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The following posts provide a snapshot of the principal European and global wholesale financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates. These posts focus on legal and compliance issues rather than accountancy or capital-related matters.

  • Bank of England Drops Warning Against Profit Distributions for Financial Market Infrastructures
    11/11/2021

    The Bank of England has written to the CEOs of all regulated U.K. financial market infrastructures notifying them that they are no longer expected to discuss prospective shareholder distributions with the BoE.

    Read more.
  • Bank of England and HM Treasury Announce Next Steps for UK Central Bank Digital Currency
    11/09/2021

    The Bank of England and HM Treasury have announced the next steps in the development of a U.K. Central Bank Digital Currency. 

    Read more.
    ATTORNEYS : Chloe BarrowmanThomas Donegan
    TOPIC : FinTech
  • HM Treasury Proposes Reforms in Latest Financial Services Future Regulatory Framework Review Consultation
    11/09/2021

    HM Treasury has launched a consultation, the Financial Services Future Regulatory Framework Review: Proposals for Reform. The consultation paper presents the government's response to the feedback received to the October 2020 FRF Review consultation and numerous proposals to progress the approach. Responses to the consultation may be submitted until February 9, 2022. 

    Read more.
  • UK Financial Conduct Authority Publishes Environmental, Social and Governance Strategy
    11/08/2021

    The U.K. Financial Conduct Authority has published an environmental, social and governance strategy to support the financial sector in the transition to a "net zero", more sustainable and more inclusive economy.

    The FCA's strategy is built on five themes supported by key actions that the FCA anticipates taking in the near future. U.K. regulated firms should expect significant engagement by the FCA on these issues.

    Read more.
  • UK Announces Plans to be World's First Net Zero Financial Centre
    11/03/2021

    The U.K. Chancellor of the Exchequer, Rishi Sunak, has announced the U.K. Government's plans to make the U.K. the world's first net zero financial centre. Under the plans, U.K. financial institutions will need to have robust transition plans describing how they will support the transition to a carbon neutral economy. The U.K. Government intends to introduce legislative measures to make these requirements mandatory with a view to increased adoption by 2023 and will incorporate standards for these transition plans into its proposed Sustainability Disclosure Requirements, announced in October in its policy paper, Greening Finance: A Roadmap to Sustainable Investing, further details of which are set out in our related client note.

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  • UK Financial Conduct Authority Publishes Discussion Paper on Sustainability Disclosure Requirements and Investment Labels
    11/03/2021
     

    The U.K. Financial Conduct Authority has published a discussion paper on its proposed Sustainability Disclosure Requirements and sustainable investment labels. The FCA is seeking initial views on these proposals with the intention of consulting on fuller policy proposals in Q2 2022. Responses to the discussion paper may be submitted until January 7, 2022. These proposals link to the U.K. government's ambitions on climate change and green finance, detailed in its October policy paper, Greening Finance: A Roadmap to Sustainable Investing, further details of which are set out in our related client note.

    Read more.
  • European Banking Authority Seeks to Address Divergence on Use of Strong Customer Authentication Exemption
    10/28/2021

    The European Banking Authority is consulting on draft Regulatory Technical Standards to amend the existing RTS on strong customer authentication and common and secure open standards of communication under the EU Payment Services Directive (known as PSD2). Responses to the consultation may be submitted until November 25, 2021.

    PSD2 requires payment service providers to apply SCA each time a customer accesses their payment account online. The existing RTS govern the process by which payment service providers authenticate the identity of customers and provide exemptions to the SCA requirements. One of the exemptions is available, on a voluntary basis, when a customer accesses limited payment account information, provided that SCA is applied for the first access and at least every 90 days subsequently. The EBA is proposing to make the exemption mandatory for PSPs where the account information is accessed through an account information service provider, subject to certain conditions being met to ensure the safety of the user's data. The exemption would remain voluntary when a user directly accesses the account information.
  • European Securities and Markets Authority Issues Statement on Investment Recommendations on Social Media
    10/28/2021

    The European Securities and Markets Authority has issued a statement on the requirements under the EU Market Abuse Regulation for firms and individuals that make investment recommendations on social media.  ESMA is concerned about the potential harm to retail investors who may base their investment decisions on information made available on social media sites, in particular in situations such as the Gamestop case.  The EU rules, which are designed to prevent the misleading of investors, apply to anyone based in or outside the EU that distributes information proposing an investment decision about EU financial instruments listed in the EU or financial instruments that depend on or effect the price or value of a listed financial instrument. 

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  • EU Publishes Proposed Banking Package 2021
    10/27/2021

    The European Commission has published three legislative proposals to amend the EU Capital Requirements Regulation and the EU Capital Requirements Directive, referred to as the Banking Package 2021. The proposals are subject to consultation, responses to which may be submitted until January 14, 2022.

    Read more.
  • Revised Global Principles on Outsourcing for Regulated Participants in the Securities Markets
    10/27/2021

    The International Organization of Securities Commissions has published an updated Principles on Outsourcing for regulated market participants in the securities markets.  The updated Principles are based on IOSCO’s 2005 Outsourcing Principles for Market Intermediaries and 2009 Outsourcing Principles for Markets.  However, the updated Principles will also apply to trading venues, market intermediaries, market participants acting on a proprietary basis, and credit rating agencies.  Financial market infrastructures may also choose to consider their application, although the Principles are not addressed to those entities.

    Read more.
  • EU Delegated Regulation on Ancillary Activity Criteria under MiFID II
    10/21/2021

    An EU Commission Delegated Regulation (2021/1833) on the criteria for when an activity will be considered as ancillary to the main business has been published in the Official Journal of the European Union.  The changes to the EU’s Markets in Financial Instruments Directive, known as MiFID Quick Fix, include changes to the ancillary activity exemption.  The exemption from authorization as an investment firm is available 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.

    Read more.
    ATTORNEYS : Sandy CollinsThomas Donegan
    TOPIC : MiFID II
  • European Supervisory Authorities Launch Call for Evidence on the EU's Packaged Retail and Insurance-based Investment Products Regulation
    10/21/2021

    The European Supervisory Authorities have launched a call for evidence on the EU's Packaged Retail and Insurance-based Investment Products Regulation. The PRIIPs Regulation requires manufacturers of PRIIPs to produce a standardized Key Information Document in an official language of all EU countries into which offerings are made. It also requires those advising on or selling PRIIPs to provide retail investors with KIDs in good time before the investor enters into the investment. The call for evidence closes on December 16, 2021.

    Read more.
  • UK Conduct Regulator Calls for Changes to Regulatory Perimeter
    10/21/2021

    The U.K. Financial Conduct Authority has published its annual Perimeter Report. The report discusses the FCA's existing remit and highlights areas where potential consumer harm could be mitigated if the regulatory perimeter is amended. The FCA cannot amend the perimeter, this can only be achieved through legislation.

    Read more.
  • Verena Ross Appointed Chair of the European Securities and Markets Authority
    10/15/2021

    The European Securities and Markets Authority has announced that Verena Ross will take up the position of Chair of ESMA from November 1, 2021. Ms. Ross will replace Steven Maijoor, the former Chair. Her appointment is for a five-year term, renewable once.
    TOPIC : People
  • Charles Randell CBE Stepping Down as Chair of UK Financial Conduct Authority
    10/15/2021

    The U.K. Financial Conduct Authority has issued a press release announcing that its current chair, Charles Randell CBE, will be resigning early from his position in Spring 2022. Mr. Randell wrote to the Chancellor informing him of the decision to step down as chair of the FCA and the Payment Systems Regulator. Mr. Randell has been Chair of the FCA and PSR since April 1, 2018. The resignation comes just 10 days after the FCA was provided with a preliminary report by the Financial Regulators Complaints Commission concerning the FCA's handling of the London Capital & Finance scandal, which is due to be published in the next month and has been reported by the press to be critical of the FCA.
    TOPIC : People
  • UK Regulator Amends Derivatives Trading Obligation for LIBOR Transition Purposes
    10/15/2021

    Following its July 2021 consultation, the U.K. Financial Conduct Authority has published a Policy Statement amending the list of derivatives subject to the U.K. trading obligation for the purposes of the LIBOR transition.

    The derivatives trading obligation under the U.K. version of the Markets in Financial Instruments Regulation requires U.K. investment firms to conclude transactions in certain derivatives on U.K. regulated markets, multilateral trading facilities, organised trading facilities or third-country venues in jurisdictions benefiting from U.K. equivalence decisions. In the absence of any equivalence decision, the FCA used its Temporary Transitional Power to provide transitional relief from December 31, 2020 (the end of the transition period) until March 31, 2022 for U.K. firms, EU firms using the U.K.'s temporary permissions regime and U.K. branches of overseas firms. The trading obligation currently applies to certain fixed-to-float interest rate swaps denominated in EUR, USD and GBP, and to certain index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover).

    Read more.
  • UK Secondary Capital Raising Review Launched
    10/12/2021

    HM Treasury has announced the U.K. Secondary Capital Raising Review, requesting recommendations on improving the U.K. capital raising process for publicly traded companies. The Review stems from Lord Hill's recommendations in the U.K. Listing Review, published in March 2021, which proposed that consideration should be given to improving the efficiency of further capital raisings by listed issuers, including by re-establishing the Rights Issue Review Group and assessing capital raising models used in other jurisdictions.

    A Call for Evidence has been issued, as the first step in the Review, calling for feedback on the key themes of the Review, including:
    • Reduction of the overall duration and cost of the existing U.K. rights issue process and how that could be achieved.
    • The role that new technology plays in the process to ensure that shareholders receive relevant information in a timely fashion and can exercise their rights.
    • Fund-raising models in other jurisdictions that should be considered for use in the U.K.
    • Improved transparency introduced by the Short Selling Regulation.
    • The potential for refining the undocumented secondary capital raising process.

    Responses to the Call for Evidence may be submitted until November 16, 2021.
  • UK Government Sets out Key Actions to Secure Its Vision for Payments
    10/11/2021

    HM Treasury has published a response to the Payments Landscape Review call for evidence.  The government sets out the key areas and steps for government, regulators, and industry to achieve a payments sector at the vanguard of technology and innovation.  

    Read more.
  • Bank of England Proposes Introducing Clearing Obligation for TONA Overnight Index Swaps
    09/29/2021

    The Bank of England has launched a consultation proposing to subject Overnight Index Swaps (OIS) that reference the Tokyo Overnight Average rate (TONA) to the U.K. derivatives clearing obligation under the U.K. version of the European Market Infrastructure Regulation. The BoE has already decided to remove contracts referencing JPY LIBOR from the clearing obligation starting December 6, 2021. Following recent announcements made by the Japanese authorities, the BoE now considers it appropriate to replace contracts referencing JPY LIBOR with contracts referencing TONA. The planned change would apply from December 6, 2021 or shortly thereafter. Responses to the consultation may be submitted until October 27, 2021.

    Read more.
  • Bank of England Confirms Changes to Derivatives Clearing Obligation to Reflect Benchmark Reforms
    09/29/2021

    The Bank of England has published a Policy Statement and final changes to the contracts subject to the derivatives clearing obligation under the U.K. version of the European Market Infrastructure Regulation. The U.K. onshored European Market Infrastructure Regulation imposes a clearing obligation on U.K. 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 details are set out in three sets of Binding Technical Standards—Commission Delegated Regulation (EU) 2015/2205, Commission Delegated Regulation (EU) 2016/592 and Commission Delegated Regulation (EU) 2016/1178.

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  • European Securities and Markets Authority Recommends Changes to EU Algorithmic Trading Rules
    09/29/2021

    The European Securities and Markets Authority has published a review report on algorithmic trading under the EU's Markets in Financial Instruments package. The Markets in Financial Instruments Directive requires the European Commission to review and report on the impact of the MiFID II requirements on algorithmic trading, including high frequency trading and direct electronic access. ESMA's report will assist the Commission with that remit, including determining whether any legislative changes are appropriate.

    Read more.
    ATTORNEYS : Thomas DoneganSandy Collins
    TOPIC : MiFID II
  • European Commission Publishes Study on Banks’ and Prudential Supervisors’ Integration of ESG Factors
    09/27/2021

    The European Commission has published a study on EU banks’ integration of environmental, social and governance factors into their risk management processes, business strategies and investment policies. The study finds that, although banks have made efforts to pursue ESG agendas, the speed and degree of integration of ESG considerations must accelerate. In addition, it finds that prudential supervisors could take more action to integrate ESG factors into their supervision of banks. Further details of the challenges facing banks and supervisors in ESG integration are set out in the study. 

    Read more.
  • Proposed Amendments to the EU Best Execution Reporting Regime under MiFID II
    09/24/2021

    The European Securities and Markets Authority has launched a consultation on proposed amendments to the best execution reporting regime under the EU's Markets in Financial Instruments Directive. Responses to the consultation may be submitted by December 23, 2021. ESMA is expected to send its recommendations for amendments to the European Commission in H1 2022.

    Read more.
  • European Securities and Markets Authority Supports Delay to Buy-In Regime under EU Central Securities Depositories Regulation
    09/24/2021

    The European Securities and Markets Authority has published a letter to the European Commission urging the Commission to delay the buy-in regime under the Central Securities Depositories Regulation. The EU CSDR provides a harmonized regulatory and prudential regime for central securities depositories and increases the robustness and resilience of securities settlement arrangements. The Commission consulted in 2020 on proposals to improve securities settlement in the EU and on central securities depositories, and legislative proposals are expected before the end of 2021.

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  • HM Treasury Publishes Amendments to UK Capital Requirements Regulation
    09/23/2021

    HM Treasury has made certain amendments under the U.K. Capital Requirements Regulation (Amendment) Regulations 2021 to the U.K. Capital Requirements Regulation. The UK CRR is the U.K. version of the corresponding EU regulation, as applicable after Brexit. The new regulations introduce some new provisions and revoke certain others. The related explanatory memorandum describes the changes in further detail. The changes will come into force on January 1, 2022.

    Read more.
  • Proposed Amendments to the EU Short Selling Regulation
    09/21/2021

    The European Securities and Markets Authority is consulting on proposed amendments to the EU Short Selling Regulation. ESMA is reviewing the SSR provisions following two occurrences of market volatility. The first is the market reactions to the impact of the COVID-19 pandemic and the related regulatory response where numerous and varied short sale bans were imposed by various EU member states. The second is the market turmoil in the U.S. markets and elsewhere for so-called meme stocks, such as Gamestop. Responses to the consultation may be submitted by November 19, 2021, and ESMA is expected to publish its report to the European Commission early in 2022.

    Read more.
  • Bank of England Publishes Dear CEO Letters to Central Counterparties, Central Securities Depositories and Payment System Operators on Supervisory Expectations for Material Outsourcing to the Public Cloud
    09/17/2021

    The Bank of England has written to the CEOs of Central Counterparties, Central Securities Depositories, Recognised Payment System Operators and Specified Service Providers subject to the BoE’s supervision, drawing their attention to the BoE’s expectations of material outsourcing arrangements, including the use of the public cloud.

    The letters observe that in Q2 2021, the BoE’s Financial Policy Committee found that financial institutions had scaled up their reliance on cloud service providers since the start of 2020, leading to an increasing reliance on a small number of providers and a potential increase in financial stability risk. Reliance on third parties by CCPs, CSDs, RPSOs and SSPs is subject to existing legislation and the Principles for Financial Markets Infrastructure, which the BoE expects firms to comply with. Firms are also expected to have regard to the BoE’s policy on operational resilience and any relevant international standards.

    Read more.
  • UK Financial Conduct Authority Publishes Proposals to Revamp its Decision-Making Process
    07/29/2021

    The U.K. Financial Conduct Authority has published a consultation paper on proposals to change its decision-making process. The objective of these proposals is to make the FCA a nimbler regulator that can make faster and more effective decisions. Responses to the consultation may be submitted until September 17, 2021. The FCA intends to publish a Policy Statement before the end of the year, likely in November, and envisages that the revised decision-making framework would start in November, too. Any cases that are being considered by the Regulatory Decisions Committee would remain with the RDC under the existing processes.

    Read more.
  • UK Listings Regulator Consults on Tightening Diversity Requirements for Listed Companies
    07/28/2021

    The U.K. Financial Conduct Authority has opened a consultation on proposals to amend the requirements on diversity and inclusion on listed company boards and executive committees. The proposals include changes to the Listing Rules and the Disclosure and Transparency Rules, including guidance. The consultation closes on October 20, 2021. The FCA intends to publish final rules before the end of 2021 and for the new requirements to apply to accounting periods starting on or after January 1, 2022. This means that annual financial reports published for 2022 in spring 2023 would include the reporting changes.

    Read more.
  • UK Conduct Regulator Consults on Changes to Listing Rules For SPACs
    07/27/2021

    Following its consultation earlier this year, the U.K. Financial Conduct Authority has published final changes to its listing rules for special purpose acquisition companies that will come into effect on August 10, 2021. SPACs are companies set up for the purpose of raising money from investors to fund the acquisition of an operating business. They have attracted much attention over the last year as an alternative way for target companies to go public without going through the traditional initial public offering process. The initial decision to adjust the U.K. approach to SPACs was one of the recommendations made by Lord Hill in the U.K. Listings Review.

    Read more.
  • Bank of England Publishes MREL Consultation and Operational Guide to Bail-In
    07/22/2021

    The Bank of England has published two documents on the U.K.’s bank recovery and resolution regime: a consultation on its approach to setting minimum requirements for own funds and eligible liabilities and an operational guide to the execution of bail-in in the U.K. In a statement on the publications, the BoE’s Deputy Governor for Markets and Banking explained that, while progress has been made in ensuring the resolvability of U.K. firms, there is more work to do to address resolvability risks. The consultation paper and operational guide form part of the U.K.’s maturing recovery and resolution regime. 

    Read more.
  • UK Government Launches Review of UK’s Anti-Money Laundering and Counter Terrorist Financing Regime
    07/22/2021

    The U.K. government has launched a review of the U.K.’s anti-money laundering and counter terrorist financing regulatory and supervisory regime with the publication of a call for evidence. The government is assessing the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime. On the same day, the government also published a consultation on proposed targeted changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, referred to as the MLRs. That consultation is focused on the changes needed to ensure the U.K. regime meets international standards. Responses to the call for evidence may be submitted until October 14, 2021. A final report on the findings of the review and, where relevant, possible reform will be published no later than June 26, 2022, in line with the review requirement in the MLRs.

    Read more.
  • UK Government Consults on Targeted Amendments to the Money Laundering Regulations
    07/22/2021

    The U.K. government has opened a consultation on proposed targeted changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, referred to as the MLRs. The consultation focuses on the time-sensitive changes that are needed to ensure that the U.K. requirements meet international standards set by the Financial Action Task Force and to strengthen the overall requirements. The government has also opened a call for evidence on the U.K.’s anti-money laundering and counter terrorist financing regulatory and supervisory regime, which is considering the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime. Responses to the MLRs’ consultation may be submitted until October 14, 2021. These MLR amendments will be implemented through secondary legislation due to be laid in Spring 2022.

    Read more.
  • UK Regulator Consults on Scope of PRIIPs
    07/20/2021

    The U.K. Financial Conduct Authority has published proposals to amend the scope of the rules governing packaged retail and insurance-based investment products (or PRIIPs). The FCA's proposals are designed to bring legal certainty to the scope of the PRIIPs regime, as it applies to corporate bonds. The consultation also addresses issues of misleading performance scenarios and summary risk indicators and concerns about the transaction costs calculation methodology. It is hoped that the amendments will promote liquidity and improve choice in the retail corporate bond market and also reduce the complexity of key information documents (or KIDs), the key information disclosure documents that must accompany PRIIPs when they are made available to retail investors.

    Responses to the FCA's PRIIPs consultation should be submitted by September 30, 2021. The FCA is aiming to finalize the amendments by the end of this year and for the changes to take effect on January 1, 2022.

    Read more.
  • HM Treasury Consults on Extension of Senior Managers’ Regime to Financial Market Infrastructures
    07/20/2021

    HM Treasury has published a consultation paper seeking feedback on its proposals for the extension of the Senior Managers’ and Certification Regime to certain U.K. financial market infrastructures. The SMCR was originally implemented for U.K. banks in 2016, extended to all U.K. authorized firms in December 2019, and further extended to U.K. benchmark administrators in December 2020. The government is seeking views on whether and, if so, how the SMCR should be extended to FMIs as well as the proportionate application of it to FMIs. Responses to the consultation on the SMR for FMIs should be submitted by October 22, 2021.

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  • European Commission Consultation on Improving the EU Secondary Markets for Markets for Non-Performing Loans
    07/16/2021

    The European Commission is consulting on improving transparency and efficiency in the EU secondary markets for non-performing loans. The objective is to provide a more liquid market by improving the quantity, quality and comparability of NPL data. The consultation was announced in December 2020 as part of the Commission’s Strategy for post-Covid-19 NPLs. Responses to the consultation may be submitted until September 8, 2021.

    Read more.
  • UK has established a new Green Technical Advisory Group
    07/09/2021

    HM Treasury has announced a new independent group, called the Green Technical Advisory Group, to help tackle “greenwashing” and create a U.K. green taxonomy. “Greenwashing” refers to unsubstantiated or exaggerated claims that an investment is environmentally friendly. GTAG’s main remit is to advise HM Treasury on developing and implementing a U.K. green taxonomy, comprising technical screening criteria. GTAG consists of financial services industry representatives, non-financial services representatives, taxonomy and climate experts. HM Treasury, the U.K. Financial Conduct Authority and the Bank of England will be observers. GTAG is expected to provide initial recommendations to HM Treasury as early as September of this year.

    View the GTAG Terms of Reference
  • UK Regulators Open Discussion on Accelerating Diversity and Inclusion in the Financial Services Sector
    07/07/2021

    The U.K. Financial Conduct Authority, Prudential Regulation Authority and the Bank of England (as regulator for financial market infrastructure) have published a discussion paper on diversity and inclusion in the financial sector. Feedback to the discussion paper may be submitted until September 30, 2021. It is expected that the FCA and PRA will consult on detailed proposals in Q1 2022 and aim to issue final Policy Statements in Q3 2022. The regulators aim to develop policy, rules and guidance that set clear minimum expectations and note that they will be prepared to use their regulatory powers where a firm fails to meet those expectations. The regulators intend to introduce any new requirements proportionately.

    Read more.
  • UK Listing Regulator Proposes Changes to UK Listings Regime
    07/05/2021

    The U.K. Financial Conduct Authority has launched a consultation on changes to the U.K. listing regime. This consultation follows the recommendations made by Lord Hill in the U.K. Listing Review as well as the Kalifa Review of FinTech. Responses to the consultation may be submitted until September 14, 2021.

    The U.K. government is currently consulting on changes to the U.K. prospectus regime, having launched the U.K. Prospectus Review last week.

    Read more.
  • UK Prospectus Review: Proposed Reforms to Boost London's Capital Markets
    07/02/2021

    The U.K. government has begun a consultation on proposals to reform the U.K. prospectus regime. This much anticipated consultation sets out proposals based on the important recommendations made in the U.K. Listing Review, which was chaired by Lord Hill. Responses to the consultation should be submitted by September 24, 2021.

    The final changes to the prospectus regime will be made through legislation and the rules of the Financial Conduct Authority, following consultation. The existing U.K. Prospectus Regulation will be replaced, in whole or part, by FCA rules.

    Read more.
  • UK Wholesale Market Review
    07/01/2021

    The U.K. government has launched a consultation, the Wholesale Markets Review, on proposals to amend the U.K.'s Markets in Financial Instruments regime. This regime is based upon the Markets in Financial Instruments Directive and related Regulation, as well as several pieces of delegated legislation thereunder, collectively and colloquially known as MiFID II, which the U.K. on-shored with minor amendments following its exit from the European Union.  HM Treasury is now seeking feedback on how the U.K.’s approach to regulating secondary markets should be adapted now that the U.K. has left the EU. The intention is to amend the regime to reflect that the U.K. market is one of the largest capital markets globally. Changes are also proposed where it is clear that the rules have had unintended outcomes, are duplicative or excessive or have curbed innovation. The consultation is open until September 24, 2021.

    Read more.
  • UK Government Proposes Measures to Protect Direct Access to Cash
    07/01/2021

    HM Treasury has opened a consultation on policy proposals for geographic access requirements upon designated firms to protect access to cash across the U.K. The consultation follows the Access to Cash: Call for Evidence, published in October 2020, which sought views on the considerations on how to maintain a sustainable network of retail cash infrastructure in the U.K. and support the use of cash by people and businesses over time. Responses to the consultation may be submitted until September 23, 2021.

    The main proposal is the introduction of geographic requirements based on cash access (e.g. ATM) facilities being available within maximum distances of a minimum percentage of the population. Geographic parameters are already used in cash provision - LINK's ATM scheme, for example, has committed to protecting free-to-use ATMs more than 1km away from the next nearest free-to-use source of cash and protecting free access to cash on high streets that do not have a free-to-use source of cash within 1 km. The Post Office Network is obliged to ensure that 99% of the total population must be within 3 miles of their nearest Post Office and 95% must be within 1 mile. HMT's proposals for designated firms would impose minimum requirements that ensure reasonable access to withdrawal and deposit facilities for individuals and reasonable access to deposit facilities for SMEs. The government does not intend to consider further factors, such as local needs, deprivation, vulnerability, and service levels, which will be for the industry to address. Flexibility would be built in to the legislative provisions to allow the government to adjust the requirements over time.

    Read more.
  • UK Government Opens Review of Securitization Regulation
    06/24/2021

    HM Treasury has opened a Review of the U.K. Securitization Regulation with the issue of a call for evidence. The Review is required under the Regulation, and HM Treasury must report to Parliament on its findings by January 2022. Responses to the consultation may be submitted until September 2, 2021. HM Treasury also asks respondents to consider whether any changes are needed that are time-sensitive so that consideration can be given to whether a change is implemented through legislation or regulator rules. In the context of the Future Regulatory Framework Review, the responsibility for making and implementing rules will be transferred to the regulators. The FRF Review is ongoing, with a second consultation expected later this year.

    The Securitization Regulation provides the criteria for identifying which securitizations will be designated as "simple, transparent and standardized" (STS) securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related provisions under the Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations.

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  • UK Conduct Regulator Consults on Enhancing Climate-Related Disclosures for Listed Companies and Certain Regulated Firms
    06/22/2021

    The U.K. Financial Conduct Authority has published two consultation papers that set out new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The proposals follow the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020 that are aligned with the recommendations of the global Taskforce on Climate-related Financial Disclosures. Responses to the consultations may be submitted until September 10, 2021. The FCA is aiming to publish its final rules and policy statements for these proposals by the end of the year.

    Read more.
  • UK Taskforce on Innovation, Growth and Regulatory Reform Publishes Recommendations
    06/16/2021

    The Taskforce on Innovation, Growth and Regulatory Reform has published its report, making several recommendations for reforming the U.K.'s approach to regulation as well as practical suggestions for implementing the reforms. The main recommendation tasks the government with building a U.K. regulatory framework that has proportionality at its core and that is based on the principles of the common law. The report also provides specific proposals for regulatory reforms across several sectors, identified as high growth sectors, including the financial services sector. The TIGRR recommendations will be progressed by the newly established Brexit Opportunities Unit, which is being led by Lord Frost, Minister of State at the Cabinet Office. Consultations on proposals to implement these ambitious recommendations are expected later this year.

    The TIGRR report recommends the approach to regulation is reformed along traditional common law lines, moving away from the EU codified system. The report suggests that the government reconsiders the approach to regulation with the aim of enhancing productivity, encouraging competition and invigorating innovation.

    Read more.
  • Basel Committee on Banking Supervision Proposes Capital Requirements for Banks' Exposures to Crypto-Assets
    06/10/2021

    The Basel Committee on Banking Supervision has launched a consultation on bank prudential requirements for exposures to crypto-assets. The consultation follows the Basel Committee's 2019 discussion paper on the prudential treatment of crypto-assets. This latest consultation sets out a preliminary proposal for the prudential treatment of crypto-assets, based on feedback to the discussion paper and other input from stakeholders. The Basel Committee believes that setting the policy will be an iterative process and that a further consultation will be needed. Responses to this consultation may be submitted until September 10, 2021.

    The Basel Committee considers that the increasing growth of crypto-assets raises financial stability concerns and is increasing the risks encountered by banks. Certain crypto-assets are highly volatile and may pose risks for banks as exposures increase, including liquidity risk, credit risk, market risk, operational risk, money laundering/terrorist financing risk, and legal and reputation risks.

    Read more.
  • UK Discussion Paper on Systemic Stablecoins Published
    06/07/2021

    The Bank of England has published a discussion paper on new forms of digital money that are potentially systemically important, focusing on systemic stablecoins. HM Treasury recently consulted on bringing certain crypto-assets into the U.K. regulatory perimeter and proposed that the BoE would regulate systemic stablecoins (under the Banking Act 2009) and that the Financial Conduct Authority would be responsible for consumer protection and conduct regulation. Feedback to the discussion paper can be submitted until September 7, 2021. The feedback will inform the BoE's next steps and it will consult on a specific regulatory framework for stablecoins, pending the finalization of the anticipated legislation.

    According to the BoE, systemic stablecoins would be those that have the potential to scale up and grow rapidly and become widely used for payments by individuals and non-financial businesses. Non-systemic stablecoins would be those that are not widely used for payments and would not be subject to regulation by the BoE. Systemic stablecoins would be: (i) denominated in sterling; (ii) backed by assets that make them stable in value, unlike crypto-assets that have no safeguard, such as Bitcoin; and (iii) would not be created by lending to the real economy, unlike commercial bank money.

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  • UK Government Proposes Power to Block Listings on National Security Grounds
    06/07/2021

    Following the commitment by the government in its 2019 Economic Crime Plan to investigate the links between listings and national security, HM Treasury has launched a consultation in which it proposes to introduce a power for it to block listings on national security grounds. The government has assessed that there is a "remote but possible risk" that a company listing in the U.K. could harm the nation's security and that this risk needs to be addressed. Responses to the consultation may be submitted until August 27, 2021.

    It is proposed that the scope of this power will include all initial equity listings and admissions on U.K. public markets. The power would not apply to secondary trading and would not include listed debt, other than certain convertible securities. Therefore, the power could be applied to: (i) shares, securities representing equity such as Global Depositary Receipts and convertible securities; (ii) regulated markets and MTFs, including the SME Growth Markets, that allow primary equity listings; and (iii) initial public offerings and non-traditional listings structures, such as introductions and Special Purpose Acquisition Companies (SPACs). The power would also not apply to delisting already listed companies.

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    TOPIC : Securities
  • UK to Remove Open Access Regime for Exchange-Traded Derivatives
    06/05/2021

    The U.K. Government has announced that it will permanently remove the open access regime for exchange-traded derivatives. The regime, established under the EU Markets in Financial Instruments Regulation and onshored into U.K. laws in preparation for the end of the Brexit transitional period, requires a trading venue to provide open and non-discriminatory access to a CCP, with a reciprocal requirement for CCPs to provide access for trading venues, when clearing transferable securities, money market instruments and ETDs. In the EU, a temporary opt-out from the regime was made available and then extended for trading venues and CCPs in relation to ETDs, but that is due to expire on July 3, 2021 (having been extended for a period of one year due to difficulties surrounding COVID-19).

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  • UK Announces Extension of Exemption for UCITS from PRIIPs Disclosure Requirements
    06/01/2021

    HM Treasury has announced that the current exemption for Undertakings for Collective Investment in Transferable Securities funds from the requirements of the U.K. Packaged Retail Investment and Insurance-based Products Regulation will be extended by five years to December 31, 2026.

    The U.K. PRIIPs Regulation, which was on-shored in the U.K. after Brexit and is based upon the corresponding and much-criticized EU regulation, requires "manufacturers" of PRIIPs to produce a standardized "key information document," designed to improve U.K. retail investors' understanding of the financial products they are purchasing. Technical Standards govern the presentation, content, review and revision of KIDs and the conditions for fulfilling the requirement to provide a KID. Under the U.K. PRIIPS Regulation, management companies, investment companies and persons advising on, or selling, units in UCITS are exempt from the requirements of the PRIIPs Regulation until December 31, 2021. UCITS funds still need to prepare a key investor information document (KIID) as required by the UCITS Directive, with different but broadly similar content requirements. The EU PRIIPs regime, which the U.K. has now adopted without material modifications, was intended to improve investor disclosures for more complex retail products such as index-tracking investments and insurance-wrapped products. However, it has resulted in deleterious impacts in other industries and has been widely criticized for its vagueness of scope and wide application, with particularly difficult consequences for bond issuers, listed derivatives and funds. The U.K. has announced that it is undertaking a broader review.

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  • Financial Stability Board Consults on Global Targets for Addressing the Four Challenges of Cross-Border Payments
    05/31/2021

    The Financial Stability Board has launched a consultation on proposed global targets for addressing the four challenges to cross-border payments. The G20 is prioritizing the enhancement of cross-border payments and the FSB states that public authorities have an important role to play in leveraging opportunities and addressing challenges in both existing and new arrangements supporting cross-border payments. In November 2020, the G20 endorsed the FSB's Roadmap and the related 19 Building Blocks. The Roadmap presents a high-level plan for tackling the issues and sets both short-term and longer-term goals and milestones. The Building Blocks indicate where further public and private sector work would enhance cross-border payments and address the frictions ascertained by the FSB. The consultation closes on July 16, 2021. The FSB will publish its final recommendations to the G20 in October 2021.

    Read more.
  • EU Technical Experts Make Recommendations on Improving Access for SMEs to Capital Markets
    05/25/2021

    The EU's Technical Expert Stakeholder Group on SMEs has published a report, including a set of recommendations to improve the capacity of SMEs to access the capital markets. It remains to be seen how much of these the Commission and other legislative bodies will take on board. Some of the recommendations echo those of the report by Lord Hill on the U.K. Listings Review, the focus of which was how to amend the U.K.'s listing regime to ensure the continued attractiveness of the U.K. as a capital markets hub (rather than focusing on SME's).

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    TOPIC : Securities
  • European Securities and Markets Authority Issues Call for Evidence on Digital Finance
    05/25/2021

    Following the publication by the Commission of its Digital Finance Strategy in September 2020, the Commission has asked the European Supervisory Authorities for technical advice on the regulatory and supervisory challenges of three areas, namely the growing fragmentation of value chains in finance, digital platforms and bundling of various financial services, and groups combining financial and non-financial activities.

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  • European Securities and Markets Authority Publishes Recommendations to Reform the EU Central Securities Depositories Regulation
    05/20/2021

    The European Securities and Markets Authority has published a letter addressed to the European Commission making recommendations for inclusion in the Commission's Review of CSDR. The EU Central Securities Depositaries Regulation provides a harmonized regulatory and prudential regime for central securities depositories and increases the robustness and resilience of securities settlement arrangements. There is a single market for CSD services across the EU and a third-country equivalence regime for CSDs. ESMA's recommendations include:
     
    1. That the Target2-Securities system, a systemically important common settlement platform, providing settlement services in central bank money for the majority of EEA CSDs, be brought within the scope of CSDR.
    2. Amendment of the supervision arrangements for T2S. Currently, the European Central Bank oversees T2S, alongside a cooperative framework based on a memorandum of understanding between the ECB, ESMA, the national competent authorities of the CSDs participating in T2S, and the central banks overseeing the CSDs. ESMA considers that CSDR should provide for a cooperative arrangement for supervision/oversight of T2S in the form of a college of supervisors, with clear roles for the participating authorities.

    Read more.
  • UK Conduct Regulator Warns E-Money Firms on Misleading Customers
    05/18/2021

    The U.K. Financial Conduct Authority has written to the CEOs of electronic money firms asking them to ensure that their customers are aware of how their money is protected. According to the FCA, many e-money firms (some of which are start-ups and FinTechs) compare their services to traditional bank accounts and portray in their financial promotions their services as an alternative to a bank account, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, e-money firms do not make it clear enough that Financial Services Compensation Scheme protection does not apply to e-money accounts. The warning follows the FCA's publication in summer last year of a letter to CEOs and guidelines on safeguarding which set out the FCA's expectations of e-money firms in light of the increased use of e-money accounts during the pandemic.

    Read more.
  • UK Regulator's Feedback Statement to Consultation on Liquidity Mismatch in Authorized Open-Ended Property Funds
    05/07/2021

    Following its consultation last year, the U.K. Financial Conduct Authority has published a feedback statement to its consultation on liquidity mismatch in authorized open-ended property funds. In the consultation, the FCA proposed introducing a notice period of up to 180 days for U.K. authorized property funds that are non-UCITS retail schemes (known as NURS) that invest directly in property. The aim is to mitigate the potential for harm arising from the structure of funds that may lead to a mismatch between a fund holding illiquid assets and offering daily redemptions.

    The FCA confirms that it will not make a final policy decision until Q3 2021 at the earliest and that if mandatory notice periods for property funds are introduced, there will be an appropriate implementation period before the rules come into force so as to allow firms to make operational changes.

    Noting some cross-over between these proposals and the FCA's more recent proposals to introduce a long-term asset fund framework, the FCA also confirms that it will consider feedback to that consultation before finalizing its position. The FCA launched its consultation on proposals on LTAFs on the same day as this feedback was published. The aim of the LTAF framework is to establish a fund that would facilitate authorized funds to be set up to invest efficiently in long-term, illiquid assets. In the feedback statement, the FCA states that if notice periods are introduced then fund managers of LTAFs might have the same operational challenges.

    View the FCA's feedback statement (FS21-8).

    View details of the FCA's consultation on a LTAF framework.

    View details of the FCA's consultation (CP20/15).
    TOPIC : Funds
  • UK Regulator Consults on a New Authorised Fund Regime for Investing in Long Term Assets
    05/07/2021

    The U.K. Financial Conduct Authority has opened a consultation on proposals to establish a regulatory framework for a new type of authorized open-ended fund called the long-term asset fund. The aim is to establish a fund that would facilitate authorized funds to be set up to invest efficiently in long-term, illiquid assets, such as venture capital, private equity, private debt, real estate and infrastructure. The consultation closes on June 25, 2021.

    The consultation paper sets out the details of the proposed framework, including increased governance requirements, clear disclosure rules and discusses the proposals on rules on the purpose of an LTAF, borrowing levels, valuation, redemption and subscription, due diligence and reporting. The FCA is proposing to restrict distribution of LTAFs to professional investors and sophisticated retail investors. However, the consultation asks for feedback on whether, and how, future wider retail access to such funds could be safely supported. LTAFs will be an alternative investment fund. As the LTAFs would invest in potentially complex and risky assets, the FCA proposes that only a firm authorized as a full-scope U.K. alternative investment fund manager could manage an LTAF. This will ensure that LTAFs have appropriate resources as well as good systems and controls.

    Read more.
    TOPIC : Funds
  • International Bodies Launch Survey on Margin Calls
    05/05/2021

    The Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructure and the International Organization of Securities Commissions has published a survey on margin calls as part of an investigation into liquidity shortfalls during the early stages of the COVID-19 pandemic. The combined effect of government measures to contain the pandemic in March 2020, together with market uncertainty, job losses and travel restrictions triggered a pullback in economic activity and stress on market liquidity. The non-bank financial intermediation sector was found to be particularly vulnerable to the liquidity shock.

    Read more.
  • European Central Bank Publishes Amendments to Systemically Important Payment Systems Regulation
    05/05/2021

    An amending Regulation (Regulation (EU) 2021/728) and two amending Decisions (Decision 2021/729 and Decision 2021/730) have been published in the Official Journal of the European Union, introducing certain changes to the SIPS Regulation on oversight requirements for systemically important payment institutions. The SIPS Regulation applies to systemically important large-value and retail payment systems and is designed to improve their safety and efficiency. Draft versions of the amending Regulation and Decisions were consulted on between November 2020 - January 2021 and proposed: (i) changes to the criteria for determining which of the Eurosystem central banks should be the competent authority for oversight of a SIPS; (ii) introduction of an additional methodology for identifying a payment system as a SIPS; and (iii) introduction of a phasing-out period for the reclassification of a SIPS as a non-SIPS.

    Read more.
  • UK Digital Regulation Cooperation Forum Publishes Report on Strengthening Digital Regulatory Cooperation
    05/04/2021

    The U.K. Digital Regulation Cooperation Forum has published a report on the measures that the U.K. Government may take to strengthen cooperation between digital regulators. The DRCF consists of the Competition and Markets Authority, Ofcom, the Information Commissioner's Office and the U.K. Financial Conduct Authority (although the FCA's views are not represented in this report because it only joined the DRCF in April 2021, after the report was commissioned). The U.K. Government asked the DRCF to produce the report to determine whether further measures were needed to support cooperation between regulators.

    Read more.
  • European Banking Authority Publishes Report on EU National Regulators' Mystery Shopping Activities
    05/03/2021

    The European Banking Authority has published its first report on the "mystery shopping" activities of EU national regulators. In this context, mystery shopping involves national regulators conducting undercover research to measure the quality of customer service and gather information about financial products and services at EU financial institutions. The EBA was mandated to coordinate the mystery shopping activities of national regulators from January 1, 2020. The report is the first stage in fulfilling that mandate. It focuses on activities conducted in relation to retail banking products and services (e.g. consumer credit, mortgage credit, basic payment accounts, payment services and car loans), as these are the products that fall within the EBA’s consumer protection mandate. The EBA will use the information to inform its coordination of mystery shopping activities going forward.

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  • UK Conduct Regulator Consults on Changes to Listing Rules for SPACs
    04/30/2021

    The U.K. Financial Conduct Authority has launched a consultation on proposed changes to its listing rules for special purpose acquisition companies. SPACs are companies set up for the purpose of raising money from investors to fund the acquisition of an operating business. They have attracted much attention over the last year as an alternative way for target companies to go public without going through the traditional initial public offering process.

    Read more.
    TOPIC : Securities
  • UK Law Commission Consults on Digital Assets and Electronic Trade Documents
    04/30/2021

    The U.K. Law Commission has launched two consultations, one on digital assets and the other on electronic trade documents. Responses to the consultations can be submitted until July 30, 2021.

