: FinTech
  • US Federal Deposit Insurance Corporation Seeks Comments Regarding the Treatment of Reciprocal Deposits
    09/13/2018

    The U.S. Federal Deposit Insurance Corporation published a notice of proposed rulemaking and request for comments regarding a limited exception for a capped amount of reciprocal deposits from treatment as brokered deposits.

    Read more.
  • Working Group Recommends Replacement of EONIA With New Euro Short-Term Rate
    09/13/2018

    The European Central Bank has announced its recommendation of the Euro short-term rate - ESTER - as a euro risk-free rate by a private sector working group. The group also recommends that ESTER replaces the Euro overnight index average, EONIA, because EONIA no longer complies with the EU Benchmark Regulation and will be restricted from January 1, 2020. The recommendations of the working group are not legally binding.

    According to the ECB, ESTER will also provide a basis for developing fallbacks for contracts referencing the EURIBOR because the reformed ESTER methodology will be assessed for compliance with the Benchmark Regulation in 2019. ESTER reflects wholesale Euro unsecured overnight borrowing costs of Euro area banks and will be produced by ECB by October 2019, at the latest.

    Read more.
  • EU Delegated Regulation on Settlement Discipline Published
    09/13/2018

    A Commission Delegated Regulation on settlement discipline has been published in the Official Journal of the European Union. The Delegated Regulation sets out Regulatory Technical Standards on settlement discipline as required under the Central Securities Depository Regulation. 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. The RTS will apply directly across the EU from September 14, 2020.

    View the RTS.
  • US Federal Reserve Board Issues Final Rule Amending the Liability Provisions of Regulation CC
    09/12/2018

    The U.S. Board of Governors of the Federal Reserve System announced a final rule amending the liability provisions of Subpart C of Regulation CC to address instances where there is a dispute between banks as to whether a check has been altered or is a forgery, and the original check is not available for inspection.  The final rule creates a rebuttable presumption of alteration (as that term is used in the UCC) with respect to disputes that arise between banks regarding substitute or electronic checks.  The presumption is rebuttable either by proving by a preponderance of the evidence that the substitute or electronic check is forged (i.e., derives from an original check that was issued with an unauthorized signature of the drawer) or does not contain an alteration.  The presumption of alteration does not apply if a copy of the original check is available for inspection by all parties or where one bank sent the original check to the other bank, even if the check was subsequently truncated and destroyed.  The final rule will take effect on January 1, 2019.

    View full text of the final rule.
  • European Commission Proposes Enhancements to the European Banking Authority's Supervisory Powers for Anti-Money Laundering
    09/12/2018

    The European Commission has published a Communication setting out a broad strategy for strengthening the EU's framework for anti-money laundering supervision. The Communication is accompanied by a fact sheet setting out Questions and Answers on the strategy.

    The Commission notes that, despite the recent strengthening of the EU's framework, through the Fourth Money Laundering Directive (4MLD) and the forthcoming Fifth Money Laundering Directive (5MLD), there are concerns that gaps remain in the EU's supervisory framework. The Commission highlights that there is no clear articulation between the prudential and anti-money laundering rules for financial institutions. It identifies shortcomings in the reaction time of national supervisors and in the level of cooperation and information sharing both between prudential and anti-money laundering supervisors and on a cross-border basis between EU supervisors and other supervisors based both within and outside the EU. While the Commission recognizes that 5MLD will remove certain obstacles to cooperation between anti-money laundering and prudential supervisors, it also notes that further steps are necessary to ensure effective supervisory cooperation, especially where financial institutions operate across borders.

    Read more.
  • UK Government Consults on Transposition Measures for the EU Bank Creditor Hierarchy Directive
    09/12/2018

    HM Treasury has published a consultation on the U.K. Government's proposed approach to implementing the EU Bank Creditor Hierarchy Directive (also known as the Insolvency Hierarchy Directive) into U.K. domestic law. Member states are required to transpose the BCHD into national law by December 29, 2018 and must apply the laws from the date of transposition.

    The BCHD is part of a package of reforms aimed at further strengthening the resilience of EU banks. It lays down harmonized rules for the insolvency ranking of unsecured debt instruments for the purposes of the EU recovery and resolution framework. The BCHD introduces statutory subordination across the EU, by amending the Bank Recovery and Resolution Directive so as to require Member States to create a new class of non-preferred senior debt in their creditor hierarchy. Instruments meeting the relevant criteria to fall within the new class will be eligible to meet subordination requirements under the provisions of the Total Loss Absorbing Capacity (TLAC) term sheet and its EU equivalent, the requirement for Minimum Requirement for Own Funds and Eligible Liabilities (MREL). HM Treasury explains in the consultation paper that the statutory subordination introduced by the BCHD will not prevent the U.K.'s preferred approach, which is to require structural subordination (i.e. subordination within the terms of capital instruments).

    Read more.
  • UK Prudential Regulator Consults on Revisions to Supervisory Reporting Requirements
    09/12/2018

    The U.K. Prudential Regulation Authority has launched a consultation on changes to the PRA's reporting requirements to reflect proposed changes set out by the European Banking Authority in EBA consultations launched in August 2018. The EBA proposes a number of revisions to the existing Implementing Technical Standards on the supervisory reporting requirements under the Capital Requirements Regulation. These include proposed revisions to the financial reporting (FINREP) annexes of the ITS, which add new reporting requirements for non-performing and forborne exposures, amend the reporting of profit or loss items (in particular on expenses) and amend the reporting on leases following International Financial Reporting Standard 16. Proposed revisions to the common reporting (COREP) annexes relate to the Liquidity Coverage Requirement for credit institutions.

    Read more.
  • US Federal Financial Regulatory Agencies Reaffirm the Role of Supervisory Guidance
    09/11/2018

    The U.S. Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency and Bureau of Consumer Financial Protection issued an interagency statement explaining the role and legal status of supervisory guidance.

    Read more.
    TOPIC: Enforcement
  • Bank of England Governor to Stay on Until Brexit
    09/11/2018

    HM Treasury has published a press release announcing that Bank of England Governor Mark Carney will remain in his position for an extended term until January 31, 2020. The extension of Dr. Carney's term will ensure continuity at the BoE until Brexit is completed. A new governor would be appointed during Autumn 2019 after the terms for the U.K.'s withdrawal and the framework for the future U.K.-EU partnership have been agreed.

    Sir Jon Cunliffe, BoE Deputy Governor with responsibility for financial stability, has also been re-appointed for a term from November 1, 2018 to October 2023.

    View the HM Treasury press release.

    View the correspondence between Dr. Carney and the Chancellor of the Exchequer
    TOPIC: People
  • US Office of the Comptroller of the Currency Proposes to Permit Certain Federal Savings Associations to Operate with National Bank Powers
    09/10/2018

    The U.S. Office of Comptroller of the Currency published a notice of proposed rulemaking regarding permitting federal savings associations with total consolidated assets of $20 billion or less as of December 31, 2017 (“covered savings associations”), to elect to operate with the same rights and privileges as a national bank.  The proposed rule seeks to implement Section 206 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amends the Home Owners’ Loan Act, and is intended to provide business flexibility for certain federal savings associations to adapt to change without a corresponding requirement to change charters.   Under the proposed rule, a covered savings association has same rights and privileges as a national bank that has its main office situated in the same location as the home office of the covered savings association, and is subject to the same duties, restrictions, penalties, liabilities, conditions and limitations that would apply to such a national bank.  The covered savings institution, however, will retain its federal savings association charter, and will be treated as a federal savings association for governance and other purposes, including consolidation, merger, dissolution, conversion, conservatorship and receivership.  Treatment as a covered savings association would generally continue even after the institution’s total consolidated assets exceed $20 billion.  Comments to proposed rule are due no later than November 19, 2018.

    View full text of the proposal.
  • US Federal Deposit Insurance Corporation Seeks to Retire Certain Financial Institution Letters
    09/10/2018

    The U.S. Federal Deposit Insurance Corporation published a proposal (FIL-46-2018) seeking comment with respect to the retirement of certain Financial Institution Letters.  FILs are letters that typically announce various types of regulations, policies, publications, and other matters of interest to those in the banking community.  The retired FILs would be archived and moved to inactive status, but would still be available for reference.  The FDIC issued the proposal pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996, which requires the FDIC (and other agencies) to conduct a review of their rules at least every 10 years to identify outdated or unnecessary regulations.  In connection with this mandate, the FDIC has identified 374 FILs issued between 1995 and 2017 regarding risk management supervision that have become outdated or redundant.  The FDIC is also currently reviewing FILs regarding other subject matters, and is exploring opportunities to update or streamline its remaining FILs generally.  Comments to the proposal are due by October 10, 2018.

    View full text of the FDIC proposal, including a list of the letters to be retired.
  • Post-Brexit UK Secondary Legislation Published For Temporary Permissions Regime For Payments Services
    09/05/2018

    HM Treasury has published draft statutory instruments on the regulation of payments and e-money and on access to the Single Euro Payments Area in preparation for the U.K.'s withdrawal from the EU - the draft Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 and the Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018. The draft Regulations are relevant to all Payment Service Providers and registered Account Information Service Providers. The draft Regulations will amend the Payment Services Regulations 2017, Electronic Money Regulations 2011 and the SEPA Regulation to:
    • Create a temporary permissions regime for EEA payment firms
    In line with the proposed temporary permissions regime for EEA firms regulated under the Financial Services and Markets Act 2000 (covered by the draft EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018), HM Treasury is proposing a TPR for payments. EEA firms operating under the TPR for payments will need to establish a U.K. subsidiary at the end of the proposed three-year TPR period. This provision should give firms the time to fully operationalize their new U.K. subsidiary.

    Read more.
  • UK Financial Conduct Authority Appoints New Director of Competition
    09/05/2018

    The U.K. Financial Conduct Authority has issued a press release announcing the appointment of Sheldon Mills as its new director of competition. Mr. Mills is currently senior director, mergers and state aid at the Competition and Markets Authority. Mr. Mills will take up his role in November 2018.

    View the FCA press release.
    TOPIC: People
  • European Supervisory Authorities Report on Automation in Financial Advice
    09/05/2018

    The Joint Committee of the European Supervisory Authorities has published a joint report on automation in financial advice. The Report follows the ESA's 2015 joint discussion paper and follow-up report in 2016. The Report provides a summary of recent sectoral work by the ESAs in this area and the main findings of a survey with national regulators on the evolution of automation in financial advice in the securities, banking and insurance sectors. The ESAs observed that automated services are more often offered through partnerships between established financial intermediaries and FinTech firms than by FinTech firms alone. The ESAs also found that automation in financial advice has grown slowly and that the number of firms and customers involved is still limited. As a result, the ESAs do not consider that any of the previously identified risks have materialized and therefore that further action is unnecessary at this stage. The ESAs will conduct a new monitoring exercise if and when market developments and risks merit the work.

    View the report.
    TOPICS: FinTechMiFID II
  • EU Disagreement on EU Technical Standards for Reporting of Securities Financing Transactions
    09/05/2018

    The European Securities and Markets Authority has published an Opinion on the European Commission's proposed amendments to the final draft Implementing and Regulatory Technical Standards on reporting under the Securities Financing Transactions Regulation. Various parts of the SFTR came into effect on January 12, 2016. However, the new reporting obligation for SFTs is not yet in force. Securities financing transactions involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy backs. The SFTR requires, amongst other things, all securities financing transactions to be reported to EU recognized trade repositories, including details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies.

    Read more.
  • Five Individuals Imprisoned for £2.8m UK Investment Fraud
    09/04/2018

    Five defendants have between them been sentenced to a total of 17.5 years' imprisonment, following a fraud prosecution brought by the U.K. Financial Conduct Authority.

    The FCA's statement announcing the sentencing highlights the investigation as one of the FCA's most complex fraud investigations to date and the first FCA prosecution of an offense of perverting the course of justice. Between July 2010 and April 2014, the defendants cold-called members of the public and subjected them to high-pressure sales tactics to persuade them to purchase shares in a company that owned land in Madeira. A number of entirely false claims were made to persuade potential investors to invest. Many of the investors were elderly and vulnerable and suffered life-changing losses.

    The FCA proposes to commence confiscation proceedings against the five defendants under the Proceeds of Crime legislation. A sixth defendant will be sentenced on September 14, 2018.

    View the FCA press release.
    TOPIC: Enforcement
  • European Commission Communication on Proposed Amendments to Technical Standards on Systematic Internalisers' Quote Rules
    09/03/2018

    The European Commission has published a Communication (dated August 10, 2018) on proposed amendments by the European Securities and Markets Authority to a Regulatory Technical Standard, known as "RTS1," supplementing the Markets in Financial Instruments Regulation.

    Under MiFIR, Systematic Internalisers must make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent of 10% of the standard market size for the quoted instrument; (ii) include both a bid and offer price; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity." ESMA submitted final draft amendments to RTS 1 in March 2018, which provided that, where a financial instrument is subject to the "minimum tick size" regime, the quotes of an SI can only adequately reflect prevailing market conditions when those quotes reflect the minimum price increments ("tick sizes") quoted by EU trading venues trading the instrument.

    Read more.
    TOPIC: MiFID II
  • UK Regulator Confirms its Expectations on Reporting for Resolution Planning
    08/31/2018

    The Prudential Regulation Authority has issued an update on the application of its supervisory statement, "Resolution Planning." The supervisory statement sets out the PRA's expectations on the resolution planning information that firms must submit to comply with their obligations under the EU Bank Recovery and Resolution Directive. The update confirms the approach that will be taken by the PRA and the Bank of England as the U.K.'s national resolution authority.

    Read more.
  • US Federal Reserve Board and FDIC Extend Resolution Plan Submission Deadlines for Certain Institutions
    08/30/2018

    The U.S. Board of Governors of the Federal Reserve System and U.S. Federal Deposit Insurance Corporation announced that the agencies have extended the submission deadline for the resolution plans (commonly referred to as “living wills”) for one designated non-bank and four foreign banking organizations. The announcement extends the submission deadline for the non-bank financial company from December 31, 2018 to December 31, 2019, and extends the submission deadline for the four foreign banking organizations from July 1, 2019 to July 1, 2020. The agencies noted that the extended deadline will allow for feedback to be provided to the institutions with respect to their prior resolution plan submissions, and will also provide time for the institutions to prepare their next resolution plan submissions.  The FDIC also announced that it will be extending the resolution plan submission deadline for all insured depository institutions to no sooner than July 1, 2020.

    View full text of the FDIC and Federal Reserve press release.
  • Basel Committee Finalizes Technical Amendment to Pillar 3 Disclosure Requirements
    08/30/2018

    Following a consultation in March 2018, the Basel Committee on Banking Supervision has published a finalized technical amendment to the consolidated Pillar 3 disclosure technical standard that was issued in March 2017. The amendment imposes additional Pillar 3 disclosure requirements for those jurisdictions implementing an Expected Credit Loss, or ECL, accounting model as well as for those adopting transitional arrangements for the regulatory treatment of accounting provisions. These additional disclosures require banks to disclose, where applicable: (i) the "fully loaded" impact of ECL transitional arrangements used in Total Loss Absorbing Capacity resources and ratios; (ii) the allocation between general and specific provisions for standardized approach exposures; and (iii) the rationale for their categorization of ECL accounting provisions in general and specific categories for standardized approach exposures.

    The technical amendment will also apply to jurisdictions adopting transitional arrangements for the regulatory treatment of accounting provisions. The interim approach to, and transitional arrangements for, the regulatory treatment of accounting provisions were published separately by the Basel Committee in March 2017.

    The amendments covered by the revised Technical Standard will take effect from January 1, 2019.

    View the Technical Amendment

    View the consultation paper.

    View the interim approach and transitional arrangements published March 2017.
  • US Office of the Comptroller of the Currency Issues Guidance with Respect to Implied Sovereign Support
    08/28/2018

    The U.S. Office of the Comptroller of the Currency issued guidance to OCC-supervised institutions with respect to the role of informal or implied expressions of support from foreign governments in determining credit risk ratings.

    Read more.
  • US Office of the Comptroller of the Currency Publishes Advanced Notice of Proposed Rulemaking with Respect to Community Reinvestment Act Modernization
    08/28/2018

    The U.S. Office of the Comptroller of the Currency issued an advanced notice of proposed rulemaking with respect to the modernization of the Community Reinvestment Act.

    Read more.
  • US Federal Reserve Board Issues Interim Final Rule Expanding the Applicability of the Small Bank Holding Company Policy Statement
    08/28/2018

    The U.S. Board of Governors of the Federal Reserve System issued an interim final rule increasing the asset threshold for the applicability of the Federal Reserve Board’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (Regulation Y, Appendix C) from $1 billion to $3 billion in total consolidated assets.

    Read more.
  • European Banking Authority Proposes Revised Implementing Technical Standards for Reporting of Securitization Information
    08/28/2018

    The European Banking Authority has published a consultation paper setting out proposed amendments to existing Implementing Technical Standards on supervisory reporting, to align the reporting of securitizations with the new EU securitization framework. The new securitization framework took effect in January 2018 and comprises: (i) the Securitization Regulation (also known as the STS Regulation), which lays down common due diligence for institutional investors, risk retention and transparency measures and establishes a category of simple, transparent and standardized securitization in the EU; and (ii) a Regulation making targeted amendments to the Capital Requirements Regulation to provide for the capital treatment of STS securitizations and certain SME synthetic securitizations, including measures to reduce reliance on external credit ratings.

    Read more.
  • European Banking Authority Proposes Revised Implementing Technical Standards for Supervisory Reporting Under the Capital Requirements Regulation
    08/28/2018

    The European Banking Authority has launched a consultation on proposed revisions to the existing Implementing Technical Standards for the financial reporting, or FINREP, framework under the Capital Requirements Regulation.

    The proposed revisions relate to the reporting requirements for non-performing and forborne exposures. The EBA proposes revisions to existing templates to provide for additional breakdowns on performing and non-performing exposures, forborne exposures and collateral obtained. The proposals include some new templates for additional reporting by institutions with elevated levels of non-performing exposures that are not "small and non-complex." The new templates are designed to provide further insights into an institution's portfolios of performing and non-performing loans and/or or forborne loans and advances and on collateral obtained. The EBA also proposes revisions to the reporting on profit or loss items in FINREP and to account for the introduction of International Financial Reporting Standard 16 Leases, which is due to replace IAS 17 as the standard for the accounting of leases from January 1, 2019.

    Read more.
  • European Banking Authority Proposes Revised Supervisory Reporting Technical Standards on Liquidity Coverage Requirement
    08/28/2018

    The European Banking Authority has launched a consultation on proposed revisions to the Implementing Technical Standards that relate to supervisory reporting, under the common reporting, or COREP, framework, in line with the Liquidity Coverage Requirement, or LCR, under the Capital Requirements Regulation.

    The proposed revisions to the ITS are intended to reflect amendments made to an existing Delegated Regulation supplementing the Capital Requirements Regulation. These amendments were made by an Amending Regulation adopted by the European Commission in July 2018. The changes introduced by the Amending Regulation require the EBA to make related changes to the ITS on LCR reporting to capture the necessary elements for its calculation and monitoring. The revisions to the ITS relate mainly to the calculation of inflows and outflows in securities financing transactions and collateral swaps or the unwind waivers envisaged for some SFTs and collateral swaps with central banks. Further minor amendments are also proposed.

    Read more.
  • European Securities and Markets Authority Intends to Extend Product Intervention Measures for Binary Options for a Further Three Months
    08/24/2018

    The European Securities and Markets Authority has announced its intention to adopt a Decision to extend the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA has previously adopted intervention measures for binary options, with the current Decision set to expire on October 1, 2018.

    ESMA has power under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices. This may be done when, among other conditions, the exercise of ESMA's power addresses a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire. In reviewing the current Decision, ESMA has agreed to exclude from the scope of product intervention certain types of binary option that are less likely to lead to a significant investor protection concern.

    Read more.
  • US Federal Reserve Board, OCC and FDIC Expand 18-Month Examination Cycle for Small Banks and Branches and Agencies of Foreign Banks
    08/23/2018

    The U.S. Board of Governors of the Federal Reserve System, U.S. Office of the Comptroller of the Currency and U.S. Federal Deposit Insurance Corporation jointly issued an interim final rule and request for comment to expand the number of insured depository institutions and U.S. branches and agencies of foreign banks eligible for an 18-month on-site examination cycle.

    Read more.
  • Commodity Futures Trading Commission Proposes Clearing Requirement Exemptions for Certain Financial End Users
    08/23/2018

    The Commodity Futures Trading Commission has proposed exempting certain bank holding companies, savings and loan holding companies and community development financial institutions from swap clearing requirements. The proposed exemptions, issued in response to comments made through the CFTC's Project KISS initiative, codify prior no-action relief provided under CFTC Staff Letters 16-01 and 16-02.

    Read more
    TOPIC: Derivatives
  • UK Government Issues Brexit "No-Deal" Guidance for Financial Services
    08/23/2018

    HM Treasury has published a technical notice entitled "Banking, insurance and other financial services if there's no Brexit deal," to provide guidance about the impact of the U.K. leaving the EU without a ratified withdrawal agreement in place. The guidance is relevant to financial services firms, funds and financial market infrastructures and to their customers. The technical notice is one of the first 25 of a series of U.K. government technical notices setting out information that will enable businesses and citizens to make informed plans and preparations in the event of the U.K. exiting the EU on March 29, 2019 without a deal. These technical notices include a notice on the government's overarching approach to preparing for a "no deal" scenario.

    Read more.
  • European Central Bank Issues Opinion on Proposed Prudential Framework for Investment Firms
    08/22/2018

    The European Central Bank has published an Opinion on the legislative proposals adopted by the European Commission in December 2017 for a new framework for the prudential regulation of investment firms. The framework proposed by the European Commission comprises a proposal for a regulation on the prudential requirements of investment firms (including amendments to the Capital Requirements Regulation, the Markets in Financial Instruments Regulation and the European Banking Authority Regulation) along with a proposal for a directive on the prudential supervision of investment firms, which includes amendments to the CRD IV Directive and the revised Markets in Financial Instruments Directive. The ECB was asked by the European Parliament and the Council of the European Union to provide its opinion on the proposed framework in January 2018.

    In the Opinion the ECB states that it generally supports the objectives of the proposed framework, which are to create a prudential framework better suited to the risks and business models of different types of investment firms and to subject systemically important investment firms to the same prudential rules as credit institutions.

    Read more.
  • US Federal Reserve Board, OCC and FDIC Issue Interim Final Rule with Respect to the Treatment of Certain Municipal Obligations as High-Quality Liquid Assets
    08/22/2018

    The U.S. Board of Governors of the Federal Reserve System, U.S. Office of the Comptroller of the Currency and U.S. Federal Deposit Insurance Corporation jointly issued an interim final rule and request for comment to treat “liquid and readily-marketable,” investment grade municipal obligations as level 2B high-quality liquid assets (HQLAs) for purposes of the liquidity coverage ratio rule.

    Read more.
  • EU Final Draft Technical Standards on Reporting and Disclosure Requirements for Securitizations
    08/22/2018

    The European Securities and Markets Authority has published a final report and technical standards on the disclosure and reporting requirements under the EU Securitization Regulation (or STS Regulation). The Securitization Regulation requires originators and sponsors to notify ESMA of any securitization that meets the "Simple, Transparent and Standardized" criteria. ESMA will maintain a list of all such securitizations on its website. Securitization special purpose entities, originators and sponsors of a securitization will be required to make certain information available via a securitization repository to holders of a securitization position, to the national regulators and, upon request, to potential investors. The Securitization Regulation will apply directly across the EU from January 1, 2019 to securities issued under securitizations on or after January 1, 2019. Securitizations issued before that date may be referred to as STS securitizations provided that they meet certain conditions.

    Read more.
  • UK Releases Draft Legislation to Onshore EU Regulatory Capital Requirements Legislation Post-Brexit
    08/21/2018

    HM Treasury has released another draft statutory instrument in preparation for Brexit, the Capital Requirements (Amendment) (EU Exit) Regulations 2018 - the draft Capital Requirements Regulations. The EU regulatory capital requirements framework for banks, building societies and investment firms comprises the Capital Requirements Regulation, the Capital Requirements Directive and secondary legislation in the form of technical standards. The CRD is implemented into U.K. law through various sector-specific legislation, for example, the Regulated Covered Bonds Regulations 2008, the Capital Requirements Regulations 2013, the Capital Requirements (Country-by-Country Reporting) Regulations 2013, and the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 as well as through PRA and FCA rules. The CRR and the technical standards are directly applicable across the EU.

    This draft Capital Requirements Regulations will amend the CRR to ensure that it continues to operate effectively in the U.K. when the U.K. leaves the EU. The domestic legislation implementing CRD is also amended to ensure that it continues to function as intended. The Prudential Regulation Authority and the Financial Conduct Authority will be responsible for amendments to the technical standards and for updating their rulebooks. They are expected to consult in Autumn 2018 on these aspects.

    Read more.
  • Commodity Futures Trading Commission Finalizes Amendments to Rules Governing Chief Compliance Officer Duties and Annual Reporting Requirements for Certain Registrants
    08/21/2018

    The Commodity Futures Trading Commission has unanimously approved final amendments to clarify and simplify its regulations governing the duties and annual reporting requirements for chief compliance officers at futures commission merchants, swap dealers and major swap participants. The amendments, first proposed in May 2017, are designed to clarify certain requirements (including as to the annual CCO report) as well as harmonize the CFTC's requirements with similar Securities and Exchange Commission rules that will be applicable to security-based swap dealers.

    Read more.
  • US Federal Deposit Insurance Corporation Announces Modifications to its Statement of Policy Regarding Section 19 of the Federal Deposit Insurance Act
    08/20/2018

    The U.S. Federal Deposit Insurance Corporation issued modification to its Statement of Policy with respect to Section 19 of the Federal Deposit Insurance Act, which (among other things) prohibits persons with convictions for certain criminal offenses, or those who have entered into pretrial diversion or similar programs with respect to the same, from participating in the affairs of a FDIC-insured financial institution without prior approval of the FDIC.

    Read more.
  • US Federal Reserve Board Division of Research and Statistics Director, David Wilcox, to Retire
    08/20/2018

    The U.S. Board of Governors of the Federal Reserve System Announced that David Wilcox, the director of the Federal Reserve Board’s Division of Research and Statistics, would retire at the end of the year.  Mr. Wilcox has served as the director of the division for 7 years, and in his 30 years of service has also held positions on the staff of the President's Council of Economic Advisers, as assistant secretary for economic policy at the Treasury Department and as deputy director of the Division of Research and Statistics.

    View full text of the Federal Reserve Press.
    TOPIC: People
  • Global Authorities Consult on Governance for OTC Derivatives Data Elements
    08/16/2018

    The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have published a consultation paper on governance arrangements for OTC derivatives data elements other than the Unique Transaction Identifier and the Unique Product Identifier. Critical data elements are an important aspect of reporting derivatives transactions to a trade repository. The consultation paper proposes the key criteria for the CDE maintenance and governance, the different areas of CDE governance and governance functions and allocation of the governance functions to different bodies.

    Responses to the consultation should be submitted by September 27, 2018 using the dedicated response form, available through the links below.

    View the press release.

    View the consultation paper.
    TOPIC: Derivatives
  • Financial Stability Board Consults on Implementation of the Legal Entity Identifier
    08/16/2018

    The Financial Stability Board has launched a thematic peer review on implementation of the Legal Entity Identifier and is inviting feedback on implementation of the LEI at the same time. The objective of the LEI system is for unique identifiers to be held by all legal entities participating in financial markets across the globe. It is envisaged that the LEI system will lead to better data aggregation, enhance systemic risk monitoring and reduce costs to market participants.

    Using the peer review, the FSB will: (i) consider the approaches and strategies used by FSB members to implement the LEI, including its adoption for regulatory requirements; (ii) assess whether current levels and rates of LEI adoption are sufficient to support the ongoing and anticipated needs of FSB member authorities; (iii) identify the challenges in further advancing the implementation and use of the LEI; and (iv) if appropriate, make recommendations for addressing any challenges.

    Read more.
  • UK Government Releases Post-Brexit Draft Legislation for Deposit Protection
    08/15/2018

    HM Treasury has published draft Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018. The draft regulations are expected to be laid before Parliament in autumn 2018 and to come into force mostly on the day the U.K. withdraws from the EU. These draft regulations are part of HM Treasury's measures to onshore EU legislation under the provisions of the European Union (Withdrawal) Act 2018. The key changes proposed are:
    • transferring the power to review, adjust and set the coverage level from EU bodies to the Prudential Regulation Authority, with approval from HMT; and
    • removing the cooperation arrangement under which the U.K. Financial Services Compensation Scheme administers compensation payments to depositors at U.K. branches of EEA banks on behalf of EEA deposit guarantee schemes. A transitional provision will allow the FSCS to continue after Brexit to accept instructions and funds from EEA DGS should an EEA firm operating in the U.K. fail immediately before Exit Day.

    View the draft Regulations.

    View the explanatory guidance.
  • EU Implementing Regulations for Benchmark Regulation Published
    08/09/2018

    Two Commission Implementing Regulations supplementing the Benchmark Regulation have been published in the Official Journal of the European Union. The Benchmark Regulation, which took effect across the EU in January 2018, sets out the authorization and registration requirements for benchmark administrators, including third-country entities, and the requirements for governance and control of administrators. It provides for different categories of benchmarks depending on the risks involved, imposes additional requirements on benchmarks considered to be "critical" and gives powers to national regulators to mandate, under certain conditions, contributions to or the administration of critical benchmarks.

    Read more.
    TOPIC: Securities
  • UK Post-Brexit Secondary Legislation on Short Selling Published
    08/09/2018

    Draft U.K. secondary legislation has been published to onshore the EU Short Selling Regulation on the day the U.K. exits the EU. The draft Short Selling (Amendment) (EU Exit) Regulations 2018 (or U.K. SSRs) are expected to be laid before Parliament in Autumn 2018 and to come into force mostly on the day the U.K. withdraws from the EU. The draft U.K. SSRs are made under the provisions of the European Union (Withdrawal) Act 2018 to address failures of retained EU law relating to short selling to operate effectively and other deficiencies arising from Brexit.

    The explanatory guide to the U.K. SSRs states that changes for firms with shares admitted to trading on a U.K. venue should be minimal. The procedure for notifying U.K. instruments to the Financial Conduct Authority will be kept and instruments admitted to trading on U.K. venues will continue to have the same restrictions applied to them.

    Read more.
  • EU and UK Authorities Clarify Trading Obligation Expectations for Pension Schemes
    08/08/2018

    The European Securities and Markets Authority has published a further statement on the transitional exemption from the clearing obligation for pension scheme arrangements under the European Market Infrastructure Regulation and delegated regulations. Transitional provisions provide for PSAs to be exempt from the clearing obligation until August 16, 2018. There is no provision in EMIR that would allow for a further extension of this exemption period. It is proposed that this exemption will be further extended under the proposal to amend EMIR, known as EMIR Refit. ESMA issued a statement on July 3, 2018 stating that national regulators are expected not to prioritize "their supervisory actions towards entities that are expected to be exempted again in a relatively short period of time and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate manner."

    This new statement clarifies that ESMA does not expect national regulators to focus on any non-compliance by PSAs with the related trading obligation under the Markets in Financial Instruments Regulation. Financial counterparties that are exempt from the clearing obligation under EMIR are also exempt from the trading obligation under MiFIR. It is likely that the clearing obligation exemption will expire before it is extended under EMIR Refit and therefore the trading obligation exemption would also lapse.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Financial Conduct Authority Confirms it is Open to a Range of Booking Models for Brexit Preparations
    08/08/2018

    The U.K. Financial Conduct Authority has published a "Dear CEO" letter on firms' cross-border booking models in preparation for Brexit. In the letter the FCA reminds firms that where the firm is expanding its European presence, it must still be possible for the FCA to supervise the firm's U.K. business and firms must still meet their threshold conditions. However, unlike other EU regulators, the FCA is not stipulating specific requirements for booking models. Instead, the FCA states that it is "open to a broad range of legal entity structures or booking models. This includes those making use of back-to-back and remote booking, providing their associated conduct risks are effectively controlled and managed. Our starting point is therefore not to restrict business models but to understand the principles and practice involved and how the conduct risks that arise from them are managed."