    Digital Assets

    The Law Commission has issued a Call for Evidence on digital assets following a request from the government for recommendations for reforms to U.K. laws that will ensure that the laws can accommodate both cryptoassets and other digital assets. The Call for Evidence will be followed by a consultation at the end of 2021 with proposals for law reforms.

    The existing laws of England and Wales do not provide legal certainty as to the legal status of digital assets. Providing certainty would encourage the use of the laws of England and Wales and jurisdiction in digital asset transactions. The Call for Evidence requests feedback about, and evidence of, the ways in which digital assets are being used, treated and dealt with by market participants. It also seeks views on the potential consequences of digital assets being "possessable."

    Read more.
  • UK Prudential Regulator Consults on "Strong and Simple" Prudential Framework for Small Banks
    04/29/2021

    In what would be a significant policy change, the U.K. Prudential Regulation Authority has published a discussion paper in which it proposes introducing a "strong and simple" prudential framework for non-systemic banks and building societies that are not internationally active. The aim is to simplify the prudential regulation of these firms, reducing costs for firms, but to maintain their resilience. The consultation closes on July 9, 2021, and will be followed by a consultation with proposals.

    The existing regulatory approach broadly applies the same requirements to all banks and building societies, irrespective of their size and activities. Certain prudential rules are simplified for smaller banks and building societies, but to a lesser extent than in some other jurisdictions. The PRA notes that a graduated framework may take years to implement. Therefore, it is starting with the smallest firms and will consider how it might be built out for larger, non-systemic U.K. domestic firms. The plans follow the principles of the Basel Standards and consider how other jurisdictions have implemented similar regimes, such as Australia, Canada and the U.S.

    The discussion paper sets out what the simpler regime might look like, including:
    • the possible approaches to identifying firms that will be in scope by looking at, for example, their activities, cross-border business and risk exposures;
    • the possible requirements under the regime; and
    • ways in which firms might transition in and out of the regime, such as by using an intermediate stage or PRA waivers.

    View the PRA's discussion paper.
  • UK Financial Services Act 2021 Published
    04/29/2021

    The U.K. Financial Services Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the Financial Services Act 2021. Some provisions of the Act came into force on the date of Royal Assent, with a limited number following on June 29, 2021. The majority of the Act will come into force on a date specified in regulations yet to be made by HM Treasury.

    Read more.
  • UK Conduct Regulator Publishes Discussion Paper on Strengthening the Financial Promotion Rules for High-Risk Investments
    04/29/2021

    The U.K. Financial Conduct Authority has published a discussion paper seeking feedback on how the U.K. financial promotion rules might be strengthened to reduce consumer harm arising from investing in inappropriate high-risk investments that do not meet a customer's needs. Feedback to the paper can be submitted until July 1, 2021. The feedback will help the FCA to develop the proposed rules on which it intends to consult later this year.

    According to the FCA, one of the main ways a consumer gains an understanding of the risks and regulatory protection associated with an investment is from the information included in a financial promotion. However, although the financial promotion might meet the FCA's requirement to be fair, clear and not misleading, the investment may still be inappropriate for that investor. High-risk investments are those to which marketing restrictions apply under the rules and include non readily realizable securities (NRRSs), peer to peer (P2P) agreements, non mainstream pooled investments (NMPIs) and speculative illiquid securities (SISs). Since January 2020, the marketing of speculative illiquid securities to retail investors has been banned, first under a temporary product intervention measure, then made permanent from January 1, 2021. The measure restricts the mass-marketing of non-transferable bonds (sometimes colloquially termed "mini-bonds") and preference shares to retail investors and requires improved disclosure to be made to high net worth and sophisticated investors.

    Read more.
  • UK Proposals to Ease Unbundling of Research and Best Execution Rules
    04/28/2021

    The U.K. Financial Conduct Authority has launched a consultation on certain proposed changes to the U.K. rules on the unbundling of research and best execution reporting, which are part of the Markets in Financial Instruments Directive (as inherited from the EU). The consultation closes on June 23, 2021, and the FCA is expected to publish its response and final rules in the second half of this year. The proposals are set out in brief below. Some of these are in the same areas covered by the EU MiFID II Quick Fix Regulation, but the FCA is not copying those rules, and it goes further in most areas.

    Read more.
    TOPIC : MiFID II
  • UK Chancellor Responds to Kalifa Review of UK FinTech
    04/26/2021

    The Chancellor of the Exchequer Rishi Sunak has published a written statement on the U.K. Government's response to the Kalifa Review of U.K. FinTech. The Kalifa Review made a series of recommendations to ensure the U.K.'s competitiveness in fintech globally. HM Treasury welcomed the Review at the time. The Chancellor's statement describes the following actions that the U.K. Government has committed to in response.

    Read more.
    TOPIC : FinTech
  • HM Treasury Publishes Response to Consultation on Insolvency Changes for Payment and Electronic Money Institutions
    04/26/2021

    HM Treasury has published its response to feedback on its December 2020 consultation on a proposed Special Administration Regime for payment institutions and electronic money institutions that fall within the scope of the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. The SAR is designed to address shortcomings of the existing insolvency regime and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs. Key objectives of the regime will include returning customer funds as soon as reasonably practicable, facilitating timely cooperation with payment systems and authorities and rescuing the institution as a going concern or winding it up in the best interests of creditors.

    Read more.
  • UK Government Announces Boost to UK FinTech and Financial Services
    04/19/2021

    The U.K. Government has announced plans to boost the U.K.'s fintech and financial services sectors. Chancellor of the Exchequer Rishi Sunak outlined the plans at U.K. FinTech Week, describing the government's vision for a greener and more technologically advanced financial services sector. The Government's announcement builds on the recommendations in the recent Kalifa Review of U.K. Fintech and Lord Hill's Review of the U.K. Listing Regime.

    Read more.
    TOPICS : FinTechSecurities
  • Bank of England and HM Treasury Announce Central Bank Digital Currency Taskforce
    04/19/2021

    The Bank of England and HM Treasury have announced a joint central bank digital currency Taskforce. The Taskforce will be chaired by Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England and Katharine Braddick, Director General of Financial Services at HM Treasury, with other U.K. authorities involved as and when required.
     
    The Taskforce's primary function is to oversee investigations into a possible U.K. CBDC. At present, the U.K. has not yet decided whether to issue a CBDC.

    Read more.
    TOPIC : FinTech
  • HM Treasury Statement on UK Listing Review
    04/19/2021

    Chancellor of the Exchequer Rishi Sunak has published a statement responding to Lord Hill's Review of the U.K. Listing Regime. Lord Hill's U.K. Listings Review was published in March 2021 and assessed how, following Brexit, the existing U.K. listing regime could be reformed to attract more companies, particularly technology and life sciences companies, to raise capital in London. The Review made 14 specific recommendations, including some requiring consultations by the U.K. Financial Conduct Authority and HM Treasury. 

    Read more.
    TOPIC : Securities
  • HM Treasury Launches Consultation on Regulation of Non-Transferable Debt Securities
    04/19/2021

    HM Treasury has launched a consultation on the regulation of non-transferable debt securities, colloquially known as "mini-bonds". The consultation was prompted by the collapse of London Capital & Finance PLC, an FCA- regulated issuer of bonds which stated on their face that they were non-transferable, issued primarily to retail investors, which fell into administration in January 2019. An investigation into regulatory failings in the supervision of LC&F was subsequently launched and chaired by Dame Elizabeth Gloster, culminating in a report that was highly critical of the U.K. Financial Conduct Authority's supervision of LC&F and included policy recommendations for HM Treasury. HM Treasury is now consulting on possible changes to the regulatory regime governing NTDS. Responses to the consultation should be submitted by July 12, 2021.

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  • UK Conduct Regulator Appoints New Leaders for ESG and Technology 
    04/19/2021

    The U.K. Financial Conduct Authority has appointed Sacha Sadan as its Director of Environment, Social and Governance, a new role which will develop the FCA's approach to sustainable finance domestically and internationally. Ms Sadan was formerly Director of Investment Stewardship at Legal and General Investment Management.

    Read more.
    TOPIC : People
  • UK Regulators Publish Dear CEO Letter for Banks and Building Societies on Deposit Aggregators
    04/14/2021

    The U.K. Prudential Regulation Authority and Financial Conduct Authority have published a joint Dear CEO letter addressed to CEOs of U.K. banks and building societies on the risks of accepting deposits from deposit aggregators.

    Read more.
  • Financial Stability Board Publishes FAQs on Securities Financing Data Collection and Aggregation
    04/12/2021
    The Financial Stability Board has published a series of FAQs to assist FSB member jurisdictions in their implementation of standards for the handling of securities transactions financing data.

    The FSB introduced its SFT Data Standards in 2015 for the collection and aggregation of data on SFTs. The Standards were intended to improve understanding on trends and developments in the SFT markets given the risks they pose to global financial stability. The FAQs offer technical guidance for FSB members on the reporting and collection of information regarding SFTs.

    View the FSB's FAQs.
    TOPIC : Securities
  • HM Treasury Published Response to Phase I of UK's Financial Services Future Regulation Framework Review
    03/11/2021

    HM Treasury has published its response to the call for evidence on Phase I of the U.K. Financial Services Future Regulatory Framework Review. The FRF Review was announced in March 2019 and will assess whether the U.K. financial services regulatory framework is fit for purpose, taking into account the U.K.'s exit from the EU, climate change and other global and technological challenges. The call for evidence on Phase I of the Review focussed on how the Government and regulators work together to ensure the best outcome for the financial services sector.

    Read more.
  • LIBOR Panel Bank Submission Cessation Dates Confirmed

    03/05/2021

    The U.K. Financial Conduct Authority has announced the dates for future cessation and unrepresentativeness for all LIBOR settings.  The FCA's statement follows its confirmation in November 2017 that the 20 panel banks for the LIBOR benchmark had agreed to support LIBOR until at least the end of 2021 and the regulator's position that the future of LIBOR could not be guaranteed because the underlying markets (the markets for unsecured wholesale term lending to banks) are no longer sufficiently active. 

    ​Read more.
  • UK Benchmark Regulator Publishes Policy on Exercising New Powers Under the Financial Services Bill
    03/05/2021

    The U.K. Financial Conduct Authority has published Statements of Policy for exercising its new benchmark powers that are being introduced into U.K. law under the Financial Services Bill. Among other things, the Financial Services Bill includes potential enhanced powers for the FCA to wind-down a critical benchmark and deal with tough legacy contracts. The increased powers are being introduced in response to concerns and uncertainty about liability issues for industry participants related to the transition from LIBOR to risk free rates by the end of 2021.  The FCA has also announced today the dates for future cessation and unrepresentativeness for all LIBOR settings.

    Read more.
  • European Banking Authority Publishes Opinion on Money Laundering Risks
    03/03/2021

    The European Banking Authority has published its latest biennial opinion on money laundering and terrorist financing risks affecting the EU financial sector. Key risks relate to: (i) virtual currencies; (ii) the provision of financial products and services through FinTech firms; (iii) weaknesses in counter-terrorism financing systems and controls; (iv) "de-risking" by firms which leads to riskier customers resorting to alternative payment channels; (v) supervisory divergence; (vi) crowdfunding platforms; (vii) divergent approaches to tackling tax-related crimes; and (viii) the COVID-19 pandemic.

    Read more.
  • UK Listings Review Recommends Major Overhaul of the UK’s Listing and Capital Markets Rules
    03/03/2021

    The U.K. Government has published the report by Lord Hill on the U.K. Listings Review.  The report assesses how, following Brexit, the existing U.K. listing regime could be reformed to attract more companies, particularly innovative technology and life sciences companies, to raise capital in London.  In the context of Brexit, the U.K. is considering the challenges to London's position as a global capital markets hub. The Review makes 14 specific recommendations to address these challenges, including changes to the Financial Conduct Authority's premium and standard segment listing rules on which the FCA will be asked to consult and more general changes in relation to prospectuses on which HM Treasury will need to consult. In addition, the Review identifies longer- term areas for reform, such as secondary capital raises and the greater empowerment of retail investors. 

    Read more.
  • European Securities and Markets Authority Proposes Improvements to Transparency Directive
    03/03/2021

    The European Securities and Markets Authority has written to the European Commission proposing a series of improvements to the EU Transparency Directive, taking account of lessons learned in the Wirecard case. Wirecard, a German payments group, collapsed in 2018 when it was revealed that €1.9bn was missing from its public accounts. Several of its senior managers remain under police investigation for alleged crimes including fraud and market manipulation. In ESMA's view, the case has highlighted the need for timely and effective enforcement of financial information and proposes the following amendments to the EU Transparency Directive to help achieve this.

    Read more.
  • European Central Bank Publishes Guide to Pecuniary Penalties for Prudential Regulatory Breaches
    03/02/2021

    The European Central Bank Banking Supervision division has published a guide to its method for setting pecuniary penalties for breaches of prudential regulatory requirements by Eurozone banks that are directly prudentially supervised by the ECB. The ECB will adopt a two-stage approach, first determining the base amount, and then deciding whether to adjust that amount by reference to a range of factors.

    Read more.
  • FICC Markets Standards Board Appoints Ed Davey as Chief Operating Officer
    03/02/2021

    The FICC Markets Standards Board has appointed Ed Davey as its Chief Operating Officer. The FMSB is responsible for setting standards for the wholesale, fixed income, currencies and commodities markets.
     
    View the FMSB's announcement.
    TOPIC : People
  • European Banking Authority Publishes Revised Guidelines on Risk Factors for Money Laundering and Terrorist Financing
    03/01/2021

    The European Banking Authority has published revised Guidelines on money laundering and terrorist financing risk factors for credit and financial institutions to consider when conducting business relationships and occasional transactions. The Guidelines will enter into force three months after their publication in all official EU languages and will replace the EBA's existing ML/TF Guidelines.

    Read more.
  • European Banking Authority Publishes Opinion on Disclosure Indicators and Methodology Under Taxonomy Regulation
    03/01/2021

    The European Banking Authority has published an opinion and a report on the key performance indicators and methodology that firms subject to the EU Taxonomy Regulation should adopt when disclosing information on the extent of their environmentally sustainable activities. The EU Taxonomy Regulation was published in June 2020 and establishes a classification system for sustainable activities to provide a consistent, EU-wide understanding of the environmental sustainability of activities and investments. The Regulation imposes an obligation upon EU firms that report under the Non-Financial Reporting Directive to disclose information on how, and the extent to which, their activities constitute economic activities that are "environmentally sustainable" for the purposes of the Taxonomy Regulation. Corporates will have to begin disclosing information on certain environmental objectives from January 2022, with disclosures on other objectives disclosed from January 2023. Most provisions of the Taxonomy Regulation have applied directly across the EU since July 12, 2020.

    Read more.
  • Financial Action Task Force Launches Consultation on Guidance on Proliferation Financing Risk Assessment and Mitigation
    03/01/2021

    The Financial Action Task Force has launched a consultation on its proposed non-binding Guidance on proliferation financing risk assessment mitigation. The FATF updated its Guidance for proliferation financing risks under Recommendation 1 and its Interpretive Note of the FATF Recommendations in October 2020. The new proposed Guidance is intended to provide a common understanding about how countries and firms can implement the new requirements.

    Read more.
  • European Banking Authority Publishes Draft Regulatory Technical Standards Under EU Capital Requirements Regulation
    03/01/2021

    The European Banking Authority has published draft Regulatory Technical Standards under the revised EU Capital Requirements Regulation, designed to harmonize the methodology for calculating certain technical elements of the standardized approach to counterparty credit risk across the EU. 

    Read more.
  • European Securities and Markets Authority Publishes Final Report and Advice on KPIs and Disclosure Methodology Under Taxonomy Regulation
    03/01/2021

    The European Securities and Markets Authority has published a final report and advice addressed to the European Commission on the key performance indicators and methodology that firms subject to the EU Taxonomy Regulation should adopt when disclosing information on the extent of their environmentally sustainable activities. The EU Taxonomy Regulation was published in June 2020 and establishes a classification system for sustainable activities to provide a consistent, EU-wide understanding of the environmental sustainability of activities and investments. The Regulation imposes an obligation upon EU firms that report under the Non-Financial Reporting Directive to disclose information on how, and the extent to which, their activities constitute economic activities that are "environmentally sustainable" for the purposes of the Taxonomy Regulation. Corporates will have to begin disclosing information on certain environmental objectives from January 2022, with disclosures on other objectives disclosed from January 2023. Most provisions of the Taxonomy Regulation have applied directly across the EU since July 12, 2020.

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  • Kalifa Review of UK Fintech Published
    02/26/2021

    HM Treasury has published the highly-anticipated Independent Strategic Review of U.K. Fintech, led by Ron Kalifa OBE. The aim of the recommendations is to, among others, ensure the U.K.'s competitiveness, attract investments for individual fintechs and raise the U.K.'s status as a global hub. The Kalifa Review makes recommendations in five key areas: (i) policy and regulation; (ii) skills and talent; (iii) investment; (iv) international attractiveness and competitiveness; and (v) national connectivity. The delivery of these recommendations is to be led by the Centre for Finance, Innovation and Technology, which is mandated by the Government but led by the private sector. This post focuses on the policy and regulation discussion.

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  • UK Financial Conduct Authority Makes Four Appointments to Executive Team
    02/25/2021

    The U.K. Financial Conduct Authority has made four new appointments to its executive team:
     
    • Stephanie Cohen will be the FCA's Chief Operating Officer, responsible for the FCA's operations and business performance, systems and infrastructure and finances;
    • Jessica Rusu will be the FCA's Chief Data, Information and Intelligence Officer, leading the transformation of the FCA's data intelligence and information;
    • Sarah Pritchard will be the FCA's Executive Director for Markets, delivering the FCA's statutory market integrity objective within the Supervision, Policy and Competition division; and
    • Emily Sheppherd will be the Executive Director for Authorizations, overseeing authorizations for firms and individuals applying to undertake regulated financial services activity in the U.K.

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    TOPIC : People
  • UK Prudential Regulation Authority Identifies Error in "Higher Paid Material Risk Taker" Definition
    02/25/2021

    The U.K. Prudential Regulation Authority has identified an error in the definition of "Higher Paid Material Risk Taker" within Rule 1.3 of the Remuneration Part of the PRA Rulebook, implementing part of the EU's Fifth Capital Requirements Directive in U.K. laws before the end of the Brexit transitional period. The definition currently requires an individual to be treated as a Higher Paid Material Risk Taker when: (a) their annual variable remuneration exceeds 33% of their total remuneration; and (b) their total remuneration exceeds £500,000. Instead, an individual should be treated as a Higher Paid Material Risk Taker when either condition (a) or (b) are satisfied.

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  • European Commission Launches Consultation on EU Crisis Management and Deposit Insurance Framework
    02/25/2021

    The European Commission has launched a consultation to aid its review of the EU crisis management and deposit insurance framework. The framework consists of the EU Bank Recovery and Resolution Directive, the EU Single Resolution Mechanism Regulation and the EU Deposit Guarantee Scheme Directive. It was introduced in the aftermath of the financial crisis and has applied across the EU since 2015 (in the case of BRRD and DGSD) and 2016 (in the case of SRMR). A number of problems have been identified with the framework, as described in the European Commission's November 2020 roadmap for this consultation. Key issues include: (i) incentivization of the use of tools other than resolution by Member States; (ii) discrepancy in the use and availability of insolvency tools across Member States, leading to inconsistent application of the framework; (iii) limited legal certainty and predictability as to when the framework will be used; and (iv) variation in the scope of depositor protection and payout processes across Member States.

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  • UK Working Group on Sterling Risk-Free Reference Rates Publishes Paper on Ending New Use of GBP LIBOR-Linked Derivatives
    02/24/2021

    The U.K. Working Group on Sterling Risk-Free Reference Rates has published a paper on how market participants can meet the Working Group's intended deadlines for cessation of GBP LIBOR in derivatives. 

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  • UK HM Treasury Consults on an Expanded Resolution Regime for CCPs
    02/24/2021

    HM Treasury has opened a consultation seeking views on an expanded resolution regime for CCPs. The existing U.K. CCP recovery and resolution regime was established by the Financial Services Act 2012, which extended to CCPs (with modifications) the special resolution regime for banks and investment firms. Since then, there have been international and EU developments. In particular, the Financial Stability Board published guidance on financial resources for CCP resolution and the EU has published the EU CCP Recovery and Resolution Regulation. The U.K., when it was an EU member state, supported and helped develop the EU Regulation. HM Treasury is proposing to amend the U.K. regime to bring it into line with international standards and the proposals, bar a few technical exceptions, follow the EU Regulation. Responses to the consultation may be submitted until May 28, 2021.

    Read more.
  • Bank of England Publishes Dear CEO Letter on Resolvability Assessment Framework
    02/24/2021

    The Bank of England has published a Dear CEO letter addressed to the CEOs of eight major U.K. banks, emphasizing the importance of the BoE's Resolvability Assessment Framework and the BoE's expectation that banks will take responsibility for their resolvability. The eight banks are in scope of the first RAF reporting and disclosure cycle.

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  • Bank of England Publishes Plan for UK Financial Sector Data Collection
    02/23/2021

    The Bank of England has published a plan to transform its ability to collect data from the financial services sector over the next decade. Three key principles of the plan are: (i) defining and adopting common data standards that are consistent across the financial sector; (ii) modernizing reporting instructions to improve how they are written and implemented; and (iii) integrating reporting to facilitate a more efficient approach to data collection. The Transformation Plan was prompted by Huw Van Steenis' 2019 report on the "Future of Finance", which highlighted the importance of data standards and protocols and the value of harnessing data. The BoE published a response to the "Future of Finance" report, in which it undertook to deliver a world-class data strategy.

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  • European Securities and Markets Authority Consults on 2021 Supervisory Fees for EU Trade Repositories
    02/22/2021

    The European Securities and Markets Authority has published a consultation on its proposals for recalibrating the 2021 annual supervisory fees to be charged by ESMA to EU trade repositories. ESMA's annual fees are intended to cover its costs for supervising EU trade repositories, and to be proportionate to the turnover of the trade repository concerned.

    Read more.
  • European Banking Authority Publishes Opinion on Removal of Obstacles to Account Access Under Revised Payment Services Directive
    02/22/2021

    The European Banking Authority has published an Opinion requiring EU national regulators to assess the steps taken by account servicing payment services providers to remove obstacles to the provision of account information services and payment initiation services by third-party providers.

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  • EU Final Draft Technical Standards on the Determination of Indirect Exposures Published
    02/19/2021

    Following its consultation last year, the European Banking Authority has published a final report and final draft Regulatory Technical Standards on the determination of indirect exposures to underlying clients of derivative and credit derivative contracts. The EU Capital Requirements Regulation, as amended by CRR 2, requires firms to add to the total exposures to a client the exposures arising from derivative contracts listed in Annex II of the CRR and credit derivative contracts, where the contract was not directly entered into with that client but the underlying debt or equity instrument was issued by that client. The final draft RTS will form part of the EU's large exposures framework. The final draft RTS include a methodology for the calculation of indirect exposures for different classes of derivative contracts and credit derivative contracts with a single underlying debt or equity instrument and a methodology for calculating exposures arising from contracts with multiple underlying reference names.

    The final draft RTS have been submitted to the European Commission for endorsement.

    View the final report and final draft RTS on the determination of indirect exposures.

    View details of CRR 2.

    View details of the EBA's consultation.
  • Final Draft EU Technical Standards on Disclosures of Indicators of Global Systemic Importance Published
    02/18/2021

    The European Banking Authority has published a final report and final draft Implementing Technical Standards on the disclosure of indicators of global systemic importance by Global Systemically Important Institutions. The EU Capital Requirements regulation requires G-SIIs to disclose annually the values of the indicators used for determining their score in accordance with a set identification methodology. The final draft ITS set out the uniform disclosure formats and associated instructions for the disclosures to be made. The provisions of these final draft ITS will be incorporated into the existing comprehensive ITS on firms' public disclosures and, to facilitate comparability. The format has been aligned with the format set out in the Basel III standards - the "Disclosure of G‐SIB indicators".

    The final draft ITS have been submitted to the European Commission for endorsement.

    View the EBA's final report and final draft ITS on G-SII disclosures.
  • EU Delays Derivatives Margin for Brexit Novations
    02/17/2021

    An EU Commission Delegated Regulation amending Regulatory Technical Standards on the application of EU bilateral margining requirements under the European Market Infrastructure Regulation has been published in the Official Journal of the European Union. The amendments to the RTS further extend the temporary exemptions from bilateral margining requirements for the following products and transactions.

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  • EU Delays Clearing Obligation for Third-Country Intragroup Derivatives and Brexit Novations
    02/17/2021


    An EU Commission Delegated Regulation delaying the clearing obligation under the European Market Infrastructure Regulation has been published in the Official Journal of the European Union. The Delegated Regulation amends the three Regulatory Technical Standards on the clearing obligation, which provide for the application of the clearing obligation to interest rate swaps and credit default swaps. In particular, for intra-group derivatives transactions conducted with a third-country entity, the exemption from the clearing obligation will be extended until June 30, 2022. The EU has failed to determine whether many third countries are "equivalent" for these purposes, meaning that another delay is necessary to avoid penal charges on intra-group exposures of EU financial groups.

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  • UK Government Consults on Legal Safe Harbor for Legacy Contracts to Support the Wind-Down of a Critical Benchmark 
    02/15/2021

    HM Treasury has opened a consultation on supporting the wind-down of critical benchmarks. The Financial Services Bill includes potential enhanced powers for the Financial Conduct Authority to wind-down a critical benchmark and deal with tough legacy contracts. The increased powers are being introduced in response to concerns and uncertainty about the transition from LIBOR to risk free rates by the end of 2021. The Financial Services Bill includes provisions granting the FCA the power to designate a critical benchmark (such as LIBOR) as an "Article 23A" benchmark if its representativeness is lost or at risk, unless representativeness can reasonably be restored and maintained and there are good reasons to do so. This designation would mean that use of the benchmark by supervised entities in relation to particular types of contracts would be prohibited, subject to certain exemptions. 

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  • EU Launches Review of the Financial Collateral Directive
    02/12/2021

    The European Commission has launched a targeted consultation related to post-trade services, which considers the EU Financial Collateral Directive. The Commission is also consulting on the Settlement Finality Directive, combining the review of these two Directives since they are closely related. The consultations close on May 7, 2021. The FCD establishes a harmonized EU framework for the use of financial collateral to secure transactions. It provides for close-out netting provisions to be enforceable under their terms and ring-fences the operation of financial collateral arrangements should one of the parties become insolvent, creating protections from the usual insolvency laws of a Member State. The FCD consultation does not cover the re-use of financial collateral given under a security financial collateral arrangement by a collateral taker as this issue has recently been addressed in the Securities Financing Transactions Regulation. The consultation focuses on issues relating to the recognition of close-out netting provisions and its impact on SFD systems.

    Read more.
  • EU Launches Review of the Settlement Finality Directive
    02/12/2021

    The European Commission has launched a targeted consultation related to post-trade services, which considers the EU Settlement Finality Directive. The Commission is also consulting on the Financial Collateral Directive, combining the review of these two Directives since they are closely related. The consultations close on May 7, 2021. The SFD establishes various insolvency carve-outs for designated market infrastructure systems and provides for finality of transactions within such systems. Under the protections currently afforded by the SFD, transfer orders which enter into designated systems within certain deadlines are guaranteed to be finally settled and cannot be unwound at the behest of insolvency officials, regardless of whether the sending participant has become insolvent or transfer orders have been revoked in the meantime. The SFD essentially excludes "insolvency claw-back" rules, such as those for transactions at an undervalue or trading by insolvent or near-insolvent entities, from applying to holdings in designated systems and modifies the timing of "moratorium" rules which prevent transactions by insolvents. This also gives certainty as regards holdings in central securities depositories and as to the finality of transactions in some clearing and payment systems. Under the SFD, each EU Member State automatically recognizes systems that have been designated by other Member States. However, there is no EU regime for third country systems, a lacuna which has already been fixed by the U.K. in its SFD laws after Brexit.

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  • European Supervisory Authorities Publish Joint Response on Proposed EU Digital Operational Resilience Act
    02/09/2021

    The European Supervisory Authorities (the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority) have published a letter to the European Parliament, the Council of the European Union and the European Commission, setting out responses to the proposed EU Digital Operational Resilience Act, a new piece of EU regulation on digital operational resilience for the financial sector. The European Commission first published the draft DORA in September 2020. It forms part of the European Commission's digital finance strategy, which aims to embrace digital finance for the benefit of consumers and businesses while ensuring digital transformation is soundly regulated. The DORA is particularly focused on combatting risks arising from information and communication technologies in order to protect operational resilience and the performance of the financial system.

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    TOPIC : FinTech
  • UK Conduct Regulator Sets Out Supervision Strategy of Retail Banks
    02/05/2021

    The U.K. Financial Conduct Authority has published a letter addressed to the CEOs of retail banks setting out the FCA's approach to retail bank supervision in light of the COVID-19 pandemic.

    In the letter, the FCA identifies the key risks of harm that retail banks' activities may pose over the next two years, sets out its expectations of the actions retail banks need to take to mitigate the risks and discusses the work that the FCA will undertake to ensure firms are meeting the expectations. The risks are grouped into the following four priority supervisory areas:
     
    1. ensuring fair treatment of borrowers, including those in financial difficulties;
    2. ensuring good governance and oversight of customer treatment and outcomes during business change over the next two years;
    3. ensuring operational resilience over the next two years and beyond; and
    4. minimizing fraud and other financial crime.

    View the FCA's letter.
  • UK Conduct Regulator Publishes Recommended Practices for Technology Change Implementation
    02/05/2021

    The U.K. Financial Conduct Authority has published a report on a multi-firm review setting out recommended practices for regulated firms to take to reduce consumer harm when technology change implementation fails. The FCA's review considered how financial firms manage technology change, the impact of technology change failures and the practices used across the industry that help to reduce the impact on consumers and market disruption of such failures. The FCA's report sets out the practices used by firms that contribute to change success and those that lead to change failure, the impact of change failures, governance and management arrangements, build and deployment of technology changes and the impact of the infrastructure used, in particular, the use of legacy systems and of public cloud-based infrastructure.

    View the FCA's report on the implementation of technology change.
  • UK Payment Services Regulator Consults on Delivery and Regulation of the UK's New Payments Architecture
    02/05/2021

    The U.K. Payment Systems Regulator has opened a consultation on the delivery and regulation of the U.K.'s New Payments Architecture. The NPA will reorganize the clearing and settlement of most of the U.K.'s domestic interbank payments, including payments that currently use the BACS and Faster Payments systems. The PSR consulted last year on issues relating to competition and innovation in payment services and remains concerned about these issues. The PSR is also concerned that the current NPA programme will not provide value for money and will delay the achievement of the benefits of the NPA. The PSR is therefore seeking views on its proposals to reduce these risks to the successful delivery of the NPA. The proposals include narrowing the scope of the initial contract for delivery to those services that support the replacement and upgrade of Faster Payments and on ways to mitigate the risks to competition and innovation, including procurement, contractual provisions and governance provisions. Responses to the proposals on reducing the risk to delivery of the NPA may be submitted until March 19, 2021 and responses to the proposals on mitigating competition issues may be submitted until May 5, 2021.

    View the PSR's consultation paper on delivery of the NPA.

    View details of the PSR's consultation on competition and innovation.
  • UK Government Publishes Proposals for Investment Firm Prudential Regime and Implementation of Outstanding Basel III Requirements
    02/04/2021

    The U.K. Government has opened a consultation on the implementation of the Investment Firms Prudential Regime and the remaining Basel III Standards in the U.K. The Financial Services Bill, once it is finalized, will introduce powers for the Financial Conduct Authority and the Prudential Regulation Authority to introduce the IFPR and outstanding Basel III prudential requirements for banks. The FCA has already launched a consultation on some aspects of the IFPR and will consult on the others throughout the year. The PRA is expected to consult on implementation of Basel III in Q1 2021. HM Treasury's consultation concerns those aspects of the two regimes that will require secondary legislation under the Financial Services Bill. The consultation closes on April 1, 2021.

    Read more.
  • European Supervisory Authorities Publish Final Report on Disclosures Under the EU Regulation Sustainable Finance Disclosure Regulation
    02/04/2021

    The European Supervisory Authorities (the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority) have published a final report and draft Regulatory Technical Standards on the content, methodologies and presentation of disclosures under the EU Regulation on sustainability-related disclosures in the financial services sector. The EU SFDR was published in December 2019 and the majority of its provisions will apply from March 10, 2021. It is designed to encourage the financial services sector to disclose information about their approaches to sustainability risk and consideration of adverse sustainability impacts in the course of their businesses. The ESAs consulted on the draft RTS in April 2020. The ESAs propose that the draft RTS should apply from January 1, 2022.

    Read more.
  • UK Conduct Regulator Publishes Approach to International Firms
    02/03/2021

    The U.K. Financial Conduct Authority has published its final Approach to international firms, setting out its approach to authorization and supervision of international firms providing or seeking to provide financial services that require authorization in the U.K. The FCA has also published a feedback statement summarizing its response to the submissions received in response to its consultation last year. The Approach Document sets out the conditions against which a firm will be assessed and discusses the circumstances in which firms may present higher risks and how the risks could be mitigated. It generally proposes that U.K.-authorized firms should have a U.K. place of business, so would not result in any new regime for EU firms which are currently using the "temporary permissions regime".

    The FCA's Approach Document is not relevant to firms that are operating in the U.K., but do not need authorization to do so, for example, those firms using the Overseas Persons Exclusion. It is not also not relevant for payment services firms, e-money institutions, depositaries, trustees and managers of U.K. authorized funds, international alternative investment fund managers and international benchmark administrators.

    Firms that are or would be subject to dual regulation, should also consider the approach of the Prudential Regulation Authority to the supervision and authorization of firms.

    View the FCA's Approach to International Firms.

    View the FCA's feedback statement.

    View details of the PRA's consultation on its approach to supervising international banks.
  • Final Draft EU Technical Standards Amending Requirements for PRIIPs Key Information Document
    02/03/2021

    The European Supervisory Authorities have published a final report and final draft amending Regulatory Technical Standards on amendments to the RTS on the presentation, content, review and revision of a standardized "key information document" and the conditions for fulfilling the requirement to provide a KID (Commission Delegated Regulation (EU) 2017/653). The RTS supplements the Packaged Retail and Insurance-based Investment Products Regulation, which introduced a requirement for manufacturers of PRIIPs to produce a KID with the intention of improving retail investors' understanding of the financial products they were purchasing.

    The ESAs were asked to review the RTS and present proposals for amending the RTS. In July 2020, the ESAs wrote to the European Commission to explain that agreement among them had not been reached on all of the proposed changes and that, therefore, the final draft amending RTS could not be submitted to the Commission. The Board of the European Insurance and Occupational Pensions Authority did not approve with qualified majority all of the proposals.

    Read more.
    TOPIC : Securities
  • UK Equivalence Decision for Swiss Exchanges Enters into Force
    02/03/2021

    The U.K.'s Swiss share trading obligation equivalence decision has entered into force. The equivalence decision has been made under the U.K.'s Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which came into force on February 3, 2021, and means that U.K. investment firms will be able to comply with the share trading obligation under the U.K. Markets in Financial Instruments Regulation by trading shares on BX Swiss AG and SIX Swiss Exchange AG. 

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  • European Securities and Markets Authority Proposes Changes to European Long-Term Investment Funds Regulation
    02/03/2021

    The European Securities and Markets Authority has written to the European Commission proposing a series of amendments to the European Long-Term Investment Funds Regulation. ESMA's letter comes in response to the Commission's consultation on the efficacy of the ELTIF Regulation, which was designed to increase long-term investments in the real economy (e.g. infrastructure projects, real estate and listed and unlisted small and medium-sized enterprises). The consultation was launched in October 2020 and was designed to analyze why the ELTIF market has not developed to a large scale and how well it is contributing to the integration of European capital markets and smart, sustainable growth within the EU.

    Read more.
    TOPIC : Funds
  • EU Amends Rules to Address LIBOR Cessation and Extends Use of Third-Country Benchmarks to 2023
    02/02/2021

    The Council of the European Union has announced that it has adopted the final text of the regulation to address LIBOR cessation, which will amend the EU Benchmark Regulation. According to the Council, the amending Regulation will be published in the Official Journal of the European Union on February 12, 2021 and it will enter into force and apply from February 13, 2021.

    The EU Benchmark Regulation 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.
  • HM Treasury to Review Ring-Fencing and Proprietary Trading in UK Banks
    02/02/2021

    HM Treasury has published its terms of reference for a review of the operation of ring-fencing legislation and banks' proprietary trading activities in the U.K. The Treasury is required to conduct each review under the Financial Services (Banking Reform) Act 2013. The FS(BR)A introduced reforms based on recommendations made by the Independent Commission on Banking that was established in the wake of the 2008 financial crisis. 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 limit the products that a ring-fenced bank can offer and where it can conduct business. Restrictions on proprietary trading (being the trading of financial instruments or commodities as principal by banks or investment firms) were introduced for ring-fenced retail banks and came into force in January 2019. The U.K. decided not to impose a complete ban on proprietary trading for all banks, as had been seen in other countries, such as the U.S. under the Volcker Rule. Among the purposes of this legislation is an attempt to limit taxpayer liability for bank bail-outs in future financial crises.

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  • European Commission Calls for Advice on Digital Finance from European Supervisory Authorities
    02/02/2021

    The European Commission has published a call for advice on digital finance and related issues from the three European Supervisory Authorities (the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Banking Authority). The call for advice is in line with the Commission's 2020 digital finance strategy, which set out the Commission's intention to review existing financial services frameworks to protect consumers and the integrity of EU financial sectors.

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    TOPIC : FinTech
  • EU Final Draft Standards on Information for Facilitating Cross-Border Distribution of Funds
    02/01/2021

    The European Securities and Markets Authority has published a final report and final draft Implementing Technical Standards setting out the forms, templates and procedures that national regulators should use to publish information on their websites to facilitate cross-border distribution of funds. The Regulation on facilitating cross-border distribution of funds 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. It was brought in at the same time amendments were made to the Directive on Undertakings for Collective Investment in Transferable Securities and the Alternative Investment Fund Managers Directive through an amending Directive. Member states are required to transpose the amending Directive into national laws by, and apply those laws from, August 2, 2021. Certain provisions of the Regulation applied directly across the EU from August 1, 2019, while the remaining provisions will apply from August 2, 2021.

    The Regulation requires ESMA to draft Implementing Technical Standards on the standard forms, templates and procedures that national regulators should use to publish information on their websites that will facilitate the cross-border distribution of funds. The information must cover:
    • the national laws, regulations and provisions on marketing requirements for Alternative Investment Funds and UCITS; and
    • the regulatory fees and charges applied by the national regulator for the activities of AIFMs, UCITS management companies and managers of European Venture Capital Fund and European social entrepreneurship funds.

    The final draft ITS have been submitted to the European Commission for consideration.

    View the final report and final draft ITS.
    TOPIC : Funds
  • European Securities and Markets Authority Publishes Final Report on Proposed Fees for Benchmark Administrators
    02/01/2021

    The European Securities and Markets Authority has published its final report on proposed supervisory fees for EU benchmark administrators. In 2019, the EU Benchmarks Regulation was amended, granting ESMA new powers to act as competent authority for EU administrators of critical benchmarks and third-country benchmark administrators that have been recognized by ESMA from January 1, 2022. Before these amendments take effect, third-country benchmark administrators may seek recognition from a national regulator of an EU member state. Both the current and new provisions only apply in the absence of an equivalence decision for the relevant third-country where the benchmark administrator is located. The recognition allows EU supervised entities to use the benchmark, for example in financial contracts. The amendments require ESMA to charge fees to the administrators under its supervision. The European Commission tasked ESMA with producing technical standards on those fees.

    Read more.
  • European Securities and Markets Authority Launches 2021 Common Supervisory Action on MiFID II Product Governance Rules
    02/01/2021

    The European Securities and Markets Authority has announced that during 2021 it will be conducting a common supervisory action with national competent authorities on the product governance rules under the Markets in Financial Instruments Directive. The product governance requirements require firms which manufacture and distribute financial instruments and structured deposits to act in their clients' best interests during all the stages of the life-cycle of products or services. The CSA will assess the progress of compliance with the requirements by manufacturers and distributors of financial products.

    ESMA conducts CSAs to promote the convergence of application of EU rules across the EU. Following a CSA into the MiFID II appropriateness requirements, ESMA is considering introducing guidelines to promote further harmonization.

    View ESMA's announcement.

    View details of ESMA's proposed guidelines on appropriateness.
    TOPIC : MiFID II
  • European Securities and Markets Authority Consults on Revised Fees for Credit Rating Agencies
    01/29/2021

    Following a request from the European Commission for technical advice on revising the rules on the calculation and payment of fees, the European Securities and Markets Authority has opened a consultation on proposed fees charged to credit rating agencies by it. Responses to the consultation may be submitted until March 15, 2021. ESMA is due to submit its final technical advice to the Commission by the end of June 2021.

    The EU CRA Regulation provides that ESMA shall charge fees to CRAs to cover ESMA's costs relating to the registration, certification and supervision of CRAs. The different types of supervisory fees payable, the amount of fees payable, the modalities of payment and the reimbursement of fees to national competent authorities are set out in Commission Delegated Regulation 272/2012. ESMA is seeking feedback on its proposals, the key ones of which are to charge a single registration fee of €45,000 and annual supervisory fees of €20,000 to registered CRAs with annual revenues between €1 million and €10 million. In addition, ESMA is proposing an annual endorsement fee of €20,000 to all CRAs endorsing credit ratings for use in the EU and annual fees for all certified CRAs.

    View ESMA's consultation paper.
    TOPIC : Credit Ratings
  • Proposed EU Guidelines on MiFID II Appropriateness Requirements
    01/29/2021

    The European Securities and Markets Authority has opened a consultation on proposed guidelines on the appropriateness and execution-only requirements under the Markets in Financial Instruments Directive. The appropriateness requirements under MiFID II require investment firms providing investment advice to assess a potential client's knowledge and experience in the investment field to ascertain whether a particular service or product is appropriate for the client. There are exemptions from these requirements under the execution-only framework, subject to certain conditions being met. Responses to the consultation may be submitted until April 29, 2021. ESMA is aiming to issue the final guidelines in Q3 2021.

    ESMA is proposing these new guidelines to enhance convergence across the EU on the application of these requirements. The common supervisory action conducted in the second half of 2019, as well as other supervisory interactions, revealed that firms have different understandings of the appropriateness and execution-only requirements and that Member States apply them differently. The proposed guidelines will apply in full to all investment firms providing non-advised services, regardless of the means of interaction with clients.

    View ESMA's consultation on proposed guidelines on the appropriateness and execution-only requirements under MiFID II.
    TOPIC : MiFID II
  • EU Grants Equivalence to More US CCPs
    01/28/2021

    An EU equivalence decision for U.S. CCPs regulated by the U.S. Securities Exchange Commission that are "covered clearing agencies" under the SEC rules has been published in the Official Journal of the European Union. The decision paves the way for these U.S. CCPs to be recognized by the European Securities and Markets Authority upon which they will be able to provide clearing services to EU trading venues and businesses. Relevant U.S. CCPs that potentially would be covered by this designation but which were not previously granted equivalence include the Fixed Income Clearing Corporation, National Securities Clearing Corporation, The Depository Trust Company and The Options Clearing Corporation. ICE Clear Credit LLC also registered with the SEC, however, this CCP already benefits from EU equivalence as it falls within the previous EU equivalence decision for U.S. CCPs regulated by the Commodity Futures Trading Commission. ICE Clear Europe, which was an EU CCP until Brexit, is also recognized under the EU's temporary equivalence for U.K. CCPs. LCH SA is also registered with the SEC, but is an EU CCP and so the equivalence regime is not applicable to it.

    Read more.
  • UK Regulator Proposes Amendments to UK Technical Standards on Secure Customer Authentication
    01/28/2021

    The U.K. Financial Conduct Authority has launched a consultation on proposed changes to the U.K. Regulatory Technical Standards on secure customer authentication and common and secure methods of communication and on proposed payments-related amendments to the Perimeter Guidance Manual and the FCA Payment Services and Electronic Money Approach Document. The proposals are relevant for payment service providers, e-money issuers, payment institutions, e-money institutions and registered account information service providers (AISPs). Responses to the consultation may be submitted until February 24, 2021, for issues relevant to contactless payments, and until April 30, 2021 for the remaining proposals.

    Read more.
  • EU Delays Securities Settlement Discipline Regime to February 2022
    01/27/2021

    EU Regulatory Technical Standards postponing the implementation deadline of the settlement discipline regime under the Central Securities Depositories Regulation have been published in the Official Journal of the European Union. The RTS delay the application date of the settlement discipline rules from February 1, 2021 to February 1, 2022, by amending the existing RTS (Commission Delegated Regulation (EU) 2018/1229). The settlement regime was originally due to apply from September 13, 2020. However, that date was changed to February 1, 2021, amid calls from industry associations and other stakeholders to delay the application date so that systems, procedures and measures could be put in place. The latest delay arises from the impact of the COVID-19 pandemic on the financial services industry. 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.

    View the amending Delegated Regulation.
    TOPICS : COVID-19Securities
  • Basel Committee on Banking Supervision Consults on Technical Amendments to Rules on Haircuts for Securities Financing Transactions
    01/26/2021

    The Basel Committee on Banking Supervision has launched a consultation on two proposed technical amendments to the Basel II Framework rules on minimum haircut floors for securities financing transactions. The proposals aim to address an interpretative issue relating to collateral upgrade transactions and correct a misstatement of the formula used to calculate haircut floors for netting sets of SFTs. Responses to the consultation may be submitted until March 31, 2021.

    View the consultation paper.

    View details of the FSB's delay to the framework for minimum haircuts for uncleared SFTs.
  • HM Treasury Launches Consultation on UK Funds Regime
    01/26/2021

    HM Treasury has launched a consultation on a series of proposed reforms to the U.K.'s funds regime, as part of the U.K. Government's plans to make the U.K. a more attractive location for asset management. Responses to the consultation should be submitted by April 20, 2021.

    Read more.
    TOPIC : Funds
  • EU CCP Recovery and Resolution Regulation Published
    01/22/2021

    The EU Regulation on the recovery and resolution of CCPs has been published in the Official Journal of the European Union. The Regulation sets out the rules and procedures for the recovery and resolution of EU CCPs authorized under the European Market Infrastructure Regulation. The aim of the Regulation is the establishment of a framework for the orderly recovery of a CCP through implementation of recovery plans. A CCP's recovery plan will form part of its operational rules, which are agreed with its clearing members. A CCP's operating rules must also ensure the enforceability of the recovery measures outlined in the recovery plan, including to contracts or assets governed by the law of a third country or to third-country entities.

    If the recovery measures do not restore the CCP's viability, the CCP's resolution authority will have the power to take action to ensure the continuity of the CCP's critical functions and, if needed, resolve the CCP. This includes setting up bridge CCPs. In the event of losses arising under a resolution, these will be borne by a CCP's owners, creditors and counterparties in line with the hierarchy of claims in insolvency. The CCP recovery and resolution framework would apply to all CCPs established in the EU. It is not proposed that the recovery and resolution framework would apply to the wider group of a CCP.

    Read more.
  • EU Consults on Potential Equivalence for Six Countries For Non-Centrally Cleared OTC Derivatives Risk Mitigation
    01/20/2021

    The European Commission has published for consultation draft equivalence decisions for six countries relating to the risk mitigation requirements for non-centrally cleared OTC derivatives under the European Market Infrastructure Regulation. EMIR requires counterparties to non-centrally cleared 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. To date, only the U.S. and Japan benefit from such decisions, both limited in scope. Each of the draft decisions for each country are detailed further below.

    Read more.
    TOPIC : Derivatives
  • EU Authority Issues Statement on Reverse Solicitation under MiFID II
    01/13/2021

    The European Securities and Markets Authority has issued a statement reminding firms of the rules on reverse solicitation under the Markets in Financial Instruments Directive and Regulation. MiFID II provides that EU retail or professional clients may reach outside the EU and acquire services and products from non-EU investment banks (known as "reverse solicitation") and that in these circumstances the third-country firm is exempt from the requirement to establish an EU branch. ESMA has issued the statement following what it describes as "questionable practices" materializing following the end of the Brexit transition period, where firms have purported to opt clients into "reverse solicitation" through either generic terms and conditions amendments or click-through "I agree" boxes online. It is clear from this guidance that ESMA's view is that more is needed than this to invoke the reverse solicitation regime. Notably, the ESMA report does not criticise more robust reverse solicitation protocols that are currently being seen in the market, such as a termination notice by the U.K. service provider of the existing agreement, sometimes with a covering note that the client could at its initiative reach out afresh to request entry into of a new agreement should it so desire.

    View ESMA's statement on reverse solicitation.

    You may like to view our client note, "On the Existence of a Pan-European Reverse Solicitation Regime Under MiFID II, and its Importance on a 'Hard' Brexit".
  • UK Grants Equivalence to Swiss Exchanges for Purpose of UK Share Trading Obligation
    01/13/2021
     

    U.K. legislation has been made granting equivalence to Swiss exchanges under the U.K.'s Markets in Financial Instruments Regulation. The Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which enter into force on February 3, 2021, grant equivalence to two Swiss exchanges - BX Swiss AG and SIX Swiss Exchange AG. U.K. MiFIR requires U.K. investment firms to ensure that the trades they undertake in shares admitted to trading on a regulated market or traded on a trading venue take place on a regulated market, multilateral trading facility, systematic internaliser or equivalent third-country trading venue. U.K. investment firms will be able to comply with the U.K. MiFIR share trading obligation by trading shares on these Swiss exchanges.

    Read more.

  • UK Prudential Regulator Consults on its Approach to Supervising International Banks
    01/11/2021

    The U.K. Prudential Regulation Authority has launched a consultation on its proposed approach to supervising international banks. The proposals cover the U.K. activities of PRA-authorized banks and designated investment firms that are headquartered outside of the U.K. or are part of a group based outside of the U.K., including those firms operating in the U.K. through a branch. Responses to the consultation may be submitted until April 11, 2021. Implementation of the final policy is expected to occur in Q2 2021, except for those EEA firms that are in the Temporary Permissions Regime which are expected to meet the expectations "as soon as reasonably practicable" and at least by the time the firm is authorized and exits the TPR.

    Read more.
  • UK Government Proposes Extending Regulatory Perimeter to Capture Stablecoins
    01/07/2021

    HM Treasury has opened a consultation on the proposed U.K. approach to crypto-assets and stablecoins, in particular a proposal to bring stablecoins into the U.K. regulatory perimeter. Responses to the consultation may be submitted until March 21, 2021. The government will consider the responses to the consultation and publish a response with further details on how the approach would be implemented in law. If the policy approach is followed, the regulators would consult further on rules for firms.

    Read more.
  • UK Prudential Regulator Publishes Final Rules on Implementation of CRD V
    12/28/2020

    The U.K. Prudential Regulation Authority has published its final Policy Statement setting out the final rules for implementing CRD V in the U.K. The Policy Statement confirms the final rules set out in the PRA's near-final Policy Statement, published on December 9, 2020. The Policy Statement also confirms the PRA's proposed approach to enforcing compliance with consolidated prudential requirements for U.K. banking consolidation groups, as proposed in the PRA's consultation paper published on December 9, 2020. The Supervisory Statements and Statements of Policy attached to the Policy Statement should be read together with the PRA's Supervisory Statement, "Non-binding PRA materials: The PRA's approach after the UK's withdrawal from the EU", for guidance on how to interpret the materials after the end of the transition period.

    Read more.
  • Final Draft EU Technical Standards on Conditions of Impracticability of Bail-in Clauses
    12/23/2020

    The European Banking Authority has published a final report and final draft Regulatory Technical Standards and Implementing Technical Standards on the impracticability of contractual recognition of write-down and conversion (i.e., bail-in) under the EU Bank Recovery and Resolution Directive. BRRD requires certain firms to include contractual recognition of bail-in in their contractual agreements covering particular liabilities which are governed by the law of a third country. This is now a more significant issue than previously, given the prevalence of English law contractual documentation in European financial markets, including following Brexit. A new exemption to the contractual bail-in requirement was introduced under BRRD 2 (which EU member states must apply through national laws from December 28, 2020) where firms consider that it is legally or otherwise impracticable to include the contractual recognition. Liabilities subject to this waiver cannot count towards MREL, must be senior to unsecured claims arising from certain debt instruments and firms intending to take advantage of the exemption should notify their resolution authority.

    Read more.
  • International Report on Educating Retail Investors about Crypto-Assets
    12/22/2020

    The International Organization of Securities Commissions has published a report on how regulators can inform retail investors about the risks and characteristics of crypto-assets. The report sets out the potential risks to retail investors, such as lack of market liquidity, volatility, partial or total loss of the invested amount, insufficient information disclosure and fraud. It then goes on to provide guidance on how regulators can develop educational content on crypto-assets and inform the public about unauthorized firms, the various communication channels available to inform the public and how partnerships might be forged to develop and distribute educational content.

    View IOSCO's report on investor education of crypto-assets
  • UK Financial Conduct Authority Publishes Policy Statement on Climate-Related Disclosures by Listed Issuers
    12/21/2020

    The U.K. Financial Conduct Authority has published a policy statement introducing a new rule and guidance on climate-related disclosures for commercial companies with a U.K. premium listing.

    The new rule, which will apply for accounting periods beginning on or after January 1, 2021, will require premium-listed commercial companies to state in their annual reports whether they have made disclosures consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures and, if they have not done so, explain why that is the case. The first financial reports containing these disclosures are expected to be published in Spring 2022.

    Read more.
  • European Securities and Markets Authority Publishes Guidelines on Reporting Securities Financing Transactions
    12/21/2020

    The European Securities and Markets Authority has published guidelines on the reporting obligations under the EU 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 reporting obligation applies from January 11, 2021 for Non-Financial Counterparties. It has applied since July 13, 2020 for banks and investment firms (delayed from April 13, 2020 due to COVID-19), CCPs and central securities depositories and from October 12, 2020 for other Financial Counterparties.

    The guidelines will apply to counterparties to SFTs, trade repositories and relevant EU financial regulators from the day after publication or the day from which the relevant obligation applies.

    The guidelines cover:
    • the reporting start date when it falls on a non-working day;
    • the number of reportable SFTs;
    • the population of reporting fields for different types of SFTs, for margin data and for reuse, reinvestment and funding sources data;
    • the approach used to link SFT collateral with SFT loans;
    • the generation of feedback by trade repositories and its subsequent management by counterparties, in the case of rejection of reported data and reconciliation breaks; and
    • the provision of access to data to authorities by trade repositories.

    View the guidelines on reporting under SFTR.

    View details of the delays to SFTR reporting due to COVID-19.
    TOPIC : Securities
  • Bank of England Publishes Discussion Paper on its Approach to Setting MREL
    12/18/2020

    The Bank of England has published a Discussion Paper on its approach to setting the minimum requirement for own funds and eligible liabilities for relevant U.K. financial institutions. MREL is a minimum requirement for firms to maintain equity and eligible debt liabilities that can bear losses before and in resolution. The requirement applies to all U.K. banks, building societies and certain investment firms supervised by the U.K. Prudential Regulation Authority or Financial Conduct Authority, to financial or mixed financial holding parent companies of those firms, and to PRA or FCA-authorized financial institutions that are subsidiaries of those firms or parent companies. The U.K. first implemented interim MREL requirements (which were lower than the full, “end-state” MREL requirements) in 2016 in line with the EU’s Bank Recovery and Resolution Directive. The U.K.’s MREL policy was updated in 2018 and in June 2018 the BoE announced that it would review MREL calibration before final “end-state” MRELs were set. The Discussion Paper forms the first part of the BoE’s review.

    Read more.
  • Bank of England Extends MREL and Resolvability Deadlines for Mid-Tier Banks
    12/18/2020

    The Bank of England has extended until January 1, 2023 the deadlines for “mid-tier” banks to comply with: (i) end-state minimum requirements for own funds and eligible liabilities; and (ii) resolvability assessment framework requirements. “Mid-tier” banks are those that do not qualify as global systemically important banks (as identified by the Financial Stability Board) or domestic systemically important banks (i.e. those that are subject to the U.K. Prudential Regulation Authority’s leverage ratio requirement or are designated as other systemically important institutions by the PRA and have a resolution entity in the U.K.). The term also includes U.K. material subsidiaries of such firms and certain U.K. subsidiaries of overseas groups for which the BoE has set internal MREL in excess of minimum capital requirements.

    Read more.
  • European Securities and Markets Authority Renews Notification Requirement for Net Short Positions at or Exceeding 0.1%
    12/17/2020

    The European Securities and Markets Authority has renewed its decision requiring holders of net short positions in shares traded on an EU-regulated market to notify national regulators if the position reaches or exceeds 0.1% of issued share capital. ESMA originally introduced the requirement on March 16, 2020 for a period of three months and has extended it twice since then. This latest extension will apply the requirements from December 19, 2020 until March 19, 2021. The temporary transparency obligations are a response to perceived threats to market integrity arising from the COVID-19 pandemic. They apply to any natural or legal person, irrespective of their country of residence, but do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making activities, or stabilization activities.

    The European Free Trade Association's Surveillance Authority published a decision on the same day renewing its decision imposing the same transparency obligations for shares admitted to trading on an EEA regulated market. The renewed requirements also apply from December 19, 2020 until March 19, 2021.

    View ESMA's decision.

    View the EFTA decision.
    TOPICS : COVID-19Securities
  • HM Treasury Consults on Draft Rules for Insolvency Regime for Payment and Electronic Money Institutions
    12/17/2020

    HM Treasury has published a supplementary annex to its consultation on the U.K. Government's proposed Special Administration Regime for payment institutions and electronic money institutions. The SAR would address shortcomings of the existing insolvency regime for PIs and EMIs and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs.

    Read more.
  • European Commission Publishes New EU Cybersecurity Strategy
    12/16/2020

    The European Commission and High Representative of the Union for Foreign Affairs and Security Policy have published details of a new EU Cybersecurity strategy, which aims to enhance the EU's resilience to cyber threats and build a cybersecure digital transformation. The overall strategy is set out in a Communication, which is accompanied by two legislative proposals. The first legislative proposal is for a new EU Directive on the resilience of critical entities (the proposed CER Directive), which will enhance and repeal the existing 2008 European Critical Infrastructure Directive (Council Directive 2008/114/EC). The second proposal is for a new Directive on cybersecurity across the EU (NIS2), which would augment and repeal the existing NIS Directive (Directive (EU) 2016/1148). The Commission consulted earlier this year on proposals for each of these legislative proposals.

    Read more.
  • UK Financial Conduct Authority Establishes Temporary AML Registration Regime for Crypto-Asset Businesses
    12/16/2020

    The U.K. Financial Conduct Authority has established a temporary registration regime for crypto-asset businesses that were operating in the U.K. prior to January 10, 2020. The regime will allow crypto-asset firms to continue providing services in the U.K., notwithstanding that they have not yet been registered with the FCA.

    Read more.
  • UK Government Seeks Input on UK Framework for Cross-Border Financial Services
    12/15/2020

    HM Treasury has launched a call for evidence on the U.K.'s framework for cross-border financial services. HM Treasury is considering policy approaches for ensuring the U.K. framework is fit for the future given the U.K.'s exit from the EU, including consideration of how effective and proportionate regulation can support attracting investment and liquidity to the U.K. Responses to the consultation may be submitted until March 11, 2021.

    Read more.
  • UK Regulator Publishes Proposals for New Investment Firm Prudential Regime
    12/14/2020

    Following the discussion paper published earlier this year, the U.K. Financial Conduct Authority has launched its first consultation on the new U.K. Investment Firms Prudential Regime. The IFPR is a new prudential regime for U.K. firms authorized under the Markets in Financial Instruments Directive, which it is proposed will be introduced from January 1, 2022, subject to the progress of the Financial Services Bill. The IFPR is intended to simplify the prudential requirements applicable to solo-regulated U.K. investment firms. It will not apply to the larger investment firms that will remain dually regulated, that is, prudentially regulated by the Prudential Regulation Authority and regulated by the FCA for all other aspects. The consultation closes on February 5, 2021.

    Read more.
  • UK Central Securities Depository Granted Temporary Recognition by the European Securities and Markets Authority
    12/11/2020

    The European Securities and Markets Authority has announced that Euroclear UK & Ireland Limited, a central securities depository established in the U.K., will be granted recognition under the EU CSD Regulation. The recognition will allow Euroclear UK & Ireland Limited to continue to provide certain services to EU customers after the end of the Brexit transitional period until at least June 30, 2021. ESMA's recognition decision follows the November 2020 temporary equivalence decision granted to U.K. CSDs.

    View ESMA's announcement.

    View details of the EU's equivalence decision for U.K. CSDs.
  • UK Conduct Regulator Makes Permanent Ban on Marketing Speculative Illiquid Securities to Retail Investors
    12/10/2020

    The U.K. Financial Conduct Authority has made permanent its temporary ban on the marketing of speculative illiquid securities to retail investors. A temporary product intervention measure was introduced on January 1, 2020 for a period of one year while the FCA consulted on making the ban permanent. The measure restricted the mass-marketing of non-transferable bonds (sometimes colloquially termed "mini-bonds") and preference shares to retail investors and required improved disclosure to be made to high-net-worth and sophisticated investors.

    Read more.
  • UK Prudential Regulator Publishes Policy Statement and Near-Final Rules on Implementation of CRD V
    12/09/2020

    The U.K. Prudential Regulation Authority has published a policy statement setting out responses to its consultations on the U.K. implementation of CRD V, as well as its near-final policy material. The final rule instruments will be published in time for the December 28, 2020 deadline for implementation of CRD V. The policy statement is relevant to U.K. banks, building societies, PRA-designated investment firms and U.K. financial holding companies and mixed financial holding companies.

    Read more.
  • UK Prudential Regulator Consults on Banking Consolidation Group Prudential Compliance During Brexit Transition Period
    12/09/2020

    The U.K. Prudential Regulation Authority has launched a consultation on which bank entities should be responsible for ensuring compliance with consolidated prudential requirements for U.K. banking consolidation groups for a transitional period between December 28, 2020 and the date on which the relevant group's parent holding company is approved or declared exempt from the requirements under the PRA's approval regime.

    Read more.
  • European Commission Consults on Central Securities Depositories Regulation
    12/08/2020

    The European Commission has launched a consultation on proposals to improve securities settlement in the EU and on central securities depositories. The EU Central Securities Depositaries Regulation provides a harmonized regulatory and prudential regime for CSDs and increases the robustness and resilience of securities settlement arrangements. There is a single market for CSD services across the EU and a third-country equivalence regime for CSDs. Responses to the consultation can be submitted until February 2, 2021.

    Read more.
  • EU Authorities Warn of Potential Loss of Preferential Capital Treatment for STS Securitizations
    12/07/2020

    The European Supervisory Authorities have issued a press release warning of the change in the status of "simple, transparent and standardized" securitization transactions at the end of the Brexit transition period on December 31, 2020. The Securitization Regulation provides the criteria for identifying which securitizations will be designated as STS securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related amendments to the EU Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations. For a securitization to qualify as an STS securitization, the EU Securitization Regulation requires the originator, sponsor and securitization special purpose entity to be established in the EU. The ESA's announcement highlights that securitizations that currently meet the STS criteria may not do so from January 1, 2021, if one or more of the originator, sponsor or SSPE are established in the U.K. The loss of STS status will mean that the EU CRR preferential capital treatment is no longer available.

    The European Securities and Markets Authority will be working with EU national regulators to ensure that its database of STS securitizations is up to date as at January 1, 2021.

    View the ESA's press release.
  • HM Treasury Consults on Insolvency Changes for Payment and Electronic Money Institutions
    12/03/2020

    HM Treasury has launched a consultation on the U.K. Government's proposed Special Administration Regime for payment institutions and electronic money institutions that fall within the scope of the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. The SAR would address shortcomings of the existing insolvency regime for PIs and EMIs and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs. Responses to the consultation should be submitted by January 14, 2021.

    Read more.
  • European Central Bank Consults on Changes to Systemically Important Payment Systems Regulation
    11/27/2020

    The European Central Bank is consulting on revisions to the Regulation on oversight requirements for systemically important payment systems (known as the SIPS Regulation). The SIPS Regulation applies to systemically important large-value and retail payment systems. The Regulation is designed to improve the safety and efficiency of those payment systems.

    Read more.
  • EU Grants Temporary Equivalence for UK Central Securities Depositories
    11/26/2020

    An EU equivalence decision has been published in the Official Journal of the European Union granting temporary equivalence for U.K. central securities depositories from the end of the Brexit transitional period (on December 31, 2020). The equivalence decision applies to CSDs already established in the U.K. and will apply from January 1, 2021 until June 30, 2021.

    View the EU equivalence decision for U.K. CSDs.
  • EU Markets Authority Confirms Position on Derivatives Trading Obligation Post-Brexit
    11/25/2020

    The European Securities and Markets Authority has confirmed its position, originally proposed in March 2019, that the derivatives trading obligation under the EU Markets in Financial Instruments Regulation will continue to apply without changes, and as things stand without any U.K. equivalency, after the end of the Brexit transition period on December 31, 2020.

    The derivatives trading obligation requires EU investment firms to conclude transactions in certain derivatives on EU regulated markets, multilateral trading facilities, organized trading facilities or third-country venues in jurisdictions benefiting from an EU equivalence decision. The trading obligation applies to certain fixed-to-float interest rate swaps denominated in EUR, USD and GBP and to certain index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover).

    Read more.
  • Financial Stability Board Report on Impact of Climate Change on Financial Stability
    11/23/2020

    The Financial Stability Board has published a report on the Implications of Climate Change for Financial Stability. The report breaks climate-related financial stability risks down into three key categories: (i) physical risks (i.e., risks of economic losses caused by natural catastrophes); (ii) transition risks (i.e., risks arising from the process of adjusting to a low carbon economy); and (iii) liability risks (i.e., risks arising from parties being held liable for losses caused by environmental damage).

    Read more.
  • European Central Bank Consults on EURIBOR Fallbacks
    11/23/2020

    The European Central Bank has published two consultation papers on fallback trigger events and fallback rates for EURIBOR. Responses to the consultations should be submitted by January 15, 2021.

    Read more.
  • Revised Final Draft EU Technical Standards Published for Derivatives Margin and Clearing Obligations
    11/23/2020

    The European Supervisory Authorities have published final draft amending Regulatory Technical Standards on the application of EU bilateral margining requirements and the clearing obligation under the European Market Infrastructure Regulation in light of Brexit. The draft RTS are set out in two separate reports – one published jointly by the ESAs (covering the bilateral margining requirements for uncleared derivatives), the other published by the European Securities and Markets Authority (covering the clearing obligation for certain derivatives).

    Read more.
  • Financial Stability Board 2020 Progress Report on Benchmark Reform
    11/20/2020

    The Financial Stability Board has published a 2020 progress report on Reforming Major Interest Rate Benchmarks.

    Read more.
  • UK Benchmark Regulator Consults on Exercise of New Powers under the Financial Services Bill
    11/18/2020

    The U.K. Financial Conduct Authority has launched a consultation on its proposed policy for exercising the new benchmark powers that are being introduced into U.K. law under the Financial Services Bill. Among other things, the Financial Services Bill includes potential enhanced powers for the FCA to wind-down a critical benchmark and deal with tough legacy contracts. The increased powers are being introduced in response to concerns and uncertainty about the transition from LIBOR to risk free rates by the end of 2021. Responses to the consultations may be submitted until January 18, 2021. 

    Read more.
  • Financial Stability Board Issues Final Guidance on Financial Resources for CCP Resolution
    11/16/2020

    The Financial Stability Board has issued a final report and guidance on financial resources to support CCP resolution and on the treatment of CCP equity in resolution. The FSB consulted on the guidance in 2018, stating that, in its view, further evidenced-based guidance was needed to develop the guidance, such as the practical experience of resolution planning that resolution authorities and Crisis Management Groups have gained.

    Read more.
  • HM Treasury and U.K. Regulators Publish Statement on Implementation Date for Prudential Reforms for UK Investment Firms
    11/16/2020

    HM Treasury has issued a joint statement with the U.K. Financial Conduct Authority and the Prudential Regulation Authority confirming a targeted implementation date of January 1, 2022 for the reforms to the prudential regulation of U.K. investment firms set out in the U.K. Financial Services Bill.

    Read more.
  • EU Authority Updates Statements on Reporting Obligations Post-Brexit Transitional Period
    11/10/2020

    The European Securities and Markets Authority has published updated statements regarding the end of the Brexit transition period on December 31, 2020. 

    Read more.
  • UK Grants Equivalence to EEA CCPs
    11/10/2020

    The U.K. Central Counterparties (Equivalence) Regulations 2020 (SI No. 2020/1244) have been made, granting equivalence for EEA CCPs from 10:59 pm on December 31, 2020. The decision will enable U.K. businesses and trading venues to continue using the clearing services of EEA CCPs under the U.K. European Market Infrastructure Regulation after the end of the Temporary Recognition Regime, provided that the Bank of England grants the individual CCP concerned recognition status.

    The EU has granted temporary equivalence for U.K. CCPs, which is set to expire in June 2022.

    View the Central Counterparties (Equivalence) Regulations 2020, SI No. 2020/1244.

    View details of the temporary equivalence decision for U.K. CCPs.
  • European Commission Publishes Roadmap for EU Bank Crisis Management and Deposit Insurance Framework
    11/10/2020

    The European Commission has published a roadmap for its proposed review of the EU's crisis management and deposit insurance framework. The framework consists of the EU Bank Recovery and Resolution Directive, the EU Single Resolution Mechanism Regulation and the EU Deposit Guarantee Scheme Directive. It was introduced in the aftermath of the financial crisis and has applied across the EU since 2015 (in the case of BRRD and DGSD) and 2016 (in the case of SRMR). 

    Read more.
  • Final Draft EU Technical Standards for SME Growth Markets Under Market Abuse Regulation
    11/05/2020

    The European Securities and Markets Authority has published its final report and final draft Technical Standards on the amendments to the Market Abuse Regulation for the promotion of SME Growth Markets. SME Growth Markets were a new sub-category of multilateral trading facility introduced by the revised Markets in Financial Instruments package in January 2018 to facilitate access to capital for SMEs. ESMA is mandated to prepare: (i) Regulatory Technical Standards on liquidity contracts; and (ii) Implementing Technical Standards on insider lists and to submit those to the European Commission by September 1, 2020. Due to the impact of the COVID-19 pandemic, the delivery of the final draft RTS and ITS have been delayed and ESMA acknowledges that it is unlikely that they will be adopted in time for the application of the amendments to MAR, which is January 1, 2021. The final report outlines ESMA's proposals and provides the final draft RTS and ITS that ESMA has submitted to the European Commission for consideration.

    Read more.
  • European Securities and Markets Authority Reports on Implementation of EU Central Securities Depositaries Regulation
    11/05/2020

    The European Securities and Markets Authority has published two reports relevant to the EU Central Securities Depositaries Regulation. The CSDR provides a harmonized regulatory and prudential regime for CSDs and increases the robustness and resilience of securities settlement arrangements. There is a single market for CSD services across the EU and a third-country equivalence regime for CSDs. ESMA's reports, which will be considered as part of the upcoming review of CSDR by the European Commission, are on the following:
     
    1. Internalized settlement, which is the regime for settlement other than through an EU CSD. In the report, ESMA notes that no significant risks have been identified. National EU regulators have identified that operational risk and custody risk are evident, in response to which, ESMA recommends improved operational processes and enhanced identification of client accounts. According to ESMA, the issues involved in the internalized settlement reporting regime are normal in terms of any new reporting requirements. Noting the limited time period that the data covers, ESMA highlights that continued monitoring of the regime is important to assess whether the area warrants regulation. ESMA considers that custodian clients should at least be informed of the risks and costs of the place of settlement.
    2. Cross-border services and handling of applications. ESMA found that CSDR has had a limited impact on the provision of cross-border services in the EU by EU CSDs. ESMA states that future reports will need access to more detailed information and that they should consider whether most of the activity remains with global custodians as well as the impact of CSDR on costs and competition.

    View ESMA's reports.
  • Task Force on Climate-Related Financial Disclosures Publishes 2020 Status Report and Guidance

    10/29/2020

    The Financial Stability Board's Task Force on Climate-Related Financial Disclosures has published its 2020 Status Report, describing progress in the global adoption of the TCFD's recommendations. 

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

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

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

    View the GFIN cross-border testing site.

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

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

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

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

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

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

    View ESMA's announcements and lists.

    View details of ESMA's earlier statement in October.

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

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

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

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

    Read more.
  • ISDA Launches IBOR Fallbacks Protocol
    10/23/2020

    The Internationals Swaps and Derivatives Association has launched its IBOR Fallbacks Supplement to the 2006 ISDA Definitions and 2020 IBOR Fallbacks Protocol. Both will become effective on January 25, 2021. The fallbacks provide alternative risk free rates to be used in place of discontinued or non-representative IBORs referenced in derivative contracts. 

    Read more.
  • Financial Action Task Force Updates Guidance for Proliferation Financing Risks
    10/23/2020

    Following its consultation earlier this year, the Financial Action Task Force has finalized amendments to Recommendation 1 and its Interpretive Note. Recommendation 1 provides guidance on assessing risks and applying a risk-based approach to money laundering and terrorist financing risks. The FATF has updated the Recommendation to require countries and the private sector to identify and assess risks of potential breaches, non-implementation or evasion of the targeted financial sanctions obligations referred to in Recommendation 7 linked to proliferation financing risks.

    View the FATF's statement.

    View the updated FATF Recommendations.
  • ISDA Publishes Papers on Legal Issues for Smart Contracts and Distributed Ledger Technology
    10/21/2020

    The International Swaps and Derivatives Association, in conjunction with certain law firms, has published a series of papers analyzing key legal issues for smart contracts and distributed ledger technology across four jurisdictions: France, Ireland, Japan and New York. These are in addition to the papers covering England and Wales and Singapore, which ISDA published in January 2020.

    Read more.
    TOPIC : FinTech
  • UK Parliament Publishes Financial Services Bill for Post-Brexit Regulatory Framework
    10/21/2020

    The U.K. Government has published a Financial Services Bill setting out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The Bill is part of the U.K.'s wider initiative under the Future Regulatory Framework Review to re-frame its regulatory framework. Although Brexit has brought challenges to the financial sector, there may also be post-Brexit opportunities for the U.K. to seize. The aim of these reforms is to cement the U.K.'s position as a global financial centre of excellence. A core piece of that will be to set conditions that continue attracting business to the U.K. and to look for opportunities to cut "red tape" whilst at the same time maintaining the U.K.'s globally recognized high regulatory standards.

    Read more
  • UK Prudential Regulator Issues Further Consultation on Implementation of CRD V and CRR II
    10/20/2020

    The U.K. Prudential Regulation Authority has published a further consultation on its proposed implementation of the fifth Capital Requirements Directive. CRD V came into force in July 2019. EU Member States are required to implement the majority of CRD V provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. is obliged to transpose those provisions of CRD V that are applicable befor the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement.

    Read more.
  • European Commission Launches Consultation on European Long-Term Investment Funds Regulation
    10/19/2020

    The European Commission has launched a public consultation on possible improvements to the European Long-Term Investment Funds Regulation. The ELTIF Regulation has applied across the EU since December 2015 and is designed to encourage investment in long-term projects in the real economy, such as infrastructure projects, real estate and listed and unlisted small and medium-sized enterprises. However, only a small number of ELTIFs have been launched since the Regulation was introduced. In addition, in its 2020 report, the High Level Forum on the Capital Markets Union recommended that the ELTIF Regulation be reviewed in order to broaden the scope of eligible assets and reduce potential barriers to investment.

    Read more.
    TOPIC : Funds
  • HM Treasury Consults on Phase II of UK's Financial Services Future Regulation Framework Review
    10/19/2020

    HM Treasury has launched a consultation on Phase II of the U.K.'s Financial Services Future Regulatory Framework Review. Phase II focuses on how the U.K.'s financial services regulatory framework must be adapted to be fit for the future given the U.K.'s exit from the EU. The first part of Phase II, to which this consultation relates, seeks to establish a blueprint for financial services regulation. Responses to the consultation should be submitted by February 19, 2021. The second part of Phase II will constitute a final package of proposals and will be consulted on later in 2021.

    Read more.
  • Financial Stability Board Publishes Global Transition Roadmap for LIBOR
    10/16/2020

    The Financial Stability Board has published a roadmap setting out a target timeline for firm's transition away from LIBOR benchmarks. The roadmap is aimed at financial and non-financial firms to ensure a successful transition away from LIBOR by the end of 2021.

    Read more.
  • HM Treasury Publishes Results of Consultation on CRD V Implementation
    10/15/2020

    HM Treasury has published a summary of the responses to its consultation on the U.K.'s implementation of the fifth Capital Requirements Directive, together with HM Treasury's proposed next steps. CRD V came into force in July 2019 and EU Member States are required to implement the majority of its provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. is obliged to transpose these provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement. 

    Read more.
  • EU Consultation on Proposed Revisions to the Guidelines on Major Incident Reporting for Payment Service Providers
    10/14/2020

    The European Banking Authority has opened a consultation on proposed revisions to the Guidelines on major incident reporting under the revised Payment Services Directive. PSD2 requires payment services providers to establish and maintain effective incident management procedures for, among other things, detecting and classifying major operational or security incidents. PSPs are required to notify their home state regulator if a major incident occurs. The Guidelines, which have applied across the EU since January 1, 2018, stipulate the criteria that PSPs should use to classify an operational or security incident as "major." Major incidents must be reported to a PSP's national regulator using the format provided in the Guidelines. The EBA is consulting on targeted amendments to the Guidelines. Responses to the consultation may be submitted until December 14, 2020. The EBA expects that the revisions to the Guidelines will become applicable by Q4 2021.

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

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

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

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

    Read more.
  • Bank for International Settlements Report on Central Bank Digital Currencies
    10/09/2020

    The Bank for International Settlements, together with seven central banks (Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riksbank, Swiss National Bank, Bank of England and Board of Governors Federal Reserve System) has released a report on the principles and core features of central bank digital currencies. The central banks concerned do not give any opinions on whether they intend to issue CBDCs. Instead, the report sets out three key principles for a hypothetical CBDC, namely: (i) that it should do no harm to central banks' public policy objectives or interfere with financial stability; (ii) that it should complement existing forms of central bank money; and (iii) that it should promote innovation and efficiency, to deter users from adopting other, less safe instruments or currencies.

    Read more.
    TOPIC : FinTech
  • ISDA Announces Upcoming Launch of IBOR Fallbacks Protocol
    10/09/2020

    The International Swaps and Derivatives Association has announced that it will launch its IBOR Fallbacks Supplement to the 2006 ISDA Definitions and its 2020 IBOR Fallbacks Protocol on October 23, 2020, although they will not take effect until January 25, 2021. The Supplement and Protocol implement fallbacks for derivatives contracts that reference discontinued or non-representative IBORs.

    Read more.
  • EU Technical Standards Published on Central Contact Points Under the Revised Payment Services Directive
    10/09/2020

    A Commission Delegated Regulation setting out Regulatory Technical Standards on central contact points under the revised Payment Services Directive has been published in the Official Journal of the European Union. The RTS apply where a payment institution or electronic money institution with its head office in one EU member state provides payment services on a cross-border basis, under the right of establishment, through agents in another (host) member state. PSD2 gives the national regulators in the host member state the option of requiring that payment institutions or electronic money institutions operating through agents must establish a central contact point in the host territory to ensure adequate communication and information reporting and effective supervision.

    Read more.
  • Bank of England Financial Policy Committee Publishes Policy Summary
    10/08/2020

    The Bank of England's Financial Policy Committee has published its latest Policy Summary and the minutes of its meeting held on September 30, 2020. The FPC notes a range of near-term risks that could impact the U.K. economy, including the evolution of the COVID-19 pandemic, post-Brexit trading arrangements between the U.K. and EU and various other geopolitical risks. 

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

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

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

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

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

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

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

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

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

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

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

    View the FCA's statement.

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

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

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

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

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

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

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

    The European Securities and Markets Authority has published a final report on the review of the Market Abuse Regulation. MAR requires the European Commission to report on certain aspects of the operation of MAR, including where appropriate, making recommendations for legislative change. ESMA's final report and recommendations will support the work by the Commission on producing that report. The proposals will mostly affect issuers of financial instruments admitted to trading or trading on a trading venue, investment firms and asset management firms.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    View ESMA's announcement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    View the final report and final draft RTS.

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

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

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

    View the PRA's statement.

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

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

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

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

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

    View the PRA's statement.

    View details of the PRA's June statement.

    View details of the PRA's March statement.
  • EU Delays Securities Settlement Discipline Rules to 2021
    08/24/2020
     

    EU Regulatory Technical Standards postponing the implementation deadline of the settlement discipline regime under the Central Securities Depositories Regulation have been published in the Official Journal of the European Union. The RTS delay the application date of the settlement discipline rules from September 13, 2020 to February 1, 2021, by amending the existing RTS (Commission Delegated Regulation (EU) 2018/1229). The RTS cover measures for preventing settlement fails through automated matching, a hold and release mechanism and partial settlement. The RTS also provide measures for monitoring and addressing settlement fails, such as a mechanism for cash penalties and a buy-in process.

    Read more.
    TOPIC : Securities
  • UK Conduct Regulator Proposes to Extend Financial Crime Reporting Obligation
    08/24/2020

    The U.K. Financial Conduct Authority has launched a consultation proposing to extend the annual financial crime reporting obligation to regulated firms undertaking regulated activities that the FCA views to be potentially posing as a higher money laundering risk. Responses may be submitted until November 23, 2020. The FCA intends to publish its final policy and amended rules by Q1 2021.

    The FCA introduced the annual financial crime reporting obligations in 2016 for banks, investment firms, building societies, mortgage lenders, large electronic money institutions, certain large consumer credit firms, life insurers and retail investment and mortgage intermediaries. Relevant firms must provide details annually on, among other things, the jurisdictions and types of customers as well as the number of suspicious activity reports to the FCA. The obligation only captures certain firms subject to FCA supervision under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations of 2017.

    Read more.
  • EU Considering Further Delaying Securities Settlement Discipline Rules to 2022
    08/24/2020

    The European Securities and Markets Authority has announced that it is preparing new Regulatory Technical Standards to further postpone the securities settlement discipline rules under the Central Securities Depositories Regulation. The move follows a request from the European Commission for ESMA to consider whether a further delay is needed in light of the impact of COVID-19. The Commission has adopted the draft RTS prepared by ESMA that will delay the application date of the settlement discipline rules from September 13, 2020 to February 1, 2021. Those RTS are now subject to scrutiny by the European Parliament and Council of the European Union and will only come into force once published in the Official Journal of the European Union. ESMA's announcement relates to a proposal for an additional delay until February 2022.

    Read more.
    TOPICS : COVID-19Securities
  • EU Review: Alternative Investment Fund Managers Directive
    08/18/2020

    The European Securities and Markets Authority has published a letter addressed to the European Commission on the upcoming review of the Alternative Investment Fund Managers Directive. In the letter, ESMA highlights areas that it considers would benefit from a review and potential amendments. ESMA considers these areas important because of the discussions it has had with national regulators on the practical difficulties involved in implementing the AIFMD. ESMA is proposing policy improvements and reporting recommendations, including harmonizing the AIFMD and UCITS regimes. The areas of focus include delegation and substance, liquidity management tools, leverage and the harmonization of supervision of cross-border entities. The Commission is likely to publish its proposals for amending AIFMD in Q3 2020.