    Read more.
  • Global Bodies Consult on Incentives to Centrally Clear OTC Derivatives
    08/07/2018

    A consultation paper on incentives to centrally clear OTC derivatives has been jointly published by the Financial Stability Board, the International Organization of Securities Commissions, the Basel Committee on Banking Supervision and the Committee on Payments and Market Infrastructures. The paper is part of the FSB's post-implementation evaluation of the effects of the G20 financial regulatory reforms. The consultation paper sets out the results of an evaluation of the reforms that have been implemented to incentivize central clearing of OTC derivatives, including mandatory clearing requirements, capital, liquidity and margin requirements, as well as the reforms to CCP resilience, recovery and resolution. The evaluation found that:
    • the changes observed in OTC derivatives markets are consistent with the G20 Leaders' objective of promoting central clearing as part of mitigating systemic risk and making derivatives markets safer.
    • the relevant post-crisis reforms, in particular the capital, margin and clearing reforms, taken together, appear to create an overall incentive, at least for dealers and larger and more active clients, to centrally clear OTC derivatives.
    Read more.
    TOPIC: Derivatives
  • Regulators Unveil Plans to Launch Global Financial Innovation Network
    08/07/2018

    12 international financial regulators and related organizations have announced the launch of the Global Financial Innovation Network. The announcement, which was accompanied by a consultation paper on the role and objectives of the GFIN, serves as part two of a whitepaper published earlier this year by the U.K. Financial Conduct Authority on the possibility of forming a "global sandbox." The GFIN, as proposed, would consist of three components: (i) information sharing and collaboration through a network of regulators; (ii) joint policy work and regulatory trials; and (iii) cross-border firm trials.

    The GFIN hopes to build upon existing information sharing agreements to allow information sharing to take place on a larger and quicker scale, which would allow regulators to fill information gaps related to innovation, technological trends and emerging issues. This would help FinTech firms navigate international regulations by providing a comprehensive forum through which to interact with multiple regulators. In addition, the GFIN aims to provide a space to encourage joint policy work and address areas of divergence between financial services regulators, particularly with respect to emerging technologies and legacy business models and regulatory frameworks. As envisioned, the GFIN would also facilitate cross-border trials of emerging technologies across global jurisdictions.

    Read more.
    TOPIC: FinTech
  • Upcoming Priorities for the Global FX Code
    08/06/2018

    The Global Foreign Exchange Committee has published a paper entitled: "The FX Global Code at One Year: a Look Back and a Look Ahead." The FX Global Code was 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 paper discusses the achievements of the GFXC and the way in which the Code has been received by market participants over the past year. These include increased awareness of and commitment to the Code, further integration of the Code into the business practices of FX market participants and evolution of the Code with changes in the FX market, in particular for transparency and disclosure.

    The GFXC's upcoming priorities are outlined in the paper. These include:
    • continuing the existing GFXC working groups - the disclosures working group and the cover and deal working group; and
    • establishing two new GFXC working groups - one on buy-side outreach and the other to further integration of the Code.

    View the paper.
  • Bank of England Establishes Enforcement Decision Making Committee and Appoints Members
    08/03/2018

    Following a consultation that ran between November 2017 and February 2018, the Bank of England has published a policy statement on the procedure and necessary revisions to existing policies and procedures required for the establishment of an Enforcement Decision Making Committee.

    The EDMC has been established as a response to a recommendation from HM Treasury arising from its review of enforcement decision-making at the U.K. financial regulators. HM Treasury had recommended the establishment of a functionally-independent decision-making committee composed of independent members with expertise suited to the Prudential Regulation Authority's regulatory focus. The BoE has gone beyond HM Treasury's original recommendation and, going forward, the EDMC will be the BoE's decision-making body in contested enforcement cases that relate to all areas in which the BoE has enforcement powers (that is, prudential regulation, financial market infrastructure, resolution and note issuances). It will ensure the necessary functional separation between the BoE's investigation teams and decision-makers.

    Alongside the Policy Statement, the BoE has published revised statements of policy and procedures reflecting the EDMC's establishment. These cover the EDMC's remit and operation and the selection, appointment, remuneration and governance of EDMC members. The BoE has also issued a press release announcing its appointment of six EMDC members. Members are appointed for renewable, fixed, three-year periods and cannot serve more than two consecutive terms.

    Read more.
    TOPICS: EnforcementPeople
  • UK Conduct Regulator Consults on Rule Alignments for EU Securitization Framework
    08/01/2018

    The U.K. Financial Conduct Authority has launched a consultation on proposed changes to its rules to ensure consistency with the provisions of the directly applicable EU Securitization Regulation (also known as the STS Regulation) and related amendments to the Capital Requirements Regulation, which take effect across the EU on January 1, 2019. This forthcoming EU legislation will introduce a new framework for simple, transparent and standardized securitizations, intended to make the EU securitization market function more effectively.

    Read more.
    TOPICS: FundsSecurities
  • UK Financial Conduct Regulator Proposes to Apply Principles and Conduct Rules to Payment Service Providers and Electronic Money Firms
    08/01/2018

    The U.K. Financial Conduct Authority has launched a consultation on general standards and communication rules for the payment services and e-money sectors.

    Payment Service Providers and e-money firms are authorized or registered under the Payment Services Regulations 2017 and Electronic Money Regulations 2011, respectively. The Payment Services Regulations 2017 brought certain of these firms within the scope of the FCA's rulemaking powers.

    Read more.
  • UK Conduct Regulator Reminds Firms of Obligations on Selling High-Risk Products to Retail Clients
    08/01/2018

    The U.K. Financial Conduct Authority has issued a statement on selling high-risk speculative investments to retail clients following the European Securities and Markets Authority's product intervention on contracts for difference products.

    ESMA issued decisions in March and June 2018 to temporarily prohibit the marketing, distribution or sale of binary options and to impose restrictions on the marketing, distribution or sale of CFDs to retail clients. In the CFD decision, ESMA had clarified that turbo certificates were outside the scope of the CFD restrictions. However, in its recently updated Q&A on its product intervention, ESMA acknowledges that turbo certificates have comparable features to CFDs, such as leverage.

    Read more.
  • Global Recommendations for Trading Venues to Manage Extreme Volatility
    08/01/2018

    The International Organization of Securities Commissions has published a report on mechanisms used by trading venues to manage extreme volatility and preserve orderly trading. Following its consultation earlier this year, IOSCO is making eight recommendations for trading venues and their regulators to consider when implementing, operating and monitoring volatility control mechanisms to preserve orderly trading.

    Read more.
  • US Office of the Comptroller of the Currency Begins Accepting National Bank Charters from FinTech Companies
    07/31/2018

    The U.S. Office of the Comptroller of the Currency announced that it would begin accepting national bank charter applications from non-depository FinTech companies that seek to engage in the business of banking.  In connection with the announcement, the OCC released a policy statement that outlines the OCC’s chartering authority with respect to non-depository FinTech companies, the OCC’s stated support for reasonable innovation, and the chartering standards and supervisory expectations applicable to such institutions.

    Read more.
    TOPIC: FinTech
  • US Treasury Publishes Report on Nonbank Financials, Fintech, and Innovation
    07/31/2018

    The U.S. Department of the Treasury released its report on Nonbank Financials, Fintech, and Innovation.  The FinTech report is the fourth in a series mandated by U.S. President Donald Trump’s Executive Order 13772 on Core Principles for Regulating the United States Financial System.

    Read more.
    TOPIC: FinTech
  • US Office of the Comptroller of the Currency Publishes Updated Business Combinations Booklet
    07/31/2018

    The U.S. Officer of the Comptroller     of the Currency released an updated version of the Comptroller’s Licensing Manual Business Combinations booklet.  The booklet, which was updated in November of 2017, has been revised to make certain technical corrections and process updates with respect to clarifications regarding the public notice and comment period and a change in the public comment calculation period.

    View full text of the revised booklet.
  • Final Draft EU Technical Standards on Securitization Risk Retention Requirements
    07/31/2018

    The European Banking Authority has published a final report and final draft Regulatory Technical Standards under the EU Securitization Regulation (or STS Regulation) on the risk retention requirements for originators, sponsors and original lenders. The Securitization Regulation requires, among other things, originators, sponsors or original lenders of a securitization to retain on an ongoing basis a material net economic interest in the securitization of at least 5 %. The final draft RTS specify in greater detail the risk retention requirement, including the modalities of retaining risk, the measurement of the level of retention, the prohibition of hedging or selling the retained interest and the conditions for retention on a consolidated basis.

    The final draft RTS have been submitted to the European Commission for endorsement. The final RTS will apply directly across the EU twenty days after publication in the Official Journal of the European Union.

    The Securitization Regulation, which will apply from January 1, 2019, has replaced the risk retention requirements in the Capital Requirements Regulation. Once the final RTS enter into force, the existing Commission Delegated Regulation ((EU) No 625/2014) on risk retention requirements, made under the Capital Requirements Regulation, will be repealed.

    View the final draft RTS.

    View the existing Delegated Regulation on risk retention requirements

    View details of the EBA's consultation on the draft RTS.
  • Final Draft EU Technical Standards on Homogeneity Conditions for STS Securitizations
    07/31/2018

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

    Read more.
  • Final Draft EU Technical Standards on Home-Host Regulatory Cooperation Under the Revised Payment Services Directive
    07/31/2018

    The European Banking Authority has published a final report and final draft Regulatory Technical Standards under the revised Payment Services Directive on cooperation between national regulators in home and host states of a payment institution that operates cross-border in the EU. PSD2 took effect on January 13, 2018. The final report summarizes the feedback the EBA received to the proposed draft RTS and sets out the EBA's responses. The EBA confirms that it has made a number of the changes to the text of the final draft RTS as a result of the feedback.

    The final draft RTS specify the framework for cooperation between supervisors of payment institutions operating on a cross-border basis, including the method for cooperation and details of information that should be provided between regulators. The final draft RTS also specify the means, details and frequency of reporting that a host national regulator may request from payment institutions concerning activities carried out in its territory through agents or branches. The final draft RTS will further apply to the framework for cooperation, and for the exchange of information, between national regulators for electronic money institutions providing services cross-border in the EU.

    The EBA has submitted the final draft RTS to the European Commission for endorsement. The final RTS will apply across the EU twenty days after publication in the Official Journal of the European Union.

    View the final report and final draft RTS.
  • UK Payment Systems Regulator Reports on the UK Contactless Mobile Payment Sector
    07/31/2018

    The U.K. Payment Systems Regulator has published a Report setting out its understanding of the Contactless Mobile Payments sector, following information-gathering during 2016 and 2017. CMPs are in-store payments made by consumers, using apps installed on their mobile devices, usually using Near Field Technology for communication between the mobile device and the retailer's point-of-sale terminal and with payment security enabled via a "tokenization" process.

    The PSR conducted two calls for information in 2016 and 2017, to increase its understanding of:
    • whether the way CMPs operate and the way they are being offered in the U.K. potentially affects competition, innovation and the interests of people and organizations that use payment systems (and, if so, how); and
    • whether there were any restrictions affecting the provision of tokenization services.

    The Report explains how CMPs work from a functional and technical perspective, outlines the main participants and their respective roles, summarizes the PSR's consideration of particular issues and proposes next steps.

    Read more.
  • International Swaps and Derivatives Association Publishes ISDA 2018 US Resolution Stay Protocol to Facilitate Compliance with US Stay Regulations
    07/31/2018

    The International Swaps and Derivatives Association has published the ISDA 2018 U.S. Resolution Stay Protocol. The protocol was developed to facilitate compliance with regulations issued by the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency that require global systemically important banking organizations to include contractual stays on early termination rights within in-scope qualified financial contracts, including swaps and repurchase agreements.

    Adherence to the protocol will allow covered entities to comply with the U.S. stay regulations by amending in-scope QFCs to ensure that they are consistent with the limits on counterparties' exercise of default rights under Title II of Dodd-Frank and the Federal Deposit Insurance Act. The protocol will also limit counterparties' ability to exercise cross-default rights based on the insolvency or resolution of an affiliate of a covered entity.

    ISDA members and non-members may adhere to the protocol beginning from the second half of August 2018. ISDA also announced it would also publish frequently asked questions to provide market participants with additional background information on the protocol and the U.S. stay regulations.

    The first compliance date for the U.S. stay regulations is January 1, 2019.

    View the protocol.

    View ISDA's press release.

    View Shearman & Sterling's client alert regarding the U.S. stay regulations.
  • UK Financial Conduct Authority Proposes Changes to Rules Governing Peer-to-Peer Lending Platforms
    07/27/2018

    The Financial Conduct Authority has launched a consultation on new rules for loan-based crowdfunding platforms, also known as peer-to-peer lending platforms. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

    The FCA began a post-implementation review of the crowdfunding sector and the applicable regimes in 2016. In the post-implementation review, the FCA identified that harm may be caused to investors as a result of poor business practices and due to the business models that some platforms have adopted. The consultation paper summarizes the FCA's findings from that review and sets out the FCA's proposals to change certain rules and guidance.

    Read more.
  • European Commission Requires Drafting Amendments to Proposed Technical Standards for Reporting of Securities Financing Transactions
    07/27/2018

    The European Commission has published a Communication announcing its intention to adopt, with amendments, the Regulatory Technical Standards and Implementing Technical Standards prepared by the European Securities and Markets Authority under the Securities Financing Transactions Regulation. ESMA submitted final draft RTS and ITS to the Commission in March 2017.

    The Commission has amended the draft RTS on the details of Securities Financing Transactions to be reported to Trade Repositories and the draft ITS on the format and frequency of reports on the details of SFTs to TRs. The draft RTS and ITS had contained wording to the effect that ESMA would have the power to endorse global unique trade identifiers for transactions or the global legal identifier system as it applies to the branch of an entity. This wording would have had the effect of delegating regulatory powers on potential future reporting requirements directly to ESMA, which is not possible under the legal framework for the European Supervisory Authorities. The Commission has made amendments to clarify that the Commission, rather than ESMA, has the responsibility to introduce changes to the reporting requirements, on the basis of a proposal by ESMA.

    Read more.
  • UK Regulator Consults on Changes to Definition of Default for Credit Risk
    07/27/2018

    The Prudential Regulation Authority has opened a consultation on proposals to implement the European Banking Authority's recent regulatory products on the definition of default in the Capital Requirements Regulation. The CRR risk quantification provisions set out that a default occurs when an obligor is past due more than 90 days on any material credit obligation to a firm, its parent or any of its subsidiaries. The materiality of the credit commitment is to be assessed against a threshold set by the national regulator according to its view of a reasonable level of risk.

    The EBA developed a roadmap of regulatory products that aim to reduce unwarranted variability in the risk weighted assets calculated using banks' Internal Ratings-Based models. Three of these products pertain to the definition of default: the Regulatory Technical Standards on the materiality threshold for credit obligations past due, the Guidelines on the application of the definition of default and the EBA Opinion on the use of the 180 days past due criterion.

    Read more.
  • Financial Action Task Force Publishes Report on Professional Money Laundering
    07/26/2018

    The Financial Action Task Force has published a report on professional money laundering. The report is intended to assist authorities to target professional money launderers and the structures that they set up and use to launder money and to disrupt the organizations of their criminal clients. PMLs are referred to by the FATF as "individuals, organisations and networks that are involved in third-party laundering for a fee or commission." PMLs specialize in providing professional money laundering services, such as locating investments or purchasing assets, establishing companies or legal arrangements, acting as nominees, recruiting and managing networks of cash couriers or money mules, providing account management services and creating and registering financial accounts. By providing detailed explanations of the roles performed by PMLs, the FATF aim to facilitate the identification and understanding of how PMLs operate. The report provides recent examples of financial organizations acquired by criminal operations or co-opted to aid money laundering and focuses on some of the common methods used to launder funds, such as trade-based money laundering, account settlement mechanism and underground banking.

    Read more.
  • UK Regulator Seeks Input on EU Packaged Retail and Insurance-based Investment Products Regulation
    07/26/2018

    The Financial Conduct Authority has issued a call for input on the Packaged Retail and Insurance-based Investment Products Regulation. Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded.

    The FCA is seeking input about the initial experience of: (i) those producing, advising on, or distributing PRIIPs and preparing and providing KIDs; and (ii) consumers using KIDs to decide whether to invest in these investment products. In addition, the FCA is asking for feedback on the scope of the PRIIPs Regulation, in particular, which instruments fall in or out of the scope of the requirements, and on practical aspects of certain cost and risk disclosure requirements.