    View the letter.
    TOPIC : Funds
  • European Banking Authority Revises 2020 Work Program in Response to COVID-19
    08/14/2020

    The European Banking Authority has published an updated work program as part of its response to the coronavirus pandemic. According to the EBA, it has only launched consultations that are critical, has kept interactions with industry to a minimum and has progressed work on technical standards according to the expected implementation timeline and degree of finalization.

    View the EBA’s updated 2020 work program.
    TOPIC : COVID-19
  • Global Common Template Published to Aid Continuity of Access to Financial Market Infrastructures
    08/14/2020

    The Financial Stability Board has published a common template for gathering information about continuity of access to financial market infrastructures for firms in resolution. The template facilitates implementation of the FSB’s 2017 Guidance on continuity of access to FMIs for a firm in resolution. The aim of the common template is to streamline the process of gathering information, reduce the burden on FMIs who receive multiple requests for information and make more efficient the process of giving information by FMIs to participants and authorities. All FMIs are urged to complete the questions in the common template and to make those available to their participants and national resolution authorities by November/December 2020. The FSB intends, after 12 months, to assess how the common template has achieved its goals.

    View the comment template.

    View the FSB’s Guidance.
  • European Banking Authority Seeks to Promote RegTech Use
    08/12/2020

    The European Banking Authority has opened a consultation on RegTech and supporting the use of RegTech across the EU. Responses may be submitted until September 30, 2020. The EBA intends to report on the use of RegTech in the first half of 2021. The survey is focused on financial institutions and ICT third party providers. The EBA is seeking to understand the extent and impact of RegTech for regulatory, compliance and reporting requirements of regulated firms. In particular, the EBA is looking at mapping and understanding existing RegTech solutions, identifying barriers and risks relating to the use of RegTech and analyzing how to facilitate the application of RegTech across the EU. The consultation covers ongoing monitoring of business relationships and transactions for anti-money laundering obligations, creditworthiness assessments, compliance with security standards, including information security, cybersecurity and payment services and supervisory reporting.

    View the EBA's survey.
  • Wolfsberg Group Statement on Developing an Effective Anti-Money Laundering and Counter Terrorist Financing Program
    08/12/2020

    The Wolfsberg Group has published a statement on how financial institutions can develop an effective anti-money laundering and counter terrorist financing program. The Wolfsberg Group was established in 2002 and comprises thirteen banks. Its objective is to develop frameworks and guidance for the management of financial crime risks, providing an industry perspective to effective financial crime risk management.

    Read more.
  • UK Conduct Regulator Urges Firms to Return Client Money if Reinvestment in Short Term is Unlikely
    08/12/2020

    The U.K. Financial Conduct Authority has published a Dear CEO letter sent to U.K.-regulated firms providing non-discretionary investment services. The FCA letter makes clear that, where firms’ clients have increased the level of client money held with a firm, the firm should return client money that is unlikely to be reinvested in the short term. Many firms have reported an increase in client money levels as clients respond to the COVID-19 situation. The FCA states that senior management at firms should consider whether it would be in the best interest of their clients to return money that isn’t likely to be reinvested in the short term.

    View the Dear CEO letter.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • EU Consultation on Draft Guidelines to Implement Alternative Internal Model Approach
    08/12/2020

    The European Banking Authority has opened a consultation on proposed guidelines on criteria for the use of data inputs in the risk measurement model under the Internal Model Approach for market risk, set out in the revised Capital Requirements Regulation, known as CRR2. The consultation closes on November 12, 2020.

    CRR2 implements a revised framework for minimum capital requirements based upon market risk—the Fundamental Review of the Trading Book, published in January 2019 by the Basel Committee on Banking Standards. The revisions include an alternative IMA, one part of which is the expected shortfall risk measure used to determine capital requirements for those risk factors with sufficient available observable market data.

    Read more.
  • European Banking Authority Provides Clarity on Application of CRR Quick Fix Package
    08/11/2020

    The European Banking Authority has published guidance on the impact on supervisory reporting and disclosure of the EU's CRR Quick Fix adjustments, which were made in response to COVID-19. The CRR Quick Fix introduced changes to a broad range of requirements on firms under the Capital Requirements Regulation. It has applied directly across the EU since June 27, 2020. The EBA's guidance consists of:
     
    1. Guidelines on supervisory reporting and disclosure requirements in compliance with the CRR "quick fix" in response to the COVID‐19 pandemic (EBA/GL/2020/11). These Guidelines aim to clarify how firms should report the Implementing Technical Standards on supervisory reporting versions 2.9 and 2.10, and on the existing ITS on disclosure of leverage ratio.

    Read more.
  • International Organization of Securities Commissions Reports on Liquidity Provision in the Equity Secondary Markets
    08/11/2020

    The International Organization of Securities Commissions has published a report on liquidity provision in the secondary markets for equity securities. The report sets out common themes for regulators to consider as the main elements of market making programs that promote liquidity provision enhance investor confidence and facilitate fair and efficient markets. These key elements are: (i) registration of market makers; (ii) obligations imposed on market makers; (iii) balancing the obligations and benefits of the programs; (iv) monitoring program compliance; and (v) public disclosure.

    View the report.
    TOPIC : Securities
  • Basel Committee on Banking Supervision Proposes Principles for Operational Risk
    08/06/2020

    The Basel Committee on Banking Supervision has opened a consultation on proposed principles for operational resilience and updated Principles for the Sound Management of Operational Risk (PSMOR). The consultation closes on November 6, 2020.

    Read more.
  • UK Prudential Regulator Proceeds with Extension of Coverage under Financial Services Compensation Scheme
    08/04/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement and final rules on the temporary high balances coverage extension under the Financial Services Compensation Scheme. The PRA has decided to implement the proposal, made in July this year and in response to the coronavirus pandemic, to extend coverage under the FSCS for temporary high balances, from six months to 12 months from the date of the deposit or the first date the balance becomes legally transferrable to the depositor. The change will be effected by changes to the PRA's depositor protection rules and the Statement of Policy on the Deposit Guarantee Scheme. The change will take effect from August 6, 2020. The coverage will revert to six months from February 1, 2021.

    View the Policy Statement, updated rules and Statement of Policy.
  • European Banking Authority Call for Input on De-Risking
    08/04/2020

    The European Banking Authority has launched a call for input on 'de-risking', whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The EBA is aiming to establish why financial institutions choose to de-risk instead of managing the related risks and to better understand the impact on access to financial services. Responses to the call for input can be provided until September 11, 2020. The feedback received will assist the EBA in preparing its next Opinion on the money laundering or terrorist financing risks impacting the EU which is due in Q1 2021.

    View the call for input on de-risking.
  • UK Regulator Consults on Addressing Liquidity Mismatch in Open-Ended Property Funds
    08/03/2020

    The U.K. Financial Conduct Authority has launched a consultation on liquidity mismatch in authorized open-ended property funds. The FCA wants to tackle the potential for investor harm that arises because the terms for dealing in units of some property funds are not aligned with the time that it takes to buy or sell the buildings that the funds invest in. Responses to the consultation may be submitted until November 3, 2020. The FCA intends to publish its final policy statement and rules as soon as possible in 2021.

    The FCA's proposals seek to address the structural issues arising from the mismatch between holding illiquid assets and offering daily redemptions and the potential harm caused by the liquidity mismatch of U.K. authorized property funds that are non-UCITS retail schemes (known as NURS) that invest directly in property. The FCA is proposing to introduce a notice period of up to 180 days for these funds with the object of removing the potential for some investors to gain at the expense of others and to decrease the probability of liquidity runs on funds that lead to rapid sales of assets.

    The FCA clarifies that the proposals in this consultation paper are only directly relevant to U.K.-authorized property funds that are NURS. The FCA is continuing its work with the Bank of England on illiquid assets in open-ended funds and will consult on additional solutions once the Financial Policy Committee has completed its work.

    View the FCA's consultation paper (CP20/15).
    TOPIC : Funds
  • EU Final Draft Technical Standards on TLAC and MREL Disclosure & Reporting
    08/03/2020

    The European Banking Authority has published a final report and final draft Implementing Technical Standards on disclosure and reporting of Minimum Requirement for Own Funds and Eligible Liabilities and Total Loss Absorbing Capacity. Revisions to the EU's Bank Recovery & Resolution Directive and the Capital Requirements Regulation, which were finalized in 2019, implement the Financial Stability Board's TLAC requirements in the EU as well as amend the EU's existing MREL requirements. The TLAC requirements will apply to all EU global systemically important institutions and the revised MREL requirements to G-SIIs and other relevant firms. The final draft ITS will supplement the Pillar 3 disclosure requirements and supervisory reporting requirements on TLAC and MREL introduced by BRRD2 and CRR2.

    The EBA has submitted the final draft ITS to the Commission for endorsement. The ITS on TLAC disclosures will apply immediately on entry into force. The MREL disclosure requirements will apply either from January 1, 2024 (the expiration date of relevant transitional periods) or from the later deadline set by the relevant resolution authority.

    View the EBA's report, final draft ITS and related annexes.

    View details of BRRD2.

    View details of CRR2.
  • UK Prudential Regulator Consults on UK Implementation of CRD V
    07/31/2020

    The U.K. Prudential Regulation Authority has published a consultation on proposed changes to the PRA rules to implement the fifth Capital Requirements Directive. CRD V came into force in July 2019 and EU Member States are required to implement the majority of its provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. must transpose those provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement. Certain of those provisions (including those relating to capital buffers and holding company approval and supervision) must be implemented in the U.K. by HM Treasury. Those provisions are the subject of a separate consultation by HM Treasury consultation (published on July 16, 2020). HM Treasury has delegated responsibility for implementation of the remaining provisions to the PRA.

    Read more.
  • UK Climate Financial Risk Forum Publishes 2020 Guide
    07/29/2020

    The U.K. Climate Financial Risk Forum has published its first guide providing practical recommendations for the financial services sector on how to respond to climate-related financial risks. The CFRF was established by the U.K. Prudential Regulation Authority and Financial Conduct Authority and is made up of industry representatives from the banking, insurance and asset management sectors, as well as others such as the London Stock Exchange Group and the Green Finance Institute. The CFRF aims to build capacity and share best practice across the finance industry in order to improve the financial services sector's response to the financial risks arising from climate change.

    Read more.
  • EU Single Resolution Board Publishes Guidance on Bank Operational Continuity and FMI Contingency Plans
    07/29/2020

    The EU Single Resolution Board has published new guidance for Eurozone banks for which it is the resolution authority on: (i) operational continuity in resolution for Eurozone banks; and (ii) financial market infrastructure contingency plans. The guidance applies to "significant" Eurozone banks that are directly prudentially supervised by the European Central Bank and certain other cross-border groups, for whom resolution is their strategy.

    Read more.
  • UK Government Launches Payments Landscape Review
    07/28/2020

    HM Treasury has launched a call for evidence on the U.K.'s payments landscape, which is the first stage of the Payments Landscape Review announced in June 2019. The government is seeking input on the opportunities, gaps and risks that need to be addressed to support the U.K.'s position as being at the forefront of payments technology. Responses may be submitted until October 20, 2020. The government will publish a summary of the responses it receives and set out next steps for the review.

    In the call for evidence, the government sets out the steps taken to achieve the aims that were published in 2012 to support the high-level strategy of ensuring that end user consumers and businesses benefit from the U.K. payment networks. Feedback is sought on the extent to which those aims have been achieved.

    HM Treasury also discusses the main incentives for new payment systems and services, covering the New Payments Architecture, Faster Payments, the impact of Open Banking on how the systems are used, trends towards new service providers and payment chains and development in cross-border payments. The call for evidence also reflects on the wider work being undertaken on crypto-assets and stablecoins.

    View the call for evidence on the U.K.'s payments landscape.
  • European Central Bank Publishes Results of Bank COVID-19 Vulnerability Analysis
    07/28/2020

    The European Central Bank Banking Division has published the results of the COVID-19 vulnerability analysis it conducted on Eurozone banks directly prudentially supervised under the Single Supervisory Mechanism. The analysis was designed to establish how 86 Eurozone banks would be impacted by the COVID-19 pandemic and any vulnerabilities that may arise over a three-year horizon.

    Read more.
  • UK Prudential Regulation Authority Announcement on Bank Dividend Payments and Share Buybacks Beyond 2020
    07/28/2020

    The U.K. Prudential Regulation Authority has published an announcement on its approach to dividend payments and share buybacks by large U.K. banks subject to its prudential supervision, in light of COVID-19. The PRA states that it intends to assess firms' plans for distributions beyond 2020 in Q4 2020, taking into account banks' current and projected capital positions and the level of uncertainty around the economy, market conditions and capital trajectories at that time.

    Read more.
  • UK Prudential Regulator Publishes Policy Statement on Asset Encumbrance
    07/27/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement on asset encumbrance, relevant to all PRA-regulated firms other than credit unions and insurance firms. The Policy Statement takes account of the PRA's consultation on its proposed expectations of how firms manage prudential risks associated with asset encumbrance. "Encumbered assets" are those that are used to secure, collateralize or credit-enhance a transaction and so cannot be freely transferred or liquidated by the pledging party. The PRA's consultation aimed, among other things, to ensure that firms: (i) put in place, and document, adequate risk management processes to monitor the potential impacts of asset incumbrance; (ii) appropriately consider the effects that increased asset encumbrance may have on the restoration of financial viability during a stress scenario; and (iii) ensure that asset encumbrance levels do not unduly impact the amount and cash value of assets that could be lent against in resolution.

    Read more.
  • European Central Bank Publishes Recommendation on Bank Dividend Distributions During COVID-19
    07/27/2020

    The European Central Bank has published an updated Recommendation on dividend distributions by significant institutions that are directly prudentially supervised by the ECB. The Recommendation states that, until January 1, 2021, no dividends should be paid out for the financial years 2019 and 2020, nor should share buy-backs aimed at remunerating shareholders take place. Banks that consider themselves legally required to pay out dividends should explain their underlying reasons to their joint supervisory team. Banks that plan to pay dividends to a non-Eurozone parent institution, parent financial holding company or parent mixed financial holding company should also discuss their intentions with their joint supervisory team.

    Read more.
  • European Commission Publishes Capital Markets Recovery Package in Response to COVID-19 Pandemic
    07/24/2020

    The European Commission has published a series of proposed legislative amendments to reduce the burden on financial institutions during the coronavirus pandemic in relation to their obligations under the EU Securitization Regulation, the Markets in Financial Instruments Directive and the Prospectus Regulation. The package is referred to as the Capital Markets Recovery Package and is designed to make it easier for companies to raise capital and increase banks' capacity to finance the recovery.

    Read more.
  • European Central Bank Consults on Compounded €STR Rates
    07/24/2020

    The European Central Bank has launched a consultation on proposals to publish compounded term rates based on the euro short-term rate (€STR). The consultation closes on September 11, 2020. The ECB is requesting feedback on specific characteristics of the compounded rate using €STR. Publication would take place on a daily basis shortly after the €STR publication. Published maturities could range from one week up to one year. A daily index, making it possible to compute compounded rates over non-standard periods, is also envisaged.
     
    View the ECB's consultation paper on compounded term rates based on €STR.
  • European Banking Authority Consults on Technical Standards on Pillar 2 and Combined Buffer Requirements for MREL under BRRD
    07/24/2020

    The European Banking Authority has launched a consultation on its draft Regulatory Technical Standards for the methodology that EU resolution authorities should use to estimate the Pillar 2 and combined buffer requirements used to set the minimum requirement for own funds and eligible liabilities under the EU Bank Recovery and Resolution Directive. Responses to the consultation should be submitted by October 24, 2020. The draft RTS are intended to be finalized by December 2020. 

    Read more.
  • European Banking Authority Consults on Technical Standards on Impracticability of Contractual Recognition of Bail-In
    07/24/2020

    The European Banking Authority has launched a consultation on draft Regulatory Technical Standards and draft Implementing Technical Standards on the impracticability of contractual recognition of write-down and conversion (i.e. bail-in) powers under the EU Bank Recovery and Resolution Directive. Responses to the consultation should be submitted by October 24, 2020.

    Read more.
  • European Central Bank Published Good Practice Guidance on Preparation for Benchmark Rate Reforms 
    07/23/2020

    The European Central Bank has published a report on the results of its industry-wide assessment of Eurozone banks’ readiness for the benchmark interest rate reforms, which affect both EONIA and EURIBOR in the euro area. The purpose of the report is to share good practices that the ECB has identified in its horizontal assessment of the preparedness of Eurozone banks supervised under the Single Supervisory Mechanism. According to the ECB, banks need to improve their preparation for the reforms and escalate their implementation of risk mitigation measures. 

    Read more.
  • European Banking Authority Consults on Technical Standards on Indirect Exposures
    07/23/2020

    The European Banking Authority has opened a consultation on proposed draft Regulatory Technical Standards on the determination of indirect exposures to clients of derivative and credit derivative contracts underlying a debt or equity instrument for large exposures purposes. The EU Capital Requirements Regulation, as amended by CRR 2, requires firms to add to the total exposures to a client the exposures arising from derivative contracts listed in Annex II of the CRR and credit derivative contracts, where the contract was not directly entered into with that client but the underlying debt or equity instrument was issued by that client. The proposed draft RTS set out how firms should determine exposures arising from derivative and credit derivative contracts not entered directly into with a client but whose underlying debt or equity instrument was issued by a client. The consultation closes on October 23, 2020.

    View the EBA's consultation paper.

    View details of CRR 2.
  • UK Prudential Regulator Consults on Simplified Obligations for Bank Recovery Planning
    07/23/2020

    The U.K. Prudential Regulation Authority has published a consultation on simplified obligations for PRA-authorized banks, buildings societies, PRA-designated investment firms and their qualifying parent undertakings that are subject to the Recovery Plans Part of the PRA Rulebook. The consultation is primarily aimed at smaller and non-systemic firms. The PRA's consultation closes on October 23, 2020, after which it plans to publish a final Policy Statement on its proposals in the second half of 2020 or 2021.

    Read more.
  • European Banking Authority Consults on Technical Standards for Estimating Default Probabilities and Losses Given Default under CRR 2
    07/22/2020

    The European Banking Authority has published draft Regulatory Technical Standards on the requirements for the internal methodologies or external sources to be used for estimating default probabilities and losses given default for firms subject to the revised Capital Requirements Regulation (CRR 2). Responses to the consultation should be submitted by October 22, 2020.

    Read more.
  • UK Prudential Regulator Consults on Supervision of New and Growing Non-Systemic Banks
    07/22/2020

    The U.K. Prudential Regulation Authority has published a consultation on proposed changes to its supervision of new and growing non-systemic U.K. banks. The consultation will primarily be relevant to banks in their first few years of authorization as a PRA deposit-taker and prospective banks interested in, or currently, applying for deposit taker authorization. The PRA notes that some new and growing banks may have sufficient experience and resources to quickly move to the standard expected of established banks. In deciding which banks should be subject to its new policy, the PRA would consider each banks' case on its merits and apply supervisory judgement. Responses to the consultation should be submitted by October 14, 2020. The PRA expects the amendments set out in the consultation to take effect in the first half of 2021.

    Read more.
  • Outcome of European Supervisory Authorities’ Review of PRIIPs Technical Standards Published
    07/21/2020

    The Joint Committee of the European Supervisory Authorities has published a letter addressed to the European Commission informing it of the outcome of the ESAs’ review of the Regulatory Technical Standards (Commission Delegated Regulation (EU) 2017/653) on the presentation, content, review and revision of a standardized “key information document” and the conditions for fulfilling the requirement to provide a KID. The RTS supplements the Packaged Retail and Insurance-based Investment Products Regulation, which introduced a requirement for manufacturers of PRIIPs to produce a KID with the intention of improving retail investors’ understanding of the financial products they were purchasing.

    Read more.
  • EU Forbearance for Issuer’s Account for COVID-19-Related Lease Modifications
    07/21/2020

    The European Securities and Markets Authority has published a statement on coordination of supervisory action on issuers’ accounting for lease modifications in light of the coronavirus pandemic. Issuers have encountered challenges in accounting for the large number of lease modifications granted in many jurisdictions. The International Accounting Standards Board issued an amendment to IFRS 16 in May 2020 which provided practical relief for lessees.

    Read more.
    TOPIC : COVID-19
  • UK Proposals to Extend Regulatory Perimeter to Capture Promotion of Unregulated Crypto-Assets
    07/20/2020

    HM Treasury has released proposals to amend the U.K.’s financial promotion rules to subject unregulated crypto-assets to the financial promotions regime. The Government proposals aim to enhance consumer protection, ensure market integrity and fight against financial crime. Responses to the consultation can be submitted until October 25, 2020. The Government is separately consulting on limiting the ability of authorized firms to approve financial promotions of unauthorized without consent from the Financial Conduct Authority.

    Read more.
  • UK Proposals to Tighten Financial Promotion Rules By Unauthorized Firms
    07/20/2020

    HM Treasury has released proposals to amend the U.K.’s financial promotion rules to provide increased consumer protection from misleading advertisements and a lack of suitable information. The U.K. financial promotion rules provide that a person may not communicate a financial promotion—an invitation or inducement to engage in an investment activity—unless the communication is exempt, the firm is authorized to carry on a regulated activity or the communication is approved by an authorized firm. Only financial promotions that are not real-time may be approved by an authorized person, and any approval must comply with the Financial Conduct Authority’s financial promotion rules. Any communication must be fair, clear and not misleading.

    Read more.
  • UK Establishes Independent FinTech Strategic Review
    07/20/2020

    The U.K. Economic Secretary to the Treasury, John Glen, has announced the establishment of the independent FinTech Strategic Review, which was first referenced in the 2020 Budget. The Review, which will be led by Ron Kalifa OBE, former CEO of Worldpay, aims to identify priority areas for industry, policy makers and regulators to investigate to facilitate the ongoing success of the U.K. fintech sector.

    Read more.
    TOPIC : FinTech
  • UK Plans to Accelerate Regulator’s Process for Cancelling Firm Authorization (in Certain Situations)
    07/20/2020

    HM Treasury has published a policy statement setting out how it intends to change the Financial Conduct Authority’s cancellation of authorization process for firms that are no longer carrying out regulated activities under the FCA’s remit. The FCA’s regulatory scope has expanded since the provisions were set out in the Financial Services and Markets Act 2000. HM Treasury is concerned that the inability of the FCA to act quickly to cancel a firm’s authorization and remove details of the firms from the Financial Services register may lead to consumer harm. The Government is therefore planning to add a simpler process whereby the FCA can remove a firm’s authorization where it suspects that the firm is no longer undertaking regulated activities, such as where a firm fails to pay its fees or file a regulatory return. The existing procedure, which requires the FCA to demonstrate that a firm is failing to fulfil the threshold conditions, has failed to carry on a regulated activity or that it is advantageous for the FCA to use its powers to meet its operational objectives, will not be amended. A bill to make the changes will be laid when Parliamentary time allows.

    View the policy statement on changes to the FCA’s cancellation of authorization process.

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  • UK Conduct Regulator Consults on Extending Certification and Conduct Rules Implementation Deadlines
    07/17/2020

    Following the announcement of the extension for solo-regulated firms of the deadline for completion of firms' first assessments of the fitness and propriety of their Certified Persons from December 9, 2020, to March 31, 2021, the U.K. Financial Conduct Authority has opened a consultation on extending certain other implementation deadlines for the Certification Regime and Conduct Rules. The extension of the deadline for firms' first fitness and propriety assessments was agreed to by HM Treasury in light of the continuing impact of the coronavirus pandemic.

    Read more.
  • HM Treasury Provides Guidance on Application of EU CRR Quick Fix Package During Brexit Transitional Period
    07/16/2020

    HM Treasury has published a statement on the application of the EU CRR Quick Fix package during the Brexit transitional period. The EU CRR Quick Fix package consists of a Regulation amending the Capital Requirements Regulation (and also amending the Regulation amending the CRR, known as CRR2) and it was published in the Official Journal of the European Union on June 26, 2020. The Regulation forms part of the EU's response to the coronavirus pandemic.

    Read more.
  • UK Financial Services Sector Plan for Supporting COVID-19 Recovery
    07/16/2020

    TheCityUK, the U.K.'s industry body for financial and related professional services, has published a report entitled "Supporting UK Economic Recovery: Recapitalising Businesses Post COVID-19". The report sets out options for how large debt burdens incurred by small and medium-sized businesses as a result of COVID-19 can be managed. The report was prepared in consultation with financial and professional services firms, HM Treasury, the Bank of England and the Financial Conduct Authority.

    Read more.
  • HM Treasury Consults on UK Implementation of CRD V
    07/16/2020

    HM Treasury has launched a consultation on the U.K.'s implementation of the EU amendments to the Capital Requirements Directive that were published in June 2019 (known as CRD V). EU Member States are required to implement the CRD V changes into their national regimes by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K must transpose those provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement. HM Treasury's consultation relates only to those aspects of CRD V that must be implemented via legislation. The rest of CRD V will be implemented by the U.K. Prudential Regulation Authority through updates to the PRA rules. Responses to HM Treasury's consultation should be submitted by August 19, 2020.

    Read more.
  • EU Sustainable Finance Group Publishes Principles for Recovery and Resilience
    07/15/2020

    The EU Technical Expert Group on Sustainable Finance has published a statement on five high-level principles for recovery and resilience. The statement is made in the context of the EU’s current discussions about recovery and resilience in response to the coronavirus pandemic. The TEG is proposing the five principles supported by recommendations for applying the EU’s Taxonomy to the EU’s recovery plan. The Taxonomy is set out in a recently adopted EU Regulation on the establishment of a framework to facilitate sustainable investment. The Taxonomy is a classification system for sustainable activities that is designed to provide a shared understanding of the environmental sustainability of activities and investments.

    Read more.
  • Stage 2 Report on Enhancing Cross-Border Payments Published
    07/13/2020

    The Committee on Payments and Market Infrastructures has published a report on enhancing cross-border payments and building blocks of a global roadmap. The report forms the second stage of the G20’s three-stage process to develop a roadmap that will enable countries to enhance their cross-border payments systems. The Financial Stability Board published the Stage 1 report in April 2020, which identified existing challenges in cross-border payments systems and specified key “frictions” in the cross-border payments system that contribute to these challenges. The third stage will involve coordination between the FSB and CPMI, together with other international organizations, to compile a roadmap for implementing the improvements. The FSB published a statement welcoming the CMPI report and confirmed that it intends to publish the Stage 3 report, which will be the roadmap for enhancing cross-border payments, in October.

    Read more.
  • Final EU Guidelines for Securitization Repositories Assessing Data Completeness and Consistency
    07/10/2020

    The European Securities and Markets Authority has published a final report and final guidelines on securitization repository data completeness and consistency thresholds. The guidelines will apply to EU securitization repositories that are registered with and supervised by ESMA. From January 1, 2021, ESMA will consider the guidelines in its supervision of securitization repositories.

    Read more.
  • EU Consultation on Guidelines for SFT Position Reporting by Trade Repositories
    07/09/2020

    The European Securities and Markets Authority has published a consultation paper on proposed Guidelines on the calculation of positions in Securities Financing Transactions by trade repositories under the EU Securities Financing Transactions Regulation. The consultation closes on September 15, 2020. ESMA intends to finalize the Guidelines for publication in Q4 2020 or Q1 2021.

    The proposed Guidelines aim to ensure consistency of position calculation by trade repositories to national regulators, including the time of calculations, the scope of the data used in calculations, the treatment of outliers, the recordkeeping of data and the calculation methodologies. They also aim to ensure a consistent methodology is used under SFTR and the European Market Infrastructure Regulation.

    View the consultation paper.
  • Basel Committee on Banking Supervision Finalizes Credit Valuation Adjustment Risk Framework
    07/09/2020

    The Basel Committee on Banking Supervision has published final revisions to the credit valuation adjustment risk framework under the Basel III standards. The updated international standard sets out the proposed regulatory capital treatment of CVA risk for derivatives and securities financing transactions. The CVA risk framework is designed to manage the risk of banks incurring mark-to-market losses from deterioration in the creditworthiness of counterparties in derivatives or SFTs. The framework was last revised in December 2017, partly to align it with the Basel Committee's market risk framework. The latest revisions include:
     
    1. The reduction of certain risk weights;
    2. The introduction of new index buckets and revised aggregation of CVA capital requirements;
    3. An amendment to the scope of portfolios subject to CVA risk capital requirements. SFTs, where the CVA risks stemming from such positions are not material, are excluded and certain client-cleared derivatives are exempt; and
    4. Revision of the overall calibration of the CVA risk framework, covering both the standardized and the basic approach.

    View the updated CVA standard.
  • UK Prudential Regulator Proposals to Extend Coverage under the Financial Services Compensation Scheme
    07/09/2020

    The U.K. Prudential Regulation Authority has opened a consultation on proposals for extending coverage of the Financial Services Compensation Scheme for temporary high balances. Responses to the consultation may be submitted until July 23, 2020. The PRA is proposing to extend coverage under the FSCS for temporary high balances, from six months to 12 months from the date of the deposit or the first date the balance becomes legally transferrable to the depositor. The coverage would revert to six months from February 1, 2021. The proposal is made because of the impact of COVID-19 on consumers.

    View the consultation paper.
  • Financial Stability Board Makes Recommendations to Support LIBOR Transition
    07/09/2020

    The Financial Stability Board and Basel Committee on Banking Supervision have published a report to the G20 on supervisory issues associated with benchmark transition. The report focuses on the transition away from using LIBOR, but is relevant to other Interbank Offered Rates. The report presents the findings of a survey on the status of the move from using LIBOR, whose usage U.K. regulators are attempting to cease from the end of 2021, and sets out recommendations for relevant authorities and supervisors. 

    Read more.
  • European Commission Publishes Notices to Financial Services Stakeholders on UK Withdrawal from EU
    07/07/2020

    The European Commission has published a series of updated notices, including many addressed to firms operating in the financial services industry, on the actions that should be taken to prepare for the end of the transition period following the U.K.'s withdrawal from the EU on January 31, 2020. The transition period ends on December 31, 2020. The notices most relevant to the financial services industry relate to asset management, banking and payment services, credit ratings agencies, emissions trading systems and consumer protection and passenger rights. They update and replace the notices originally published in 2018.

    Read more.
  • European Commission Consults on Proposed Revisions to EU Cybersecurity Rules
    07/07/2020

    The European Commission has launched a consultation on proposed revisions to the EU Directive on the security of network and information systems across the Union (commonly known as the NIS Directive), which is designed to protect the security of EU network and information systems. The NIS Directive sets out, among other things, the parameters of national network and information security strategies to be implemented by Member States for providers of "essential services", which include credit institutions (as defined under the EU Capital Requirements Regulation) and financial market infrastructures.

    Read more.
  • European Central Bank Publishes Guideline on Default Definition for Less Significant Eurozone Institutions
    07/07/2020

    The European Central Bank, Banking Supervision division has published a guideline harmonizing the threshold for assessing the materiality of credit obligations past due for the purposes of default assessments under the EU Capital Requirements Regulation. CRR defines the circumstances in which an obligor under a credit obligation will be deemed to be in default. The materiality of the credit obligation is relevant for these purposes, and CRR grants competent authorities the discretion to determine, according to their view of a reasonable level of risk, the threshold against which materiality should be measured.

    Read more.
  • European Banking Authority Report on Implementation of EU Prudential Framework During COVID-19
    07/07/2020

    The European Banking Authority has published a report on the implementation of certain prudential policies introduced by the EBA to deal with the effects of the COVID-19 pandemic. The report focuses on two areas in particular: implementation issues around the EBA's Guidelines on legislative and non-legislative moratoria on loan repayments and the criteria that institutions should follow for the identification and treatment of operational risk events and losses.

    Read more.
  • Financial Action Task Force Publishes 12-Month Review on Revised FATF Standards for Virtual Assets
    07/07/2020

    The FATF has published the results of its 12-month review into the revised FATF standards published in June 2019, designed to help tackle money laundering and terrorist financing risks connected with virtual assets and virtual asset service providers. The FATF's revised standards introduced a new Interpretive Note to Recommendation 15 on New Technologies, which clarified how countries should apply the FATF standards to virtual assets and VASPs, as well as updated guidance on a risk-based approach for virtual assets and VASPs. When the revisions were published, the FATF undertook to conduct a 12-month review of the changes.

    Read more.
  • European Commission Publishes Proposed Roadmap on Capital Markets Union Action Plan
    07/07/2020

    The European Commission has published a proposed Roadmap setting out details of its new Action Plan on the Capital Markets Union. The CMU is an EU initiative seeking to enhance and further integrate the capital markets of EU Member States. An action plan to develop the initiative was first adopted in 2015 and has been commented upon and updated since then, most recently in June 2020 when a High-Level forum on the CMU published a final report with 17 recommendations for advancing the CMU.

    Read more.
    TOPIC : Securities
  • Financial Action Task Force Report on Stablecoins
    07/07/2020

    The Financial Action Task Force has published a report on issues of anti-money laundering and counter-terrorism financing in relation to global stablecoins and stablecoins. The report was mandated by the G20 in October 2019, when it also published its own report on the impact of global stablecoins. The FATF uses the term "so-called stablecoins" in its report to avoid endorsing the use of the phrase "stablecoins", which it views as a marketing term used by promoters of such coins. The term "so-called stablecoins with the potential for mass production" refers to global stablecoins. The FATF has, in parallel, published a 12-month review of its revised FATF standards on virtual assets and virtual asset service providers setting out areas in which the FATF intends to provide updated guidance to cover newly identified risks and provide clarifications.

    Read more.
  • UK Resolution Authority Provides Clarity on Impact of LIBOR Transition on Bail-In and Stays Clauses
    07/07/2020

    Following the letter published on December 18, 2019, to the Chair of the Working Group on Sterling Risk-Free Reference Rates, which provided clarification on the impact that the LIBOR transition is likely to have on the prudential requirements for banks, the Prudential Regulation Authority has published a statement providing clarity on the implications of LIBOR transition for contracts in scope of the PRA’s rules on Contractual Recognition of Bail-In and Stay in Resolution. The PRA states that, where the sole purpose of an amendment to a liability or a financial arrangement is to cease using LIBOR, the amendment should not be considered a material amendment under the PRA rules. 

    Read more.
  • UK Conduct Regulator Statement on Open Access Regime for Exchange-Traded Derivatives
    07/06/2020

    The U.K. Financial Conduct Authority has published an updated statement on the open access regime for trading and clearing exchange-traded derivatives. The Markets in Financial Instruments Regulation provided a temporary opt-out from the open access requirements for trading venues and clearing houses in relation to ETDs. The opt-out was due to expire on July 3, 2020. However, in light of COVID-19, the EU has announced it is postponing the implementation of the open access regime for ETDs until July 3, 2021. The FCA's statement acknowledges the EU's postponement of the regime and states that the amended open access regime will form part of retained EU law that will be transposed by the U.K. post-Brexit and will continue to apply in the U.K. after the end of the transition period.

    Read more.
  • UK Government Publishes Global Human Rights Sanctions Regulations 2020
    07/06/2020

    HM Treasury has published the Global Human Rights Sanctions Regulations 2020, a new piece of U.K. legislation designed to target those involved in serious violations of human rights. The Regulations come into force on July 6, 2020. They apply to relevant conduct by any person across the whole of the U.K. but also have extra-territorial effect, additionally applying to conduct by U.K. persons (including U.K. incorporated companies and overseas branches of such companies) outside the U.K. and by any person in the territorial sea adjacent to the U.K.

    Read more.
  • EU Notice on Postponement of Open Access Provisions for Exchange-Traded Derivatives
    07/03/2020

    A notice of information has been published in the Official Journal of the European Union, postponing the entry into application of open access provisions for exchange-traded derivatives under the Markets in Financial Instruments Regulation until July 3, 2021.

    MiFIR requires a trading venue to provide open and non-discriminatory access to a CCP so that a CCP can clear trades in transferable securities, money market instruments and ETDs concluded on a trading venue of their choice. There is a reciprocal requirement on CCPs to provide open and non-discriminatory access to a trading venue that wishes to clear financial instruments through a particular CCP. These provisions have been in force for over-the-counter products (i.e. those not traded on a regulated market) for some time. The European Securities and Markets Authority published a statement in June 2020 setting out the circumstances in which trading venues and CCPs may refuse requests for access, acknowledging the strain placed on trading venues and CCPs by COVID-19, which may impact their ability to deal with such requests.

    Read more.
  • Basel Committee on Banking Supervision Publishes Final Updated AML Guidelines
    07/02/2020

    The Basel Committee on Banking Supervision has published final updated guidelines on the "Sound management of risks related to money laundering and financing of terrorism". The updated guidelines apply to all banks, banking groups and relevant regulators.

    The updated guidelines include detailed guidance on the interaction between prudential and AML/CFT supervision to enhance the effectiveness of the supervision of banks' AML/CFT regimes. The updated guidelines also merge and replace two other Basel Committee documents, namely Customer due diligence for banks (October 2001) and Consolidated KYC risk management (October 2004). The guidelines should be read in conjunction with other Basel Committee papers, such as the Core principles for effective bank supervision, as well as relevant guidance published by the Financial Action Task Force.

    View the updated guidelines.
  • Financial Stability Board Statement on COVID-19 Impact on Benchmark Reform
    07/01/2020

    The Financial Stability Board has published a statement on the impact of COVID-19 on global benchmark reforms. Although the FSB acknowledges some aspects of benchmark reform will be delayed due to the effects of COVID-19, many areas can go on as planned and the FSB considers that firms should continue to make wider use of risk-free rates to reduce reliance on IBORs. Firms should also ensure their transition programs facilitate a transition away from LIBOR before the end of 2021. The FSB will publish a report on the remaining challenges for benchmark transition later in July.

    View the FSB's statement on the impact of COVID-19 on LIBOR benchmark reform.
  • Financial Action Task Force Sets out Priorities for 2020-2022
    07/01/2020

    The new German Presidency of the Financial Action Task Force commences today and has set out its objectives for 2020-2022.

    Read more.
  • Final EU Guidelines on the Treatment of Structural FX Under Capital Requirements Regulation
    07/01/2020

    The European Banking Authority has published final guidelines on the implementation of the structural FX provision under the Capital Requirements Regulation. The CRR requires institutions to calculate their net open positions in currencies according to specified formulae but permits institutions to exclude positions that have been taken for hedging purposes and that are structural. The guidelines will apply to both firms and national regulators from January 1, 2022, to allow firms time to comply with the new framework.  However, regulators should review, update or revoke permissions already granted before the guidelines apply.

    Read more.
  • UK Conduct Regulator Announces Expectations for Approved Persons Regime for Benchmark Administrators During COVID-19
    06/30/2020

    The U.K. Financial Conduct Authority has announced its expectations for benchmark administrators and firms using Appointed Representatives that are subject to the Approved Persons Regime during COVID-19. The APR has been superseded by the Senior Managers and Certification Regime for most solo- and dual-regulated firms. However, as benchmark administrators were a new category of authorized firm, they were granted a one-year extension from the roll-out of the SM&CR and so remain subject to the APR until December 7, 2020, when the SM&CR for benchmark administrators that do not undertake other regulated activities will be implemented.

    Read more.
  • UK Prudential Regulator Statement on EU CRR ‘Quick Fix’ Package
    06/30/2020

    The U.K. Prudential Regulation Authority has published a statement on the EU Capital Requirements Regulation ‘Quick Fix’ package, confirming that it applies directly to all PRA-regulated firms. The CRR Quick Fix package has applied across the EU since June 27, 2020. The CRR Quick Fix package is part of the EU’s response to the coronavirus pandemic.

    In its statement, the PRA confirms that U.K.-regulated banks already applying the CRR transitional arrangements for IFRS 9 must implement the revised calculations as a result of the Quick Fix package, which extended by two years the transitional measures for the implementation of IFRS 9. In addition, a bank contemplating ceasing to apply the IFRS 9 transitional measures must first obtain PRA approval to do so. The PRA is encouraging those banks to submit their requests by July 31, 2020, which requests must include a written explanation of the basis on which senior management has satisfied itself with the continuing adequacy of the bank’s financial resources.

    Read more.
  • Financial Action Task Force Consults on Updating Guidance for Proliferation Financing Risks
    06/30/2020

    The Financial Action Task Force has opened a consultation on amendments to Recommendation 1 and its Interpretive Note. Recommendation 1 provides guidance on assessing risks and applying a risk-based approach to money laundering and terrorist financing risks. The FATF is proposing to update the Recommendation to require countries and the private sector to identify and assess risks of potential breaches, non-implementation or evasion of the targeted financial sanctions obligations referred to in Recommendation 7 linked to proliferation financing risks. Responses to the consultation may be submitted until August 31, 2020. The FATF intends to consider the feedback at its plenary session in October 2020.

    View the consultation paper.
  • Extension of Fitness and Propriety Assessments for UK FCA-Regulated Firms
    06/30/2020

    The U.K. Financial Conduct Authority has announced the extension for solo-regulated firms of the deadline for completion of firms’ first assessments of the fitness and propriety of their Certified Persons. In light of the impact of the coronavirus pandemic on financial institutions, HM Treasury agreed to extend the deadline from December 9, 2020, to March 31, 2021, although the legislation to formalize the extension is yet to be finalized. The FCA states that firms that are able to carry out their assessments before the March 2021 deadline, should do so.

    Read more.
  • UK Legislation Made to Onshore EMIR 2.2
    06/26/2020

    The U.K. has published Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020 to onshore the new EU regime for third-country CCPs introduced by amendments to the European Market Infrastructure Regulation, known as EMIR 2.2. EMIR 2.2, which has applied since January 1, 2020, is part of the EU’s push to enhance the regulation of CCPs amid concerns regarding potential CCP failures given their increasing systemic importance and is widely regarded as a direct response to Brexit, given that three of the largest European CCPs are based in the U.K.