    Feedback to the call for input should be provided by September 28, 2018. The FCA intends to publish a feedback statement in Q1 2019.

    View the call for input.
  • US Federal Reserve Board Launches New Consumer Protection Bulletin
    07/26/2018

    The U.S. Board of Governors of the Federal Reserve System launched the Consumer Compliance Supervision Bulletin.  The bulletin will be published by the Federal Reserve Board’s Division of Consumer and Community Affairs, and will provide high-level summaries of supervisory issues, highlight violations that have been identified, include practical guidance with respect to the management of consumer compliance risks and enhance transparency with respect to the Federal Reserve Board’s consumer compliance supervisory program.  The current issue of the bulletin includes content with respect to fair lending, unfair or deceptive acts or practices and regulatory and policy developments.

    View full text of the bulletin.
  • UK Payment Systems Regulator Will Review Supply of Card-Acquiring Services
    07/24/2018

    The U.K. Payment Systems Regulator has published for consultation its draft terms of reference for a planned market review into the supply of card-acquiring services in the U.K. Merchants that accept card payments from customers purchase card-acquiring services from specialist providers to enable card payments to be accepted and processed on their behalf. The market review is a response to concerns raised by stakeholders that the supply of these services may not be working well for some merchants and, ultimately, consumers.

    The market review will examine: (i) the nature and characteristics of card-acquiring services; (ii) the providers of these services and how their market shares have developed historically; (iii) how merchants buy card-acquiring services; (iv) the availability of credible alternatives to card-acquiring services for some or all merchants; and (v) how competition is working in the sector, including looking at issues around the fees merchants pay and the quality of service they receive.

    The PSR is inviting feedback on its draft terms of reference until September 14, 2018. The PSR intends to publish finalized terms of reference, including a timetable for the review, before the end of 2018.

    View the draft terms of reference for the review (MR 18/1.1).
  • UK Secondary Legislation Published to Align Ring-Fencing With Financial Sanctions Legislation
    07/24/2018

    The Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018 has been made and will come into force on October 31, 2018.

    The Amendment Order amends the definition of a "core deposit" (set out in The Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014) for the purposes of the U.K. framework for the ring-fencing of retail from wholesale/investment banking. Under the U.K. framework, if a deposit is not a "core deposit," then carrying on the regulated activity of accepting deposits in relation to that non-core deposit can take place in the non-ring-fenced bank.

    Read more.
  • European Banking Authority Makes Policy Recommendations for Proposed Introduction of European Secured Notes
    07/24/2018

    The European Banking Authority has published a final report in response to a call for advice from the European Commission, in the context of the Commission's Capital Markets Union project, to help the Commission assess the case for introducing European Secured Notes, an additional instrument which would be available for institutions to gain funding on the capital markets, particularly infrastructure loans and loans to Small and Medium Sized Enterprises. ESNs are defined in the call for advice as "dual recourse financial instruments on an issuer's balance sheet applying the basic structural characteristics of covered bonds to two non-traditional cover pool assets - SME bank loans and infrastructure bank loans."

    The Commission asked the EBA to assess whether a dual recourse instrument, similar to covered bonds, may provide a useful funding option to banks engaged in lending to SMEs and infrastructure projects and to determine an appropriate EU framework and regulatory treatment for this new product.

    In the final report, the EBA: (i) assesses the business case for ESNs; (ii) analyzes the potential implications of issuances of ESNs on asset encumbrance; and (iii) considers the risk profile of SME loans and project finance. The EBA makes suggestions on the pool eligibility criteria and the structure and features of ESNs and on their potential regulatory treatment. The EBA makes five main policy recommendations on crucial aspects for the Commission to consider when possibly designing the legislative framework for ESNs. These relate to the structure, cover assets and regulatory treatment of SME ESNs, the EBA's reservations about introducing Infrastructure ESNs and the impact of ESNs on asset encumbrance.

    View the final report.
    TOPIC: Securities
  • UK White Paper Published on How the Withdrawal Agreement Will Be Implemented in the UK
    07/24/2018

    The U.K.'s Department for Exiting the EU has published a further Brexit white paper, entitled: "Legislating for the Withdrawal Agreement between the United Kingdom and the European Union." The paper describes the Bill that will implement the terms of the Withdrawal Agreement in the U.K. The Bill, which must pass before exit day (March 29, 2019) will only be introduced once Parliament has approved the finalized Withdrawal Agreement as required under the EU (Withdrawal) Act 2018. In the paper, the Government sets out how it envisages the Bill will implement the U.K.'s withdrawal and provides detail on those parts of the draft Withdrawal Agreement that have been agreed so far: citizens' rights, the implementation period and the negotiated financial settlement. The final provisions of the Bill will be subject to the final terms of the Withdrawal Agreement. The paper also sets out the procedures for Parliament's approval of the terms of the final Withdrawal Agreement.

    Read more.
  • UK Legislation Published for a Post-Brexit Recognition Regime for CCPs
    07/24/2018

    A draft of the Central Counterparties (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 has been laid before Parliament. The finalized Regulations will come into force partly on the day after the day they are made and fully on the day the U.K. withdraws from the EU.

    The draft Regulations have been prepared using the power under the European Union (Withdrawal) Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the U.K. from the EU. These draft Regulations deal with "onshoring" certain aspects of the European Market Infrastructure Regulation that relate to the regulatory framework for CCPs. The Bank of England wrote to non-U.K. CCPs in December 2017, outlining how it envisaged that non-U.K. CCPs will be recognized to provide services in the U.K. once the U.K. has withdrawn from the EU. Recognized status under EMIR enables third-country CCPs to provide clearing services to clearing members or trading venues established in the EU. The BoE explained in its letter that U.K. domestic law requirements for the recognition of non-U.K. CCPs would be substantially the same as the current requirements under EMIR, although references to international MoUs being in place would change, such that these must be established between third countries and relevant U.K. authorities.

    Read more.
  • UK Secondary Legislation Published for Post-Brexit Temporary Permissions Regime
    07/24/2018

    A draft of one of several pieces of U.K. legislation has been published, that will establish a temporary permissions regime after the U.K.'s withdrawal from the EU. Temporary permission will be available for EEA firms currently operating in the U.K. under financial services passports. The draft EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 are expected to be laid before Parliament in Autumn 2018 and to come into force mainly on the day after they are made, apart from some provisions that will apply on the day the U.K. withdraws from the EU. The draft Regulations also amend the Financial Services and Markets Act 2000 and related legislation to remove references to EEA passport rights.

    The draft Regulations have been prepared under the provisions of the EU (Withdrawal) Act 2018, which sets out an enhanced scrutiny procedure for secondary legislation used to amend certain retained EU law. This means that the draft Regulations will require the approval of both Houses of Parliament before they are made.

    Read more.
  • UK Plans Temporary Designation Regime for Settlement Finality Designation Post-Brexit
    07/24/2018

    The U.K. Government has announced that it intends to legislate to ensure, after U.K. withdrawal from the EU, the continuation of U.K. settlement finality protections currently provided under the Settlement Finality Directive and implemented in the U.K. by the Financial Markets and Insolvency (Settlement Finality) Regulations 1999. The SFRs establish various insolvency carve-outs for designated market infrastructure systems and also legislate for finality of transactions within such systems. However, only EU systems are in scope.

    The SFD requires Member States to notify the European Securities and Markets Authority with information concerning the national systems (and the respective system operators) they have designated to be included within the scope of the SFD protections. Member States must also designate the national authorities that must be notified when insolvency proceedings are opened against a participant or a system operator. Under the protections afforded by the SFD, transfer orders which enter into designated systems within certain deadlines are guaranteed to be finally settled, regardless of whether the sending participant has become insolvent or transfer orders have been revoked in the meantime. Under the SFD, each Member State automatically recognizes systems that have been designated by other Member States.

    Read more.
  • G20 Sets October 2018 Deadline for Financial Action Task Force to Clarify AML/CTF Standards For Crypto Assets
    07/23/2018

    The G20 Finance Ministers & Central Bank Governors have issued a communiqué following their meeting in Buenos Aires on July 21 - 22, 2018. Among other things, the communiqué requests that the Financial Action Task Force clarify, by October 2018, how its global anti-money laundering and counter-terrorist financing standards apply to crypto assets.

    The FATF's global standards (also known as the 40 Recommendations) promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. However, the FATF standards do not refer explicitly to crypto assets or the associated service providers and intermediaries, which creates uncertainty as to the scope of AML/CTF obligations that may apply to them.

    Read more.
  • US Federal Reserve Vice Chairman Randal Quarles Sworn in for Second Term
    07/23/2018

    Randal Quarles, current Vice Chairman for Supervision, was sworn in for his second term as a member of the U.S. Board of Governors of the Federal Reserve System.  Vice Chairman Quarles’s term as Vice Chairman for Supervision ends in 2021, while his term as a member of the Federal Reserve Board ends in 2032.

    View full text of the Federal Reserve Board press release.
    TOPIC: People
  • UK Proposals for a Register of Beneficial Ownership for Foreign Entities
    07/23/2018

    The U.K.'s Government Department for Business, Energy & Industrial Strategy has launched a consultation on a draft Bill that would introduce a register of beneficial owners for overseas legal entities that own U.K. property. Since April 6, 2016, the U.K. has required U.K. companies, limited liability partnerships and societates europaeae to establish and maintain a register of persons with significant control over them and since June 30, 2016 and those entities have been required to file such information with Companies House where it is publicly available on the People with Significant Control register.

    Currently, information about overseas owners of land or property is often limited to the entity's name and territory of incorporation and it is unclear who ultimately owns and/or controls the entity. The aim of the draft Bill is to prevent and combat the use of land in the U.K. by overseas entities for the purposes of laundering money or investing illicit funds.

    Read more.
  • Five EU Banks Fined for Issuing Credit Ratings Without Authorization
    07/23/2018

    The European Securities and Markets Authority has fined five EU banks for issuing credit ratings without being authorized to do so by ESMA. The Credit Rating Agencies Regulation requires firms to register with ESMA as a Credit Rating Agency before issuing credit ratings to ensure that such ratings are independent, objective and of adequate quality.

    ESMA found that the banks had each issued credit research to their clients that included shadow ratings and opinions. ESMA deemed that these aspects of the reports amounted to a credit rating as defined in the CRA Regulation. None of the five banks have been authorized by ESMA under the CRA Regulation, nor have any of them applied for such authorization.

    The banks have a right of appeal to the Board of Appeal of the European Supervisory Authorities.

    View ESMA's press release and decision notices.
  • UK Working Group Outlines Risk Mitigation Considerations for Bond Market Participants During Transition From LIBOR
    07/23/2018

    The U.K. Working Group on Sterling Risk-Free Reference Rates has published a paper to raise awareness among market participants of some of the current market uncertainties surrounding issuance of long-dated bonds referencing LIBOR. The Working Group is tasked with helping to bring about broad-based transition to the Sterling Overnight Index Average rate by end-2021 across Sterling bond, loan and derivative markets. SONIA has been selected as the preferred alternative risk-free rate for Sterling and, among other work, the Working Group is in the process of developing market conventions for SONIA-linked bonds. A key milestone for the Working Group will be its publication, later in 2018, of best practice for referencing SONIA in bond markets.

    In the paper, the Working Group outlines some of the risks faced by bond market participants who are continuing to issue, offer and purchase new Sterling bonds referencing LIBOR, in particular where those bonds are long-dated. "Long-dated" refers to bonds set to mature beyond the end of 2021, when banks' commitments to submit data for purposes of LIBOR are due to end. The Working Group suggests certain steps market participants could take to mitigate some of the risks arising where LIBOR continues to be referenced in new Sterling bonds issued in the interim period before market conventions and infrastructure for referencing alternatives to LIBOR are fully developed.

    View the paper.
  • Bank of England Confirms its Renewed Real-Time Gross Settlement System Can Interface With DLT
    07/23/2018

    The Bank of England has published the outcomes from a "Proof of Concept" it ran to understand how its renewed Real-Time Gross Settlement service could be capable of supporting settlement in systems operating on innovative payment technologies, such as those built on Distributed Ledger Technology. The BoE has operated the RTGS service since 1996 to provide a safe and reliable means of settling high-value cash payments in real time in sterling central bank money. The BoE published a blueprint for renewal of the RTGS in May 2017, setting out how it proposed to overhaul the system to ensure higher resilience, broader access, wider interoperability, improved user functionality and strengthened end-to-end risk management of the high-value payment system.

    Read more.
  • UK Law Commission Seeks Input on Proposals for Reform of Anti-Money Laundering and Counter-Terrorism Financing Law in England and Wales
    07/20/2018

    The Law Commission has published a substantial consultation paper entitled "Anti-Money Laundering: the SARs Regime," seeking views on proposals to reform the law of England and Wales governing anti-money laundering. In particular, the report considers issues around Suspicious Activity Reports, which are the mechanism by which the private sector make disclosures relating to money laundering and terrorism financing.

    The Law Commission has identified a number of legal difficulties that arise from the current regime and, following extensive fact-finding meetings with stakeholders, it has also identified a number of issues in the current regime that are causing particular practical difficulties. In the consultation paper, the Law Commission: (i) identifies the most pressing problems and proposes provisional solutions to improve the current regime; (ii) consults on reforming the consent regime within the Proceeds of Crime Act 2002 (POCA), which sets out the process whereby an individual who suspects that they are dealing with the proceeds of crime can seek permission to complete a transaction by disclosing their suspicion to the U.K. Financial Intelligence Unit of the National Crime Agency; and (iii) seeks to generate and consider ideas for long term reform.

    Read more.
  • UK Conduct Regulator Confirms Policy on Recognizing Industry Codes of Conduct in Unregulated Markets
    07/20/2018

    The U.K. Financial Conduct Authority has published a Policy Statement outlining its final policy and rule amendments on its approach to recognizing industry codes of conduct in unregulated markets, including the process and criteria for doing so. In the FCA's view, industry codes of conduct can be useful in helping firms to communicate what is expected of individuals to meet their conduct obligations under the Senior Managers and Certification Regimes. The SM&CR, which currently only applies to banks, credit unions, building societies and large investment firms (including EEA branches), will be extended to insurers from December 2018 and to all other FCA-regulated firms from December 2019.

    The FCA consulted in November 2017 on proposals to formally recognize industry codes of conduct in markets that are outside the regulatory perimeter and to publish a list of recognized industry codes on its website. The consultation set out the criteria to be met for recognition of industry codes and proposed that recognition would apply for a renewable period of three years.

    Read more.
  • European Banking Authority Publishes Final Revised Pillar 2 Guidelines
    07/20/2018

    Following a consultation between October 2017 and January 2018 on a package of revisions to certain of its Guidelines, the European Banking Authority has published three final reports and revised Guidelines aimed at strengthening the Pillar 2 framework.

    The revised Guidelines have been prepared in line with the EBA's April 2017 Roadmap for revisions of the Pillar 2 framework, to keep the SREP Guidelines that were published in December 2014 (and in force from January 2016) up to date with respect to the EU and international standards. The EBA also aims to promote best supervisory practices and address issues identified in the EBA's ongoing work on assessment of supervisory convergence.

    Read more
  • Upcoming Changes to the EU Single Resolution Board's Composition
    07/20/2018

    The EU Single Resolution Board has announced that Sr. Mauro Grande, Board Member and Director of Resolution Strategy and Cooperation, intends to leave his position. Sr. Grande has been with the SRB since its inception in March 2015. Sr. Grande will vacate the position once a successor is appointed, which is expected in the next few months. The European Commission and the SRB have jointly published a vacancy notice and applications for the position can be made until September 12, 2018.

    View the SRB's announcement.
    TOPIC: People
  • UK Conduct Regulator Outlines Scope of Digital Regulatory Reporting Pilot
    07/20/2018

    The U.K. Financial Conduct Authority has published the terms of reference (dated June 2018) for the pilot phase of its Digital Regulatory Reporting project. The FCA is working with the Bank of England in the RegTech sphere to explore ways of using technology to link regulation, compliance procedures and firms' policies and standards together with firms' transactional applications and databases.

    The FCA published a Call for Input in February 2018 following a TechSprint in November 2017, at which a 'proof of concept' was achieved, showing that it was feasible to make regulatory reporting requirements machine readable and executable. Using this "Digital Regulatory Reporting" would allow firms to map their regulatory requirements directly to the data that they hold. Potential benefits include automated, straight-through processing of regulatory returns, greater accuracy in data submissions and faster implementation of changes in regulatory requirements, as well as cost reduction and improvements to competition.

    Read more.
    TOPIC: FinTech
  • European Banking Authority Responds to Caius Capital LLP's Challenge Against Regulatory Capital Treatment of UniCredit CASHES
    07/20/2018

    The European Banking Authority has published a response following allegations by Caius Capital LLP that UniCredit S.p.A.'s regulatory capital treatment in respect of a 2008 issuance of convertible and subordinated hybrid equity-linked securities (CASHES), which had been sanctioned by regulators including the European Central Bank, was incorrect. On May 3, 2018, Caius wrote a letter to the EBA, asking it to open an investigation for a breach of EU law on the basis that the structure of the transaction called into question the eligibility of ordinary shares underlying the CASHES as CET1 capital under the EU Capital Requirements Regulation. Caius has since published further letters restating and expanding upon its arguments that a portion of UniCredit's regulatory capital currently recognized as CET1 under the EU rules is ineligible for such classification.

    Read more.
  • EU Consultation on Revised Guidelines on Periodic Reporting by Credit Rating Agencies
    07/19/2018

    The European Securities and Markets Authority has launched a consultation on proposed revised Guidelines on periodic reporting by credit rating agencies. Under the EU Credit Rating Agencies Regulation, ESMA is responsible for direct supervision of EU CRAs registered with it. ESMA wishes to update its existing Guidelines, first published in 2015, to better reflect ESMA's supervisory powers and duties. In particular, ESMA does not consider that the current approach of determining reporting requirements according supervisory fees matches its risk-based approach to supervision. ESMA is proposing to establish reporting categorizations for CRAs as well as reporting calendars based on reporting categorization. Furthermore, ESMA is proposing to standardize the reporting templates and to provide additional reporting instructions.

    The consultation closes on September 26, 2018. ESMA intends to publish the Final Report on the Guidelines before the end of 2018.

    View the consultation.
  • Financial Action Task Force Reports to G20 and Announces Priority Work for 2018-2019
    07/19/2018

    The Financial Action Task Force has published its report to the G20 Finance Ministers and Central Bank Governors. The report gives an overview of recent FATF work and its proposed next steps in its current workstreams. The United States takes over the FATF Presidency for the period July 2018 to June 2019 and has separately published a document summarizing its priority and other initiatives for the duration of its presidency.

    Read more
  • US Federal Reserve Vice Chairman Randal Quarles Discusses the SOFR Reference Rate
    07/19/2018

    U.S. Board of Governors of the Federal Reserve System Vice Chairman for Supervision, Randal Quarles, discussed the evolution of reference rates at the Alternative Reference Rates Committee (ARRC) Roundtable at the Federal Reserve Bank of New York. Vice Chairman Quarles stated his view that certain markets relevant to some LIBOR tenors are relatively illiquid. He contrasted this with the newly established secured overnight financing rate (SOFR). SOFR is the product of a collaborative effort by the Federal Reserve Bank of New York, the Federal Reserve Board and the U.S. Office of Financial Research, and was created in response to the ARRC's interest in establishing a Treasury repo rate benchmark that would span the widest possible scope of the market. Vice Chairman Quarles further noted that the implementation timetable for SOFR is ahead of schedule, that market participants have begun offering clearing of SOFR overnight index and basis swaps, and that futures markets for SOFR have been introduced on the Chicago Mercantile Exchange.

    View full text of Vice Chairman Quarles’s remarks.
    TOPIC: Derivatives
  • UK Serious Fraud Office Confirms Benchmark Manipulator Sentencing and Will Pursue Retrial of Bankers for Benchmark Manipulation
    07/19/2018

    The U.K.'s Serious Fraud Office has announced that two former bankers that had been convicted of conspiracy to defraud for manipulating the Euro Interbank Offered Rate (EURIBOR) have been sentenced to a combined total of just over 13 years' imprisonment. The SFO has also announced that it is going to pursue a retrial of three other bankers for whom the jury could not reach verdicts.

    View the SFO's announcement.
    TOPIC: Enforcement
  • European Commission Presses for Step Up in Brexit Preparations
    07/19/2018

    The European Commission has published a Communication on preparing for the withdrawal of the U.K. from the EU on March 30, 2019. Alongside the Communication, a factsheet has been published entitled, "Seven Things Businesses in the EU27 Need to Know in Order to Prepare for Brexit." In the Communication, the Commission warns all stakeholders that "[p]reparation must therefore be stepped up immediately at all levels and taking into account all possible outcomes." The Commission highlights that it is not yet certain that an agreement will be in place by exit day (March 30, 2019) and that a cliff-edge scenario could still occur. Without ratification of the Withdrawal Agreement, there will be no transitional period providing a further 21 months to prepare for when EU law ceases to apply to and in the U.K. and the Commission is urging all stakeholders to prepare for all scenarios.

    In the Communication, the Commission counsels the financial services sector (see page 14) to prepare for a "hard Brexit." The Commission advises that ensuring that there is no disruption to their current business model and that they can continue to serve clients is the responsibility of all operators in all financial services sectors. Notably, the Commission is not concerned, at this stage, about any contractual continuity issues on the principle that the performance of existing obligations can continue post-Brexit. However, the Commission notes that "every type of contract needs to be looked at separately."

    Read more.
  • UK Competition Authority Consults on Proposed Remedies to Adverse Competition in the Investment Consultancy and Fiduciary Management Markets
    07/18/2018

    The U.K. Competition and Markets Authority has published a Provisional Decision Report in respect of the Investment Consultants Market Investigation in which it is assessing the supply and acquisition of investment consultancy services and fiduciary management services. The CMA has already published several working papers and an Issues Statement as part of the investigation.

    The Provisional Decision Report sets out the CMA's assessment of the investment consultancy and fiduciary management markets, its general conclusions on competition, its provisional decision on competition and provisional remedies to address the identified competition issues. The CMA's provisional finding is that there is an adverse effect on competition which may result in material detriment to customers in both the investment consultancy and fiduciary management markets, although there are more concerns with the fiduciary management market.

    Read more.
    TOPICS: CompetitionFunds
  • Final EU Guidelines Clarify the Third-Country Endorsement Regime for Credit Ratings
    07/18/2018

    The European Securities and Markets Authority has published a final report on the application of the endorsement regime under the EU Credit Rating Agencies Regulation. The report contains ESMA's feedback statement for its earlier consultation on draft supplementary Guidelines as well as the final supplementary Guidelines.

    The 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 ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. Endorsement allows credit ratings issued by a third-country CRA to be used for regulatory purposes in the EU provided that the rating has been endorsed by an EU CRA. The CRA Regulation sets out various conditions for such an endorsement.

    Read more.
  • Financial Stability Board Consults on Initial Evaluation of the Impact of Regulatory Reforms on Infrastructure Finance
    07/18/2018

    The Financial Stability Board is seeking feedback on an initial evaluation of the effects of the post-financial crisis regulatory reforms on infrastructure finance. The initial evaluation focuses on infrastructure finance provided by the financial sector, for which the financial regulatory reforms are of immediate relevance. The FSB has established a framework for assessing whether the reforms are achieving their intended outcomes and whether there are any material unintended consequences to be addressed.

    The initial evaluation shows the results of a qualitative and quantitative analysis of the Basel III reforms to regulatory capital and the OTC derivatives reforms. The results of a qualitative analysis of reforms that are at an earlier stage of implementation, such as investment funds rules and accounting standards, are also presented.

    Feedback on the initial evaluation is invited by August 22, 2018. The FSB will consider the feedback in finalizing its report to the G20, due to be published towards the end of November 2018.

    View the consultation paper.
  • US Federal Reserve Vice Chairman Randal Quarles Discusses Streamlining the Supervision and Regulation of Large Financial Institutions
    07/18/2018

    U.S. Board of Governors of the Federal Reserve System Vice Chairman for Supervision, Randal Quarles, discussed the tailoring of supervision and regulation for large financial institutions.  Vice Chairman Quarles noted that post-crisis regulations made the financial system demonstrably stronger and more resilient, and that there was some degree of tailoring that occurred in the initial creation of the post-crisis regulatory framework.  Vice Chairman Quarles stressed that while steps have been taken since to improve the efficiency and efficacy of regulation, more can be done to streamline this framework.  He noted that there are still improvements that can be made to allow for greater differentiation in the supervision and regulation of large firms and further tailoring, a theme he has reiterated in several prior speeches.

    Read more.
  • EU Final Guidelines on Fraud Reporting Under the Payment Services Directive
    07/18/2018

    The European Banking Authority has published final Guidelines on fraud reporting under the revised Payment Services Directive. PSD2 aims to increase the security of electronic payments and decrease the risk of fraud. The Directive, which has applied since January 13, 2018, requires Payment Service Providers to provide, at least on an annual basis, data on fraud relating to different means of payment to their national regulator. The regulators must in turn provide such data in aggregated form to the EBA and the European Central Bank. Existing data reporting practices vary across the EU. The EBA has worked with the ECB to develop these Guidelines to ensure that data is reported consistently and that the data is comparable and reliable.

    The final Guidelines are addressed to PSPs, except account information service providers, and to their national regulators. The Guidelines cover payment transactions that have been initiated and executed, including the acquiring of payment transactions for card payments, identified by reference to: (a) fraudulent payment transactions data over a defined period of time; and (b) payment transactions over the same defined period. The Guidelines also set out how national regulators should aggregate the data.

    Read more.
  • Financial Action Task Force and Egmont Group Publish Research Findings on Concealment of Beneficial Ownership
    07/18/2018

    The Financial Action Task Force has issued a detailed report on the concealment of beneficial ownership, assessing how legal persons, legal arrangements and professional intermediaries can help criminals conceal wealth and illicit assets. The aim of the report is to help national authorities including financial intelligence units, financial institutions and other professional service providers in understanding the nature of the risks that they face. The report was prepared in conjunction with the Egmont Group of financial intelligence units.

    The FATF and the Egmont Group together identified the need for further analysis of the vulnerabilities associated with beneficial ownership, with a particular focus on the involvement of professional intermediaries, to guide global responses. Their joint report brings together the results of analysis of open-source research, public intelligence reports, classified intelligence holdings and public and private sector experience and expertise. It sets out a comprehensive overview of the main characteristics and vulnerabilities that lead to the misuse of legal persons and arrangements, and the exploitation of professional intermediaries, to conceal beneficial ownership.

    The report identifies a number of issues for consideration to help address the vulnerabilities associated with the concealment of beneficial ownership.

    View the FATF-Egmont Group report.
  • Financial Stability Oversight Council Announces Proposed Decision to not Apply "Hotel California" Provision to Large US National Bank
    07/18/2018

    The U.S. Financial Stability Oversight Council issued a proposed decision with respect to a national bank’s petition to not treat the surviving entity of a bank holding company parent merging into its large U.S. national bank subsidiary as a nonbank financial company supervised by the U.S. Board of Governors of the Federal Reserve System pursuant to Section 117 of the Dodd Frank Act (commonly referred to as the “Hotel California” provision).  Section 117 applies to any entity, or its successor entity, that received financial assistance under, or participated in, the Capital Purchase Plan established under the Troubled Asset Relief Program and was a bank holding company with total consolidated assets of at least $50 billion as of January 1, 2010.

    Read more.
  • US Federal Financial Regulators Publish Proposed Changes to the Volcker Rule
    07/17/2018

    The U.S. Office of the Comptroller of the Currency, U.S. Board of Governors of the Federal Reserve System, U.S. Federal Deposit Insurance Corporation, U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission published their previously announced notice of proposed rulemaking entitled Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds in the Federal Register.  The proposed rules seek to simplify and tailor the Volcker Rule.  Comments to the proposal are due by September 17, 2018.

    View proposed changes to the Volcker Rule.

    View full text of the proposal.
  • UK Brings First Service Provider to Payment Systems Within Special Administration Regime
    07/17/2018

    The Financial Market Infrastructure Administration (Designation of VocaLink) Order 2018 has been laid before Parliament. The Order relates to the special administration regime for operators of financial market infrastructures, which came into force on July 13, 2018. Relevant FMIs are operators of recognized payment systems, excluding recognized CCPs (which are already subject to the Banking Act resolution regime in the U.K.) and recognized central securities depositories operating a securities settlement system. However, HM Treasury is able to designate certain service providers to FMIs as infrastructure companies and so bring them within the FMI administration regime.

    The Order designates VocaLink as an infrastructure company in connection with its provision of services to the operators of Faster Payments Service, Bacs and LINK. HM Treasury judges that an interruption in VocaLink's services to these operators of payment services would have a serious adverse effect on their operation.

    The Order comes into force on August 9, 2018.

    View the Order (SI 2018/858).

    View the explanatory memorandum.
  • Bank of England Consults on Term SONIA Reference Rates
    07/17/2018

    The Bank of England's Working Group on Risk-Free Reference Rates has launched a consultation on term reference rates for the Sterling Overnight Index Average.

    The Working Group is tasked with facilitating the transition across sterling bond, loan and derivatives markets from the use of sterling LIBOR to the use of SONIA. The Working Group notes that SONIA is an overnight rate, while LIBOR is commonly referenced in longer tenors of three or six months. Some end-users in loan and debt capital markets have reported that term rates are essential for their business needs.

    The consultation focuses on how a term SONIA reference rate (TSRR) can be constructed to facilitate sterling LIBOR transition in markets where term rates better suit users' needs. The Working Group seeks feedback on how the development of TSRRs could be catalyzed. The Working Group notes that the International Swaps and Derivatives Association is simultaneously consulting on preventing derivatives market disruption in the event a key IBOR is discontinued and that the Financial Stability Board has also recently stressed the importance to financial stability of transitioning most derivatives to robust overnight risk-free rates.

    Comments on the consultation are invited by September 30, 2018. The Working Group anticipates that a number of steps would be required to produce robust and reliable TSRRs by the second half of 2019.

    View the consultation paper.

    View details of the ISDA consultation on IBOR fallbacks for OTC derivatives contracts.

    View details of the Financial Stability Board's position paper.
  • Final Draft Technical Standards Under the EU Prospectus Regulation Published
    07/17/2018

    The European Securities and Markets Authority has published a final report setting out Regulatory Technical Standards supplementing the Prospectus Regulation, which will apply fully across the EU from July 21, 2019. ESMA consulted on draft RTS in December 2017. The final draft RTS cover:
    • the content and format of key financial information for the summary;
    • the data necessary for the classification of prospectuses and the practical arrangements to ensure machine readability of that data;
    • advertisements;
    • situations requiring a supplement to the prospectus to be published;
    • requirements on the publication of the prospectus; and
    • technical arrangements for the notification portal for passporting prospectuses.

    ESMA has submitted the final draft RTS to the European Commission for endorsement.

    View ESMA's final report.
    TOPIC: Securities
  • UK Conduct Authority Contemplates Introducing a New Duty of Care
    07/17/2018

    The Financial Conduct Authority has published its Approach to Consumers alongside a discussion paper on the potential introduction of a new duty of care and possible alternative approaches. The Approach to Consumers forms part of a series of formal approach documents explaining the FCA's approach to regulation in more depth. It should be read alongside the FCA's Mission document, which was first published in October 2016 and most recently updated in November 2017.

    The Approach to Consumers sets out the FCA's approach to regulating for retail customers. The document sets out the FCA's vision for well-functioning markets that work for consumers, the relevant regulatory and legal framework, when and how the regulator will act to protect consumers, the FCA's policy position on key issues and its strategy for ensuring that its consumer protection objective is advanced with the greatest impact.

    Read more.
  • UK Secondary Legislation Laid Before Parliament Amending Building Societies Legislation
    07/16/2018

    A draft of the Building Societies Legislation (Amendment) (EU Exit) Regulations 2018 has been laid before Parliament. The Regulations will come into force on the day the U.K. withdraws from the EU.