    Read more.
  • UK Prudential Regulator Updates Statement on Regulatory Reporting
    06/26/2020

    The U.K. Prudential Regulator has announced that, given the time firms have had to adjust to working during COVID-19 and the need for prudential regulators to access data in a timely manner, the PRA expects that, in general, firms will submit regulatory reports on time going forward. Firms experiencing difficulty with this should contact their supervisor. This amends the statement made by the PRA on April 2, 2020, when it stated that it would accept delayed submission of certain regulatory returns with deadlines on or before May 31, 2020. The PRA's previous statement, which confirmed its flexibility on receiving firms' Pillar 3 disclosures, still stands, although the PRA notes that it does not expect publication timelines for Pillar 3 disclosures to be affected by COVID-19 in most cases.

    View the PRA's statement on regulatory reporting during COVID-19.

    View the PRA's April statement on regulatory reporting.
  • EU Banking ‘Quick Fix’ Regulation Published
    06/26/2020

    A new EU Regulation amending the Capital Requirements Regulation (and also amending the Regulation amending the CRR, known as CRR2), has been published in the Official Journal of the European Union. It is known as the CRR Quick Fix package and applies from June 27, 2020. The Regulation forms part of the EU’s response to the coronavirus pandemic. 

    Read more.
  • International Organization of Securities Commissions Proposes Artificial Intelligence Requirements for Market Intermediaries and Asset Managers
    06/25/2020

    The International Organization of Securities Commissions has issued a consultation on proposed guidance on the use of artificial intelligence and machine learning by market intermediaries and asset managers. The draft guidance is intended to assist IOSCO member jurisdictions to develop appropriate regulatory frameworks to mitigate the risks arising from the increased use of AI and ML by financial institutions. Comments on the draft Guidance can be submitted until October 26, 2020.

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  • EU Amends Technical Standards on Prudent Valuation in Response to COVID-19
    06/25/2020
    An EU Regulation amending the Regulatory Technical Standards on prudent valuation has been published in the Official Journal of the European Union. The amending Regulation amends Delegated Regulation (EU) No 101/2016 (which supplements the EU Capital Requirements Regulation) by increasing the aggregation factor applicable to the core approach from 50% to 66% until December 31, 2020, with the aim of it applying for the June 30, 2020, COREP reporting. The amending Regulation applies from June 26, 2020.

    View the amending Regulation.
  • European Banking Authority Publishes Final Draft Technical Standards for Public Disclosures and Reporting Requirements Under CRR II
    06/24/2020

    The European Banking Authority has published its final reports and draft Implementing Technical Standards for public disclosures and supervisory reporting requirements under the revised EU Capital Requirements Regulation. CRR implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce the draft ITS to ensure comparability of the disclosures made with international non-EU active banks.

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  • European Banking Authority Publishes Final Draft Technical Standards for Public Disclosures and Reporting Requirements Under CRR II
    06/24/2020

    The European Banking Authority has published its final reports and draft Implementing Technical Standards for public disclosures and supervisory reporting requirements under CRR II. The EU Capital Requirements Regulation implements the Basel Committee on Banking Supervision's Pillar 3 disclosure requirements, which require banks to disclose information about their risks and risk management procedures and policies. In 2018, the Basel Committee published updated Pillar 3 requirements. The revised CRR, published in June 2019, incorporates the revised Basel Committee disclosure standards and mandates the EBA to produce the draft ITS to ensure comparability of the disclosures made with international non-EU active banks.

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  • UK Regulator Publishes Discussion Paper on New Investment Firm Prudential Regime
    06/23/2020

    The U.K. Financial Conduct Authority has published a discussion paper setting out its initial views on establishing a new Investment Firm Prudential Regime. The EU introduced a new prudential regime for EU investment firms through the Investment Firm Regulation and the Investment Firm Directive, which will (mostly) apply from June 26, 2021. The U.K. encouraged the introduction of the EU IFD and IFR while it was a member of the EU. However, the U.K. will not implement the IFR and IFD into U.K. laws as they come into force after the U.K. has left the EU and after the Brexit transitional period ends.

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  • HM Treasury Consults on UK Transposition of Revised EU Bank Recovery & Resolution Directive
    06/23/2020

    HM Treasury has launched a consultation on the U.K.'s intended transposition of the revised EU Bank Recovery and Resolution Directive (known as BRRD 2). BRRD 2 came into force in June 2019 and introduced a series of amendments to BRRD. EU Member States are required to transpose BRRD 2 into their national laws and apply the provisions by no later than December 28, 2020, except for provisions relating to Minimum Requirements for Own Funds and Eligible Liabilities, which apply from January 1, 2024. Under the terms of the Brexit Withdrawal Agreement, the U.K. government has committed to implementing all EU legislation due to be transposed before the end of 2020. HM Treasury has confirmed that, as the implementation of MREL provisions is not required until 2024, the U.K. intends to exercise its discretion to transpose those requirements. The U.K. already has a MREL framework which is based on the Financial Stability Board's Total Loss Absorbing Capacity standards.

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  • HM Treasury Updates Policy Statement on Prudential Standards for Investment Firms in UK Financial Services Bill
    06/23/2020

    HM Treasury has published an updated policy statement on its proposals for the prudential standards in the U.K.'s upcoming Financial Services Bill. The Financial Services Bill will set out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. HM Treasury published its original policy statement on the proposed prudential regime in March 2020, setting out its plans to: (i) complete the U.K.'s implementation of the remaining Basel III standards; and (ii) establish a new prudential regime for U.K. investment firms.

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  • EU Sustainable Finance Taxonomy Regulation Published
    06/22/2020

    A new EU Regulation on the establishment of a framework to facilitate sustainable investment (commonly referred to as the Taxonomy Regulation) has been published in the Official Journal of the European Union. The Taxonomy is a classification system for sustainable activities that is designed to provide a shared understanding of the environmental sustainability of activities and investments. The Regulation sets out the environment objectives for the Taxonomy and the criteria for determining whether an economic activity qualifies as environmentally sustainable. It also makes various amendments to the Sustainable Finance Disclosure Regulation, including requiring the European Supervisory Authorities to develop regulatory technical standards specifying the content and presentation of information demonstrating that a given investment does not significantly harm relevant environmental objectives. 

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  • UK Conduct Regulator Consults on Permanent Ban for Marketing Speculative Illiquid Securities to Retail Investors
    06/18/2020

    The U.K. Financial Conduct Authority has launched a consultation on its proposals to make permanent its ban on the mass-marketing of speculative illiquid securities to retail investors. The FCA’s temporary product intervention measures, restricting the sale of speculative illiquid securities to retail investors other than sophisticated or high net worth investors, came into force on January 1, 2020 for a period of one year. The FCA’s consultation sets out the FCA’s plan for making the measures permanent and extending them to include listed bonds with similar features to speculative illiquid securities that are not regularly traded. Responses to the consultation should be submitted by October 1, 2020.

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  • European Banking Authority Publishes Amended Draft Technical Standards for Passport Notifications
    06/18/2020

    The European Banking Authority has published amending draft Regulatory Technical Standards and Implementing Technical Standards on passporting notifications under the fourth Capital Requirements Directive. CRD4 requires an EU bank wishing to establish a branch in another EU Member State to notify the national regulator of its home Member State of certain information. In the event of any changes in the information supplied, the relevant bank must notify the national regulators of both the home and host Member State at least one month prior to the change coming into effect. In 2014, the EBA produced RTS on the information to be provided to the national regulators in connection with the exercise of these passporting rights, and ITS on the forms, templates and procedures for such notifications.

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  • European Banking Authority Extends Payments Moratoria Guidelines
    06/18/2020

    The European Banking Authority has extended the applicability of its Guidelines on legislative and non-legislative loan repayments in light of the ongoing effects of COVID-19. The Guidelines were originally published in April 2020 and stated that, where payment moratoria were based on national law or a private-sector initiative broadly applied by credit institutions in response to COVID-19, they would not be classified as forbearance or distressed restructuring measures. The Guidelines as originally published applied to moratoria applied before June, 30 2020. That deadline has now been extended to moratoria applied before September 30, 2020.
     
    View the EBA's updated statement on its Guidelines on payments moratoria.
     
    View details of the EBA's original statement on its Guidelines on payments moratoria.
  • European Banking Authority Publishes Peer Review of Deposit Guarantee Scheme Stress Test Results
    06/17/2020

    The European Banking Authority has published the results of its peer review of EU deposit guarantee schemes. The EU Deposit Guarantee Scheme Directive establishes requirements for EU DGSs, including that Member States conduct stress tests of their DGSs. Member States were required to report on their stress tests by July 3, 2019, and the EBA has based its peer review report on the results of the tests. The report is intended to assess the resilience of EU DGSs and identify good practices and areas for improvement.

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  • UK Publishes Post-Brexit Cyber Sanctions Regulations
    06/17/2020

    The U.K. Government has published the Cyber (Sanctions) (EU Exit) Regulations 2020 and an explanatory memorandum. The Regulations are made under the Sanctions and Anti-Money Laundering Act 2018, which was introduced to enable the U.K. Government to implement international sanctions following its departure from the EU. The majority of the SAMLA provisions entered into force on November 22, 2018. The purpose of the Regulations is to ensure that the U.K. has an effective cyber sanctions regime at the end of transitional period (currently scheduled for December 31, 2020) as part of the U.K.'s exit from the EU.

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  • UK Payment Systems and Conduct Regulators Publish Joint Statement on Access to Cash
    06/16/2020

    The U.K. Payment Systems Regulator and U.K. Financial Conduct Authority have published a joint statement on their approach to maintaining access to cash for those that need it in light of bank branch and cash machine closures due to COVID-19. The regulators have adopted a series of actions, including mapping which regions have seen branch and cash machine closures, working with banks, building societies, the Post Office and Link to ensure access to these facilities is re-established as soon as possible and focusing on the needs of vulnerable consumers who require ongoing access to cash. In the longer-term, the regulators will work to ensure reasonable access to cash is maintained, including through use of shared services and local community initiatives, and anticipate additional powers to preserve access to cash from upcoming legislation announced in the U.K. Government’s 2020 budget.
     
    View the PSR's statement on access to cash.
     
    View the FCA's statement on access to cash.
     
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • EU Working Group on Risk-Free Rates Publishes Recommendation on Voluntary Compensation for Swaptions
    06/16/2020

    The EU Working Group on Risk-Free Rates has published its recommendation on voluntary compensation for swaptions affected by the CCP discounting transition from EONIA to €STR. The recommendation follows the Working Group’s March 2020 consultation on the topic. The Working Group recommends that counterparties exchange voluntary compensation for relevant legacy swaption contracts and that market participants contact their swaption counterparties promptly to determine whether compensation is required. 

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  • European Banking Authority Call for Input on Impact of De-Risking on Financial Institutions and Consumers
    06/15/2020
    The European Banking Authority has launched a call for input to understand why financial institutions choose to “de-risk” (meaning they elect not to service a particular customer or category of customers on the basis of higher money laundering and terrorist financing risks) instead of managing the risks of working with those customers. Responses are sought from financial institutions and end users by September 11, 2020. The call for input will inform the EBA’s Opinion on the risks of money laundering and terrorist financing affecting the EU’s financial sector.
     
    View the EBA's call for input.
  • European Securities and Markets Regulator Publishes 2019 Annual Report and Updated 2020 Work Program
    06/15/2020

    The European Securities and Markets Authority has published its 2019 Annual Report together with an updated version of its 2020 Work Program, incorporating changes in response to the COVID-19 pandemic.
     
    ESMA’s 2019 Annual Report discusses ESMA’s work in 2019, which included: (a) the entry into force of EMIR 2.2, including significant new responsibilities for ESMA in the authorization and supervision of CCPs; (b) ESMA’s common supervisory action on the application of the revised Markets in Financial Instrument Directive’s requirements on the assessment of appropriateness, for which ESMA will consider whether any follow-up work is needed in 2020; (c) reviews of MiFID II and the Markets in Financial Instruments Regulation, including on fair access to, and lowering the cost of, market data and the consolidated tape; and (d) sustainable finance, including technical advice delivered to the European Commission on the integration of sustainability risks for investment firms and investment funds into relevant EU legislation, a report on undue short-termism in securities markets and contributions to the technical expert group on sustainable finance which is due to deliver technical advice on delegated legislation relating to the EU Benchmarks Regulation.

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  • UK Government Amends Sanctions Legislation
    06/13/2020

    HM Treasury has published the Sanctions (EU Exit) (Miscellaneous Amendments) Regulations and the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations, amending certain aspects of the U.K. sanctions regime. The legislation is made under the Sanctions and Anti-Money Laundering Act 2018, which was introduced to enable the U.K. Government to implement international sanctions following its departure from the EU. The majority of the SAMLA provisions entered into force on November 22, 2018.

    Read more.
  • European Commission Consults on Proposed EU Green Bond Standard
    06/12/2020

    The European Commission has published a consultation on the establishment of an EU Green Bond Standard. The EU's GBS initiative forms part of the European Green Deal, which aims to increase the EU's climate action and environmental policy ambitions. The proposed GBS will establish standards and labels for green financial products and instruments. In June 2019, the EU Technical Expert Group on Sustainable Finance published a report on the proposed GBS, setting out ten recommendations for the substance of the GBS and for how market participants and regulators could support and monitor it. In March 2020, the TEG also published a Usability Guide to the GBS, setting out the TEG's views on its application, including confirming its view that the GBS should be voluntary. The TEG's March 2020 report also included a series of recommendations for the secondary legislation to be published in connection with the EU's proposed Taxonomy Regulation. The Commission and TEG recently published joint FAQs on the EU taxonomy and GBS.

    Read more.
  • FICC Markets Standards Board Publishes Case Studies for Managing LIBOR Transition Conduct Risks
    06/11/2020

    The FICC Markets Standards Board has published a Spotlight Review on case studies for navigating conduct risks during the LIBOR transition, which is due to be completed by the end of 2021. The Review will be of interest to all market participants, including sell-side, buy-side and corporates. It is intended to assist in the identification and management of conduct risks related to the LIBOR transition. The Review assesses risks to market fairness and effectiveness that could arise during the LIBOR transition and discusses how market participants could tackle these risks. Using practical case studies, the Review draws attention to how uncertainties might lead to decision-making challenges for market participants offering new products to clients or changing performance benchmarks.

    The U.K. Financial Conduct Authority published a statement in November 2019 setting out its expectations of firms relating to governance and accountability, replacing LIBOR with alternative rates in existing contracts, offering new products with alternative rates, communicating with customers about the transition from LIBOR and best practice for firms investing on behalf of clients.

    View the FMSB Spotlight Review on case studies for navigating LIBOR transition conduct risks.

    View the FCA's statement on conduct risks.
  • European Commission Publishes Draft Delegated Regulation on Fees Charged to Third-Country Central Counterparties
    06/11/2020

    The European Commission has published a draft delegated regulation on the fees charged by the European Securities and Markets Authority to central counterparties established in third-countries that are recognized by ESMA and able to provide clearing services in the EU. The draft regulation will supplement the European Market Infrastructure Regulation. EMIR was revised twice during 2019. The second revision (known as EMIR 2.2) introduced changes to the procedures and authorities involved in the authorization of CCPs and the requirements for the recognition of third-country CCPs. EMIR 2.2, is part of the EU’s push to enhance the regulation of CCPs amid concerns regarding potential CCP failures given their increasing systemic importance and is widely regarded as a direct response to Brexit, given that three of the largest European CCPs are based in the U.K. Feedback on the draft delegated regulation can be submitted until July 9, 2020.

    Read more.
  • EU Statement on Open Access Requests for Exchange-Traded Derivatives
    06/11/2020

    The European Securities and Markets Authority has published a statement on the open access provisions for exchange-traded derivatives under the Markets in Financial Instruments Regulation.

    MiFIR requires a trading venue to provide open and non-discriminatory access to a CCP so that a CCP can clear trades in transferable securities, money market instruments and ETDs concluded on a trading venue of their choice, which will in turn allow the members of a trading venue to select the CCP they wish to use for clearing. There is a reciprocal requirement on CCPs to provide open and non-discriminatory access to a trading venue that wishes to clear financial instruments through a particular CCP. These provisions are controversial since they mean that valuable intellectual property and IT systems developed by exchanges effectively must be made available to competitors or new market entrants. It has been argued that the open access requirements make the EU unattractive as a location for exchange businesses due to the commercial disadvantages that result for those exchanges which have successfully invested in innovation.

    Read more.
  • European Commission Publishes Draft Delegated Regulations on Criteria for Tiering of Third-Country CCPs and on Comparable Compliance
    06/11/2020

    The European Commission has published two draft delegated regulations, the first is on the criteria for determining whether a third-country CCP is systemically important and the second is on the minimum elements to be assessed by the European Securities and Markets Authority when assessing third-country CCPs’ requests for comparable compliance and the modalities and conditions of that assessment. The draft regulations will supplement the European Market Infrastructure Regulation. EMIR was revised twice during 2019.  The second revision (known as EMIR 2.2) introduced changes to the procedures and authorities involved in the authorization of CCPs and the requirements for the recognition of third-country CCPs. “EMIR 2.2” is part of the EU’s push to enhance the regulation of CCPs amid concerns regarding potential CCP failures given their increasing systemic importance and is widely regarded as a direct response to Brexit, given that three of the largest European CCPs are based in the U.K. Feedback on the draft delegated regulations can be submitted until July 9, 2020.

    Read more.
  • Bank of England Confirms Daily Compounded SONIA Index
    06/11/2020

    Following the discussion paper published on February 26, 2020, the Bank of England has announced that it will begin publishing a daily compounded Sterling Overnight Index. It is expected that this will start in early August, although the BoE will confirm the date in due course. The daily compounded index would represent the return on an investment earning daily interest at the SONIA rate; market participants could calculate the interest payable on their instruments by reference to the change in the index between two dates. The BoE has decided not to proceed with publishing the proposed SONIA period averages due to lack of industry consensus on the usefulness of such data and the underlying conventions. The BoE will consider producing this data if market participants are able to reach a more united view.

    Read more.
  • European Commission Publishes FAQs on Sustainable Finance Initiatives
    06/10/2020

    The European Commission has published Frequently Asked Questions on the EU taxonomy and Green Bond Standard. The EU taxonomy is a classification system that will create a common language for sustainable activities, to help determine whether an economic activity is environmentally sustainable. The Green Bond Standard establishes labels for financial products that are judged to be "green". The taxonomy and Standard are two products of the Commission's 2018 Action Plan on Financing Sustainable growth. 

    Read more.
  • Final Recommendations on EU Capital Markets Union Published
    06/10/2020

    The High Level Forum on the Capital Markets Union has published its final report setting out 17 recommendations aimed at moving the EU’s capital markets forward and completing the Capital Markets Union. The recommendations are grouped into four main clusters, which focus on: (i) creating a vibrant and competitive business environment; (ii) building stronger and more efficient market infrastructure; (iii) fostering retail investments in capital markets; and (iv) going beyond boundaries across the internal market.

    Read more.
    TOPIC : Securities
  • UK Regulators Acknowledge European Systemic Risk Board Recommendation on Financial Institution Distributions
    06/08/2020

    The Bank of England and U.K. Prudential Regulation Authority have publicly acknowledged the ESRB's Recommendation on the restriction of distributions during COVID-19. The ESRB recommends that EU financial institutions refrain from making dividend distributions, entering into buy-backs of ordinary shares or creating obligations to pay variable remuneration to material risk takers where those actions reduce the quantity or quality of own funds at the EU group level and sub-consolidated or individual level. The BoE and PRA note that the Recommendation applies to U.K. authorities during the Brexit transition period.

    View the BoE and PRA's joint statement on the ESRB's Recommendation.

    View details of the ESRB's Recommendation.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • European Systemic Risk Board Announces Further Actions to Combat Impact of COVID-19
    06/08/2020

    The European Systemic Risk Board has announced a series of further actions designed to combat the impact of COVID-19 on European financial markets. The actions relate to the five priority areas already identified by the ESRB as requiring particular focus in the context of the COVID-19 pandemic, as follows:
    • Implications for the financial system of guarantee schemes and other fiscal measures to protect the economy: the ESRB has published a Recommendation introducing minimum requirements for national monitoring of the financial stability implications of the various debt moratoria and guarantee schemes introduced by Member States to support economies through COVID-19 (Recommendation A); national regulators are also advised to regularly report information on these schemes to the ESRB in accordance with reporting templates to be published by the ESRB by June 30, 2020 (Recommendation B); national regulators implicated by the Recommendation should communicate the actions they have taken, or intend to take, in response to the Recommendation A by July 31, 2020 and Recommendation B by December 31, 2020;
    Read more.
  • Final EU Guidelines on Compliance Function Requirements Under MIFID II
    06/05/2020

    The European Securities and Markets Authority has published final guidelines on the compliance function requirements that are set out in the revised Markets in Financial Instruments package. The final guidelines replace ESMA's 2012 guidelines issued under MiFID I.

    Read more.
    TOPIC : MiFID II
  • UK Conduct Regulator Publishes Guidance on Branch Access During COVID-19
    06/04/2020

    The U.K. Financial Conduct Authority has published guidance for banks on continuing to make branch access available for essential services. In considering reopening and operating branches, banks should balance the needs of their customers against the safety and welfare of their staff. Maintaining access to essential services for vulnerable customers, such as access to cash, telephone banking and in-person payments, should be a particular priority. Firms should also prioritize the reinstatement of access to cash and essential services in local areas which have lost access to bank branches as a result of the pandemic, and, where this is not possible, should ensure they communicate clearly with customers through websites and physical signs at branches to point them to alternatives, including Post Office services.
     
    View the FCA's guidance on branch access during COVID-19.
     
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • UK Conduct Regulator Update on COVID-19 Response and 2020 Expectations
    06/04/2020

    The U.K. Financial Conduct Authority’s Executive Director of Supervision for Investment, Wholesale and Specialists, Megan Butler, has given a speech setting out the FCA’s current priorities, its expectations of firms during the COVID-19 pandemic and the outcomes it is focusing on for the wealth management sector, as well as the future priorities for financial regulation.
     
    The FCA initially prioritized immediate relief for firms and consumers, including on mortgages and unsecured lending products, at the outset of the COVID-19 crisis, but is now looking at how it will respond to the challenges of COVID-19 on a more long-term basis. This longer-term approach includes ensuring a good level of operational resilience (in line with the FCA’s ongoing consultation on that topic), that markets can continue to function well, that customers are treated fairly and protected from scams and that the FCA understands firms’ financial resilience so that they can fail in an orderly manner. 

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  • UK Prudential Regulator Publishes Further Guidance on IFRS 9 and Capital Requirements
    06/04/2020

    The U.K. Prudential Regulation Authority has published a “Dear CEO” letter providing further guidance on IFRS 9 and capital requirements in the context of COVID-19. The PRA published a “Dear CEO” letter in March 2020, advising firms on the application of certain key concepts (including the definition of "default" in the Capital Requirements Regulation and expected credit loss accounting under IFRS 9). This guidance related in large part to payment holidays, many of which are now coming to an end. The PRA’s latest guidance therefore focuses on exits from those initial payment deferrals. 

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  • Bank of England Warns Financial Market Infrastructures Against Profit Distributions
    06/04/2020

    The Bank of England has written to CEOs of U.K. financial market infrastructure providers, urging them to carefully consider the additional risks and potential financial and operational demands of COVID-19 when determining shareholder distributions or variable remuneration. U.K. FMI providers are expected to discuss any intended shareholder distributions with the Bank of England.
     
    View the BoE's Dear CEO letter to FMIs.
     
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • EU Consultation on Proposed Capital Requirements of Non-Modellable Risks Under the Fundamental Review of the Trading Book
    06/04/2020

    The European Banking Authority has opened a consultation on proposed Regulatory Technical Standards on capital requirements of non-modellable risks under the Fundamental Review of the Trading Book. The Regulation amending CRR, which was finalized in June 2019, implements, among other things, the Basel III revised requirements to calculate own funds requirements for market risk (FRTB). It will apply directly across the EU from June 28, 2021. The consultation closes on September 4, 2020.

    Read more.
  • First Consultations on Proposed Technical Standards for New EU Investment Firm Prudential Regime
    06/04/2020

    The European Banking Authority has opened consultations on several draft technical standards required to implement the new prudential framework for investment firms. The Investment Firm Regulation and the Investment Firm Directive introduce a more tailored prudential regulatory regime for many EU investment firms that reflect the risks inherent in the diverse activities those firms undertake. It also aims to amend the prudential requirements imposed on certain investment firms to avoid the imposition of undue administrative burdens by removing those firms from the scope of the revised Capital Requirements Regulation and Capital Requirements Directive. Only the largest investment firms will be subject to, and need to obtain bank authorization under, CRD and CRR. The majority of both the IFR and IFD will apply from June 26, 2021. The EBA's consultations are on proposed technical standards that will supplement the IFR and IFD.

    Read more.
  • European Banking Authority Provides Additional Opinion on Strong Customer Authentication Requirements for Account Servicing Payment Service Providers
    06/04/2020

    The European Banking Authority has published an Opinion on the obstacles to the provision by third-party service providers of account information and payment initiation services under the revised Payment Services Directive. PSD2 and the related Regulatory Technical Standards on strong customer authentication and common and secure communication require account servicing payment service providers to establish access interfaces through which third-party service providers can securely access a customers’ payment accounts. Where the ASPSP provides a dedicated interface (as opposed to a modified customer interface), the SCA RTS require it to ensure that there are no obstacles to the provision of services by third-party service providers. The EBA has published the Opinion in response to queries from market participants on issues arising in this area.

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  • EU Consultation on Draft Guidelines on Outsourcing to Cloud Service Providers
    06/03/2020

    The European Securities and Markets Authority has opened a consultation on draft guidelines on outsourcing to cloud service providers. The draft guidelines cover: (i) governance, documentation, systems and procedures that firms should have in place; (ii) the assessment and due diligence to be undertaken before outsourcing arrangements are entered; (iii) minimum elements that outsourcing agreements should include; (iv) exit strategies; and (v) access and audit rights. The consultation closes on September 1, 2020. ESMA expects to publish the final guidelines in Q4 2020 or Q1 2021.

    Read more.
  • European Securities and Markets Authority Publishes Updated Transparency and Position Limits Opinions for Third-Country Trading Venues
    06/03/2020

    The European Securities and Markets Authority has published two opinions on the application of post-trade transparency and position limits rules to third-country trading venues.
     
    The first opinion relates to post-trade transparency requirements under the Markets in Financial Instruments Regulation. Under MiFIR, EU investment firms must publish information on transactions in financial instruments traded on an EU trading venue. ESMA’s opinion states that information about transactions concluded on a third-country trading venue should also be made public in accordance with MiFIR, but it is unnecessary for EU firms to republish such information where the transparency rules of the third-country trading venue are similar to those applicable to EU trading venues under MiFIR. 

    Read more.
  • EU Extends Period for Lower Short Sale Disclosures
    06/03/2020

    The European Securities and Markets Authority has published a Decision renewing the temporary lower threshold for disclosures of net short positions in shares. ESMA's original Decision has been in effect since March 16, 2020 and was due to expire on June 16, 2020. The Decision to renew the measures will apply from June 17, 2020 for a further three months. The lower thresholds apply to all holders of net short positions in shares traded on an EU regulated market (i.e., exchange) who must notify the relevant national regulator if the position reaches or exceeds 0.1% of the issued share capital and of each 0.1% above that threshold.

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    TOPICS : COVID-19Securities
  • European Banking Authority Publishes Roadmap on Investment Firm Regulation and Directive Deliverables
    06/02/2020

    The European Banking Authority has published a new roadmap under the Investment Firm Regulation and the Investment Firm Directive. The IFR and IFD introduce a more tailored regulatory regime for many EU investment firms that reflects the risks inherent in the diverse activities those firms undertake. It also aims to amend the prudential requirements imposed on certain investment firms to avoid the imposition of undue administrative burdens by removing them from the scope of the revised Capital Requirements Regulation and Capital Requirements Directive. The majority of both the IFR and IFD will apply from June 26, 2021.

    The EBA's roadmap sets out the timing for the EBA to produce final versions of Regulatory Technical Standards, Implementing Technical Standards, Guidelines and Reports. The EBA must also establish a list of capital instruments and a database of administrative sanctions. The mandates will be delivered in four phases, starting from December 2020, and cover:
    • Thresholds and criteria for investment firms to be subject to the CRR;
    • Capital requirements and composition;
    • Reporting and disclosure;
    • Remuneration and governance;
    • Supervisory convergence and supervisory review and Pillar 2; and
    • Environmental, social and governance exposures.

    View the EBA's IFR and IFD Roadmap.

    View details of the IFR and IFD.
  • Extension of Senior Managers Regime to Benchmark Administrators
    06/02/2020

    The U.K. Financial Conduct Authority has published a Policy Statement and final rules and guidance on the application of the Senior Managers Regime to Benchmark Administrators. The final rules will apply from December 7, 2020 to Benchmark Administrators authorized in the U.K. that do not undertake any other regulatory activities. The FCA’s SMR was originally implemented for banks in 2016 and was extended to all FCA solo-regulated firms authorized under the Financial Services and Markets Act 2000 in December 2019. Benchmark administrators were only obliged to become FCA-authorized by the end of 2019 pursuant to the EU Benchmark Regulation, and so were granted a one-year extension from the roll-out of the SMR.

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  • European Securities and Markets Authority Publishes Final Technical Advice on FRANDT Clearing Services Provision Under EMIR REFIT
    06/02/2020

    The European Securities and Markets Authority has published its final report and technical advice on the conditions for clearing services providers’ commercial terms to be considered fair, reasonable, non-discriminatory and transparent, in accordance with changes introduced under the revised European Market Infrastructure Regulation, or EMIR Refit. EMIR Refit requires the European Commission to adopt legislation setting out these conditions by June 18, 2021. The Commission tasked ESMA with publishing technical advice on the conditions, which ESMA launched a consultation on in October 2019. ESMA’s final technical advice takes account of the responses received to the consultation. 

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  • UK Prudential Regulator Publishes Statement on Electronic Signatures
    06/02/2020

    The U.K. Prudential Regulation Authority has published a statement on the use of electronic signatures in the context of remote working arrangements during the COVID-19 pandemic. The PRA has stated that, in the absence of specific legal provisions to the contrary, firms are entitled to use electronic signatures to submit forms and other regulatory documents to the PRA. The advice does not extend to the use of electronic signatures more generally.

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  • European Banking Authority Publishes Guidelines on COVID-19 Exposures Reporting
    06/02/2020

    The European Banking Authority has published guidelines on bank reporting and disclosure of exposures subject to measures designed to protect borrowers from the economic impact of the COVID-19 crisis. The measures include payment moratoria, which are exempt from prudential treatment as forbearance measures and therefore not subject to the usual supervisory reporting framework. Public guarantee schemes introduced in many Member States are also not captured by existing reporting frameworks. This has created a data gap, which has implications for the risk-analysis of individual institutions and for overall financial stability in the EU.

    Read more.
  • FCA Publishes Final Guidance on COVID-19 Measures for Mortgage Providers
    06/02/2020

    The U.K. Financial Conduct Authority has published final guidance on how mortgage lenders should treat customers coming to the end of a payment holiday, or those yet to request one, in light of the COVID-19 pandemic. The guidance will come into force on June 4, 2020 and remain in force until October 31, 2020, unless renewed or updated. The guidance covers: (i) fair treatment of customers seeking, or coming to the end of, a payment deferral; (ii) options for customers able, or unable, to resume full payments; (iii) the interaction of the guidance with the FCA’s Mortgage Conduct of Business Sourcebook; (iv) training, monitoring, record keeping and Credit Reference Agency reporting; (v) repossessions; and (vi) debt help and money guidance.

    Read more.
  • UK Joint Money Laundering Steering Group Publishes Revised Guidance
    06/01/2020

    The Joint Money Laundering Steering Group has published amendments to its Guidance following its consultation launched on February 3, 2020. The revisions to the Guidance account for changes introduced by The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, which came into force on January 10, 2020. The 2019 Regulations amend the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to incorporate changes arising from the EU's Fifth Anti-Money Laundering Directive.

    The JMLSG's consultation on proposed new Guidance on how the U.K. Money Laundering Regulations apply to crypto-asset exchange providers and custodian wallet providers closed on May 18, 2020. The final new Guidance is still to be published.

    The JMLSG is currently consulting on draft guidance on Pooled Client Accounts, with comments due by June 10, 2020.

    View the June 2020 JMLSG Guidance.

    View details of the JMLSG's consultation on pooled client accounts.

    View details of the JMLSG's consultation on crypto-asset exchange provider and custodian wallet provider guidance.
  • Guidance Published on Financial Services Exclusions in the UK Corporate Insolvency and Governance Bill
    06/01/2020

    Following the introduction of the Corporate Insolvency and Governance Bill into Parliament on May 20, 2020, the U.K. government has published a series of guidance notes on the measures proposed in the Bill. The proposed measures, first announced by Secretary of State for Business, Energy and Industrial Strategy on March 28, 2020, are intended to protect companies and businesses facing major funding and operational difficulties in the current COVID-19 pandemic. Once final, the Bill will amend current U.K. insolvency law by, among other things, introducing a new moratorium, establishing a new restructuring plan procedure for failing companies that includes a mechanism to bind a dissenting class of creditors to the plan, and banning termination clauses that would come into effect when a company enters into insolvency, begins a moratorium or starts the new restructuring plan procedure. The Bill will also temporarily remove the threat of personal liability from wrongful trading for directors of companies where they face financial difficulties as a result of COVID-19, which will apply retrospectively from March 1, 2020.

    Read more.
    TOPIC : COVID-19
  • UK Working Group Publishes Paper on Identifying Tough Legacy Issues in the LIBOR Transition
    05/29/2020

    The Working Group on Sterling Risk-Free Reference Rates has published a paper on the identification of tough legacy issues. The paper concerns those instances where a contract cannot be amended to reference a suitable alternative rate to LIBOR or use a robust fallback so that the contract moves to a suitable alternative rate on the occurrence of certain events. The Working Group is advocating for the U.K. Government to consider legislation to address tough legacy exposures in contracts governed by English law that reference LIBOR (in sterling or other LIBOR currencies) that remain in operation when LIBOR is proposed to be phased out at the end of 2021. The recommendation is similar to the proposed solution of the Alternative Reference Rates Committee under New York law. The Group advises that other steps should also be taken, including the methodology for LIBOR being modified by either an administrator or official intervention. The latter option of official intervention is controversial, in that the benchmark administrator and its committees would lose control over how the benchmark operates, yet remain liable to regulators for its operation and face other legal risks resulting from external decisions. In the Group's view, the only path for certainty over contracts is for market participants to proactively transition away from LIBOR before the end of 2021.

    The paper also sets out the Working Group's analysis of whether tough legacy issues exist for certain types of contracts, covering derivatives, bonds, mortgages and loans.

    View the RFRWG paper on tough legacy issues.
  • International Organization of Securities Commissions Publishes Statement on COVID-19 Disclosure for Issuers
    05/29/2020

    The International Organization of Securities Commissions, the international policy forum for securities regulators, has published a statement on the disclosure standards that securities issuers should adhere to in the context of COVID-19.

    Read more.
    TOPICS : COVID-19Securities
  • UK Conduct Regulator Announcement on Continuing Professional Development for Regulated Firms
    05/27/2020

    The U.K. Financial Conduct Authority will temporarily allow regulated firms subject to continuing professional development requirements to carry over any uncompleted CPD hours to the following 12-month period, for years ending before April 1, 2021. Firms should review the FCA’s conditions for carrying over CPD requirements, which include where an individual, due to the current exceptional circumstances arising from COVID-19, will be unable to complete their CPD hours in their current CPD period. The FCA also notes that firms are still expected to demonstrate that relevant individuals remain competent to carry out their work and it expects most individuals to be able to continue to complete CPD while on furlough or working from home.
     
    View the FCA's announcement on CPD requirements.
     
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • European Commission Publishes Adjusted 2020 Work Program
    05/27/2020

    The European Commission has published an adjusted 2020 Work Program to reflect the unexpected challenges arising from COVID-19. The Commission still intends to deliver on the commitments made under its original Work Program, published in January 2020, but has adjusted the timing of certain actions necessary to achieve its objectives. An update on the delivery and expected timing of the objectives under the adjusted Work Program are set out in an amended version of Annex 1 on the Commission’s website.

    Read more.
  • EU Consultation on Enhancing Intra-EU Investor Protection
    05/26/2020

    The European Commission has launched a consultation on the intra-EU investment protection and facilitation framework. The Commission is seeking views on the current EU system for investor protection, in particular, how it might be strengthened to encourage further cross-border investment within the EU. The Commission is also investigating how to make cross-border investments easier in the context of the Capital Markets Union. Both legislative and non-legislative options are being considered to address the divergence of investor protection across the EU and concerns about enforcements of rights and remedies. The consultation closes on September 8, 2020. If its assessment of the feedback indicates that it would be appropriate to do so, the Commission intends to publish a legislative proposal in Q1 2021.

    View the consultation page.
  • European Banking Authority Reports on Impact of COVID-19 on EU Banking Sector
    05/25/2020

    The European Banking Authority has published a report on the impact of the COVID-19 pandemic on the financial health of EU banks. The report is mostly based on supervisory data submitted by banks in Q4 2019 and Q1 2020. The EBA's report confirms that banks have activated their contingency plans in response to the crisis, however, their operational capabilities remain under pressure. In addition, some banks have used parts of their capital and liquidity buffers and are expected to continue to do so in the coming months. The report also confirms that the asset quality of banks is likely to continue deteriorating as non-performing loan volumes increase.

    View the EBA's report.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • EU Response to UK Letter on Negotiating Positions
    05/22/2020

    The EU's chief negotiator, Michel Barnier, has responded to the letter of May 19, 2020 of U.K. chief negotiator, David Frost. Mr. Frost had notified Mr. Barnier that the U.K. government had published U.K. drafts of the proposed Comprehensive Free Trade Agreement between the U.K. and EU, as well as other agreements and schedules. Mr. Frost's letter had also included comments on some of the EU positions in the negotiations. In his letter, Mr. Barnier states that he does not think that the substantive points of the negotiation should be debated through written correspondence, however, he does go on to respond to the comments. Mr. Barnier states that the EU is not bound to follow as precedent deals that the EU has concluded with other countries, and that the EU is only following the commitments made in the Political Declaration agreed between the EU and the U.K. in October 2019. Mr. Barnier also emphasises that the EU is seeking to obtain a "level playing field", which, according to the EU's chief negotiator means upholding the current common high standards applicable in the EU and in the U.K. at the end of the transition period in the areas of state aid, competition, social and employment standards, environment, climate change and relevant tax matters. It would mean that the U.K. could impose tougher regulations after the transitional period, but would be tied to the existing EU level of standards.

    Read more.
  • Bank of England to Discontinue Three-Month Contingent Term Repo Facility
    05/22/2020

    The Bank of England has announced that it will discontinue its three-month Contingent Term Repo Facility at the end of May 2020, with the final operation scheduled to take place on May 28, 2020. The BoE’s one-month CTRF operations will continue on a weekly basis until at least June 26, 2020. The BoE has also said that it will reintroduce the operations if necessary. 
     
    The CTRF was established by the BoE in March 2020, at the outset of the COVID-19 outbreak, allowing financial market participants to borrow central bank reserves in exchange for less liquid assets.
     
    View the BoE's market notice on amendments to the CTRF.
    TOPIC : COVID-19
  • UK Prudential Regulator Publishes Guidance on Treatment of COVID-19 Payment Holidays
    05/22/2020

    The U.K. Prudential Regulation Authority has published a new statement on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address COVID-19. The statement follows the announcements made by the PRA, the U.K. Financial Conduct Authority and the U.K. Financial Reporting Council in March 2020 on financial reporting and audit requirements in light of COVID-19. Those announcements included a letter from the PRA to banks on the application of IFRS 9 (including expected credit loss accounting) to loan arrangements during the pandemic.

    Read more.
  • UK Conduct Authority Consults on Guidance on COVID-19 Measures for Mortgage Lenders and Payments Firms
    05/22/2020

    The U.K. Financial Conduct Authority has published two consultations on its draft guidance for firms on mortgages and safeguarding customers’ funds during the COVID-19 pandemic.
     
    The first consultation relates to the FCA’s proposed guidance on how mortgage lenders should treat customers coming to the end of a payment holiday or those yet to request one. The timeframe for customers who have not yet benefited from a payment holiday to apply for one will be extended to October 31, 2020. The current ban on house repossessions will also be extended to October 31, 2020.

    Read more.
  • UK Insolvency and Governance Bill Published
    05/20/2020

    The U.K. Government has published the U.K. Corporate Governance and Insolvency Bill. The Bill amends aspects of insolvency and company law to assist firms struggling to cope with the effects of the COVID-19 pandemic. The measures include:
     
    • A new moratorium giving companies breathing space from creditors while they investigate rescue options;
    • A prohibition on contractual termination upon insolvency clauses, preventing suppliers from refusing to supply goods while a company is going through a rescue process;
    • A temporary removal of liability for wrongful trading for company directors who try to keep their businesses operating through the pandemic;
    • A temporary prohibition on the filing of statutory demands and winding up petitions by creditors; and
    • Temporary permission for companies to hold closed Annual General Meetings.

    Read more.
  • European Central Bank Consults on Climate-Related and Environmental Risks Guide for Banks
    05/20/2020

    The European Central Bank has launched a consultation on its proposed guide on how Eurozone banks should manage and disclose climate-related and environmental risks in accordance with the EU prudential framework. The guide is not legally binding, but aims to raise awareness within the Eurozone banking industry of climate-related and environmental risks and to improve the management of such risks. The consultation closes on September 25, 2020.
     
    The guide applies to significant institutions directly supervised by the ECB, although national regulators in Eurozone member states are expected to apply the guide’s expectations proportionately when supervising less significant Eurozone banks. It should be read in the context of the wider EU bank prudential framework, with particular reference to the Capital Requirements Regulation, the Capital Requirements Directive and relevant ECB guidelines. The guide includes an overview of the nature and characteristics of climate-related and environmental risks as well as the ECB’s supervisory expectations of banks’ business models and strategies, governance and risk appetite and integration of climate-related and environment risks into their credit, operational, market and liquidity risk management frameworks.
     
    View the ECB's consultation on its Climate-Related and Environmental Risks Guide.
  • EU Single Resolution Board Publishes Revised MREL Policy
    05/20/2020

    The EU Single Resolution Board has published a revised policy on minimum requirements for own funds and eligible liabilities. The policy is applicable to Eurozone banks and reflects the changes made in 2019 to the EU Banking Package (which includes the Bank Recovery and Resolution Directive, the Capital Requirements Regulation and the Capital Requirements Directive).

    Read more.
  • EU Single Resolution Board Publishes Revised MREL Policy
    05/20/2020

    The EU Single Resolution Board has published a revised policy on minimum requirements for own funds and eligible liabilities. The policy is applicable to Eurozone banks and reflects the changes made in 2019 to the EU Banking Package (which includes the Bank Recovery and Resolution Directive, the Capital Requirements Regulation and the Capital Requirements Directive). 

    Read more.
  • European Banking Authority Report on Links Between Bank Recovery and Resolution Planning
    05/20/2020

    The European Banking Authority has published a report on the links between recovery and resolution planning for EU credit institutions and investment firms subject to the EU Bank Recovery and Resolution Directive.
     
    BRRD sets out the actions that must be taken where EU credit institutions and certain EU investment firms run into financial difficulty. Recovery and resolution are the BRRD “crisis preparation tools” designed, in the case of recovery, by the firm itself to help the firm recover from a severe stress scenario and, in the case of resolution, by the resolution authority where recovery is no longer viable and resolution action must be taken. The EBA notes that, while the two processes are separate, they are related and recovery may often lead to resolution. By assessing links between planning for each process, synergies could be maximized and material inconsistencies addressed to ensure a more effective application of the regime.

    Read more.
  • EU Call for Transparency in Financial Reports of EU-Listed Issuers
    05/20/2020

    The European Securities and Markets Authority has published a statement calling for transparency in the half-year financial reports of EU-listed issuers. The statement focuses on interim financial statements that need to be prepared according to IFRS standards and on interim management reports for 2020 half-yearly reporting periods. However, the statement is also relevant to the reporting of financial information in other interim periods. ESMA highlights that issuers must provide updated and useful information that covers the current and expected impact of the coronavirus pandemic on their financial position, performance and cash-flows. In addition, issuers should identify the principal risks and uncertainties to which they are exposed.

    View ESMA's statement.
    TOPICS : COVID-19Securities
  • Single Resolution Board Launches Consultation on Standardized Data Set for Resolution Valuations
    05/19/2020

    The EU Single Resolution Board has launched a consultation on two proposed documents providing further guidance on the SRB’s expectations for the minimum data sets required to support a robust valuation for Eurozone bank resolutions. Responses to the consultation should be submitted by June 30, 2020.
     
    In February 2019, the SRB published its Framework for Valuation, a guidance document for independent valuers and the public setting out the SRB’s expectations on the principles upon which valuations for resolution under the Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation should be based. 

    Read more.
  • UK Draft Negotiating Documents Published
    05/19/2020

    The U.K. government has published a letter from U.K. chief negotiator David Frost to EU counterpart Michel Barnier and U.K. draft legal texts of the proposed U.K.-EU Comprehensive Free Trade Agreement, as well as other agreements and schedules. The documents set out the U.K. government's position on the future U.K.-EU relationship. In the letter, key points on the U.K.'s position are made. These are:
     
    1. The U.K. is seeking to conclude a suite of agreements with the EU with an FTA at the core, all of which are based on precedent agreements that the EU has with other countries. The U.K. is not seeking to remain in the Single Market or the Customs Union.
    2. The EU's drafts do not include the same text as that agreed with other countries. For example, the EU is not proposing to replicate the inclusion of provisions on regulatory cooperation for financial services that are agreed between the EU and Japan.
    3. The EU proposals are unaligned with the commitment made by both parties to maintain a level playing field. For example, the EU is proposing that the U.K. accept EU state aid rules and be subject to tariffs on trade if those rules were to be breached.
    Read more.
  • EU Consultation on Requirements for Contractual Provisions for Recognition of Stay Powers
    05/15/2020

    The European Banking Authority has opened a consultation on proposed Regulatory Technical Standards on the contractual recognition of stay powers under the Bank Recovery and Resolution Directive. Revisions to the BRRD were published in June 2019. EU Member States are required to transpose the amending Directive into their national laws and to apply the provisions by no later than December 28, 2020, except for provisions relating to the minimum requirement for own funds and eligible liabilities (MREL), which apply from January 1, 2024. The consultation closes on August 15, 2020.

    The BRRD provides resolution authorities with powers to stay the contractual rights of parties in financial contracts. These powers allow resolution authorities, for a limited period of time, to suspend contractual payment or delivery obligations due under a contract with a firm under resolution. In certain circumstances before resolution, a resolution authority may also restrict the enforcement of security interests and suspend certain rights of counterparties, such as rights of close-out, netting, accelerating future payments or terminating financial contracts.

    Read more.
  • UK Regulator Confirms Policy on Credit Risk
    05/14/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement on its approach to implementing the European Banking Authority's Technical Standards and Guidelines on Probability of Default estimation, Loss Given Default estimation and the treatment of defaulted exposures in the Internal Ratings Based approach to credit risk. The EBA's regulatory products are designed to address concerns about the variability of own funds requirements arising from the internal models that firms use to calculate their minimum credit risk capital requirements under the Capital Requirements Regulation. The Policy Statement is relevant to U.K. banks, building societies and PRA-designated U.K. investment firms.

    Read more.
  • Financial Services Exemptions in UK Insolvency and Governance Bill
    05/14/2020

    The U.K. Government intends to exempt financial services firms from certain provisions of the new U.K. Corporate Governance and Insolvency Bill. The Bill, announced on March 28, 2020, will amend aspects of the U.K. insolvency regime (as set out under the Insolvency Act 1986) in light of the financial difficulties faced by many businesses as a result of the COVID-19 pandemic. The Bill also includes provisions for companies’ annual general meetings and filing requirements during the COVID-19 crisis.

    Read more.
  • UK Joint Money Laundering Steering Group Consults on Pooled Client Accounts Guidance
    05/14/2020

    The U.K. Joint Money Laundering Steering Group has launched a consultation on draft guidance on Pooled Client Accounts. The JMLSG Guidance is provided for firms in the financial sector. A PCA is a bank account opened with a financial institution by a customer, to administer funds that belong to the customer's clients. The customers clients' money will be co-mingled but the customer's clients will not be able to directly instruct the financial institution to carry out transactions. The JMLSG is proposing guidance on the risks, risk assessments, written agreements and due diligence that might be needed when a financial institution opens and administers a PCA for a customer. The consultation closes on June 10, 2020.

    View the consultation paper.
  • Revised ISDA 2006 Definitions Implementing Pre-Cessation Fallbacks Expected in July 2020
    05/14/2020

    The International Swaps and Derivatives Association has published a summary, prepared by the Brattle group, of the responses to the ISDA 2020 consultation on how to implement pre-cessation fallbacks in derivatives. Pre-cessation triggers would cause LIBOR-based derivative contracts to fall back to an alternative reference rate in the event that the U.K. Financial Conduct Authority deemed LIBOR no longer to be representative. ISDA sought views as to whether provisions should be included in its standard documentation specifying that rate options for LIBOR in USD, GBP, CHF, JPY and EUR all contain fallbacks that would apply upon the earlier of: (i) a permanent cessation trigger; and (ii) a 'non-representativeness' trigger.

    The report confirms the preliminary findings, published by ISDA on April 15, 2020. The majority of respondents are in favor of including the pre-cessation fallbacks in ISDA documentation via either an amended version of the ISDA 2006 definitions (for new contracts) or a protocol (for legacy contracts).

    In July 2020, ISDA intends to publish the amended 2006 ISDA Definitions to incorporate the fallbacks for new trades. The protocol will be published at the same time. Both the revised Definitions and the new protocol will come into effect before the end of 2020.

    View the report.

    View ISDA's press release.
  • European Systemic Risk Board Actions on Five COVID-19 Priority Areas
    05/14/2020

    The European Systemic Risk Board has established five priority areas on which it intends to take action to combat the impact of COVID-19 on the EU financial system. In determining its actions, the ESRB hopes to ensure an effective response to the pandemic across the EU that prevents individual Member State actions from negatively impacting the EU Single Market and to take advantage of flexibility in regulatory standards to support financial institutions in providing financial services and liquidity.

    Read more.
  • Bank for International Settlements Reports on Financial Crime During COVID-19
    05/14/2020

    The Bank for International Settlements has published a report on financial crime during the COVID-19 pandemic. The Report provides an overview of the increase in financial crime observed since the COVID-19 outbreak, which includes an increase in cyber threats, greater misuse of online financial services and virtual assets to move illicit funds and possible corruption associated with government stimulus funds. The Report also describes the cyber resilience measures proposed by national and international agencies and the AML actions taken by supervisory bodies, including the issuance of public statements to raise awareness of COVID-19-related AML risks, provision of guidance on the application of existing AML/CTF frameworks and coordination with the financial sector for the reporting of COVID-19-related fraud.

    Read more.
  • European Securities and Markets Authority Publishes Statement on Fund Managers' Liquidity Risk Management During COVID-19
    05/14/2020

    The European Securities and Markets Authority has published a statement confirming its support for the European Systemic Risk Board's Recommendation on tackling the implications of market illiquidity for asset managers with exposures to corporate debt and real estate. In accordance with the ESRB's Recommendation, ESMA intends to coordinate with Member State national regulators to engage closely with these asset managers. The supervisory engagement ties in with ESMA's common supervisory action, announced in January 2020, on liquidity risk management by managers of Undertakings for the Collective Investment in Transferable Securities.

    View ESMA's statement on fund managers' liquidity risk management.

    View details of the ESRB's Recommendation.

    View details of ESMA's common supervisory action on liquidity risk management for UCITS.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
    TOPICS : COVID-19Funds
  • EU Report on CLO Rating Risks
    05/13/2020

    The European Securities and Markets Authority has published a report highlighting certain issues related to rating-collateralized loan obligations. ESMA launched a review in May 2019 on the arrangements that the three main credit rating agencies (Fitch Ratings, Moody’s Investors Service and S&P Global Ratings) have adopted to assign and monitor credit ratings on CLO instruments issued and rated in the EU. The review is part of ESMA's work on identifying vulnerabilities to financial stability arising from leveraged loans. Leveraged loans are of concern because of: (i) the excessive level of financial leverage of some corporate issuers; (ii) the weakening of underwriting criteria applied by lending entities; and (iii) the expected evolutions in the credit cycle.

    Read more.
    TOPIC : Credit Ratings
  • UK Working Group Updates LIBOR Expectations in Wake of COVID-19
    05/13/2020

    The U.K. Financial Conduct Authority has announced a series of updates to the Working Group on Sterling Risk-Free Reference Rates’ proposed implementation of LIBOR reforms. In March 2020, the RFRWG published a roadmap for the discontinuation of new sterling LIBOR lending by the end of Q3 2020. The FCA, Bank of England and RFRWG now acknowledge that, in light of the COVID-19 pandemic, it will no longer be feasible to transition away from LIBOR across all sterling LIBOR-linked loans by this proposed deadline.

    Read more.
  • UK Conduct Regulator Guidance on Post and Paper Documents During COVID-19
    05/13/2020

    The U.K. Financial Conduct Authority has published guidance on how firms should handle post and paper documents during COVID-19. The FCA expects firms to continue to comply with requirements for post and paper-based processes and, where this is not possible, firms should notify the FCA. The FCA also expects firms to contact customers who do not use online services in a timely manner and should be able to demonstrate any steps they have taken to mitigate the impact of any non-compliance with usual post and paper-based processes.

    Firms should also ask customers who have sent cheques via post that have not yet been processed to contact the firm. The firm should consider whether the cheque relates to client money under the FCA’s Client Assets Sourcebook regime, whether they are able to provide the services without cashing the cheque and, if so, whether their intended actions are in compliance with the FCA Client Assets Sourcebook.

    View the FCA's statement on post and paper documents.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • European Banking Authority to Act on Dividend Arbitrage Trading Schemes
    05/12/2020

    In response to the November 2018 request of the European Parliament to conduct an enquiry into dividend arbitrage trading schemes, the European Banking Authority has published a report (dated April 28, 2020) on the approach of national regulators across the EU to tackle market integrity risks associated with dividend arbitrage trading schemes. The EBA has also published a ten-point Action Plan to address the risks arising from such schemes. Both the report and Action Plan accompanied the EBA's letter to the European Parliament that describes its actions and the steps it intends to take in the future on this issue.

    The report sets out the findings arising from the enquiry, which consisted of surveys of national authorities responsible for anti-money laundering and counter terrorist financing and of national prudential regulators. The EBA found that dividend arbitrage trading schemes are not possible in all EU member states and that, where they are possible, they are not always regarded as a tax crime. The EBA concluded that AML and prudential authorities approach dividend arbitrage trading schemes in different ways and there are variations in the extent to which the handling of the proceeds from these schemes by financial institutions constitutes money laundering.

    Read more.
  • FICC Market Standards Board Publishes Report on Data Management
    05/11/2020

    The FICC Market Standards Board has published a report on the critical role of data management in the financial system. The Report is part of the FMSB's Spotlight Reviews, which highlight significant emerging issues in the FICC markets. The Report discusses the principal areas of data risk, which are business continuity, data confidentiality, trading, aggregate exposure, regulatory enforcement, ownership rights and security risks relating to misconduct. The Report also outlines the work of regulators on data governance and analyzes eight key components of data governance, being the data lifecycle, data policies, data taxonomy, mapping data sources, data movement and lineage, data classification, data leakage detection and data quality.

    View the FMSB's report on data management in the financial system.
  • UK Prudential Regulator Statement on Pillar 2A Capital Requirements
    05/07/2020

    The U.K. Prudential Regulation Authority has published a statement announcing its decision to set all Pillar 2A requirements to a nominal amount for the purposes of the 2020 and 2021 Supervisory Review and Evaluation Processes, instead of their usual percentage of Risk Weighted Assets. The statement applies to all firms subject to the Capital Requirements Regulation and Capital Requirements Directive. The PRA has said that it is making the change as it does not consider that RWAs are a useful measure for the evolution of risks in the stressed situation that the pandemic represents. The outcome of the change is that banks are freed up to use their Pillar 2A capital to fund lending and other activities.

    Read more.
  • Bank of England Publishes Interim Financial Stability Report on Impact of COVID-19
    05/07/2020

    The Bank of England’s Financial Policy Committee and Monetary Policy Committee have published reports focusing on the impact of COVID-19 on the U.K. economy and banking sector, together with the minutes of their May Committee meetings and a transcript of the BoE’s joint FPC and MPC press conference, discussing the findings of the Committee reports.

    Read more.
  • Bank of England Weighs in on LIBOR Transition with a Mandatory Additional LIBOR Collateral Haircut
    05/07/2020

    The Bank of England has published a market notice on risk management approaches to collateral referencing LIBOR for use in the Sterling Monetary Framework. The market risk notice applies to GBP LIBOR, USD LIBOR, EUR LIBOR, JPY LIBOR and CHF LIBOR. It states that from April 1, 2021, a haircut add-on will be applied to all LIBOR Linked Collateral maturing after December 31, 2021. LIBOR Linked Collateral is LIBOR Linked Loan Portfolios, Collateral Securities where the coupon pays interest calculated by reference to LIBOR, Collateral Securities where embedded swap payments are calculated by reference to LIBOR and Collateral Securities backed by loans where one or more loans in the portfolio is a LIBOR Linked Loan. The add-on will be 10% from April 1, 2021, 40% from September 1, 2021 and 100% from December 31, 2021.

    The market notice also stipulates that from April 2021, LIBOR Linked Collateral that matures after December 2021 will be ineligible for use in the Sterling Monetary Framework.

    View the market notice.
  • UK Conduct Regulator Issues Guidance on Financial Crime Controls and Information Security During COVID-19
    05/06/2020

    The U.K. Financial Conduct Authority has issued guidance on financial crime controls and information security for financial services firms during COVID-19. The FCA notes the increase in cyber-crime during the COVID-19 pandemic, the risks of which may be magnified by operational disruptions arising from working from home arrangements. Firms are expected to be proactive in managing the increased risks during this period, including being vigilant about the potential increase in cyber risks, ensuring they maintain appropriate governance and oversight arrangements, reviewing the impact of COVID-19 on their information security defenses and ensuring that general notification requirements are followed and significant cyber incidents are reported.

    Read more.
  • UK Conduct Regulator Extends Absence Cover Under Senior Managers Regime
    05/06/2020

    The U.K. Financial Conduct Authority has extended the maximum period for which FCA solo-regulated firms are permitted to arrange cover for a Senior Manager without seeking the FCA's approval from 12 to 36 weeks, within a consecutive 12-month period. Firms will be able to reallocate an absent Senior Manager's prescribed responsibilities for up to a 36-week period via an application for a modification by consent of the FCA's standard 12-week rule. The modification by consent will apply from the date of the firm's application until April 30, 2021. The FCA is yet to issue any further guidance regarding the application of the 12-week rule to U.K. dual-regulated firms.

    View the FCA's modification by consent to the 12-week rule.
  • European Securities and Markets Authority Statement on MiFID II Conduct of Business Obligations in Light of COVID-19
    05/06/2020

    The European Securities and Markets Authority has published a statement reminding firms of their MiFID II conduct of business obligations in light of a significant increase in investment accounts opened by retail clients, together with a surge in retail clients' trading activities.

    Read more.
    TOPICS : COVID-19MiFID II
  • EU Consultation on SME Growth Markets
    05/06/2020

    The European Securities and Markets Authority has launched a consultation on the functioning of the small and medium-sized Growth Markets regime under the Markets in Financial Instruments Directive II and on draft technical standards for the promotion of the use of SME Growth Markets to be developed under the Market Abuse Regulation. SME Growth Markets were a new sub-category of multilateral trading facility introduced by MiFID II in January 2018 to facilitate access to capital for SMEs. The consultation closes on July 15, 2020.

    Read more.
  • EU Recommendations For STS Framework For Synthetic Securitization
    05/06/2020

    The European Banking Authority has published a report on the feasibility of developing a framework for simple, transparent and standardized synthetic securitization that is limited to balance-sheet securitization under the EU Securitization Regulation.

    The EBA is recommending:
    • The establishment of a cross-sectoral framework for STS synthetic securitization that is limited to balance-sheet securitization;
    • To be eligible for 'STS' status, a synthetic securitization must comply with the proposed STS criteria, including the criteria adapted appropriately for synthetic securitization;
    • The European Commission should consider the potential for a differentiated capital treatment for STS balance-sheet synthetic securitization; and
    • Any proposal for STS synthetic securitization should include a mandate to the EBA to monitor the functioning of the STS synthetic market.

    The European Commission will consider the report and recommendations in preparing its own report and, if appropriate, legislative proposal.

    View the EBA's report on a STS framework for synthetic securitization.
  • UK Bounce Back Loan Scheme Launches
    05/04/2020

    HM Treasury's Bounce Back Loan Scheme has launched today. The scheme provides government guarantees for loans between £2,000 to £50,000 and will enable small businesses to apply for loans quickly and easily. The loans will also be subject to a flat interest rate of 2.5% and firms that have already taken out a Coronavirus Business Interruption Loan of £50,000 are entitled to apply for it to be switched to the BBLS. HM Treasury has also published a Dear CEO letter addressed to accredited lenders describing the pricing and regulation of the BBLS and the interaction between the BBLS and the CBILS. Loans of £25,000 or less made under the BBLS will also fall outside the regulatory perimeter for the purposes of the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000.

    View HM Treasury's announcement on the BBLS.

    View HMT's Dear CEO letter on BBLS.

    View details of the regulatory perimeter exemption for the BBLS.
    TOPIC : COVID-19
  • UK Prudential Regulator on Regulatory Treatment of UK Bounce Back Loan Scheme
    05/04/2020

    The U.K. Prudential Regulation Authority has published a statement on credit risk mitigation eligibility and the leverage ratio treatment of loans made under HM Treasury's Bounce Back Loan Scheme and a separate modification by consent of the exclusion of loans under the BBLS from the calculation of the total exposure measure of the leverage ratio.

    Read more.
  • EU Moves to Further Delay the Bilateral Margin Requirements for Uncleared Derivatives
    05/04/2020

    The European Supervisory Authorities have published updated joint draft Regulatory Technical Standards amending the existing EU risk mitigation techniques for uncleared OTC derivatives. In December 2019, the ESAs published a draft RTS to amend existing bilateral margin requirements made under the European Market Infrastructure Regulation in line with certain clarifications made to the related international framework by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions. These updated draft RTS include all those amendments and also delay the upcoming bilateral margin requirements to bring the EU framework in line with the global timeline. In response to the coronavirus outbreak, the Basel Committee announced in April 2020, a one-year deferral for the implementation of the final two phases of the joint Basel Committee and International Organization of Securities Commissions' framework for non-centrally cleared derivatives margin requirements.

    Read more.
    TOPICS : COVID-19Derivatives
  • UK Conduct Regulator Announces New Digital Sandbox in Response to COVID-19
    05/04/2020

    The U.K. Financial Conduct Authority has announced a new digital sandbox pilot program, which will provide regulatory support for innovative firms whose business plan addresses issues arising from the coronavirus pandemic. The FCA intends to open the sandbox for applications in summer and, in the meantime, welcomes any expressions of interest from interested innovative firms. The FCA had been planning a digital sandbox before the pandemic, but is fast-tracking the process in light of the challenges facing firms and how the sandbox might assist them.

    View the FCA's announcement.
    TOPICS : COVID-19FinTech
  • Financial Action Task Force Reports on Financial Crime During COVID-19
    05/04/2020

    The Financial Action Task Force has published a report on financial crime (including money laundering and terrorism financing activities) during COVID-19, identifying challenges, good practices and policy responses to the emerging threats and vulnerabilities.

    The increased threats identified include fraud from criminals attempting to profit from the pandemic, a spike in cyber crime, particularly phishing emails and spam campaigns and a corresponding impact on other predicate crimes including human trafficking, exploitation of workers, online child exploitation and organized property crime. In conjunction, confinement and social distancing measures designed to combat COVID-19 are impacting government and private sector capacity to implement AML and CTF obligations.

    Read more.
  • Bank of England Announces COVID-19 Changes to Resolution Measures
    05/01/2020

    The Bank of England and U.K. Prudential Regulation Authority have issued a statement on changes to the resolution measures applicable to the major U.K. banks and building societies, designed to ease the operational burden on firms in the wake of COVID-19.

    The dates by which firms must submit their first reports describing their preparations for resolution, and publish summaries of those reports, under the BoE and PRA’s new Resolvability Assessment Framework have been extended by one year. The first reports should be submitted to the PRA by October 2021 and public disclosures should be made by June 2022.

    Read more.
  • HM Treasury Exempts Certain Bounce Back Loans From Regulatory Regime
    05/01/2020

    HM Treasury has published the Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020, exempting certain loans made under the U.K. Government's Bounce Back Loan Scheme from regulation under the U.K. financial regulatory regime. The Order applies to loans of £25,000 or less made under the BBLS by commercial lenders to sole traders, unincorporated associations and partnerships of four people. These loans will be classed as exempt credit agreements and will therefore largely not be subject to the provisions of the Consumer Credit Act 1974. 

    Read more.
  • UK Conduct Regulator Grants Regulatory Forbearance From Strong Customer Authentication for E-Commerce Transactions
    04/30/2020

    The U.K. Financial Conduct Authority has granted firms an additional six months to implement strong customer authentication for e-commerce, extending the deadline from March 14, 2021 to September 14, 2021. The forbearance has been granted in light of the exceptional circumstances arising from COVID-19, in a bid to minimize disruption to consumers and merchants.

    Read more.
  • European Central Bank Modifies Terms of Targeted Lending Operations and Announces New Refinancing Operations
    04/30/2020

    The European Central Bank has announced a series of modifications to its targeted longer-term refinancing operations (referred to as TLTRO III) to facilitate ongoing access of firms and households to bank credit. TLTRO III is the latest in the series of Eurosystem refinancing operations that provide financing to Eurozone credit institutions.
     

    Read more.
    TOPIC : COVID-19
  • Council of the European Union Publishes Working Paper on Interoperability Arrangements and MiFIR Open Access for Exchange Traded Derivatives
    04/29/2020

    The Council of the European Union has published a working paper on interoperability arrangements as a source of contagion risk and open access provisions for exchange-traded derivatives under the Markets in Financial Instruments Regulation.

    Interoperability arrangements are links between CCPs that involve the cross-system execution of transactions. They are relevant where multiple CCPs service the same trading venue and allow clearing members of one CCP to centrally clear trades carried out with members of another CCP, without requiring the first counterparty to be a member of the second CCP. The European Market Infrastructure Regulation contains provisions governing CCP interoperability arrangements, including the need for non-discriminatory access, adequate risk management policies and the need for prior approval of relevant national regulators.

    Read more.
  • UK Regulators Respond to Amended COVID-19 Support Packages
    04/27/2020

    The U.K. Prudential Regulation Authority and the U.K. Financial Conduct Authority have published guidance for firms on the implications of HM Treasury's amendments to the U.K. Coronavirus Business Interruption Loan Scheme and Coronavirus Large Business Interruption Loan Scheme and the introduction of the Bounce Back Loan Scheme.

    HM Treasury has announced the new BBLS which will run alongside the existing CBILS and CLBILS, providing government guarantees for loans to small businesses of between £2,000 and £50,000. The minimum threshold for CBILS loans will be increased to £50,001, and firms with existing CBILS loans of £50,000 or less will be entitled to switch their facility to the BBLS. The BBLS will launch for applications from May 4, 2020.

    Read more.
  • European Supervisory Authorities Consult on Technical Standards on Sustainability Disclosures
    04/23/2020

    The European Supervisory Authorities have launched a joint consultation on proposed Regulatory Technical Standards on content, methodologies and presentation of disclosures under the EU Regulation on sustainability‐related disclosures in the financial services sector, known as the Sustainable Finance Disclosure Regulation. Responses to the consultation can be submitted until September 1, 2020.

    Read more.
  • European Banking Authority Publishes Guidance on Prudential Flexibility for COVID-19
    04/22/2020

    The European Banking Authority has published guidance on its supervisory flexibility for certain aspects of the European bank prudential regulatory framework, in light of the COVID-19 pandemic.

    Read more.
  • Financial Stability Board Consults on Cyber Incident Responses
    04/20/2020

    The Financial Stability Board has launched a consultation on its proposed guidance on Effective Practices for Cyber Incident Response and Recovery. The consultation seeks input on a toolkit of cyber incident responses compiled by the FSB based on effective actions taken by organizations across the world. The consultation paper opens with a series of specific questions for respondents to consider, before setting out the draft toolkit of responses on which feedback should be given. Responses should be submitted by July 20, 2020.

    Read more.
    TOPICS : Cyber SecurityFinTech
  • UK Prudential Regulator Publishes Q&A on Use of Liquidity and Capital Buffers During COVID-19
    04/20/2020

    The U.K. Prudential Regulation Authority has published a Q&A guide on how banks should use their capital and liquidity buffers during the COVID-19 crisis. The PRA and Financial Policy Committee have stressed the important role that banks must play in providing liquidity to the economy in the wake of the pandemic, using all tools at their disposal, including the buffers built up in the years since the 2007-2009 financial crisis.

    Read more.
  • UK Conduct Regulator Confirms Regulatory Rules Allow Electronic Signatures
    04/20/2020

    The U.K. Financial Conduct Authority has published a statement on its expectations for wet-ink signatures in light of the coronavirus pandemic. The FCA confirms that FCA rules do not require wet-ink signatures for agreements and do not prevent the use of electronic signatures either. However, the FCA stresses the validity of electronic signatures is a legal matter, for which firms should seek legal advice, if appropriate.

    The FCA also states that firms may use electronic signatures in submitting forms.

    View the FCA's statement on wet-ink signatures.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
    TOPIC : COVID-19
  • UK Conduct Regulator Statement on Financial Resilience for Solo-Regulated Firms
    04/17/2020

    The U.K. Financial Conduct Authority has published a statement on its intended approach to prudential regulation of FCA solo-regulated firms during the COVID-19 pandemic. Firms are expected to plan ahead and prudently manage their financial resources. Firms that have been set capital buffers are permitted to use them to support the continuation of their activities, but should contact the FCA if they intend to draw down a buffer. Firms should also maintain up-to-date wind-down plans taking account of the impact of COVID-19 and should contact the FCA if they are concerned about their ability to meet debts as they fall due or their wind-down plans identify material execution risks. Boards should be satisfied that any discretionary distributions of capital to fund share buy-backs, dividends, or upstream cash are prudent.
     
    View the FCA's statement on financial resilience for solo-regulated firms.
  • European Central Bank Announces Capital Requirements Relief for Market Risk
    04/16/2020

    The European Central Bank has announced its decision to temporarily reduce capital requirements for market risk in response to high levels of volatility arising from the COVID-19 pandemic. The reduction will be effected via the reduction of the qualitative market risk multiplier, a supervisory measure that is set by regulators and used to compensate for underestimation of market risk capital requirements. The ECB's decision will be reviewed after six months.
     
    View the ECB's announcement on capital requirements relief for market risk.
  • International Swaps and Derivatives Association Announces Preliminary Results of LIBOR Pre-Cessation Fallbacks Consultation
    04/15/2020

    The International Swaps and Derivatives Association has announced the preliminary results of its consultation on pre-cessation fallbacks for LIBOR-referencing derivatives. The consultation was launched in February 2020, and sought industry responses on ISDA’s proposals to add a pre-cessation trigger to the LIBOR cessation fallbacks ISDA is proposing to implement in its standard documentation. The trigger would cause LIBOR-based derivative contracts to fall back to an alternative reference rate in the event that the U.K. Financial Conduct Authority deemed LIBOR to be no longer representative.

    Read more.
  • G20 Action Plan for COVID-19
    04/15/2020

    The G20 finance ministers and central bank governors have published an Action Plan for the international response to the COVID-19 pandemic. The Action Plan covers the healthcare, economic and fiscal responses that G20 members have agreed to undertake, as well as measures to ensure a return to a strong and sustainable global economy, the provision of support to countries in need and the learning of lessons in preparation for future crises.

    Read more.
  • COVID-19: European Central Bank Confirms Easing of Prudential Measures for Large Eurozone Banks
    04/15/2020

    The European Central Bank, Banking Supervision has published a letter addressed to the significant Eurozone banks that it directly prudentially supervises under the Single Supervisory Mechanism. The ECB, Banking Supervision, expresses its support of the EBA's statement dated March 31, 2020 on supervisory reporting and Pillar 3 disclosures. In line with the EBA's statement, the ECB: (i) confirms that significant Eurozone banks may delay by one month the submission of supervisory data for remittance dates between March 2020 and May 2020; (ii) excludes information on the liquidity coverage ratio; and (iii) is allowing firms an additional two months to submit information on funding plans.

    The ECB recommends that Eurozone national regulators should apply the same delays to the smaller Eurozone banks.

    View the ECB's letter to significant banks.

    View details of the EBA's statement on supervisory reporting and Pillar 3 disclosures.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • Financial Stability Board Reports to G20 on COVID-19 Response
    04/15/2020

    The Financial Stability Board has published a report to the G20 on the financial stability implications and policy measures taken in response to the coronavirus pandemic. The report provides an overview of the impact on financial stability of the outbreak and describes the policy actions taken by FSB member jurisdictions. The FSB confirms that it is monitoring financial resilience, focusing on the ability of:
    • financial institutions and markets to channel funds to the real economy;
    • market participants to obtain U.S. dollar funding, particularly in emerging markets;
    • financial intermediaries to manage liquidity risk; and
    • market participants and financial market infrastructures, such as CCPs, to manage evolving counterparty risks.

    The report also sets out how the FSB is supporting international cooperation and coordination on the COVID-19 response by: (i) information sharing; (ii) conducting financial stability risk assessments; and (iii) assisting with coordinating responses on policy issues.

    View the FSB's report to the G20 on the COVID-19 response.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
    TOPIC : COVID-19
  • European Banking Authority Updates Guidelines on Equivalence of Non-EU Confidentiality Regimes
    04/15/2020

    The European Banking Authority has published updated Guidelines on the equivalence of confidentiality regimes under the Capital Requirements Directive. The EBA has added one new third-country national regulator—the New York State Department of Financial Services—to the current list of third-country national regulators whose confidentiality regimes can be regarded as equivalent to those in the EU, following an assessment of the professional secrecy and confidentiality frameworks under which they operate. The updated recommendations apply from April 16, 2020. The Guidelines are intended to assist national regulators in the EU in their assessment of third-country equivalence with the aim of facilitating cooperation with third-country supervisory authorities and their participation in supervisory colleges overseeing international banks.

    View the updated Guidelines.
  • UK Conduct Regulator Says Banks Must Have a Senior Manager Responsible for the Unregulated Activity of Lending to Small Businesses
    04/15/2020

    The U.K. Financial Conduct Authority has published a Dear CEO letter to U.K. regulated banks on lending to small businesses. In the letter, the interim Chief Executive, Christopher Woolard, reminds banks about the importance of ensuring that the benefits of the Government's Coronavirus Business Interruption Loan Scheme are passed to the businesses and consumers that need it. The FCA confirms that it and the PRA are monitoring the level of lending to businesses.

    Read more.
  • International Organization of Securities Commissions Highlights Cross-Border Issues in Sustainable Finance
    04/14/2020

    The International Organization of Securities Commissions has published a final report on Sustainable Finance and the Role of Securities Regulators and IOSCO. The report underlines the negative impact on cross-border financial activities and the investor protection concerns caused by the existence of multiple and diverse sustainability frameworks and standards, including sustainability-related disclosure, the absence of common definitions of sustainable activities and greenwashing and other challenges to investor protection.

    As a result of the findings, the IOSCO Board is establishing a Board-level Task Force on Sustainable Finance. The Task Force will aim to: (i) improve sustainability disclosures by issuers and asset managers; (ii) collaborate with other international standard-setters and regulators to avoid duplicative efforts and to enhance regulatory coordination; and (iii) develop case studies and analyses of transparency, investor protection and other issues to demonstrate the practical implications.

    View the report.
  • Financial Stability Board Consults on Global Stablecoins
    04/14/2020

    The Financial Stability Board has launched a consultation on global stablecoin arrangements. The consultation is in response to the G20 mandating the FSB to analyze potential regulatory issues posed by global stablecoins and to advise on multilateral responses. Responses to the consultation should be submitted by July 15, 2020. The FSB's final report is expected to be published in October 2020.

    Read more.
  • Financial Stability Board Writes to G20 on COVID-19 Response
    04/14/2020

    The Financial Stability Board has published a letter from Randal K. Quarles, the FSB Chair, to G20 Finance Ministers and Central Bank Governors on the response to the coronavirus pandemic. The letter highlights that the financial sector needs to respond to a "twin challenge": the increased demand for credit throughout the global economy and the uncertainty around the value of assets. The letter describes how the FSB and its member jurisdictions have responded to the pandemic to support local and global market functioning, discussing in particular, the steps taken to maintaining financial stability and supporting the real economy during the COVID-19 crisis. The letter also outlines the work to promote a global financial system that supports a strong recovery, including the FSB's prioritizing of certain areas, namely non-bank financial intermediation, the orderly transition away from LIBOR, utilizing technological innovation to assist in cybersecurity and promoting efficient and resilient cross-border payments.

    View the FSB's letter.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • UK Conduct Regulator Announces Details of Post-Brexit Temporary Permissions Regime for EEA Firms and Funds
    04/11/2020

    The U.K. Financial Conduct Authority has published details of the temporary permissions regime that will allow FCA-regulated EEA firms to continue providing financial services in the U.K. for a limited period following the U.K.’s exit from the EU, in the event that no implementation or transitional period is agreed under the Withdrawal Agreement. Without an implementation or transitional period, EEA firms’ passporting rights to provide financial services would cease on the date that the U.K. leaves the EU.

    Read more.
  • EU Delays Publication Dates for Annual Transparency Calculations for Non-Equities
    04/09/2020

    The European Securities and Markets Authority has issued a public statement announcing the delay of the publication dates of the annual transparency calculations for non-equity instruments. ESMA's statement is made in response to the impact of the coronavirus. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, which became effective on January 3, 2018, introduced pre- and post-trade transparency requirements for equity and non-equity financial instruments. ESMA is postponing the publication of the annual transparency calculation for derivatives, exchange traded commodities, exchange traded notes, emission allowances and structured finance products from April 30, 2020 to July 15, 2020 and their application from June 1, 2020 to September 15, 2020. The transitional transparency calculations will continue to apply until September 14, 2020 (inclusive). The publication and application of the annual transparency calculations for bonds remain unchanged. The new thresholds will be applicable from June 1, 2020.

    Read more.
    TOPICS : COVID-19MiFID II
  • European Securities and Markets Authority Recommends Regulatory Forbearance for Funds’ Periodic Reporting Obligations
    04/09/2020

    The European Securities and Markets Authority has announced its expectation that national regulators should, where possible, deprioritize supervisory action against certain fund managers for failure to comply with periodic financial reporting deadlines for funds they manage for the periods ending from December 31, 2019 to April 30, 2020 (inclusive). The fund managers covered by ESMA’s statement are: (i) undertakings for the collective investment in transferable securities (UCITS) management companies; (ii) self-managed UCITS investment companies; (iii) authorized alternative investment fund managers; (iv) non-EU AIFMs marketing AIFs; (v) European Venture Capital Fund managers; and (vi) European Social Entrepreneurship managers.

    Read more.
    TOPICS : COVID-19Funds
  • UK Prudential Regulator Announces Delays for Certain Regulatory Reporting and Disclosure Requirements
    04/09/2020

    The U.K. Prudential Regulation Authority has announced a series of amendments to regulatory reporting and disclosure requirements applicable to U.K. banks, building societies, designated investment firms and credit unions, in light of the global COVID-19 pandemic. The PRA’s changes follow recent statements and recommendations made by the European Banking Authority, providing clarity on measures to mitigate the impact of COVID-19 on the EU banking sector.

    Read more.
  • UK Prudential Regulator Publishes 2020/2021 Business Plan
    04/09/2020

    The U.K. Prudential Regulation Authority has published its Business Plan for 2020/2021, which sets out its strategic goals for the next 12 months and its work plan to deliver them. The PRA has had to tailor its intended Business Plan to take account of the impact of the COVID-19 pandemic. In particular, it has elected to cancel its 2020 annual cyclical scenario stress tests, delay the publication of the results of the 2019 biennial exploratory scenario, postpone less critical aspects of its supervisory program for individual firms and extend consultation periods and implementation timeframes for new initiatives where possible.

    Read more.
  • Financial Stability Board Report on Global Enhancement of Cross-Border Payments
    04/09/2020

    The Financial Stability Board has published a report addressed to the G20 on international cross-border payment arrangements, where the sender and recipient of funds are in different jurisdictions. The report forms the first stage of the G20’s three-stage process to develop a roadmap that will enable countries to enhance their cross-border payments systems. The second stage will see the Committee on Payments and Market Infrastructures set out the building blocks of a system to improve cross-border payments and is due to be submitted to the G20 in July 2020. The third stage will involve coordination between the FSB and CPMI, together with other international organizations, to compile a roadmap for implementing the improvements. A report on the full three-stage process is expected to be delivered to the G20 in October 2020.

    Read more.
  • EU Regulatory Forbearance for Audit Requirements for Interest Rate Benchmark Administrators and Contributors
    04/09/2020

    The European Securities and Markets Authority has issued a public statement asking national regulators across the EU not to prioritize supervisory actions against interest rate benchmark administrators and contributors for failing to comply with the external audit requirements under the Benchmark Regulation, where those audits are carried out by September 30, 2020. The EU Benchmark Regulation requires an interest rate benchmark administrator to have an external audit conducted of its compliance with the benchmark methodology and Benchmark Regulation. Contributors to interest rate benchmarks are required to have an external audit conducted of their input data and compliance with the Benchmark Regulation. ESMA is granting the regulatory forbearance in response to the impact of COVID-19. ESMA states that administrators and contributors that anticipate a delay to the required audits should inform their nation regulator.

    View ESMA's statement.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • UK Prudential Regulator Takes Further Steps in Response to COVID-19
    04/09/2020

    The U.K. Prudential Regulation Authority has announced two further measures in response to the coronavirus outbreak. The first is the PRA's decision to maintain the systemic risk buffer rates at the rate set in December 2019. The rates determine the amount of additional regulatory capital that must be held by "systemic risk buffer institutions" (i.e. U.K. financial institutions 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 banks and 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. In December 2019, the PRA maintained the rates that had first been set in May 2019. The SRB rates will be re-assessed in December 2021 and the decision taken then will take effect in January 2023.

    Read more.
  • European Banking Authority Report on Impact of Basel III Reforms
    04/08/2020

    The European Banking Authority has published two reports on the impact of the Basel III liquidity coverage ratio, as implemented in the EU, and the estimated impact of the Basel III credit and market risk, and credit valuation adjustment reforms, which are yet to be implemented by the EU. The reports are based on 2019 data that was collected prior to the outbreak of COVID-19.

    Read more.
  • European Commission Launches Consultation on Sustainable Finance Strategy
    04/08/2020

    The European Commission has launched a consultation on its renewed sustainable finance strategy. The consultation was proposed at the beginning of 2020 as part of the Commission’s next steps for sustainable finance. It poses a series of questions to all EU citizens, public authorities and private organizations, as well as experts with particular knowledge of finance and sustainability, on the aspects of the EU’s renewed strategy. Responses to the consultation should be submitted by July 15, 2020.