    The draft Regulations have been prepared using the power under the European Union (Withdrawal) Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the U.K. from the EU. The draft Regulations make amendments to various U.K. primary and secondary legislation that relate to building societies. The amendments remove references to EEA countries and territories, EU directives and EU member states that will no longer be appropriate following the U.K.'s withdrawal. In addition, the amendments remove provisions that provide reciprocal treatment to borrowers whose loans are secured on land in an EEA state and to bodies incorporated in an EEA state.

    Read more.
  • Final Draft Technical Standards Under the Securitization Regulation Published
    07/16/2018

    The European Securities and Markets Authority has published final draft technical standards under the Securitization Regulation (also known as the STS Regulation). Among other things, the Securitization Regulation, which will apply directly across the EU from January 1, 2019, provides the criteria for identifying which securitizations will be designated as "simple, transparent and standardized" (STS) securitizations. The Securitisation Regulation requires originators and sponsors to notify ESMA when a securitization meets the STS criteria and ESMA will maintain a list of all such securitizations on its website. The Securitization Regulation allows (but does not require) originators, sponsors and securitization special purpose entities to use third-party firms to assess whether a securitization meets the STS criteria, provided that those firms are authorized by the relevant national regulator.

    ESMA is mandated under the Securitization Regulation to develop Regulatory Technical Standards and Implementing Technical Standards on these elements. ESMA consulted on proposed draft Technical Standards in December 2017.

    Read more.
    TOPIC: Securities
  • UK Secondary Legislation Laid Before Parliament on Regulators' Powers to Onshore EU Technical Standards on Brexit
    07/16/2018

    A revised draft of the Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 has been laid before Parliament. The Regulations will come into force the day after the day on which they are made.

    The draft Regulations, which include some changes to the original draft published in April 2018, among other things empower the Bank of England, the Financial Conduct Authority, the Prudential Regulation Authority and the Payment Systems Regulator to make EU Exit instruments and to make any necessary amendments to the Regulatory Technical Standards and Implementing Technical Standards that comprise "level 2" of the EU financial services legislation that will be onshored (that is, converted into U.K. law) on the U.K.'s withdrawal from the EU. A schedule to the draft Regulations sets out a full list of technical standards that will be onshored and allocates responsibility for making EU Exit instruments to one or more of the regulators.

    The draft Regulations have been prepared under the EU (Withdrawal) Act 2018, which sets out an enhanced scrutiny procedure for secondary legislation used to amend certain retained EU law. This means that the draft Regulations will require the approval of both Houses of Parliament before they are made.

    View the draft Regulations.

    View the draft explanatory memorandum.

    View details of the proposed approach to onshoring EU legislation.

    View details of the EU (Withdrawal) Act 2018.
  • UK Conduct Regulator Publishes Interim Report on Investment Platforms Market Study
    07/16/2018

    The U.K. Financial Conduct Authority has published an Interim report as part of its market study to ascertain whether competition between investment platforms is working in the interests of consumers. The FCA launched the investment platforms market study in July 2017 after potential competition issues in the sector were highlighted in the course of its asset management market study, on which it issued its final report in June 2017.

    The FCA has been assessing competition in the sector by exploring a range of areas, namely: barriers to entry and expansion; business models; platform profitability; the impact of financial advisers; and consumer preferences and behaviour. Noting the increasing vertical integration in the sector, the FCA has also been examining commercial relationships between platforms, asset managers, discretionary investment managers and financial advisers.

    The FCA has found that the market appears largely to be working well for both advised and non-advised consumers and that customer satisfaction is currently high. However, the FCA has found that there are some customers for whom the market is not working as well as it should. The interim report highlights the issues the FCA has identified and consults on proposed remedies. The report is supported by eight annexes covering elements of the FCA's research and findings so far.

    Read more.
    TOPICS: CompetitionFundsMiFID II
  • Financial Stability Board Reports on the Work of International Bodies on Crypto-Assets
    07/16/2018

    The Financial Stability Board has issued a report to the G20 providing an overview of its current work on crypto-assets and that of the international standard setters, namely the Committee on Payments and Market Infrastructures, the International Organization of Securities Commissions and the Basel Committee on Banking Supervision. The G20 Ministers of Finance and Central Bank Governors issued a communiqué in March 2018 stating that they were concerned that crypto-assets raise a number of problematic issues in the contexts of consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing. The G20 highlighted that crypto-assets may also have implications for financial stability and called on the FSB to provide a report on ongoing work by July 2018.

    Read more.
    TOPIC: FinTech
  • EU Court Annuls European Central Bank Leverage Ratio Decisions for Six Banks
    07/13/2018

    The General Court of the European Union has annulled decisions of the European Central Bank, refusing to allow six French banks to exclude from the calculation of the leverage ratio certain exposures connected to French savings accounts. Banque Postale, BPCE, Confédération Nationale du Crédit Mutual, Société Générale, Crédit Agricole and BNP Paribas applied to the ECB, as their direct prudential supervisor under the Single Supervisory Mechanism, for permission to exclude exposures consisting of sums in a number of savings accounts taken out with them and transferred to the Caisse des Dépôts et Consignations, a French public investment vehicle. National regulators and the ECB have discretion to allow banks to exclude exposures that satisfy a number of conditions from the calculation of the leverage ratio under the Capital Requirements Regulation.

    Read more.
  • EU Secondary Legislation for Money Market Funds Published
    07/13/2018

    A Commission Delegated Regulation amending and supplementing the European Money Market Funds Regulation has been published in the Official Journal of the European Union. The MMF Regulation, which applies directly across the EU from July 21, 2018, allows MMFs to invest in securitizations or asset-backed commercial paper and incentivizes the investment in simple, transparent and standardized securitizations. The Delegated Regulation amends the MMF Regulation (or MMFR) by applying the requirements for STS securitizations provided for in the Securitization Regulation (also known as the STS Regulation).

    The MMF Regulation also allows an MMF to enter into a reverse repurchase agreement provided that certain conditions are met. The assets received by the MMF under that agreement must be money market instruments that meet certain requirements. A derogation from those requirements provides that an MMF may also receive instruments that are either: (i) issued or guaranteed by the EU, a central authority or central bank of a Member State, the European Central Bank, the European Investment Bank, the European Stability Mechanism or the European Financial Stability Facility; or (ii) issued or guaranteed by a central authority or central bank of a third country. The Delegated Regulation supplements the MMF Regulation by providing the quantitative and qualitative liquidity requirements for the assets that an MMF receives under a reverse repurchase agreement where the derogation is being used.

    Read more.
    TOPICS: FundsSecurities
  • EU Proposals to Amend MiFID II's Tick Size Regime
    07/13/2018

    The European Securities and Markets Authority has launched a consultation on proposed amendments to the Regulatory Technical Standards (Commission Delegated Regulation (EU) 2017/588, also known as RTS 11) providing for the tick size regime under the Markets in Financial Instruments package, known as MiFID II. The tick size regime subjects orders in shares and depositary receipts to minimum tick sizes that are determined according to both the: (i) average daily number of transactions on the most relevant market in terms of liquidity; and (ii) price of the order. RTS 11 calibrates the minimum tick size based on the most liquid market in the EU, without any consideration being given to the liquidity on non-EU trading venues. The result is that EU trading venues have experienced a drop in market share in third-country financial instruments since January 3, 2018 when MiFID II came into effect. The trading venues have highlighted that the decrease in market share is because the RTS 11 methodology requires them to have in place larger price increments than those of their third-country competitor trading venues.

    Read more.
    TOPIC: MiFID II
  • European Commission Adopts Regulatory Technical Standards Under the EU Benchmarks Regulation
    07/13/2018

    The European Commission has adopted a series of Commission Delegated Regulations comprising all of the Regulatory Technical Standards to supplement the EU Benchmarks Regulation. The Benchmark Regulation, which took effect across the EU in January 2018, sets out the authorization and registration requirements for benchmark administrators, including third-country entities, and the requirements for governance and control of administrators. It provides for different categories of benchmarks depending on the risks involved, imposes additional requirements on benchmarks considered to be "critical" and gives powers to national regulators to mandate, under certain conditions, contributions to or the administration of critical benchmarks. The RTS outline the behaviors and standards expected of administrators of and contributors to benchmarks. The RTS adopted by the Commission are based on draft RTS prepared by the European Securities and Markets Authority in March 2017.

    The European Parliament and the Council of the European Union will now have three months in which to raise any objections to the Delegated Regulations. The Delegated Regulations will take effect 20 days after their publication in the Official Journal of the European Union.

    Read more
  • EU Secondary Legislation Adopted Amending Liquidity Coverage Requirement
    07/13/2018

    The European Commission has adopted an Amending Regulation to make amendments to an existing Delegated Regulation (Regulation (EU) 2015/61) supplementing the Capital Requirements Regulation. The existing Delegated Regulation sets out detailed requirements on the Liquidity Coverage Requirement and specifies which assets are to be considered as liquid (so-called high quality liquid assets) and how the expected cash outflows and inflows over a 30-day stressed period are to be calculated.

    The European Commission consulted on a draft of the Amending Regulation between January and February 2018. The Amending Regulation makes changes to the existing Delegated Regulation with the objective of improving its practical application, relating to:
    • full alignment of the calculation of the expected liquidity outflows and inflows on repurchase agreements, reverse repurchase agreements and collateral swaps transactions with the international liquidity standard developed by the Basel Committee on Banking Supervision;
    • treatment of certain reserves held with third-country central banks;
    • waiver of the minimum issue size for certain non-EU liquid assets;
    • the application of the unwind mechanism for the calculation of the liquidity buffer; and
    • integration in the existing Delegated Regulation of the new criteria for simple, transparent and standardized securitizations.

    Read more
  • European Securities and Markets Authority Consults on Minimum Standards for an Exemption from Providing a Prospectus Under the Prospectus Regulation
    07/13/2018

    The European Securities and Markets Authority has published a consultation paper on its draft technical advice to the European Commission on the minimum information content of documents provided for the purpose of describing a takeover, merger or division. ESMA was mandated by the Commission in February 2017 to provide it with technical advice for the circumstance where, under the Prospectus Regulation, issuers can benefit from an exemption to the requirement to supply a prospectus when they offer or admit securities connected with a takeover, merger or division. Issuers may, as an alternative to a prospectus, make available to investors an alternative document, which describes the transaction and its impact on the issuer.

    ESMA's technical advice sets out the minimum information content of documents describing a merger, division or takeover which is necessary for an exemption from the obligation to publish a prospectus. ESMA invites comments on a range of questions on the content of the following sections of such "exempted documents": (i) operative provisions and definitions; (ii) Minimum Information Content Simplified Disclosure Regime for the Issuer; (iii) the Minimum Information Content Securities; (iv) the Minimum Information Content Description and Impact of Takeover, Merger and Division.

    The consultation on the draft technical advice closes on October 5, 2018. ESMA expects to publish its final report on its technical advice in Q1 2019.

    View the consultation.
    TOPIC: Securities
  • European Securities and Markets Authority Seeks Feedback on Proposed Risk Factors Guidelines Under the Prospectus Regulation
    07/13/2018

    The European Securities and Markets Authority has published a consultation paper setting out draft guidelines for national regulators on risk factors under the Prospectus Regulation. ESMA has prepared the draft guidelines following a mandate from the European Commission to assist national regulators in their review of the specificity and materiality of risk factors within prospectuses and of the presentation of risk factors across categories depending on their nature.

    The draft guidelines cover: (i) specificity; (ii) materiality; (iii) corroboration of the materiality and specificity; (iv) presentation of risk factors across categories; (v) focused/concise risk factors; and (vi) risk factors in the summary.

    Comments on the draft guidelines are invited by October 5, 2018.

    View the consultation paper.
    TOPIC: Securities
  • European Commission Adopts Regulations Clarifying Duties of Third-Party Custodians Safe-Keeping Fund Assets
    07/12/2018

    The European Commission has adopted revisions to the Delegated Regulations on the safekeeping duties of depositaries under both the Alternative Investment Fund Managers Directive and the Undertakings for Collective Investment in Transferable Securities Directive. The Commission consulted on the proposed changes between May 29 and June 26, 2018. Following feedback received during that consultation the Commission has agreed to defer the date from which the revisions will apply to 18 months after publication in the Official Journal of the European Union. It had been proposed that the revisions would apply from six months of publication. In addition, the Commission has made certain changes to the text to improve the clarity of the requirements without introducing any further substantive changes.

    The adopted Delegated Regulations are subject to review by the European Parliament and the Council of the European Union. If there is no objection from either of those bodies, the revised Delegated Regulations should apply directly across the EU from Spring 2020.

    View the amending Delegated Regulation under AIFMD.

    View the amending Delegated Regulation under UCITS.

    View details of the proposed revisions to the Delegated Regulations.
    TOPIC: Funds
  • UK Special Administration Regime for Financial Market Infrastructure Brought Into Force
    07/12/2018

    A U.K. Order, the Financial Services (Banking Reform) Act 2013 (Commencement No. 1) (England and Wales) Order 2018, has been made. The Order brings into force, from July 13, 2018, the provisions in the Financial Services (Banking Reform) Act 2013 relating to the special administration regime for operators of financial market infrastructures. Relevant FMIs are operators of recognized payment systems, excluding recognized CCPs (which are already subject to the Banking Act resolution regime in the U.K.) and recognized central securities depositories operating a securities settlement system.

    Read more.
  • Two Bankers Found Guilty by UK Court of Manipulating EURIBOR
    07/12/2018

    The U.K.'s Serious Fraud Office has announced that two former bankers have been found guilty by a jury of conspiracy to defraud for manipulating the Euro Interbank Offered Rate (EURIBOR). One other former banker has been found not guilty by a jury. The findings follow an investigation launched by the SFO 2012.

    The jury could not reach verdicts on the case of three other bankers. By July 20, 2018, the SFO will inform the court whether it intends to proceed with a retrial. The two convicted bankers will be sentenced on July 20, 2018.

    View the SFO's press release.
    TOPIC: Enforcement
  • European Securities and Markets Authority Urges UK Financial Institutions to Apply for EU Authorizations Now
    07/12/2018

    The European Securities and Markets Authority has issued a public statement urging U.K.-based financial institutions to prepare for a hard Brexit. In particular, ESMA states that firms wishing to continue providing services across the EU after the U.K. has exited the EU must make timely applications for authorization to the relevant national regulators in the EU member state in which the firm wants to relocate its business. ESMA notes that it has seen an increase in applications being made and highlights that some national regulators have stipulated that applications needed to be received in June/July 2018 for approval to be granted in time.

    View ESMA's statement.
  • UK Prudential Regulator Provides Hurdle Rate Change Information for 2018 Stress Test
    07/12/2018

    The U.K. Prudential Regulation Authority has published a statement on Systemic Risk Buffers and Pillar 2A in stress test hurdle rates. The Bank of England announced in its March 2018 Key Elements of the 2018 Stress Test that it would be making four changes to the way hurdle rates are calculated. Hurdle rates are the level that a firm's capital ratio falls to during a stress scenario relative to the level of capital a firm is expected to maintain during the scenario. The PRA's statement provides details on two of the ways in which hurdle rates will change: (i) hurdle rates will incorporate buffers to capture domestic systemic importance, in addition to global systemic importance; and (ii) the calculation of minimum capital requirements (incorporated in the hurdle rates) will more accurately reflect how they would evolve in a real stress scenario.

    The PRA has not commented on when further details of the other changes to hurdle rates will be published. The BoE expects to publish the results of the stress test in Q4 2018.

    View the statement.

    View details of the Key Elements of the 2018 stress test.
  • Financial Stability Board Welcomes ISDA Consultation on Fall Backs Risk-Free Rates for Derivatives
    07/12/2018

    The Financial Stability Board has published a statement welcoming the consultation by the International Swaps and Derivatives Association on fall backs based on overnight risk-free rates for certain derivative contracts. The statement has been issued to provide market participants with the FSB's views ahead of the consultation by ISDA. The FSB's view is that overnight RFRs are more robust than interbank or term rates because they are based on active and liquid underlying markets. Overnight RFRs are considered by the FSB to be a better choice than term rates for markets where participants do not need forward-looking term rates. The FSB stated that for those markets where the IBOR may cease, citing the example of LIBOR, a transition to new reference rates will be crucial. The FSB acknowledges the work to reform some IBORS excluding LIBOR. It is therefore unclear whether the FSB has factored in the recently announced changes to LIBOR methodology in making this assessment and reaching these conclusions.