    Read more.
  • UK Conduct Regulator Publishes 2020/2021 Business Plan
    04/07/2020

    The U.K. Financial Conduct Authority has published its Business Plan for 2020/2021, which sets out its five key priorities for the next one to three years.

    Read more.
  • European Commission Consults on Retail Payments Strategy for the EU
    04/03/2020

    The European Commission has launched a consultation on a retail payments strategy for the EU. The Commission's final strategy will be published in Q3 2020 alongside the new digital finance strategy, on which the Commission launched a consultation on the same day. The consultation closes on June 26, 2020.

    The Commission states that the RPS will be a key to reinforcing the international role of the euro, strengthening Europe's influence and enhancing its economic autonomy. In addition, the Commission notes that safe and efficient payment systems and services will assist the EU in tackling emergencies, such as the coronavirus outbreak.

    Read more.
  • Basel Committee on Banking Supervision Announces Further Measures to Alleviate COVID-19 Impact
    04/03/2020

    The Basel Committee on Banking Supervision has announced a series of measures designed to reduce the impact of COVID-19 on the global banking sector. The latest measures are designed to facilitate bank lending to the real economy and boost banks’ operational capacity to the financial strain of COVID-19. They follow the extension to Basel III implementation deadlines announced by the Group of Central Bank Governors and Heads of Supervision on March 27, 2020.

    Read more.
  • UK Conduct Regulator Publishes Guidance on Senior Managers and Certification Regime for Solo-Regulated Firms in Response to COVID-19
    04/03/2020

    The U.K. Financial Conduct Authority has published guidance for solo-regulated firms on adherence to the Senior Managers and Certification Regime in light of COVID-19. The FCA has separately issued joint Guidance with the Prudential Regulation Authority on the SM&CR for dual-regulated firms.

    Read more.
  • HM Treasury Announces Further Funding Support for Businesses During COVID-19
    04/03/2020

    HM Treasury has announced further funding to support businesses during COVID-19. The actions include extending the Coronavirus Business Interruption Loan Scheme to make all small businesses affected by COVID-19 eligible for funding, as opposed to just those unable to secure regular commercial financing. Lenders will also no longer be permitted to seek personal guarantees for loans under £250,000. The government has also announced the introduction of the new Coronavirus Large Business Interruption Loan Scheme, which will make government-backed loans of up to £25 million available to firms with an annual turnover of between £45 million and £500 million.
     
    The funding schemes will not be available to banks, insurers or building societies. Further details of all of the government's funding schemes can be found on the government's website.
     
    View the government's announcement on COVID-19 support measures.
     
    View the Government's COVID-19 support packages.
    TOPIC : COVID-19
  • UK Regulators Publish Guidance on Senior Managers and Certification Regime for Dual-Regulated Firms in Response to COVID-19
    04/03/2020

    The U.K. Financial Conduct Authority and Prudential Regulation Authority have published joint guidance for dual-regulated firms on adherence to the Senior Managers and Certification Regime in light of COVID-19. The U.K. regulators intend to be flexible in enforcing SM&CR requirements given the disruption to personnel and operations triggered by the pandemic. The FCA has issued separate guidance for solo-regulated firms subject to the SM&CR.

    Read more.
  • European Commission Consults on a New Digital Finance Strategy for the EU
    04/03/2020

    The European Commission has launched a consultation on a new digital finance strategy and FinTech action plan for Europe. The Commission states that although it is prioritizing fighting the coronavirus pandemic, it has decided not to delay this work because the digital finance can help to tackle issues arising as a result of the coronavirus pandemic. The Commission's final strategy, due to be published in Q3 2020, will set out the focus FinTech policy areas for the next five years. The consultation closes on June 26, 2020.

    Read more.
  • Financial Stability Board COVID-19 Actions
    04/02/2020

    The Financial Stability Board has announced its coordinated actions with FSB members to support the real economy and maintain financial stability in the wake of COVID-19. Key actions include:
    • Information sharing – FSB members are sharing information on the actions taken to deal with COVID-19, which include lending and liquidity support, market functioning support and measures to support business continuity of both financial institutions and regulators;

    Read more.
  • European Commission Acknowledges Postponement of COP26
    04/02/2020

    The European Commission has acknowledged the U.K. Presidency's decision to postpone the UN Climate Change Conference of the Parties (commonly known as COP26) in order to focus efforts on containing COVID-19. The Commission's work to produce a plan to raise the EU's 2030 climate-change ambitions and cut greenhouse gas emissions by 50-55% compared to 1990 levels is on track to be presented by September 2020.

    Read more.
  • UK Conduct Regulator Consults on COVID-19 Financial Relief for Consumers Guidance
    04/02/2020

    The U.K. Financial Conduct Authority is consulting on proposed measures to ease the financial implications of COVID-19 on consumers. The measures would be introduced via guidance issued by the FCA on areas of particular concern to consumers. The consultation, which is deliberately short given the unprecedented circumstances arising from the pandemic, is open until 9am on April 6, 2020 and, if confirmed, the measures will take effect from April 9, 2020.

    Read more.
  • UK Prudential Regulator Welcomes Postponement of Basel III Implementation
    04/02/2020
    HM Treasury and the U.K. Prudential Regulation Authority have published a joint statement welcoming the delay to implementation of certain aspects of the Basel III regulatory reforms, announced by the Group of Central Bank Governors and Heads of Supervision. The GHOS has delayed the deadlines for introducing certain Basel III standards by one year until 2023 (or, in the case of the output flow, 2028). The Treasury and PRA intend to work together to produce a U.K. implementation timetable that is consistent with the GHOS’s delay.

    View the PRA's statement on the delayed implementation of Basel III.

    View details of the GHOS's delays to the implementation of Basel III.

    Details of other regulatory responses to COVID-19 are available at our COVID-19 Research Center.
  • European Banking Authority Guidelines on Treatment of COVID-19 Payments Moratoria
    04/02/2020

    The European Banking Authority has published guidelines on legislative and non-legislative moratoria on loan repayments applied in light of the COVID-19 crisis. The Guidelines state that, where payment moratoria are based on national law or a private-sector initiative broadly applied by credit institutions in response to COVID-19, they will not be classified as forbearance or distressed restructuring measures. 

    Read more.
  • Financial Action Task Force Issues Statement on Remaining Vigilant to AML and CFT Risks During the COVID-19 Pandemic
    04/01/2020

    The Financial Action Task Force has published a statement on measures to combat illicit financing during the coronavirus pandemic. The key messages are that the FATF supports the use of the flexibility built into the risk-based approach to anti-money laundering and counter-financing terrorism. However, it warns financial institutions to remain vigilant to new and emerging finance risks arising due to COVID-19, such as frauds arising due to difficulties in customer due diligence in person or reductions of monitoring due to remote working, or due to possible risks of fraud in government cash handout schemes. It reminds firms that they should ensure that they continue to effectively mitigate risks and are able to detect and report suspicious activities. In addition, the FATF urges financial institutions to use responsible digital customer onboarding and the delivery of financial services wherever possible and refers institutions to the FATF's recently released Guidance on Digital ID. Furthermore, the FATF encourages countries and financial institutions to consider appropriate use of simplified due diligence measures to assist in the delivery of government benefits established in response to the pandemic.

    View the FATF's statement.

    View details of the FATF's Guidance on Digital ID.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • Single Resolution Board Letter to Eurozone Banks on COVID-19 Relief Measures
    04/01/2020

    The EU Single Resolution Board has written to Eurozone banks about potential COVID-19 relief measures. It is united with the European Supervisory Authorities and national regulators in aiming to alleviate operational burdens on banks to enable them to deal with the COVID-19 crisis. The SRB intends to apply a pragmatic and flexible approach to 2020 resolution plans and MREL decisions and will consider postponing less urgent information requests where necessary. It does, however, confirm that Eurozone banks still need to submit the following reports: Liability Data Report, Additional Liability Report and MREL quarterly template.

    View the SRB's letter to Eurozone banks.
  • EU Consultation on Standardized Information for Facilitating Cross-Border Distribution of Funds
    03/31/2020

    The European Securities and Markets Authority has launched a consultation on the forms, templates and procedures that national regulators should use to publish information on their websites to facilitate cross-border distribution of funds. The Regulation on facilitating cross-border distribution of funds 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. It was brought in at the same time amendments were made to the Directive on Undertakings for Collective Investment in Transferable Securities and the Alternative Investment Fund Managers Directive through an amending Directive. Member states are required to transpose the amending Directive into national laws by, and apply those laws from, August 2, 2021. Certain provisions of the Regulation applied directly across the EU from August 1, 2019, while the remaining provisions will apply from August 2, 2021.

    Read more.
    TOPIC : Funds
  • European Securities and Markets Authority Publishes Advice on Fines and Penalties for Third-Country CCPs
    03/31/2020

    The European Securities and Markets Authority has published its final technical advice to the European Commission on procedural rules for imposing fines and penalties on third-country CCPs and trade repositories. The technical advice also covers the alignment of the rules with those applicable to EU credit rating agencies, which ESMA directly supervises. The European Commission mandated ESMA to produce the technical advice in response to changes made to the European Market Infrastructure Regulation by EMIR Refit and EMIR 2.2. EMIR Refit updated (amongst other things) the requirements applicable to trade repositories, including with respect to fines and penalties. EMIR 2.2 introduced investigatory and supervisory powers over CCPs for ESMA to ensure compliance with the new requirements, including the ability to request information from CCPs, appoint an independent investigation officer to investigate any possible infringements under EMIR 2.2 and impose fines.

    Read more.
  • UK Prudential Regulator Statement on Bank Dividends and Bonuses in Light of COVID-19
    03/31/2020

    The U.K. Prudential Regulation Authority has published a statement supporting the decisions of the U.K.'s largest banks to suspend dividends and buybacks on ordinary shares until the end of 2020 and to cancel outstanding 2019 dividends. The PRA also makes it clear that it expects banks to refrain from paying cash bonuses to senior staff, including material risk takers. In parallel, the PRA has written to the CEOs of the largest U.K. banks (HSBC, Nationwide, Santander, Standard Chartered, Barclays, RBS and Lloyds Banking Group), notifying them of the PRA's expectation that they should not pay cash bonuses to senior staff.

    View the PRA's statement.
  • UK Conduct Regulator Dear CEO Letter to Firms on Consumer Protection During COVID-19 Pandemic
    03/31/2020

    The U.K. Financial Conduct Authority has published a Dear CEO letter addressed to firms providing services to retail investors on the actions they should be taking to protect consumers during the COVID-19 pandemic. Firms are expected to provide strong support and service to consumers, to be transparent with their customers and to report to the FCA immediately if they foresee themselves getting into financial difficulty.

    Read more.
  • UK Prudential Regulator Publishes Capital Requirements Guidance for UK Firms in Light of COVID-19
    03/31/2020

    The U.K. Prudential Regulation Authority has published two statements addressed to U.K. firms on the application of certain requirements of the EU Capital Requirements Regulation.
     
    The first statement sets out the PRA's approach to calculating exposure under the internal models method for counterparty credit risk in light of the significant moves in counterparty credit risk exposures during the COVID-19 pandemic. Firms are reminded of their notification obligations in relation to any changes they make to their internal models method models as a result of the PRA's guidance.

    Read more.
  • European Banking Authority Issues Statements on Addressing COVID-19 Impact for EU Banking Sector
    03/31/2020

    The European Banking Authority has published three statements providing clarity on measures to mitigate the impact of COVID-19 on the EU banking sector. The statements are: Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19: referring to its statement issued on March 12, 2020, the EBA outlines further details on actions that firms, national regulators and resolution authorities can take to mitigate the impact of COVID-19. The EBA stresses the importance of firms providing reliable data for supervisory purposes, particularly given market fluctuations. However, the EBA reiterates that some leeway can be given to firms for certain areas and asks national regulators to consider the extent to which a delay to submission of data may be justified. In general, the EBA suggests that firms should be given an additional month to submit data (with an additional two months given for remittance of data on funding plans), but national regulators should confirm the precise requirements. The EBA excludes from the forbearance information on the liquidity coverage ratio (LCR) and reporting for resolution planning purposes. The EBA also encourages national regulators to be flexible about the deadline for firms to publish their Pillar 3 data. Firms should contact their regulator if they expect that there will be a delay to their Pillar 3 disclosures.

    Read more.
  • European Securities and Markets Authority Encourages Regulatory Forbearance for Best Execution Reporting in Light of COVID-19
    03/31/2020

    The European Securities and Markets Authority has published a statement encouraging national regulators to deprioritize supervisory actions against firms that fail to meet best execution reporting deadlines under the revised Markets in Financial Instruments Directive. The MiFID II best execution requirements oblige investment firms to obtain the best possible result for their clients when executing client orders, and require execution venues and investment firms to make data relating to the quality of execution of transactions publicly available.

    Read more.
    TOPICS : COVID-19MiFID II
  • European Securities and Markets Association Publishes Call for Evidence on Credit Rating Information and Data
    03/30/2020

    The European Securities and Markets Authority has published a call for evidence on credit rating information and data, the purpose of which is to understand the activities of those who use credit ratings.
     
    In doing so ESMA wants to identify each users' requirements of credit ratings information, including:
     
    • the format of the information;
    • the frequency with which the information is required; and
    • the scope.
     
    ESMA also aims to understand why users prefer to rely on paid-for third-party providers, rather than rely on the freely published information provided by the European Rating Platform.

    Read more.
    TOPIC : Credit Ratings
  • Basel Committee on Banking Supervision Defers Basel III Implementation in Response to COVID-19
    03/30/2020

    The Basel Committee on Banking Supervision has delayed the implementation timeline for Basel III to allow firms to focus on tackling the challenges resulting from the coronavirus (COVID-19) pandemic.

    Read more.
  • European Securities and Markets Authority Maintains MiFID II Equity Transparency Calculations Application Date
    03/27/2020

    The European Securities and Markets Authority has issued a statement in which it confirms that the existing date for the application of the equity transparency calculations will remain unchanged. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, which became effective on January 3, 2018, introduced pre- and post-trade transparency requirements for equity and non-equity financial instruments. On February 28, 2020, ESMA published the transparency calculations that will apply to new instruments from April 1, 2020 until March 31, 2021. Further calculations will be released ahead of that date once the data quality review for those instruments has been completed.

    ESMA's statement confirms that the new calculations will apply from April 1, 2020, as intended, because firms have had to implement new transparency calculations in the past and so do not need to revise their IT systems to comply with the obligation. In addition, ESMA is of the view that a delay could negatively impact those firms that have planned for the new calculations.

    View ESMA's statement.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Centre.
    TOPICS : COVID-19MiFID II
  • UK Financial Conduct Authority Clarifies Senior Manager Responsibility For Work-Related Travel
    03/27/2020

    The U.K. Financial Conduct Authority has published a statement emphasizing the responsibility of relevant Senior Managers or equivalent persons in prioritizing which of their firm's employees cannot work from home and need to travel into an office or business continuity site to perform their role. The FCA's statement is relevant to all FCA-regulated firms across the U.K. and is made in relation to the COVID-19 pandemic. The FCA states that it expects the number of individuals that need to travel into an office or other place of work to be considerably less than would be required for a business-as-usual basis. The FCA provides a list of roles that it considers are capable of being performed from home. These are: financial advisers, staff who can safely and securely trade shares and financial instruments from home, business support staff, claims management companies and those selling non-essential goods and credit.

    View the FCA's statement.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Centre.
  • COVID-19: European Central Bank Recommends Suspension of Dividends by Large Eurozone Banks
    03/27/2020

    The European Central Bank has published an updated Recommendation requiring the largest Eurozone-based banks to suspend the payment of any dividends and buyback of shares until at least October 1, 2020. The Recommendation is addressed to significant institutions that are directly prudentially supervised by the ECB. Eurozone national regulators of smaller banks are expected to apply the Recommendation, as deemed appropriate. The Recommendation applies to both 2019 and 2020 dividends, but does not retroactively apply to dividends that have already been paid for the 2019 financial year. Where a bank believes that it is legally obliged to make a dividend pay-out, it should explain the reasons to its joint supervisory team.

    The purpose of the Recommendation is to ensure that banks are able to maintain their lending and therefore the support of businesses during the current global pandemic.

    View the ECB recommendation here.

    View the ECB press release here.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • European Securities and Markets Authority Grants Regulatory Forbearance for Financial Reporting in Wake of COVID-19
    03/27/2020

    The European Securities and Markets Authority has published guidance for issuers on compliance with their financial reporting requirements in light of the challenges presented by the coronavirus (COVID-19) pandemic. Under the EU Transparency Directive, issuers of debt securities or shares must publish annual and half-yearly financial reports within four months and three months, respectively, of the end of the relevant reporting period.

    Read more.
  • COVID-19: EU Regulatory Forbearance for Banks and Investment Firms for Reporting Securities Financing Transactions
    03/26/2020

    UPDATE: Further to its statement published on March 18, 2020, the European Securities and Markets Authority has published a clarifying statement to confirm that the regulatory forbearance granted for banks and investment firms subject to the upcoming reporting obligation under the Securities Financing Transaction Regulation also applies to securities financing transactions subject to the backloading requirement.

    ESMA published its initial public statement on steps it is taking to mitigate the impact of the coronavirus (COVID-19) on the EU financial markets. ESMA is granting regulatory forbearance for banks and investment firms subject to the upcoming reporting obligation under the SFTR. Banks and investment banks were due to start reporting SFTs from April 13, 2020. EU banks and investment firms have been rolling out necessary diligence to categorize their clients and confidentiality waivers ahead of the launch, as well as installing new IT systems to report. ESMA's regulatory forbearance delays the reporting obligation for banks and investment firms from April 13, 2020 to July 13, 2020, which is the date from which CCPs and central securities depositories must begin reporting SFTs. Other Financial Counterparties must report from October 12, 2020 and Non-Financial Counterparties from January 11, 2021.

    Read more.
    TOPICS : COVID-19Securities
  • UK Financial Conduct Authority Expectations on Financial Resilience of Firms
    03/26/2020

    The U.K. Financial Conduct Authority has published a statement reminding firms that they are able to use capital and liquidity buffers during the COVID-19 pandemic. The FCA also stated that firms should plan ahead and ensure that any potential exit from the market is conducted in an orderly manner. The statement is relevant for firms that are solo-regulated by the FCA.

    Firms are encouraged to contact the FCA if they are unable to meet their capital requirements.

    View the FCA announcement.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • COVID-19: UK Regulators Issue Joint Statement on Financial Statement Requirements
    03/26/2020

    The U.K. Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulation Authority have announced a number of measures and initiatives to assist firms during the current global coronavirus pandemic. These include:
    • a statement from the FCA on the publishing of audited financial reports for listed companies;
    • guidance from the FRC for companies preparing financial statements to be read in conjunction with PRA guidance on assessing expected loss under IFRS9; and
    • guidance from the FRC for audit firms.

    Read more.
  • UK Conduct Regulator: COVID-19 Will Not Impact LIBOR Deadline
    03/25/2020

    On March 25, 2020, the U.K. Financial Conduct Authority confirmed that COVID-19 is not expected to affect LIBOR preparations and the target date for LIBOR cessation of the end of 2021 still stands. The FCA does acknowledge, however, that some interim LIBOR milestones may not be met as a result of the pandemic, and it will continue to monitor the impact on such timelines carefully.
     
    View the FCA's statement on COVID-19 and LIBOR.
     
    Details of other regulatory responses to COVID-19 are available at our COVID-19 Research Center.
  • COVID-19: European Securities and Markets Authority Publishes Statement on Accounting Implications
    03/25/2020

    The European Securities and Markets Authority has published a statement to ensure the consistent application by issuers of International Financial Reporting Standards within the European Union. In particular, it addresses the requirement for consistent application of IFRS 9 related to the classification of financial assets and liabilities. ESMA considers a range of accounting implications that may arise for Issuers as a result of national governments' and EU bodies' responses to the COVID-19 pandemic. 

    Read more.
  • European Banking Authority Provides Clarity on the Prudential Framework in Light of COVID-19 
    03/25/2020

    The European Banking Authority has released two separate statements in response to the COVID-19 pandemic, the first covering bank prudential regulation and the second dealing with consumer protection and payment services.

    Read more.
  • European Banking Authority Announces Postponement of Certain of its Activities
    03/25/2020

    In order to ensure that banks are able to focus on key operations throughout the current COVID-19 pandemic, the European Banking Authority has announced a postponement and extension of certain activities.

    Read more.
  • Bank of England Financial Policy Summary and Record of the Financial Policy Committee March 2020 Meetings
    03/24/2020

    The Bank of England's Financial Policy Committee met on March 9 and 19, 2020, a time when the COVID-19 pandemic dominated the news and in turn presented challenges for markets.

    Read more.
  • International Organization of Securities Commissions Publishes Report on Global Stablecoins
    03/23/2020

    The International Organization of Securities Commissions has published a report analyzing the regulatory issues arising from the use of global stablecoins and setting out how the existing IOSCO principles would apply to a global stablecoin, depending on its structure. IOSCO states that global stablecoins, depending on how they are set up, share features with regulated securities and other regulated financial instruments and services. Using a hypothetical global stablecoin case, the report analyzes how the IOSCO Principles and Standards would apply and also considers some of the broader implications. The report also includes an analysis, jointly conducted by IOSCO and the Committee on Payment and Market Infrastructures, of the applicability of the CPMI-IOSCO Principles for Financial Market Infrastructures. The conclusion is that the PFMI will apply to global stablecoin arrangements involving the performance of systemically important payment system functions or other FMI functions.

    View IOSCO's report on global stablecoin initiatives.
  • COVID-19: UK Financial Conduct Authority Confirms No Short Selling Ban (Yet)
    03/23/2020

    The U.K. Financial Conduct Authority has published a statement confirming that, in the wake to the COVID-19 pandemic, it is working with regulators in the U.S., the EU and elsewhere to ensure that the financial markets can remain orderly and open. Noting the recent volatility in the financial markets, the FCA confirms that the U.K. has not imposed a short selling ban and neither has the U.S. or any other major financial market. The EU has however temporarily reduced the threshold for the reporting of short positions. Net short position holders are required to notify the relevant national regulator of any net short position of 0.1% of the issued share capital of a company and of each 0.1% above that threshold. This also applies to listed shares on UK markets.  It is not necessary to notify existing positions above the new lower threshold that were not previously notifiable, until new trading takes place.

    Read more.
    TOPICS : COVID-19FundsSecurities
  • HM Treasury Exempts COVID Corporate Financing Facility from Regulated Activity Regime
    03/20/2020

    HM Treasury has published the Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2020, exempting the COVID Corporate Financing Facility from the U.K.'s regulated activity regime. The Order will come into effect from March 23, 2020. The exemption means that the COVID Corporate Financing Facility is not subject to the U.K. prohibition on conducting regulated activities in the U.K. under section 19 of the Financial Services and Markets Act 2000. 

    Read more.
  • Financial Stability Board Announces Coordinated Financial Sector Response to COVID-19
    03/20/2020

    The Financial Stability Board is coordinating with its members to support coordinated action required to preserve global financial stability. National regulators and financial institutions are encouraged to take advantage of regulatory flexibility to protect funding for market participants and the real economy, and international standard setting bodies are working together, including with reference to financial policy responses in their respective jurisdictions, to ensure the financial system can continue to finance growth.
     
    View the FSB's announcement.
  • European Securities and Markets Authority Announces MiFID II Tick-Size Regime Forbearance
    03/20/2020

    The European Securities and Markets Authority expects national regulators to de-prioritize their supervision of the new tick-size regime for systematic internalizers under the Markets in Financial Instruments Regulation in light of the challenges posed by COVID-19. Amendments to the MiFIR tick-size regime were introduced by the Investment Firms Regulation and are due to come into effect on March 26, 2020. ESMA's statement demands that national regulators do not prioritize supervisory actions in relation to the new regime from March 26, 2020 until June 26, 2020.
     
    View ESMA's statement on regulatory forbearance for new tick-size regime.
     
    View details of the Investment Firms Regulation.
    TOPICS : COVID-19MiFID II
  • Bank of England Announces COVID-19 Policy Measures
    03/20/2020

    The Bank of England has announced a series of supervisory and policy measures designed to help firms prudentially regulated by the U.K. Prudential Regulation Authority (banks, building societies, insurers and large investment firms) and BoE-regulated financial market infrastructures (CCPs, central securities depositories and recognized payment systems) with the impact of COVID-19. 

    Read more.
  • COVID-19: European Securities and Markets Authority Extends Consultation Deadlines
    03/20/2020

    The European Securities and Markets Authority has announced that it is extending the consultation response dates to assist market participants as they implement arrangements to ensure business continuity during the coronavirus outbreak.

    Read more.
  • COVID-19: European Securities and Markets Authority Clarifies MiFID II Telephone Recording Requirements
    03/20/2020

    The European Securities and Markets Authority has published a statement on the telephone recording obligations in the Markets in Financial Instruments Directive. MiFID II requires records to be kept of all services, activities and transactions undertaken by an investment firm, including recordings of telephone conversations or electronic communications relating to: (i) transactions concluded when a firm deals on own account (proprietary trading); and (ii) the provision of client order services that relate to the reception, transmission and execution of client orders. Firms are also required to implement and maintain a policy for the recording of these telephone conversations.

    Read more.
    TOPICS : COVID-19MiFID II
  • UK Joint Money Laundering Steering Group Consults on Crypto-Asset Exchange and Custodian Wallet Provider Guidance
    03/18/2020

    The U.K. Joint Money Laundering Steering Group has launched a consultation on its proposed new Guidance on how the U.K. Money Laundering Regulations apply to crypto-asset exchange providers and custodian wallet providers. The proposed Guidance will form a new Sector 22 section in Part II of the existing JMLSG Guidance. Comments on the proposed Guidance should be submitted by May 18, 2020.

    Read more.
  • Brexit Negotiations: European Commission Publishes Draft EU-UK Agreement
    03/18/2020

    The European Commission has published a draft of the proposed agreement between the U.K. and the EU to govern the future relationship between the two, including provisions on financial services. The list of in-scope services includes all services under the Markets in Financial Instruments Directive, the EU Capital Requirements legislation, the European Market Infrastructure Regulation and other legislation. Other provisions of the draft bring market developments in scope and ensure that U.K. financial institutions can provide, subject to certain conditions being met, new services and products in the EU. Notably, the Commission’s draft text provides a carve-out that allows either side to adopt prudential measures for financial stability reasons or for the protection of investors, depositors, policy-holders or persons to whom a fiduciary duty is owed by a financial service supplier. The draft text also includes a commitment by both the EU and U.K. to implement internationally-agreed standards for financial services regulation and supervision, anti-money laundering and counter terrorism and tax evasion.

    View the European Commission's Draft Text of the Agreement on the New Partnership with the United Kingdom.
  • EU Lowers Short Sale Disclosure Threshold
    03/16/2020

    The European Securities and Markets Authority has announced a Decision to lower the threshold for disclosing short positions in shares. Effective March 16, 2020, all holders of net short positions in shares traded on an EU regulated market (i.e., exchange) must notify the relevant national regulator if the position reaches or exceeds 0.1% of the issued share capital. Net short position holders must notify the relevant national regulator of any net short position of 0.1% of the issued share capital of a company and of each 0.1% above that threshold.

    Read more.
    TOPICS : COVID-19Securities
  • EU Working Group on Risk-Free Rates Consults on Voluntary Compensation for Legacy Swaptions
    03/13/2020

    The EU Working Group on Risk-Free Rates has launched a consultation on a proposed recommendation for voluntary compensation for legacy swaptions impacted by the CCP discounting transition to Euro Short-Term Rate (€STR). A Swaption is a type of interest-rate derivative contract. The CCP discounting switch from EONIA to €STR is planned for June 2020. The Working Group has identified that if the exercise date of swaptions is after the CCP transition date, the valuation of the products may change because of the discounting switch from EONIA to €STR. However, because the contracts are bilateral, the CCP compensation mechanism will not apply. The Working Group is seeking feedback on whether it should issue recommendations on the voluntary exchange of a cash compensation between bilateral counterparties to swaption contracts.

    The consultation closes on April 3, 2020.

    View the consultation paper.
  • EU Single Resolution Board Announces Staff Teleworking Arrangements
    03/13/2020

    The EU Single Resolution Board has announced that SRB staff will commence teleworking from March 16, 2020, following relevant decisions from the European Commission and Belgian government. SRB staff remain contactable via email or phone.

    View the SRB's announcement
    TOPIC : COVID-19
  • European Central Bank Announces Temporary Capital and Operational Relief for Banks
    03/12/2020

    The European Central Bank has announced a series of measures designed to support banks to continue their vital role of funding the real economy in the wake of COVID-19. Banks will be permitted temporarily to operate below the level of capital required by Pillar 2 Guidance, the capital conservation buffer and the liquidity ratio. They will also be permitted partially to use capital instruments that do not qualify as Common Equity Tier 1 capital to meet Pillar 2 Requirements. The ECB hopes that, together with EU national regulators' relaxation of the countercyclical capital buffer, these measures will provide significant capital relief to banks.

    Read more.
  • European Banking Authority Prioritizes Supporting Core Bank Operations
    03/12/2020

    The European Banking Authority has published a statement on actions to mitigate the impact of COVID-19 on the EU banking sector. In the statement, the EBA states that it is working with the European Central Bank and EU national regulators to ease the immediate operational burden on EU banks and recommends that national regulators should use, where appropriate, the flexibility embedded in the regulatory framework.

    The EBA views supporting banks' focus on core operations as a priority and has decided to postpone the EU-wide stress test to 2021. However, the EBA will conduct an additional EU-wide transparency exercise to provide updated information on banks' exposures and asset quality. The EBA also recommends that national regulators grant some flexibility on the remittance dates for supervisory reporting by banks.

    The EBA states that banks should adopt prudent dividend and other distribution policies, including variable remuneration.

    View the EBA's statement.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • UK Bank of England Opens Discussion on Central Bank Digital Currency Options
    03/12/2020

    The Bank of England has published a Discussion Paper on central bank digital currency opportunities, challenges and design. The BoE is one of several banks exploring introducing a CBDC. The Discussion Paper describes a platform model of CBDC that demonstrates the issues raised by the concept of a CBDC, highlighting both the risks and opportunities. The BoE stresses that the model does not represent any decision by the BoE on the design of a CBDC and is merely intended to aid the overall discussion. Indeed, the BoE emphasizes that no decision has been made on whether to introduce a CBDC and that it would need to ensure that the benefits outweigh any risks. If a CBDC were to be introduced in the U.K. it would be denominated in pounds sterling and would exist alongside cash and commercial bank deposits.

    Read more.
  • HM Treasury Policy Statement on Prudential Standards for Investment Firms in UK Financial Services Bill
    03/11/2020

    HM Treasury has published a policy statement on its proposals for the prudential standards in the U.K.'s upcoming Financial Services Bill. The Financial Services Bill will set out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The U.K. has historically wished and repeatedly sought to impose higher capital requirements on banks and investment firms than the EU has accepted, in part driven by the better capitalization of U.K. banks compared to some EU institutions. The new policy statement establishes four overarching principles which will govern HM Treasury's approach to prudential standards: (i) financial stability and high international standards; (ii) supporting growth, competition and competitiveness; (iii) giving U.K. regulators a central role in designing technical prudential requirements; and (iv) flexibility, allowing the U.K. to maintain its relationship with the EU and take account of U.K.-specific requirements.

    Read more.
  • Working Group on Sterling Risk-Free Reference Rates Publishes Roadmap for Ceasing New GBP LIBOR Lending by Q4 2020
    03/10/2020

    The Working Group on Sterling Risk-Free Reference Rates has published two documents relevant to the transition away from the use of LIBOR. The first is a statement on bond market conventions and the second is a path for discontinuation of new GBP LIBOR lending by the end of Q3 2020.

    Read more.
  • EU Technical Expert Group on Sustainable Finance Publishes Final Taxonomy Recommendations 
    03/09/2020

    The European Commission has published a final Taxonomy report of the Technical Expert Group on Sustainable Finance. The EU Taxonomy is the EU's classification system of sustainable activities, the legal basis of which is set out in the proposed Taxonomy Regulation (agreed at political level in December 2019). The proposed Taxonomy Regulation sets the environment objectives for the Taxonomy and imposes new obligations for market participants, large companies, the EU and EU Member States. The Taxonomy Regulation will be supplemented by secondary legislation that will set out detailed technical screening criteria to establish when an economic activity can be considered sustainable. The Taxonomy Report provides the TEG's final recommendations to the European Commission on certain content for much of that secondary legislation and replaces the earlier reports of the TEG. 

    Read more.
  • UK Regulator Consults on Enhancing Climate-Related Disclosures by Certain Issuers
    03/06/2020

    The U.K. Financial Conduct Authority has published a consultation paper on proposals to enhance climate-related disclosures by listed issuers and to clarify the existing disclosure obligations of issuers in relation to climate, environmental, social and governance matters. The FCA proposals would implement the disclosure recommendations of the Financial Stability Board's Taskforce on Climate-related Financial Disclosures. Responses to the consultation may be submitted until October 1, 2020. 

    Read more.
  • Guidance Published on Digital Identification Technologies for Anti-Money Laundering Purposes
    03/06/2020

    The Financial Action Task Force has published Guidance on how digital identification technologies can be used to conduct some aspects of customer due diligence for anti-money laundering purposes. The FATF presents a risk-based approach to the use of digital ID software, relying on a set of open source, consensus-driven assurance frameworks and technical standards for digital ID systems. In addition, the FATF sets out a series of recommendations for relevant authorities, regulated entities (meaning financial institutions, virtual asset service providers and designated non-financial businesses and professions) and digital ID services providers. The Guidance is non-binding, however, it clarifies the FATF's standards.

    View the FATF's Guidance on digital ID.
  • UK Regulator Highlights Board Diversity Expectations for Banks and Investment Firms
    03/04/2020

    The U.K. Prudential Regulation Authority has published a letter addressed to the chairpersons of banks, large investment firms and insurance companies on board diversity. The letter is intended to remind firms of the importance of board diversity in achieving effective challenge and improving decision-making and of the need to comply with the PRA's rules. The European Banking Authority published a report on benchmarking of diversity practices in February 2020. The report shows a huge improvement in board diversity in banks and investment firms since 2015. However, the PRA notes that compliance is not comprehensive.

    The PRA asks chairs of all firms subject to its diversity requirements to ensure that their firm is in compliance and to take remedial action if not.

    View the PRA's letter on board diversity.
  • Brexit Negotiations: UK Government Publishes Approach to Future EU-UK Relationship
    02/27/2020

    The U.K. government has published a document setting out its negotiating proposals for a future relationship with the EU. The U.K. left the EU on January 31, 2020 and is no longer an EU member state. However, during an agreed transitional period (currently scheduled to end on December 31, 2020), EU laws and regulations will continue to apply in the U.K. The EU and U.K. will be negotiating during that period on their future relationship.

    Read more.
  • UK Launch of COP26 Private Finance Agenda
    02/27/2020

    The outgoing Governor of the Bank of England has announced the launch of the COP26 Private Finance Agenda. In January this year, Mark Carney was appointed as Finance Adviser for COP26 to assist the U.K. Government to build a sustainable financial system that supports the transition to a net zero emissions economy. Andrew Bailey will replace Mr. Carney as the Governor of the Bank of England from March 16, 2020. The objective of the COP26 Private Finance Agenda is for every professional financial decision to take climate change into account.

    View the Bank of England's press release of the launch.

    View Mark Carney's speech to launch the COP26 Private Finance Agenda.
  • Bank of England Announces LIBOR Initiatives and Publishes Discussion Paper on Risk-Free Rates Transition
    02/26/2020

    Andrew Hauser, the Executive Directive of Markets at the Bank of England, today announced the launch of two significant initiatives to boost the U.K.’s transition away from sterling LIBOR. Firstly, the BoE intends to begin publishing a compounded Sterling Overnight Index Average index from July 2020, enabling market participants to construct compounded SONIA rates which can be used as a replacement reference rate for term LIBOR-linked instruments. Secondly, from October 2020, the BoE will progressively increase the haircuts applied to LIBOR-linked collateral placed with the BoE as security against central bank loans, with a final haircut of 100% by the end of 2021.

    Read more.
  • EU Council Authorizes European Commission to Negotiate Post-Brexit Trade Agreement with the UK
    02/25/2020

    The Council of the European Union has authorized the opening of negotiations with the U.K. for a new partnership agreement between the U.K. and the EU. The Council's Decision (dated February 13, 2020) authorizes the opening of the negotiations, appoints the Commission as negotiator and stipulates that the negotiations must be conducted in consultation with the Working Party on the United Kingdom and in accordance with the Council's directives.

    The EU intends to enter into a free trade agreement with the U.K. For financial services, the Council directs that the arrangements between the EU and U.K. should be based on their respective equivalence frameworks, complemented by close and voluntary cooperation and consultation and transparency on equivalence decisions. The EU envisages that the FTA should be in line with existing EU FTAs with other countries for specific sectors, including the financial services sector.

    It is expected that the first session of negotiations will take place in early March.

    View the Council's decision authorising the opening of the negotiations.

    View the negotiating directives.
  • Draft UK Legislation to Onshore EMIR 2.2 Published for Feedback
    02/24/2020

    HM Treasury has published for feedback a draft statutory instrument to implement the revised provisions for CCPs in the European Market Infrastructure Regulation (known as EMIR 2.2.) into U.K. law once the Brexit implementation period ends (currently scheduled for December 31, 2020). HM Treasury is publishing the draft instrument to provide Parliament and stakeholders the opportunity to provide feedback on the proposed approach before the instrument is laid before Parliament. The draft instrumentOver the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020is due to be laid before Parliament in the Spring.

    Read more.
  • International Swaps and Derivatives Association Announces Results of LIBOR Fallbacks Consultation and New Pre-Cessation Fallbacks Consultation
    02/24/2020

    The International Swaps and Derivatives Association has published the results of its consultation on fallbacks to be introduced into standard ISDA documentation based on alternative risk-free rates for EUR LIBOR and EURIBOR. The fallbacks would apply if the relevant IBOR were to be permanently discontinued. Respondents to the consultation agreed with ISDA’s proposed approach of adopting a compounded setting in arrears rate with a backward-shift adjustment and historical median over a five-year lookback period approach to address technical issues associated with the fallback rates. ISDA therefore intends to develop fallback provisions on this basis. It will publish an anonymized summary of the consultation feedback in the coming weeks.

    Read more.
  • EU High-Level Forum Sets Out Vision for European Capital Markets
    02/20/2020

    The European Commission’s High-Level Forum on the Capital Markets Union has published an interim report setting out its vision for the future of European capital markets. The CMU is an EU initiative which aims to enhance integration of EU capital markets, further safeguard financial stability, strengthen the international role of the euro and diversify sources of finance for small- and medium-sized enterprises. The High-Level Forum was established in November 2019 and consists of experienced industry executives and international experts who will work together to propose policy recommendations designed to contribute to the CMU.

    Read more.
    TOPIC : Securities
  • European Commission Launches Strategy for Data and Artificial Intelligence
    02/19/2020

    The European Commission has published a set of documents presenting its strategies for data and Artificial Intelligence. The main document is a Communication to the European Parliament, the European Council and relevant committees, entitled "A European strategy for data." The Communication describes the policy measures put forward by the European Commission for an EU data economy that aims to increase the use of, and demand for, data and data-enabled products and services in the EU over the next five years. The Commission argues for an attractive policy environment that provides for access to data, the flow of data across the EU, protection of personal data protection rights and an open yet assertive approach to international data flows that is based on European values. 

    Read more.
    TOPIC : FinTech
  • EU Working Group on Risk-Free Rates Publishes Report on Liquidity in EONIA transition
    02/19/2020

    The EU Working Group on Risk-Free Rates has published a report setting out recommendations for the transition of financial products from EONIA to the Euro Short-Term Rate (€STR). The recommendations aim to ensure liquidity in €STR cash and derivatives products and include practical recommendations, such as replacing EONIA with €STR products at the earliest opportunity and communicating with customers and other market participants about the transition.

    Read more.
  • European Systemic Risk Board to Evaluate Systemic Cyber-security Risk
    02/19/2020

    The European Systemic Risk Board has published a report on cyber-security risk, which it has identified as a source of systemic risk to the global financial system. The report notes that the increased digitalization and interconnectedness of the global financial system makes it heavily reliant on ICT infrastructure and vulnerable to cyber attacks. The report provides an overview of key regulatory and industry initiatives aimed at combatting cyber risk, which include: (i) the 2019 International Organization of Securities Commissions’ Cyber Task Force report on cyber regulation; (ii) the European Banking Authority’s Guidelines on management of information and communication technology and security risks; and (iii) the European Securities and Markets Authority’s 2020-2022 Strategic Orientation, which establishes the dangers of cyber threats as an area of focus for ESMA and the other European Supervisory Authorities.

    Read more.
    TOPICS : Cyber SecurityFinTech
  • Financial Stability Board Highlights Vulnerabilities in Global Financial System
    02/18/2020

    The Financial Stability Board has written to G20 Finance Ministers and Central Bank Governors outlining the key focus areas for the FSB’s work ahead of the next G20 summit in Saudi Arabia in November 2020. The communication builds on certain areas highlighted as priorities in the FSB’s 2020 Work Program, published in December 2019.

    Read more.
  • European Systemic Risk Board Appoints Vice-Chair and Board Members
    02/17/2020

    The European Systemic Risk Board has appointed Jan Reinder De Carpentier as its new Vice Chair. New board members Pedro Machado and Jesús Saurina have also been appointed. The new appointees will take up their positions on March 1, 2020 and will hold them for five years.
     
    View the SRB's announcement.
     