    Read more
  • International Swaps and Derivatives Association Consults on Fall Backs Based on Overnight Risk-Free Rates for Certain Derivatives
    07/12/2018

    The International Swaps and Derivatives Association has launched a consultation in which it proposes to amend its standard documentation to implement fall-backs based on alternative risk-free rates for certain key Interbank Offered Rates - GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW. ISDA states that the back-ups will apply if the relevant IBOR is permanently discontinued, based on defined triggers.

    ISDA is seeking feedback on the approach to address certain technical issues arising from the necessary adjustments that will apply to the RFRs if the fall backs are triggered.

    ISDA intends to consult on the technical issues for these changes for derivatives referencing USD LIBOR, EUR LIBOR and EURIBOR at a later date. It requests preliminary feedback on the technical issues associated with fall-backs for these benchmarks in this consultation.

    Responses to the consultation should be submitted by October 12, 2018. ISDA will determine which approach to adopt based on the feedback and will publish the final approach for review and comment before implementing any changes to the ISDA standard documentation.

    The FSB issued a statement on the same day welcoming ISDA's consultation and encouraging market participants to respond to the proposals.

    View ISDA's consultation.

    View details of the FSB's statement
  • UK Government Publishes White Paper on the Future Relationship Between the UK and the EU
    07/12/2018

    The U.K. Government has published a White Paper setting out its approach and proposals for a future relationship between the U.K. and the EU. The Government is proposing new economic and regulatory arrangements for financial services that would give both the EU and the U.K. autonomy over decisions regarding access to its market. The Government acknowledges that both the EU and the U.K. will want to legislate for their own interests to take account of the differences in the EU and U.K. markets, business models as well as financial stability exposures.

    The Government does not intend to replicate the existing EU passporting regime, which is reserved for countries falling within the single market. Instead, the Government intends that the new arrangements would be based on an enhanced equivalence regime that would enable the cross-border provision of the most important financial services and would preserve regulatory and supervisory cooperation. The Government states that the existing equivalence frameworks would need to be expanded, because the EU's equivalence regime does not cover the breadth of U.K. and EU financial services provision and because there are no provisions which ensure a transparent and predictable process with lasting effect.

    Read more
  • US FDIC Publishes Updates to Interagency Forms
    07/11/2018

    The U.S. Federal Deposit Insurance Corporation announced updates to four of its interagency forms: (i) the Biographical and Financial Report (OMB Control Number 3064-0006); (ii) the Bank Merger Act Application (OMB Control Number 3064-0015); (iii) the Notice of Change in Control form (OMB Control Number 3064-0019); and (iv) the Notice of Change in Director or Senior Executive Officer form (OMB Control Number 3064-0097).  The U.S. Board of Governors of the Federal Reserve System also published updated versions of these forms (FR 2081c, FR 2070, FR 2081a and FR 2081b, respectively) to its website on July 11, 2018.  The FDIC announcement notes that these updates are based upon the comments and recommendations of an interagency working group, comprised of representatives from the FDIC, the Federal Reserve Board and the U.S. Office of the Comptroller of the Currency.  The changes to the forms were made  to improve the clarity of the specific information requested in the forms, provide additional transparency to financial institutions completing the forms, make changes to reflect new laws, regulations, capital requirements and accounting rules and to delete information requests that have been determined to be unnecessary.  The changes to the FDIC forms are effective immediately.

    View full text of the FDIC Financial Institution Letter.
  • EU Consultation on Extending the Exemption From the Clearing Obligation for Intragroup Transactions with Third Country Group Entities
    07/11/2018

    The European Securities and Markets Authority has opened a consultation on the exemption from the clearing obligation for intragroup transactions with a third country group entity. There are three Regulatory Technical Standards made under the European Market Infrastructure Regulation that provide for the clearing obligation of interest rate derivatives and credit derivatives - the RTS on the clearing obligation for IRS denominated in G4 currencies, the RTS on the clearing obligation for IRS denominated in certain other currencies and the RTS on the clearing obligation for CDS. Each of the RTS also exempt from the clearing obligation intragroup derivative transactions that meet certain conditions where one of the counterparties is a third country group entity and there is no relevant equivalence decision. An equivalence decision enables parties subject to both the EU and a third country's clearing obligation to only comply with one jurisdiction's requirements.

    Each of the RTS sets a different expiry date for the exemption period. These dates are:
    • December 21, 2018 in the RTS on the clearing obligation for IRS denominated in G4 currencies (RTS 2015/2205);
    • May 9, 2019 in the RTS on the clearing obligation for CDS (RTS 2015/592); and
    • July 9, 2019 in the RTS on the clearing obligation for IRS denominated in certain other currencies (RTS 2016/1178).

    ESMA is proposing to extend the exemption period by amending each of the RTS to have one unified expiry date of December 21, 2020.

    Comments on the proposals should be provided by August 30, 2018. ESMA will consider the feedback in finalizing the draft amending RTS for submission to the European Commission.

    View the consultation paper.
    TOPIC: Derivatives
  • FICC Markets Standards Board Consults on Statement of Good Practice on Algorithmic Trading
    07/11/2018

    The FICC Markets Standards Board has launched a consultation on a transparency draft of a Statement of Good Practice on algorithmic trading in the wholesale fixed income, commodity and currency markets. The draft SGP forms part of the FMSB's work to build up a body of Standards and Statements of Good Practice to improve conduct and raise standards in the wholesale FICC markets. The FMSB Standards and SGPs do not impose legal or regulatory obligations on FMSB members, nor do they take the place of regulation. Instead, an SGP is intended to be considered to the extent it is possible to follow it in compliance with applicable laws.

    For the purposes of the consultation paper, "algorithmic trading" is defined as trading in instruments where a computer algorithm, with limited or no human intervention, automatically determines individual parameters of orders, such as whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission.

    Read more.
  • UK Financial Conduct Authority Confirms UK Rule Alignments for the EU Money Market Funds Regulation
    07/11/2018

    The U.K. Financial Conduct Authority has published a Policy Statement outlining the rule changes necessary to align its rulebook with the provisions of the EU Money Market Funds Regulation.

    The FCA has made changes to amend, delete or disapply rules in its Handbook to MMFs to ensure those rules do not conflict with the MMFR. The regulator consulted on the proposed changes between January and March 2018. The amended rules apply from July 21, 2018 to new MMFs, including funds with substantially similar objectives to MMFs, once they are authorized as MMFs under the MMFR. Funds already operating as either MMFs or funds falling within the current definition of short-term money market funds in the FCA's rules will benefit from transitional provisions and will have until July 21, 2019 to apply for authorization under the MMFR.

    The MMFR takes effect directly across the EU from July 21, 2018. The effect of the MMFR in the U.K. will be that authorized unit trusts, authorized contractual schemes, open-ended investment companies and alternative investment funds can all apply to be authorized as MMFs. As a directly applicable EU regulation, the MMFR does not require transposition into national law. However these changes have been made to ensure the U.K. rules are in line with EU laws and empower the FCA to authorize funds as MMFs, to levy fees and to enforce requirements under the MMFR.

    View the Policy Statement (FCA PS 18/17).

    View details of the FCA consultation on proposed Handbook changes.

    View details of the U.K. implementing regulations for the MMFR.
    TOPICS: FundsShadow Banking
  • UK Conduct Regulator Chair Supports New Standards for Data Ethics
    07/11/2018

    Charles Randell, Chair of the Financial Conduct Authority and Payment Systems Regulator,delivered a speech on big data, regulation and data protection entitled, "How can we ensure that big data does not make us prisoners of technology?"

    Discussing the risks associated with big data and artificial intelligence, Mr. Randell highlighted that in order to innovate ethically, thought needs to be given to the questions posed by big data, AI and behavioural science. In particular, the FCA Chair is concerned that technical innovation could increase social exclusion and reduce access to financial services if it was used, for example, to identify the most profitable or most risky customers.

    Read more.
  • UK Legislation Published to Permit Islamic Bonds to be Traded on More Venues
    07/10/2018

    The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018 has been made and comes into force on July 11, 2018. The Order amends the definition of "Alternative Finance Investment Bonds" in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The result of the amendment is that AFIBs, such as Sukuk, will be permitted to trade on multilateral trading facilities or organised trading facilities and ensure AFIBs are treated in the same way as conventional bonds for trading purposes.

    The amendment removes a glitch creating disparity of treatment between AFIBs and conventional bonds, which had created an obstacle to the use of U.K. venues for the issue and trading of AFIBs. This was contrary to the U.K. Government's standing commitment to provide a level playing field for Islamic finance instruments in regulation and taxation in the U.K.

    Read more.
    TOPIC: Securities
  • US Federal Reserve Board and US FDIC Publish Public Sections of July 2018 Resolution Plans
    07/09/2018

    The U.S. Board of Governors of the Federal Reserve System and U.S. Federal Deposit Insurance Corporation published the public portions of the July 2018 resolution plans for four foreign banking organizations, which plans focus on the institutions’ U.S. operations.  The public sections of the resolution plans summarize certain elements of the plans and how the resolution plans would be executed.  The public portions of the resolution plans are published exactly as submitted by the institutions and are available on the Federal Reserve Board and FDIC websites.

    View full text of the FDIC release.

    View full text of Federal Reserve Board press release.
  • EU Regulatory Technical Standards Published on Assessment Methodology For Use of Advanced Measurement Approaches for Calculating Operational Risk Capital Requirements
    07/06/2018

    A Commission Delegated Regulation has been published in the Official Journal of the European Union, which supplements the Capital Requirements Regulation with Regulatory Technical Standards on the assessment methodology to be used by national regulators when deciding whether to permit institutions to use Advanced Measurement Approaches for operational risk. The RTS cover: (i) the qualitative and quantitative criteria that firms must meet before they are granted permission to use AMA models for calculating their capital requirements to cover operational risk; (ii) the criteria for the supervisory assessment of key methodological components of the operational risk measurement system; and (iii) common standards for the supervisory assessment of a bank’s operational risk governance.

    The Delegated Regulation was made by the European Commission on March 14, 2018 and is based on final draft RTS submitted to the European Commission by the European Banking Authority in June 2015. The Delegated Regulation comes into effect across the EU on July 26, 2018. For institutions currently using AMA models or whose application to do so is pending, the Delegated Regulation will apply from July 26, 2019 and certain provisions related to correlation will not apply until July 26, 2020.

    View the Commission Delegated Regulation (EU) 2018/959.

  • Financial Action Task Force Seeks Input on Draft Risk-Based Approach Guidance for the Securities Sector
    07/06/2018

    The Financial Action Task Force has published for consultation draft Risk-Based Approach Guidance for the securities sector. The FATF is developing the Guidance to assist countries, regulators, Financial Intelligence Units and participants in the securities sector to adopt a risk-based approach to anti-money laundering and countering financing of terrorism. The draft Guidance aims to assist in the risk-based design and implementation of applicable AML/CFT measures by providing general guidelines and examples of current practices and facilitate the effective implementation and supervision of national AML/CFT measures by focusing on risks and on mitigation measures. The FATF is also hoping that the draft Guidance will aid the development of a common understanding of what the risk-based approach to AML/CFT entails in the context of the securities sector. The Guidance will not be binding once it is finalized. The draft Guidance should be read in conjunction with the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation and the 2009 Report on Money Laundering and Terrorist Financing.

    Read more
  • UK Financial Conduct Authority Updates Guidance on its Approach to Payment Services and Electronic Money
    07/06/2018

    The U.K. Financial Conduct Authority has updated its Approach Document on payment services and electronic money, to reflect final guidelines issued in December 2017 by the European Banking Authority on security measures for mitigating operational and security risks under the revised Payment Services Directive. The changes will affect all payment service providers. The FCA has also updated its webpage on reporting requirements for payment services providers and e-money issuers to reflect these changes. The webpage includes a link to the revised version of the FCA's REP018 (operational and security risk) reporting form.

    The FCA will expect payment services providers to comply with the EBA guidelines, which cover issues such as operational and security risk management framework governance, the use of models, outsourcing and how functions, processes and assets should be identified, classified and risk-assessed. The EBA guidelines also cover security of data integrity, systems and confidentiality as well as physical security and asset control and communication of the security measures to payment service users. PSPs will be expected to report at least annually to the FCA on their operational and security risk management frameworks.

    Read more.
  • UK Draft Regulations Restricting the Assignment of Receivables Published
    07/06/2018

    The draft Business Contract Terms (Assignment of Receivables) Regulations 2018 have been laid before Parliament. The draft Regulations will invalidate terms in business contracts that prohibit or restrict the assignment of receivables, including terms that prevent the enforcement of a receivable. A receivable in this context is a right to be paid under a contract for the supply of goods, services or intangible assets. The Regulations will not apply if the person to whom the receivable is owed is a large enterprise or a special purpose vehicle.

    Read more.
  • US Federal Reserve Board Seeks Comment on Changes to Fedwire Funds Service Message Format
    07/05/2018

    The U.S. Board of Governors of the Federal Reserve System published a notice of proposed service enhancement and request for comment with respect to adopting the International Organization for Standardization (ISO) 20022 message format for the Fedwire Funds Service.  The new format would replace the service’s current proprietary message format.  The proposal notes that the decision to implement the ISO 20022 message format standard is the result of a multi-year process, where the Federal Reserve Board and U.S. Federal Reserve Banks sought input from a number of stakeholders and industry participants, including The Clearing House Payments Company, which owns and operates the other main large-value payment system in the United States.  The Federal Reserve Banks have also performed extensive public outreach on this topic, including the formation of advisory groups, the distribution of customer surveys, and the preparation of educational materials regarding the ISO 20022 standard.  The proposal suggests that switching to the ISO 20022 standard may result in a number of benefits, including a richer and more structured message format, improved domestic and cross-border interoperability and the ability for financial institutions to provide additional services to customers.  The proposal notes that the implementation of the ISO 20022 standard will consist of three phases, with a target final implementation date of November 2023.  Comments to the proposal are due by September 4, 2018.

    View full text of the FRB proposal.
  • Basel Committee Finalizes Revised Assessment Framework for G-SIBs
    07/05/2018

    The Basel Committee on Banking Supervision has published a revised methodology and the higher loss absorbency (HLA) requirement for the assessment of Global Systemically Important Banks. The revised framework updates and replaces the Basel Committee's July 2013 publication, "Global systemically important banks: updated assessment methodology and the higher loss absorbency requirement."

    The Basel Committee committed, on the introduction of the G-SIB framework, to review the framework every three years. It consulted on potential enhancements to the framework between March and June 2017. Following feedback to that consultation, the Basel Committee is proposing no changes to the fundamental structure of the G-SIB framework and states that it is generally recognized that the G-SIB framework is meeting its primary objective of requiring systemically important banks to hold higher capital buffers. The framework is also providing incentives for G-SIBs to reduce their systemic importance.

    The proposed revisions to enhance the framework include a timetable for implementation. The revised assessment methodology will apply from 2021, based on end-2020 data. The corresponding HLA requirements based on the revised methodology will apply from January 1, 2023.

    Read more.
  • UK Regulators Seek Views on Improving Operational Resilience of Firms and Financial Market Infrastructures
    07/05/2018

    The Bank of England, the U.K. Prudential Regulation Authority and the U.K. Financial Conduct Authority have published a joint discussion paper entitled "Building the UK financial sector’s operational resilience." The Discussion Paper is aimed at opening a dialogue with the financial services industry on achieving what the Authorities view as a "step change" in the operational resilience of firms and Financial Market Infrastructures and at generating debate about the expectations regulators and the wider public might have of the operational resilience of financial services institutions.

    While the existing regulatory framework already supports operational resilience, the BoE, PRA and FCA are together considering the extent to which they might supplement existing policies, to improve the resilience of the financial system as a whole and increase the focus on operational resilience within firms and FMIs.

    Read more.
  • US Federal Financial Regulators Release Statements Regarding Implementation and Impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act
    07/05/2018

    The U.S. Board of Governors of the Federal Reserve System, U.S. Office of the Comptroller of the Currency and U.S. Federal Deposit Insurance Corporation released statements regarding the implementation and impact of the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

    Read more.