    View the Council Implementing Decision giving effect to the appointments of the Vice-Chair and Board Members.
    TOPIC : People
  • Single Resolution Board Launches Consultation on Minimum Requirements for Own Funds and Eligible Liabilities Policy
    02/17/2020

    The Single Resolution Board has launched a consultation on proposed changes to its policy on minimum requirements for own funds and eligible liabilities (MREL) for Eurozone banks, designed to bring the SRB’s MREL policy in line with the changes introduced by the 2019 EU banking package for EU banks.  MREL is the EU's precursor to total loss-absorbing capacity (TLAC) standards at international level.  The SRB is responsible for ensuring the compliance of Eurozone-based institutions that are subject to the Single Resolution Mechanism (primarily Eurozone countries) with their resolution and recovery planning requirements.  It works with national regulators from Eurozone countries to determine MREL requirements. Responses to the consultation should be submitted by March 6, 2020. The SRB expects to publish its final MREL Policy Statement based on these responses by the end of April 2020 and will apply the policy to MREL decisions taken in early 2021.

    Read more.
  • European Commission Consults on MiFID II
    02/17/2020

    The European Commission has launched a consultation on reviewing the EU Markets in Financial Instruments package. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation have applied across the EU since January 1, 2018 and regulate the functioning and transparency of EU financial markets. The consultation closes on May 18, 2020. The Commission is due to publish a legislative proposal to amend MiFID II and MiFIR in Q4 2020.

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

    The U.K. Payment Systems Regulator has published a policy statement setting out its final decision on varying Specific Direction 10, which requires payment service providers to implement the Confirmation of Payee system by March 31, 2020. Confirmation of Payee is a system which ensures that certain identifiers (including name, sort code and account number) of a payee are verified against the records of a payment services provider before a payment is made.
    Read more.
  • International Organization of Securities Commissions Reports on Risks and Regulatory Considerations for Crypto-Asset Trading Platforms
    02/12/2020

    Following its consultation last year, the International Organization of Securities Commissions has published a report on the key issues and risks related to trading of crypto-assets on crypto-asset trading platforms (referred to as CTPs). The report aims to assist IOSCO member jurisdictions to assess the issues and risks relating to CTPs and sets out key considerations to be taken into account, including related toolkits for regulators. The considerations are: (i) access to CTPs; (ii) safeguarding assets; (iii) conflicts of interest; (iv) operations of CTPs; (v) market integrity; (vi) price discovery; and (vii) technology. IOSCO states that where a regulator has determined that a crypto-asset is a security, the provisions on securities trading and regulation apply.

    Read more.
    TOPICS : FinTechSecurities
  • European Banking Authority Consults on Guidelines on Systemic Risk Buffers for Sectoral Exposures
    02/12/2020

    The European Banking Authority has launched a consultation on proposed Guidelines on the appropriate subsets of sectoral exposures to which national regulators may apply a systemic risk buffer under the Capital Requirements Directive. CRD 5 amended the provisions on when a national regulator may set a systemic risk buffer for sectoral exposures.  The EBA is mandated to prepare Guidelines to enhance harmonization of the approach across the EU. CRD 5 must be transposed into Member State laws by December 28, 2020 and those laws must be applied from December 29, 2020. Responses to the consultation can be submitted until July 13, 2020. Once finalized, the Guidelines will apply to the relevant national regulators from December 29, 2020.

    View the consultation paper.

    View details of CRD 5 and CRR 2.
  • European Banking Authority Publishes Final Set of Recommendations for Improving the EU Deposit Guarantee Scheme Directive
    02/11/2020

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

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

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

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

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

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

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

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

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

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

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

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

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

    View ESMA's announcement.

    View details of ESMA's suitability supervisory briefing.

    View details of ESMA's suitability guidelines.
    TOPIC : MiFID II
  • EU Consultation on Revised Risk Factor Guidelines for Assessing Money Laundering Risks
    02/05/2020

    The European Banking Authority has launched a consultation on proposed revisions to the Risk Factor Guidelines for financial institutions to assess money laundering and terrorist financing risks. The proposed changes aim to take into account the most recent revisions to the EU Anti-Money Laundering Directive (i.e. 5MLD) and newly identified risks, including those specified in the EBA's implementation reviews. The consultation closes on July 6, 2020.

    Read more.
  • EU Recommendations on MiFID II Product Intervention Amendments
    02/04/2020

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

    Read more.
    TOPIC : MiFID II
  • Amended EU Guidelines for National Regulators on Enforcing Financial Information Publication by EU Issuers
    02/04/2020

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

    View the amended Guidelines.
    TOPIC : Securities
  • EU Consultation on Potential Amendments to MiFID II's Equity Transparency Regime
    02/04/2020

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

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

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

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

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

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

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

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

    Read more.
  • UK Prime Minister Sets Out Plan for Post-Brexit Relationship with EU
    02/03/2020

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

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

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

    View the draft Recommendation and negotiating directives.
  • EU Consultation on Draft Technical Standards For Third-Country Firm Registration and Disclosure Under MiFID II
    01/31/2020

    The European Securities and Markets Authority has launched a consultation on proposed draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. The consultation closes on April 28, 2020 and ESMA intends to submit the final draft Technical Standards to the European Commission in Q3 2020.

    The provisions in the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation on third-country firms were recently amended. Among other things, the changes require third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions.

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

    View the consultation paper.
  • EU Opinion on Italian Accepted Market Practice in Accordance with the Market Abuse Regulation
    01/31/2020

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

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

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

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

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

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

    Read more.
    TOPIC : Securities
  • UK Conduct Regulator Confirms EU Regulatory Reporting Regime Applies During Brexit Implementation Period
    01/30/2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The U.K. Payment Systems Regulator has published a Call for Input on competition and innovation in the U.K.'s New Payments Architecture. Feedback was originally requested by March 24, 2020, but in light of COVID-19 that deadline has been extended to May 1, 2020. The PSR confirms that it will consult further on this issue, including on a draft policy statement. All of the feedback will assist the PSR to develop the NPA regulatory policy, the final version of which will be published before the end of 2020. The NPA will reorganize the clearing and settlement of most of the U.K.'s domestic interbank payments, including payments that currently use the BACS and Faster Payments systems. The consultation paper sets out certain potential harms to competition and innovation and possible mitigating measures to address these.

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

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

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

    View the letter.

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

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

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

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

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

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

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

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

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

    View the Policy Statement.

    View the updated Statements.

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

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

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

    View the FCA's announcement.

    View the BoE's webpage.

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

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

    View the EBA's announcement and the consolidated Guidelines.

    View details of the SCA RTS.
  • EU Proposals to Amend the EU-Wide Stress Test Framework for Banks
    01/22/2020

    The European Banking Authority has commenced a consultation on proposed changes to the EU-wide stress test framework for banks. The EU-wide stress test contributes to improving the financial resilience of banks. Responses to the consultation may be submitted until June 30, 2020. The EBA is holding a public hearing on the proposals on February 21, 2020.

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

    View the consultation paper and other details.
  • UK Conduct Regulator Wants Asset Management Sector to Reflect on Risks to Customers and Markets
    01/22/2020

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

    Read more.
  • UK Conduct Authority to Review Suitability of Retirement Income Financial Advice
    01/21/2020

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

    View the FCA's statement.

    View the Dear CEO letter.
  • Group of Central Banks to Collaborate on Potential of Central Bank Digital Currencies
    01/21/2020

    The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank, the Swiss National Bank and the Bank for International Settlements have announced that they have created a group to share experience as they assess the potential cases for central bank digital currency. The group will assess CBDC use cases, economic, functional and technical design choices, including cross-border interoperability and the sharing of knowledge on emerging technologies.

    View the announcement.
  • European Central Bank Sets Out Expectations of Eurozone Banks' Dividend and Variable Remuneration Policies
    01/21/2020

    The Banking Supervision arm of the European Central Bank has set out its expectations of Eurozone banks regarding their dividend distribution and variable remuneration policies. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism and has certain powers relating to the supervision by national Eurozone regulators of smaller banks. The ECB has published a letter addressed to significant banks warning them to take a "prudent, forward-looking stance" when setting the banks' remuneration policy and has also published a Recommendation (dated January 17, 2020) on requiring significant banks to "establish dividend policies using conservative and prudent assumptions". The Recommendation will apply directly to significant Eurozone banks. The ECB expects national Eurozone regulators to consider how it might be applied proportionally to the smaller banks. The ECB expects Eurozone banks to consider how their variable remuneration policies and dividend distribution policies will impact their ability to continue to meet their regulatory capital requirements, particularly taking into account the transitional provisions of the Capital Requirements Directive (version IV) and the transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds.

    View the ECB's letter.

    View the ECB's Recommendation.
  • UK Conduct Regulator Clarifies Rules on Publication of Non-Representative LIBOR
    01/20/2020

    The U.K. Financial Conduct Authority has responded to a request from the International Swaps and Derivatives Association for clarification on the expected timeframes for publication of a non-representative LIBOR. The FCA (in conjunction with the Financial Stability Board) had previously requested ISDA to introduce “pre-cessation” triggers in its derivative contracts, causing LIBOR-based contracts to fall back to an alternative reference rate in the event that the FCA deemed LIBOR to no longer be representative. ISDA requested clarity about the length of the period during which such a non-representative LIBOR might be published prior to its total cessation.

    Read more.
  • European Central Bank Consults on Proposed Guidelines on Materiality Threshold for Credit Obligations Past Due for Small Eurozone Banks
    01/20/2020

    The European Central Bank has opened a consultation on proposed guidelines on the materiality threshold for credit obligations past due for less significant institutions based in the Eurozone. The EU Capital Requirements Regulation 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 has set the materiality threshold for these firms. The proposed guidelines are addressed to national Eurozone regulators within the SSM responsible for setting the threshold for less significant institutions. The ECB is proposing a single materiality threshold for all less significant institutions, both for retail and non-retail exposures.

    The consultation closes on February 17, 2020.

    View the consultation paper.
  • UK Conduct Authority Halts UK Operation of MiFID Transparency Regime in Light of Commitment to Brexit Deal
    01/20/2020

    The U.K. Financial Conduct Authority has updated its webpage and statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The U.K. Government has stated that it is committed to leaving the EU with a deal on January 31, 2020, followed by an implementation period. As a result, the FCA confirms that during the implementation period, all MiFID systems will remain connected to the European Securities and Markets Authority. A further update will be provided in due course.

    View the FCA's updated statement.
  • UK Proposals for Confirmation of Payee Exemptions
    01/20/2020

    The U.K. Payment Systems Regulator has opened a consultation on proposals to vary its Specific Direction 10 on Confirmation of Payee. Confirmation of Payee is a system that ensures that certain identifiers (including name, sort code and account number) of a payee are verified against the records of a payment services provider before a payment is made. On August 1, 2019, the PSR issued Specific Direction 10 to certain institutions within the six largest U.K. payment service providers - Lloyds Group, Barclays Group, HSBC Group, Royal Bank of Scotland Group, Santander Group and Nationwide Building Society - requiring them to implement "Confirmation of Payee" by March 31, 2020. The PSR is consulting on amending the Direction to introduce a new basis for a payment service provider to request an exemption from the requirements. The existing text of the Direction only allows exemptions in exceptional circumstances. The PSR also intends to include a limited exemption for HSBC UK Bank plc in the revised Direction. Responses to the consultation can be submitted until January 29, 2020.

    View the consultation.
  • Proposed EU Guidelines for Securitization Repositories Assessing Data Completeness and Consistency
    01/17/2020

    The European Securities and Markets Authority has launched a consultation on proposed guidelines on securitization repository data completeness and consistency thresholds. The proposed guidelines would apply to EU securitization repositories that are registered with and supervised by ESMA. The consultation closes on March 16, 2020.

    Read more.
  • UK Court Confirms Bitcoin Status as Property for Certain Proprietary Claims
    01/17/2020

    A U.K. court has granted an interim proprietary injunction over Bitcoin held in an account of a cryptocurrency exchange after it had been transferred there as part of a cyber attack on a Canadian insurance company. The judgment in AA v Persons Unknown & Ors, Re Bitcoin [2019] EWHC 3556 (Comm) was given on December 13, 2019, and following the lifting of reporting restrictions, was released for publication on January 17, 2020. In coming to its decision, the High Court adopted the analysis as to the proprietary status of crypto assets set out in the recent legal statement by the UK Jurisdiction Taskforce. Although each case will depend on the relevant facts and issues, the decision confirms that crypto assets are a form of property capable of being the subject of a proprietary injunction.

    Read more.
    TOPICS : Cyber SecurityFinTech
  • UK Regulators Push For More Action on LIBOR Transition
    01/16/2020

    The Bank of England, U.K. Prudential Regulation Authority, U.K. Financial Conduct Authority and the Working Group on Sterling Risk-Free Reference Rates have published a set of documents outlining priorities and milestones for 2020 on LIBOR transition.

    Read more.
    TOPICS : DerivativesSecurities
  • Global Financial Innovation Network Announces Plans to Improve the Framework for Cross-Border Testing of Innovative Firms
    01/16/2020

    The Global Financial Innovation Network has published a report on lessons learned during the cross-border testing of innovative firms and their products. The GFIN was launched at the start of 2019 and is a network of organizations committed to supporting financial innovation in the interests of consumers. One of GFIN's priorities is to facilitate cross-border trials of emerging technologies across global jurisdictions (a global sandbox). The GFIN began a pilot with eight firms in April 2019, which aimed to develop testing plans for their cross-border trials. However, as none of the firms developed a testing plan that satisfied each jurisdiction's requirements, the GFIN could not progress things further. The GFIN has since met to consider how to take things forward and will further develop the framework of cross-border testing.

    The report describes the accomplishments and the challenges that arose during the pilot and sets out the proposed next steps and solutions to improve cross-border testing for the next phase. The solutions include establishing a central website for GFIN and creating a single application form for applicants, both of which should make it easier for prospective firms to find relevant information and submit an application. In the first half of 2020, the GFIN will open applications for the first formal cohort of participants.

    View the report.
    TOPIC : FinTech
  • International Organization of Securities Commissions Recommends UTC Clock Synchronization to Facilitate Market Abuse Monitoring
    01/16/2020

    The International Organization of Securities Commissions has published a report in which it recommends that where jurisdictions require clock synchronization for trading purposes, clocks should be synchronized to Coordinated Universal Time (UTC). In its 2013 report - Technological Challenges to Effective Market Surveillance – Issues and Regulatory Tools (FR04/13) – IOSCO recommended the introduction of a requirement for trading venues and their participants to synchronize the business clocks used to record the date and time of a reportable event. The practice assists regulators in monitoring the markets for market abuse and identifying market abuse. Certain jurisdictions have already implemented clock synchronization according to UTC, including Australia, Canada and the EU.

    View IOSCO's report.
  • Mark Carney Appointed as Finance Adviser to UK Government on Sustainable Finance
    01/16/2020

    Mark Carney, the outgoing Governor of the Bank of England, has been appointed as Finance Adviser for COP26. The role will be to assist the U.K. Government to build a sustainable financial system that supports the transition to a net zero economy. Andrew Bailey will replace Mr. Carney as the Governor of the Bank of England from March 16, 2020.

    Read more.
    TOPIC : People
  • European Commission Announces Next Steps for Sustainable Finance
    01/16/2020

    The European Commission has published a Communication detailing the Sustainable Europe Investment Plan that will support the European Green Deal Investment Plan. The Communication is accompanied by a proposed Regulation to establish a Just Transition Fund and a Factsheet explaining the Plan. Feedback on the proposed Regulation can be submitted until March 12, 2020.

    Read more.
  • European Banking Authority Launches Consultation on Technical Standards Governing Own-Funds Requirements for Non-Trading Book Positions
    01/13/2020

    The European Banking Authority has launched a consultation on its draft regulatory technical standards specifying how institutions should calculate their own funds requirements for market risk in respect of non-trading book positions that are subject to foreign-exchange risk or commodity risk. The draft RTS have been published for consultation in accordance with the revised Capital Requirements Regulation, which came into force on June 7, 2019 and (subject to certain exceptions) will apply directly across the EU from June 28, 2021. Responses to the consultation should be submitted by April 10, 2020. The EBA is expected to consult in 2020 on other technical standards to supplement CRR II and has published a roadmap providing the due dates for its deliverables.

    Read more.
  • UK Conduct Authority Publishes Findings of Review of Risk Modelling and Other Portfolio Management Tools in the Asset Management Sector
    01/13/2020

    The U.K. Financial Conduct Authority has published a report on its review of how firms in the asset management sector selected and used risk modelling and other portfolio management tools. The review was undertaken to assess how firms identify and manage the risks as well as firms' ability to respond to system failures or service interruptions.

    Read more.
  • European Banking Authority Publishes Report on Big Data and Advanced Analytics
    01/13/2020

    The European Banking Authority has published a report on big data and advanced analytics in the banking sector. The report sets out the findings of the EBA's review of big data and analytics and presents key pillars and elements of trust for the development, implementation and adoption of BD&AA by banks.

    Read more.
  • International Swaps and Derivatives Association Publishes FAQs on IBOR Fallback Rate Adjustments
    01/10/2020

    The International Swaps and Derivatives Association has published a set of Frequently Asked Questions on Interbank Offered Rate Fallback Rate adjustments. The FAQs are part of ISDA's preparations for the sweeping changes being made to global interest rate benchmarks, which may see a transition from IBORs to overnight risk free rates. Parties to derivatives contracts that currently reference IBORs are being encouraged to include contractual fallback provisions providing for adjusted RFRs that could replace IBORs if they are discontinued before a contract is concluded. RFRs are structurally different to IBORs, hence why the RFRs must be adjusted in order to be incorporated into contracts that currently reference IBORs.

    Read more.
    TOPIC : Derivatives
  • European Systemic Risk Board Recommends Options for Addressing Procyclicality in Derivatives Markets and Securities Financing Transactions
    01/09/2020

    The European Systemic Risk Board has published a report on mitigating the procyclicality of margins and haircuts in derivatives markets and securities financing transactions. The report assesses the systemic risks arising from procyclicality associated with margin and haircut practices and makes recommendations for addressing the risks. 

    Read more.
    TOPIC : Derivatives
  • European Securities and Markets Authority Publishes 2020-2022 Strategic Orientation
    01/09/2020

    The European Securities and Markets Authority has published its Strategic Orientation for 2020-2022, setting out its longer-term objectives for regulating financial markets. The previous Strategic Orientation covered the period from 2016-2020 and so is coming to an end this year. Looking forward, ESMA aims to:
    • develop the EU Capital Markets Union by encouraging wider retail investor participation, which would assist with the diversification of funding sources and efficiency of capital markets;
    • promote sustainable finance and long-term oriented capital markets as part of the EU's commitment to meet the UN's Sustainable Development Goals by 2030;
    • examine the opportunities and risks of digitalization and technology for market participants and regulators;
    • guarantee the EU's voice in financial markets, aiming to maintain the openness of EU financial markets and develop EU co-operation with third-country authorities to ensure investor protection and financial stability; and
    • encourage proportionality, particularly with respect to SMEs and innovative companies, where ESMA may need to tailor its initiatives to meet its objectives.

    View ESMA 2020-2022 Strategic Orientation.
  • European Securities and Markets Authority Publishes Final Report and Updated Q&A on CCP Membership Criteria and Due Diligence
    01/07/2020

    The European Securities and Markets Authority has published a final report on the 2018 survey it conducted on central counterparties' membership criteria and due diligence practices, together with an update to its Q&As providing guidance on the correct implementation of the European Markets Infrastructure Regulation. The survey was prompted by the default in September 2018 of an individual who was acting as a clearing member of Nasdaq Clearing AB. This triggered ESMA's investigation into CCPs' membership and due diligence practices and their compliance with participation requirements under EMIR and the joint Principles for Financial Market Infrastructures issued by the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions.

    Read more.
  • Bank of England and UK Conduct Regulator Announce Proposals for Financial Sector Data Reforms
    01/07/2020

    The Bank of England and U.K. Financial Conduct Authority have published a series of proposals setting out their plans to enhance their data and analytics capabilities. The proposals include a revised FCA data strategy, a BoE discussion paper on transforming data collection and a viability report published by the FCA and BoE, together with seven regulated firms, on the possibilities of digital regulatory reporting. The FCA and BoE depend on data to conduct their supervisory responsibilities.  

    Read more.
  • European Securities and Markets Authority Publishes Evidence on Market Impacts of Circuit Breakers
    01/07/2020

    The European Securities and Markets Authority has published a working paper setting out its findings on the market impacts of “circuit breakers”, instruments used by trading venues to interrupt excessive price movements in financial instruments. The revised Markets in Financial Instruments Directive places obligations on national regulators to require a regulated market in their jurisdiction to be able to temporarily halt or constrain trading if there is significant price movement in a financial instrument on that market during a short period and, in exceptional cases, to be able to cancel, vary or correct any transaction. 

    Read more.
  • International Swaps and Derivatives Association Publishes Guide on Cross-Border Application of Margin Rules
    01/06/2020

    The International Swaps and Derivatives Association has published a guide on the cross-border application of margin rules established under the U.S., EU and Japanese regimes for uncleared derivatives. While most jurisdictions base their margin rules on the framework established by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions, there is still scope for differences to arise under national regimes. The guide provides an overview of the margin rules in each of the three jurisdictions, focussing on the cross-border and substituted compliance elements. It also includes a series of charts showing the application and availability of substituted compliance under each regime.

    Read more.
    TOPIC : Derivatives
  • European Securities and Markets Authority Publishes Clarifications on Reporting of Securities Financing Transactions
    01/06/2020

    The European Securities and Markets Authority has published a final report and guidelines on reporting under the Securities Financing Transaction Regulations, together with amended SFTR validation rules and a statement on Legal Entity Identifiers. The SFTR requires all securities financing transactions to be reported to EU-recognized trade repositories. SFTs involve the use of securities to borrow cash or other high investment-grade securities and include repurchase transactions, securities lending and sell/buy backs.

    Read more.
    TOPIC : Derivatives
  • New EU Regulation Enhances European Supervisory Authorities' Powers
    12/27/2019

    An EU Regulation has been published amending the European Supervisory Authorities' powers under various pieces of EU legislation. The Regulation grants ESMA additional powers to monitor market data and authorize benchmark administrators under the Markets in Financial Instruments Regulation and the Benchmarks Regulation, respectively. It also amends the legislation founding the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, granting them additional powers to facilitate their supervisory duties. The Regulation will enter into force on December 30, 2019. The provisions regarding ESMA's enhanced supervisory powers over market data and benchmarks will apply from January 1, 2022. All other provisions regarding the European Supervisory Authorities' enhanced powers will apply from January 1, 2020.

    Read more.
  • European Supervisory Authorities Publish New Risk Mitigation Technique Standards for OTC Derivative Contracts
    12/23/2019

    The European Supervisory Authorities have published joint draft Regulatory Technical Standards amending the existing EU risk mitigation techniques for uncleared OTC derivatives, together with a joint statement on the introduction of fallbacks in OTC derivative contracts and the requirement to exchange collateral. The draft RTS amend existing bilateral margin requirements made under the European Market Infrastructure Regulation, in line with certain clarifications made to the related international framework by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions. The draft RTS were originally published on December 5, 2019, but have been republished with one additional amendment. The Final Report has been submitted to the European Commission for endorsement.

    Read more.
    TOPIC : Derivatives
  • EU Temporary Equivalence and Recognition for UK CCPs Extended in Event of a No-Deal Brexit
    12/23/2019

    An amended temporary equivalence decision on the regulatory framework applicable to central counterparties in the U.K. and Northern Ireland has been published in the Official Journal of the European Union. The decision amends the existing EU equivalence decision, which applies from the date that the U.K. leaves the EU in the event that no withdrawal agreement has been agreed, and ends on March 30, 2020. The amended decision extends the period of equivalence to one year following a U.K. no-deal exit from the EU and will apply from December 24, 2019. It would not apply in the event that the Withdrawal Agreement is ratified by both sides.

    Read more.
  • European Parliament Publishes Resolution on EU Financial Services Regulation for Third Countries
    12/23/2019

    The European Parliament has published a resolution on relationships between the EU and third countries concerning financial services regulation and supervision. The resolution follows the publication of a report in August 2018 by the European Parliament’s Committee on Economic and Monetary Affairs setting out its proposal for the European Parliament’s resolution, which comes in the wake of the U.K.’s upcoming exit from the EU. The key factors prompting the resolution include the need to mitigate risks to financial stability arising from a possible no-deal Brexit, the need for clarification of the relationship between third-country markets and the EU’s single market in the interests of broader financial stability and the fact that existing third-country equivalence rules are not currently subject to a single framework.

    Read more.
  • European Securities and Markets Authority Publishes Follow-Up Report on Credit Rating Agency and Trade Repository Fees
    12/20/2019

    The European Securities and Markets Authority has published a follow-up report on its 2018 Thematic Report on the fees charged by credit rating agencies and trade repositories. ESMA directly supervises all CRAs and trade repositories that are established in the EU. The 2018 Thematic Report highlighted three key areas of concern in the fee charging practices of CRAs and trade repositories, namely: (i) transparency and disclosure to clients and ESMA of fees; (ii) the process of setting fees; and (iii) how interactions with other group entities may pose challenges to the principles of non-discrimination and cost-related fees to which credit rating agencies and trade repositories are expected to adhere.

    Read more.
  • UK Chancellor Appoints New Governor of Bank of England
    12/20/2019

    The U.K. Chancellor of the Exchequer, Sajid Javid, has announced the appointment of Andrew Bailey as the new Governor of the Bank of England. 

    Read more.
    TOPIC : People
  • Financial Stability Board Publishes Feedback to Resolution Planning Disclosures Consultation
    12/20/2019

    The Financial Stability Board has published a statement summarizing the feedback it received to its June 2019 consultation on firms’ public disclosures on resolution planning and resolvability. The consultation sought feedback on a series of questions regarding general and firm-specific disclosures made by systemically important banks and other firms subject to resolution planning requirements.

    Read more.
  • Financial Stability Board Publishes Feedback to Derivatives and Trading Portfolios’ Solvent Wind-Down Consultation
    12/20/2019

    The Financial Stability Board has published a statement summarizing the feedback it received to its June 2019 consultation on the solvent wind-down of derivatives and trading portfolios. The consultation sought feedback on a series of questions regarding existing wind-down practices that may be used as a recovery option for global systemically important institutions that find themselves under stress. The FSB intended to consider publishing guidance on solvent wind-down planning depending on the responses elicited by the consultation.

    Read more.
  • UK Secondary Legislation Published Implementing EU Fifth Money Laundering Directive
    12/20/2019

    The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 have been published, amending the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The amending Regulations incorporate changes made to EU legislation under the EU’s Fifth Anti-Money Laundering Directive. The majority of the amending Regulations provisions will come into force on January 10, 2020, with the exception of those governing: (i) customer due diligence on anonymous prepaid cards; and (ii) requests for information about accounts and safe-deposit boxes, which will come into force on July 10, 2020 and September 10, 2020 respectively.

    Read more.
  • EU Publishes Handbook for Climate Benchmarks
    12/20/2019

    The EU Technical Expert Group on Sustainable Finance has published a Handbook providing guidance on the EU’s new climate transition benchmarks (EU CTB) and Paris-aligned benchmarks (EU PAB), as well as on the environmental, social and governance disclosures that will be applicable to all investment benchmarks (other than currency and interest rate benchmarks) in the future. Conventional benchmarks do not typically reflect low-carbon considerations, but an increasing focus on sustainability has led to a proliferation in recent years of specific low-carbon benchmarks that were not subject to clear or comparable standards.

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  • EU Political Agreement on Proposed Regulation on Cross-Border Crowdfunding Service Providers
    12/19/2019

    The EU legislative bodies have announced that political agreement has been reached on the proposed Regulation on European Crowdfunding Service Providers for Business. The proposed ECSP Regulation is part of the EU Capital Markets Union initiative and the Commission's FinTech Action Plan. It aims to increase access to finance through crowdfunding for innovative companies, start-ups and SMEs. The European Commission published the original legislative proposal on March 8, 2018. Since then, the text of the proposed ECSP Regulation has been amended.

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  • Consultation on Credit Adjustment Spread Methodologies for Fallbacks in Cash Products Referencing GBP LIBOR
    12/19/2019

    The Working Group on Sterling Risk-Free Reference Rates has opened a consultation on credit adjustment spread methodologies for fallbacks in cash products referencing GBP LIBOR. The consultation focuses on cash products, including, but not limited to, syndicated loans, floating rate notes, retail loans, bilateral corporate loans and securitizations.  It only covers GBP LIBOR and credit adjustment spreads to be applied to a SONIA-derived rate. Responses to the consultation can be submitted until February 6, 2020.

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    TOPICS : DerivativesSecurities
  • Financial Stability Board Assesses Financial Stability Implications of Expanding Leveraged Loans and Collateralized Loan Obligations Markets
    12/19/2019

    The Financial Stability Board has published a report on the vulnerabilities associated with leveraged loans and collateralized loan obligations. In the report, the FSB assesses how the leveraged loan and CLO markets have developed and analyzes the potential implications for global financial stability.

    Noting that there are data gaps, the FSB makes the following conclusions:
    • there are indications that weaknesses in the leveraged loan and CLO markets have increased since the 2008-09 global financial crisis;
    • banks have the largest direct exposures to leveraged loans and CLOs. These exposures are concentrated among a limited number of large global banks and have a significant cross-border dimension; and
    • non-bank investors, such as investment funds, insurance companies, pension funds, broker-dealers and holding companies, also have exposures to leveraged loans and CLOs.

    The FSB intends to consider whether there is scope to close data gaps, but will continue to analyze the financial stability risks and will examine the regulatory and supervisory implications related to leveraged loans and CLOs.

    View the report.
    TOPIC : Securities
  • European Banking Authority Launches Consultation on Draft Technical Standards Identifying Material Risk Impact Staff Subject to Compensation Requirements
    12/19/2019

    The European Banking Authority has launched a consultation on its draft Regulatory Technical Standards setting out the criteria for identifying staff whose professional activities have a material impact on credit institutions’ risk profiles. The EBA is required to produce the RTS under the revised Capital Requirements Directive (CRD V), in support of the CRD requirement that remuneration policies for staff whose professional activities have a material impact on the credit institution’s risk profile are appropriate to the size, nature and complexity of the credit institution in question. 

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  • European Commission Launches Consultations on Digitalization in the Financial Sector
    12/19/2019

    The European Commission has launched two consultations on digitalization in the financial sector. They form part of the EU’s new Digital Finance Strategy which aims to deepen the Single Market for digital financial services, promote a data-driven EU financial sector while addressing the risks inherent in that and enhance the digital operational resilience of the financial system. 

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    TOPICS : Cyber SecurityFinTech
  • European Banking Authority Publishes Final Technical Standards for the Standardized Approach to Counterparty Credit Risk
    12/18/2019

    The European Banking Authority has published final draft Regulatory Technical Standards governing the standardized approach to counterparty credit risk in derivatives transactions. The final draft SA-CCR RTS will supplement the requirements set out in the EU's Capital Requirements Regulation, as amended by CRR 2. The SA-CCR requirements aim to address the shortcomings of existing calculation methods to ensure parties are adequately protected in the event of default by a counterparty to a derivatives transaction and these final draft RTS aim to ensure a more harmonized calculation of own funds requirements for counterparty credit risk than has been the case under CRR.

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  • Bank of England Consults on Proposed 2021 Climate Change Stress Tests
    12/18/2019

    The Bank of England has published a discussion paper seeking feedback on its proposals for a series of 2021 stress-tests on climate-related risks for the largest banks, insurers and the financial system. The stress tests will help to quantify potential climate change risks faced by the financial system and enable market participants and oversight bodies like the BoE to develop measures to prepare for those risks. Responses to the consultation should be submitted by March 18, 2020. The final stress testing framework will be published in the second half of 2020 with the results of the exercise published in 2021.

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  • EU Recommendations to Combat Undue Short-Term Pressure From Financial Sector on Corporates
    12/18/2019

    The European Supervisory Authorities have each published advice to the European Commission on undue short-term pressure from the financial sector on corporations. The ESAs comprise the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The ESAs' advice responds to the European Commission's request in June 2019 for evidence and possible advice on potential undue short-term pressure by financial service participants on corporations. The Commission asked the ESAs 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 ESAs' advice, summarized below, may result in the Commission proposing amendments to several pieces of EU legislation, such as the Capital Requirements Directive and related Regulation, the Markets in Financial Instruments package and the Non-Financial Reporting Directive.

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  • International Swaps and Derivatives Association Consults on Fallbacks Based on Alternative Risk-Free Rates For Derivatives Referencing EUR Libor and EURIBOR
    12/18/2019

    The International Swaps and Derivatives Association has launched a consultation in which it proposes to amend its standard documentation to implement fallbacks based on alternative risk-free rates for certain key Interbank Offered Rates - EUR LIBOR and EURIBOR. ISDA states that the back-ups will apply if the relevant IBOR is permanently discontinued, based on defined triggers. Responses to the consultation should be submitted to ISDA by January 21, 2020.
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  • UK Prudential Regulatory Authority Responds on Prudential Impediments for Banks Arising from the LIBOR Transition
    12/18/2019

    The Prudential Regulation Authority has published a letter addressed to the Chair of the Working Group on Sterling Risk-Free Reference Rates. The letter responds to the Working Group's letter in October 2019 requesting regulatory forbearance or clarification from regulators on the impact that the LIBOR transition is likely to have on the prudential requirements for banks. The main issues raised by the Working Group include: (i) the potential for certain capital instruments to no longer qualify as regulatory capital; (ii) the potential for securitizations and MREL-eligible instruments to be considered as "new contracts" as a result of changes to contractual terms, leading to the need to insert bail-in or other bank recovery contractual terms; and (iii) that many banks will need to obtain regulatory approvals for alterations to the models used to determine their regulatory capital arising from their exposures and risks.

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  • Financial Stability Board Calls for Sustained Efforts to Migrate From LIBOR
    12/18/2019

    The Financial Stability Board has published a progress report on reforms to major interest rate benchmarks. The report provides the FSB's annual update on progress taken by the official sector and market participants to move from interbank offered rates to overnight risk-free rates by the end of 2021 in line with the FSB's 2014 recommendations. The FSB highlights that the continued reliance by global financial markets on LIBOR poses significant financial stability risks and urges all participants to continue with their efforts to transition to the alternative risk-free rates. The FSB also warns regulated firms to expect increased examination from regulators of their efforts to transition as the end of 2021 approaches.

    View the report.
  • EU Regulation and Directive on Covered Bonds Published
    12/18/2019

    A new Regulation and Directive amending certain provisions of the Capital Requirements Regulation on covered bonds and introducing standards on the issuance of covered bonds and covered bond public supervision has been published in the Official Journal of the European Union. The Regulation and Directive will both enter into force on January 7, 2020. The Regulation will apply directly in all Member States from July 8, 2022, while Member States must publish national legislation implementing the Directive by July 8, 2021 and must apply that legislation from July 8, 2022.

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    TOPIC : Securities
  • UK Prudential Regulator Finalizes Revisions to Pillar 2 Liquidity Reporting Frequency
    12/17/2019

    The U.K. Prudential Regulatory Authority has published a Policy Statement, revised reporting rules and a revised Supervisory Statement on the PRA's approach to supervising liquidity and funding risks (SS 25/15).

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  • Financial Stability Board Publishes 2020 Work Program
    12/17/2019

    The Financial Stability Board has published its work program for 2020. The FSB confirms that it will continue to monitor developments to identify and manage new and emerging risks, work to finalize the outstanding components of the post-crisis reforms and assess the implementation of reforms as well as their effects. Key areas of focus will be:
    • LIBOR transition: the FSB will monitor implementation of the benchmark reforms and report on outstanding issues.
    • Global stablecoins: the FSB will launch a consultation on global stablecoins in April 2020.
    • Global payment systems: the FSB will work with other international bodies to develop and deliver a roadmap for using digital innovations to improve global cross-border payments.
    • FinTech: the FSB will report on the perspective of emerging market and developing economies.

    View the FSB work program for 2020.
  • UK Financial Policy Committee Highlights Risks of Open-Ended Funds and Global Stablecoins
    12/16/2019

    The Financial Policy Committee of the Bank of England has published its latest financial stability report. The report sets out the FPC's view of the resilience of the U.K. financial system and the main risks to the U.K.'s financial stability as well as the work being carried out to address those risks. The FPC states that the 2019 annual cyclical scenario stress test indicates that the U.K. banking system would be resilient to deep simultaneous U.K. and global recessions. Furthermore, the U.K. financial system is resilient to and prepared for any disruptions that may arise from a disorderly Brexit.

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  • International Organization of Securities Commissions Consults on Combating Conduct Risks in Debt Capital Raising
    12/16/2019

    The International Organization of Securities Commissions has launched a consultation on methods of addressing potential conflicts of interest and other conduct risks that arise from market intermediaries’ participation in the debt capital raising process. Responses should be submitted by February 16, 2020.

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  • European Supervisory Authorities Publish Guidelines on AML/CTF Cooperation
    12/16/2019

    The European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority (collectively known as the European Supervisory Authorities) have published joint guidelines aimed at enhancing cooperation between national regulators in combating anti-money laundering and counter-terrorist financing. The EU Fourth Money Laundering Directive requires national regulators to cooperate in their AML/CTF supervision of entities that operate on a cross-border basis. 

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  • UK Conduct Regulator Publishes Feedback on Climate Change and Green Finance Projects
    12/16/2019

    The U.K. Financial Conduct Authority has published a feedback statement on its proposals for improving climate change disclosures and the information given to consumers about green financial products and services. The feedback statement follows the FCA’s discussion paper on climate change and green finance, in which it sought comments on potential changes to its regulatory approach in these areas. 

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  • European Securities and Markets Authority Publishes Information on Pending Applications for Benchmark Administrators
    12/13/2019

    The European Securities and Markets Authority has published a list of the entities that are awaiting their national regulator’s approval for authorization and registration as EU benchmark administrators. Under the EU Benchmark Regulation, existing EU and third country benchmark administrators are entitled to apply for authorization to continue as administrators.

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  • EU Expert Group on Regulatory Obstacles to Financial Innovation Publishes Recommendations on Regulatory Framework for FinTech
    12/13/2019

    The EU Expert Group on Regulatory Obstacles to Financial Innovation (or ROFIEG) has published a set of Recommendations and a Q&A on the establishment of an accommodative framework for FinTech in the EU. The ROFIEG was established by the European Commission in 2018 to provide expertise on technology in the financial services sector and, in particular, to review the EU’s legal and regulatory FinTech framework.

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  • International Organization of Securities Commissions Publishes Framework for Monitoring Leverage in Funds
    12/13/2019

    The International Organization of Securities Commissions has published a framework designed to facilitate regulators’ monitoring of leverage in investment funds, assisting regulators in identifying potential risks to financial stability.

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    TOPIC : Funds
  • EU Report on Accepted Market Practices Under the Market Abuse Regulation
    12/13/2019

    The European Securities and Markets Authority has published an annual report to the European Commission on the application of accepted market practices under the 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.

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  • Proposed EU Procedural Rules for Penalties Imposed on Third-Country CCPs, Trade Repositories and Credit Rating Agencies
    12/13/2019

    The European Securities and Markets Authority has launched a consultation on proposed procedural rules for penalties imposed on third-country CCPs, trade repositories and credit rating agencies. Responses are invited by January 18, 2020. ESMA intends to finalize its technical advice by the end of Q1 2020.

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  • EMIR 2.2 Regulation on the Authorization and Recognition of CCPs Published
    12/12/2019

    A new Regulation amending the European Market Infrastructure Regulation has been published in the Official Journal of the European Union, introducing changes to the procedures and authorities involved in the authorization of central counterparties and the requirements for the recognition of third-country CCPs. The Regulation, known as “EMIR 2.2”, is part of the EU’s push to enhance the regulation of CCPs amid concerns regarding potential CCP failures given their increasing systemic importance. 

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  • European Securities and Markets Authority Publishes Final Report on Suspicious Transaction Reporting Under the Market Abuse Regulation
    12/12/2019

    The European Securities and Markets Authority has published its final report on the compliance of Member States with suspicious transaction and order reports under the Market Abuse Regulation, in which it sets out the results of its peer review into certain aspects of the STOR framework. Experts from national regulators and ESMA were appointed to conduct the review and issued a self-assessment questionnaire to all 31 EEA national regulators, as well as conducting on-site visits to six national regulators.

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  • Basel Committee on Banking Supervision Consults on Prudential Treatment of Crypto-Assets
    12/12/2019

    The Basel Committee on Banking Supervision has published a discussion paper seeking the views of stakeholders on the prudential regulatory treatment of crypto-assets. The paper is relevant for academics, banks, central banks, finance ministries, market participants, payment system operators and providers, supervisory authorities and technology companies. Responses should be submitted by March 13, 2020.

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  • European Securities and Markets Authority Reports on Sanctions Imposed Under UCITS Directive
    12/12/2019

    The European Securities and Markets Authority has published its second annual report on the sanctions imposed in 2018 under the Undertakings for Collective Investments in Transferable Securities Directive. The UCITS Directive requires national regulators to inform ESMA annually of information relating to all penalties and measures they have imposed under the Directive during the previous calendar year, which ESMA then compiles in a single annual report. 

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    TOPIC : Enforcement
  • Committee on Payments and Market Infrastructures Publishes Report on Wholesale Digital Tokens
    12/12/2019

    The Committee on Payments and Market Infrastructures has published a report on wholesale digital tokens. The report focuses on how digital tokens might be used to effect settlement in wholesale transactions, replacing existing systems where such transactions are settled by updating balances in account records on a centralized register. The CPMI confirms that any wholesale digital token arrangement would need to comply with the applicable regulatory requirements, including, if the arrangement is systemically important, the Principles for Financial Market Infrastructure.

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  • New EU Regulation on Promotion of Small- and Medium-Sized Enterprise Growth Markets
    12/11/2019

    A new Regulation amending the revised Markets in Financial Instruments Directive, Market Abuse Regulation and Prospectus Regulation has been published in the Official Journal of the European Union, introducing changes to support small- and medium-sized enterprise growth markets as trading venues. 

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