     
  • UK Conduct Regulator Issues Near-Final Rules on Extension of Individual Accountability Regime to All Financial Services Firms
    07/04/2018

    The U.K. Financial Authority has published Policy Statements confirming the rule changes it will apply to extend the application of the Senior Managers & Certification Regimes to all FCA solo-regulated firms (that is, firms for which the FCA is both conduct and prudential regulator). At this stage, the rules are near-final as they are subject to commencement regulations that will be made by HM Treasury and they may also be amended by subsequent changes related to, for example, Brexit or SM&CR optimizations. The FCA also plans to consult separately on rules for benchmark-related activities.

    The extended SM&CR will apply to all firms authorized under the Financial Services and Markets Act 2000 and regulated by the FCA, as well as EEA and third country (non-EEA) branches. SM&CR will be extended to FCA solo-regulated firms from December 9, 2019.

    While insurance intermediaries, which are solo-regulated by the FCA, will fall within the FCA's new rules, the FCA and the Prudential Regulation Authority have separately published policy statements on the extension of the SM&CR to insurers.

    Read more.
  • UK Regulators Finalize Rule Changes For Extending Individual Accountability Regime to Insurers
    07/04/2018

    The U.K. Financial Conduct Authority and Prudential Regulation Authority have published Policy Statements confirming the near-final and final rule changes they will apply to extend the application of the Senior Managers & Certification Regimes to insurers. The Policy Statements do not make an changes to the prudential rules implementing Solvency II or to the wider U.K. regulatory framework for insurers.

    The extended SM&CR will apply from December 10, 2018, subject to commencement regulations being made by HM Treasury. The SM&CR will apply to all insurers and reinsurers regulated by the FCA and the PRA. The Policy Statements will be of specific interest to Solvency II firms (that is, all firms within the scope of the U.K. rules implementing the Solvency II Directive), insurance special purpose vehicles (undertakings with permission to carry on the regulated activity of insurance risk transformation), insurers outside the scope of the Solvency II Directive (so-called Non-Directive Firms) and small run-off firms (all insurers with less than £25 million technical provisions that no longer have permission to write or acquire new business).

    Read more.
  • UK Financial Conduct Authority Consults on a New Directory For Financial Services Workers
    07/04/2018

    The Financial Conduct Authority has published a consultation paper setting out proposals to introduce a new directory of financial services workers.

    In the consultation paper, the FCA explains that one effect of the extension of the Senior Management and Certification Regimes to all financial services firms will be that the Financial Services Register will contain the details of fewer individuals. Currently the Financial Services Register contains details of individuals who have been approved by the FCA or PRA. This includes individuals in senior management roles, individuals approved to hold controlled functions and individuals who hold customer-facing roles. However, this will change following the extension of SM&CR to all firms, because Individuals in customer functions, for example, will need to be assessed as fit and proper by firms rather than being approved by the regulators. Only individuals in specified senior manager roles will be approved by the relevant regulators and entered on the Register.

    Read more.
  • UK Financial Policy Committee Outlines Steps to Reduce Risks to the UK's Financial Stability
    07/03/2018

    The Bank of England has published a Financial Stability Report, dated June 2018, and a record of the Financial Policy Committee Meeting held on June 19, 2018. The Report sets out the FPC's view of the U.K.'s financial stability, the resilience of the U.K.'s financial system and the risks posed to each of those. Where applicable, the Report also notes the steps that the FPC is taking to address the risks. The record of the meeting provides a summary of issues discussed by the FPC in June.

    Read more
  • First UK Statutory Instrument Made Under the European Union (Withdrawal Act) 2018
    07/03/2018

    The European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018 have been made. These Regulations are the first statutory instrument to be made under the EU (Withdrawal) Act 2018, which was made on June 26, 2018. The Regulations bring into force some of the provisions of the Act. The Act, which was also formerly referred to as the Great Repeal Bill, ensures that the U.K.'s laws will continue to operate from the day the U.K. exits the EU.

    View the Regulations.

    View details of the EU (Withdrawal) Act 2018.
  • EU and UK Authorities Clarify Clearing Obligation Expectations for Pension Schemes
    07/03/2018

    The European Securities and Markets Authority has published a statement on the transitional exemption from the clearing obligation for pension scheme arrangements under the European Market Infrastructure Regulation and delegated regulations. Transitional provisions provide for PSAs to be exempt from the clearing obligation until August 16, 2018. There is no provision in EMIR that would allow for a further extension of this exemption period. It is proposed that this exemption will be further extended under the proposal to amend EMIR, known as EMIR Refit. The length of the extension is yet to be agreed as part of the EMIR Refit legislative process between the European Parliament (which advocates a two-year extension) and the Council of the European Union (which supports a three-year extension). Parliament is also proposing to backdate the application of the new transitional period to August 16, 2018 if EMIR Refit enters into force after the expiry of the existing exemption so as to prevent a gap between the two exemptions periods, providing legal certainty for PSAs and their counterparties.

    Read more.
    TOPIC: Derivatives
  • New UK Standard on Risk Management Transactions for New Issuances for the Fixed Income Markets
    07/03/2018

    The U.K. Fixed Income, Currency and Commodities Markets Standards Board has published a new Standard on Risk Management Transactions for New Issuances for the Fixed Income markets.

    The FMSB has created several Standards to improve conduct in the FICC markets since its establishment in 2015 in response to the Fair and Effective Markets Review conducted by HM Treasury, the Bank of England and the Financial Conduct Authority. FMSB members commit to applying the FMSB Standards but the Standards do not impose legal or regulatory obligations.

    The new Standard describes expected behaviors to improve the practice and awareness regarding risk management activities conducted in and around the new issuance of bonds and includes 12 Core Principles. Following its consultation at the end of 2017 on the proposed Standard on Risk Management Transactions for New Issuances, the FMSB has made some minor changes, including providing more detail on the nature of the conduct risks and amending the Principle on dissemination of information (Core Principle 9).

    Read more.
  • European Central Bank Publishes Best Practices for Eurozone Recovery Plans
    07/03/2018

    The European Central Bank has published a report on recovery plans. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism. Under that remit, the ECB has analyzed the recovery plans of numerous Eurozone banks. The report sets out the ECB's experience of that process and best practices that have been adopted by some banks. The report is intended to assist Eurozone banks to improve their recovery planning, although the report itself is restricted to the recovery plans of significant institutions.

    View the ECB's report.
  • European Commission Formally Withdraws Proposals for an EU Regulation on Bank Structural Reform
    07/03/2018

    Following its announcement in its 2018 Work Programme of its intention to withdraw 15 pending EU legislative proposals, the European Commission has announced the formal withdrawal of that legislation, which includes the 2014 Proposal for a Regulation on structural reform of the EU banking sector.

    The original proposal built on the 2013 recommendations of a high level expert group on reforming the structure of EU banking sector, chaired by Bank of Finland Governor and European Central Bank Governing Council member Erkki Liikanen. For banks within its scope, the provisions of the proposed regulation would have imposed a ban on proprietary trading and would have empowered supervisors to require banks to ring-fence certain trading activities from a deposit-taking entity.

    Read more.
  • European Central Bank Consults on Materiality Threshold for Credit Obligations Past Due
    07/03/2018

    The European Central Bank has launched a consultation on a proposed Regulation on the materiality threshold for credit obligations past due under the Capital Requirements Regulation. The CRR risk quantification provisions set out that a default occurs when an obligor is past due more than 90 days on any material credit obligation to a firm, its parent or any of its subsidiaries. The materiality of the credit obligation is to be assessed against a threshold set by the national regulator according to its view of a reasonable level of risk. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism and must set the materiality threshold for these banks. The ECB must take into account the Regulatory Technical Standards on the materiality threshold for credit obligations past due that supplement the CRR requirements on the conditions for use of the internal ratings-based approach.

    Read more.
  • UK Prudential Regulator Consults on Reflecting the Systemic Risk Buffer Framework Within the Leverage Ratio Framework for UK Systemic Ring-Fenced Bodies
    07/03/2018

    The U.K. Prudential Regulation Authority has published a consultation paper entitled "UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer."

    The Systemic Risk Buffer is one of the elements of the overall capital framework for U.K. banks and building societies. It is applied by the PRA to individual institutions and will be introduced at the same time that ring-fencing comes into force in 2019. SRB institutions are banks falling within the definition of Ring-fenced Bodies in the Financial Services and Markets Act 2000 and large building societies that hold more than £25 billion in deposits (where one or more of the accountholders is a small business) and shares (excluding deferred shares).

    Read more.
  • UK Regulator Announces Successful Applicants to Cohort Four of Its Regulatory Sandbox
    07/03/2018

    The Financial Conduct Authority has published a press release confirming the acceptance of 29 firms to begin testing in the fourth cohort of its regulatory sandbox.

    The FCA's regulatory sandbox is part of Project Innovate, the FCA's initiative for encouraging innovation in the interest of consumers. On its launch in June 2016, the FCA sandbox was the first in the world and has since been emulated by regulators globally. The sandbox is open to authorized and unauthorized firms of all sizes and provides a controlled live environment for participating firms to test product and service innovations on a time-limited basis. Applicants to the sandbox must satisfy strict eligibility criteria to be able to test in the sandbox and testing is subject to appropriate safeguards for consumer protection which are set on a case-by-case basis. Cohort 4 had 69 applicants, which is the largest number of applicants to date.

    Read more.
    TOPIC: FinTech
  • European Banking Authority Publishes First Outputs from Its FinTech Roadmap
    07/03/2018

    Following the publication of its FinTech Roadmap in March 2018, the European Banking Authority has published two reports contemplated by the Roadmap.

    The first report sets out the results of a thematic review of the impact of FinTech on the business models of incumbent credit institutions. The second report outlines the perceived benefits and potential prudential risks of seven FinTech use cases.

    The EBA has also established a FinTech Knowledge Hub for the sharing of information and experience and promotion of emerging trends among EU national regulators.

    Read more.
    TOPIC: FinTech
  • UK Competition and Markets Authority to Impose Confidentiality Ring for Provisional Decision Report on the Investment Consultants Market Investigation
    07/02/2018

    The U.K. Competition and Markets Authority has published a notice of intention to operate a confidentiality ring, following publication of the Provisional Decision Report on the Investment Consultants Market Investigation. The CMA is assessing the supply and acquisition of investment consultancy services and fiduciary management services. As part of the investigation, the CMA has received information and/or data from a number of parties. This data has been used by the CMA in the investigation, in particular in preparing the Provisional Decision Report, which will be published in mid-July 2018. The notice:
    • provides a description of the data that has been used;
    • sets the timing of the confidentiality ring - from 9.30 am on the date of publication of the Provisional Decision Report until 5 pm on the date five weeks thereafter; and
    • stipulates the access conditions under the confidentiality ring, including completion of an undertaking by those wishing to access the confidentiality ring, the form of which is set out in an annex.

    View the CMA's notice.

    View the form of undertaking.
    TOPICS: CompetitionFunds
  • UK Payments Regulators Announce Full Consolidation of UK Retail Payment Systems
    07/02/2018

    The Payment Systems Regulator and the New Payment System Operator have issued press releases confirming that the consolidation of U.K. retail payment systems is now complete. Consolidation of the three U.K. payment systems was one of the recommendations made in the Payments Strategy Forum's November 2016 report, which set out a wide-ranging strategy for reforming the U.K. retail payments industry.

    The NPSO assumed responsibility for Bacs Payment Schemes Limited and Faster Payments Scheme Ltd on May 1, 2018. The NPSO's press release confirms that, as of July 1, 2018, the Cheque and Credit Clearing Company Limited has become a subsidiary of the NPSO and the NPSO has assumed responsibility for oversight of running and managing the cheque paper and cheque image clearing systems. All payments will continue to be processed through the cheque clearing systems. The NPSO has also acquired UK Payments Administration Ltd, which is the service company responsible for providing people, facilities and business services to the U.K. payments industry.

    Read more.
  • Financial Stability Board Issues Consultation on Developing a Cyber Lexicon
    07/02/2018

    As part of its work on the protection of financial stability against the malicious use of information and communication technologies, the Financial Stability Board has published a draft cyber lexicon for consultation.

    In March 2017, the FSB was asked by the G20 Finance Ministers to review and produce a stock-take report on the existing regulation, supervisory practices and guidance on cyber security in the financial sectors of G20 jurisdictions. The G20 welcomed the FSB's stock-take report in October 2017 and asked the FSB to continue its work and to develop a common lexicon of cyber terms.

    The FSB stresses that the lexicon is not intended for use in the legal interpretation of any international arrangement or agreement or any private contract. The use of the cyber lexicon will not be mandatory. Its purpose is to support the work of the FSB, standard-setting bodies, national authorities and private sector participants to address, and develop guidance on, cyber security and cyber resilience in the financial sector. In particular, the aim of the cyber lexicon is to create a cross-sector common understanding of relevant cyber security and cyber resilience terminology and to facilitate assessment and monitoring of financial stability risks in cyber risk scenarios.

    Read more.
  • US Regulators Extend Resolution Plan Filing Deadline for 14 US Financial Institutions
    07/02/2018

    The U.S. Federal Reserve Board and FDIC have announced that they were extending the filing deadline for the resolution plans of 14 U.S. financial institutions to December 31, 2019. The agencies note that the deadline was extended to allow for additional time to provide feedback to these institutions with respect to their last resolution plan submissions and for the institutions to file their next resolution plan submissions. The agencies also reiterated that, pursuant to the Economic Growth, Regulatory Reform, and Consumer Protection Act, financial institutions with less than $100 billion in total consolidated assets are no longer subject to resolution plan requirements, and that over the course of the next 18 months, the agencies will determine which financial institutions with $100 billion or more, but less than $250 billion in total consolidated assets will be subject to the resolution plan process going forward.

    View the FDIC  press release.

    View the Federal Reserve press release
  • UK Regulations Implementing Parts of the Prospectus Regulation Published
    06/29/2018

    The Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018, dated June 27, 2018, have been laid before Parliament. The U.K. Regulations will come into force on July 21, 2018, implementing parts of the Prospectus Regulation that will apply from that date. The Prospectus Regulation will replace the existing Prospectus Directive and sets out the requirements for a prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The Prospectus Regulation aims to simplify the rules and administrative obligations for companies wishing to issue shares or debt on the market and reducing the costs of preparing a prospectus, thus fostering cross-border investments in the single market, while at the same time still enabling investors to make informed investment decisions. The remainder of its provisions take effect on July 21, 2019.

    U.K. law is not needed to transpose the Prospectus Regulation, which will be directly applicable across the EU. However, certain U.K. legislation will need to be amended to ensure that there is no conflict of laws. The U.K. Regulations amend the Financial Services and Markets Act by increasing the threshold, from €5 million to €8 million, for which a prospectus is required for an offer of securities to the public within the U.K. The U.K. Regulations also amend the U.K. legislation that implemented the Markets in Financial Instruments Directive, including by correcting the definition of a MiFID investment firm.

    View the U.K. Regulations (S.I. 2018/786).

    View the explanatory memorandum.
    TOPICS: MiFID IISecurities
  • EU Draft Amended Technical Standards on Benchmarking of Internal Models
    06/29/2018

    The European Banking Authority has published amended draft Implementing Technical Standards specifying the benchmarking portfolios, templates and definitions to be used as part of the annual benchmarking exercise by those institutions that use internal approaches for market and credit risk under the EU Capital Requirements Directive. The EBA consulted on proposed changes to the ITS in Q4 2017 and Q1 2018.

    The amended ITS include all the portfolios that will be used for the 2019 benchmarking exercise, provided that the amended ITS are adopted by the European Commission. For market risk benchmarking, major changes have been made to the portfolios, including the introduction of a new set of portfolios comprising vanilla instruments. Minor changes have been made to the credit risk portfolios including changes to the information requested from firms.

    Regarding the 2018 benchmarking exercise, the EBA has confirmed that firms do not have to resubmit the same data as a result of the difference between the submission dates in the draft ITS published by the EBA and the final ITS published on May 18, 2018 in the Official Journal of the European Union.

    View the amended ITS.

    View details of the EBA's consultation on amending the ITS.
  • US Federal Reserve Board and US Federal Deposit Insurance Corporation Seek Comment on 2019 Resolution Plan Guidance
    06/29/2018

    The U.S. Board of Governors of the Federal Reserve System and U.S. Federal Deposit Insurance Corporation have published revised resolution plan (or "living wills") guidance for the eight largest and most complex U.S. banki