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The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • 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.

    Read more.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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 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 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.
  • 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 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.
  • 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.
  • 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.
  • 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.

    Read more.
  • 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. 

    Read more.
  • UK Conduct Regulator Publishes Consultation on Proposed Miscellaneous Changes to Rules
    12/06/2019

    The U.K. Financial Conduct Authority has published a consultation on its proposed changes to various aspects of the FCA Handbook.

    Read more.
  • European Commission Vice President Addresses CCP Temporary Equivalence and Sustainable Finance in London Speech
    11/15/2019

    The Vice President of the European Commission, Valdis Dombrovskis, has given a keynote speech at the Guildhall in London covering, amongst other things, the EU’s proposals for the development of the European sustainable finance framework and a proposed extension to the temporary equivalence regime for U.K. central counterparties.

    Read more.
  • Final EMIR 2.2 Technical Advice Published
    11/11/2019

    Following its consultation earlier this year, the European Securities and Markets Authority has published final reports and the final technical advice on third-country CCP tiering, comparable compliance and fees under draft revisions to the European Market Infrastructure Regulation, known as EMIR 2.2. EMIR 2.2 will change the requirements for the supervision of both EU and third-country CCPs, and includes the controversial formal EU "location policy" for CCPs. The technical advice will assist the Commission in preparing the final delegated legislation that will supplement the EMIR 2.2.

    Read more.
  • HM Treasury Publishes Equivalence Determinations for EU Financial Services Legislation
    11/06/2019

    HM Treasury has published the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, providing U.K. government ministers with a temporary power to make equivalence and exemptions directions for the EU and EEA Member States under relevant financial services legislation. The temporary power will come into force on the date that the U.K. leaves the EU (currently expected to be no later than January 31, 2020) and can only be used for up to twelve months from that date.

    Read more.
  • UK Conduct Regulator Postpones Implementation Date for Brexit Contingency Plans
    10/30/2019

    The U.K. Financial Conduct Authority has extended the date by which firms must implement Brexit contingency plans following the extension of the Brexit deadline from October 31, 2019 to January 31, 2020. Firms and funds should now notify the FCA for entry into the temporary permissions regime by January 30, 2020 and fund managers have until January 15, 2020 to notify the FCA if they wish to change their existing notification. Firms should continue to comply with transaction and trade reporting requirements under the Markets in Financial Instruments Directive and European Market Infrastructure Directive, respectively.
     
    View the FCA's statement on contingency planning deadlines.
  • UK Government Agrees Extension of Brexit Deadline With European Union
    10/30/2019

    The U.K. Government has published legislation extending the deadline for the U.K.'s withdrawal from the European Union, following an agreement reached with relevant European Union bodies on the extended Brexit deadline. The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 3) Regulations 2019 amend the day of the U.K.'s exit from the European Union from October 31, 2019 to January 31, 2020, granting the U.K. government an additional three months in which to ratify its proposed Brexit deal.

    Read more.
  • UK Regulator Publishes Final Technical Standards on Strong Customer Authentication in the Event of a No-Deal Brexit
    10/25/2019

    The U.K. Financial Conduct Authority has published a Policy Statement, final Technical Standards and changes to the Handbook rules on strong customer authentication and common and secure open standards of communication to be applicable when the U.K. leaves the EU. The FCA consulted on the proposed SCA RTS in early 2019 when the U.K. was due to leave the EU on March 29, 2019, and before the EU SCA Regulatory Technical Standards application date. Since then, Brexit has been extended and the EU SCA RTS has applied directly across the EU since September 14, 2019. As a result, the EU SCA RTS would be onshored into U.K. law under the Withdrawal Act. However, in preparation for a no-deal Brexit, the U.K. Payment Services Regulations would require firms to apply the U.K. SCA RTS. As a result, the EU SCA RTS would be revoked and the FCA's SCA RTS will apply in the U.K. in the event of a no-deal Brexit.

    Read more.
  • EU and UK Agree Revised Brexit Deal
    10/19/2019

    The EU and U.K. have, in principle, agreed new terms for the withdrawal agreement giving effect to the U.K.'s exit from the European Union. These include a revised political declaration and protocol concerning Northern Ireland replacing the controversial backstop. An amended unilateral declaration on consent in Northern Ireland by the U.K. has also been published. The new Withdrawal Agreement provides for a transitional period from the day the U.K. exits the EU until December 31, 2020. That period may be extended for a period of one to two years, if agreed between the EU and the U.K by July 31, 2020.

    View the revised Withdrawal Agreement and Political Declaration.

    View our client note providing comparisons to the previous versions.
  • EU Council Adopts Laws on Enhanced Supervision of Third-Country CCPs 
    10/15/2019

    The Council of the European Union has adopted the amendments to EU law on CCP supervision. The adopted laws revising the European Market Infrastructure Regulation (EMIR 2.2) will change how both EU CCPs and third-country CCPs are supervised, and implement into legislation the controversial EU "location policy" for the largest third-country CCPs. According to the Council's press release, EMIR 2.2 is scheduled to be published in the Official Journal of the European Union on December 12, 2019 and would come into force 20 days later. The legislative process relevant to EMIR 2.2 has taken place with the U.K. exit from the European Union in the background and many of the changes relevant to third-country CCPs are effectively a response to the U.K.'s decision to leave the EU, given that two of the three largest European Union clearing houses are U.K.-based.

    Read more.
  • UK Financial Policy Committee Issues Summary of UK Financial System
    10/11/2019

    The U.K. Financial Policy Committee has issued a summary of the resilience of the U.K. financial system to potential economic shocks and the vulnerabilities it faces. The summary follows the FPC’s meeting on October 2, 2019, at which the FPC agreed on its intended policy action going forward. The FPC is made up of Bank of England staff, the Chief Executive of the U.K. Financial Conduct Authority and certain external members who work to identify, monitor and take action to remove or reduce systemic risks to the U.K. financial system.

    Read more.
  • Brexit: European Banking Authority Again Warns Against Letter-Box Entities
    10/08/2019

    The European Banking Authority has issued a further Communication on issues associated with the U.K.'s withdrawal from the EU, scheduled to take place on October 31, 2019. The EBA notes that financial institutions have made progress on their preparations for a no-deal Brexit. However, national regulators have highlighted concerns about the operationalization of relocation plans and customer communication. In particular, national regulators have noted that in some cases authorization has been obtained, but it remains unclear whether the firm has transferred assets, skilled staff and risk function to fully operationalize the new business. The EBA reminds firms of the principles it set out in its October 2017 Opinion on structures, and particularly the need for firms not to set up so-called "empty shells".

    Read more.
  • European Securities and Markets Authority Issues Public Statements on No-Deal Brexit Preparations
    10/07/2019

    The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019. 

    Read more.
  • UK Regulator Update on the Operation of the MiFID Transparency Regime Post-Brexit
    10/07/2019

    The U.K. Financial Conduct Authority has published an update to the Supervisory Statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The FCA published a statement on March 14, 2019 on the operation of the MiFID II transparency regime should the U.K. leave the EU without a deal on March 29, 2019. The FCA has updated the statement to reflect how the regime would work if the U.K. leaves the EU on October 31, 2019, without a deal.

    View the FCA's update.

    View details of the FCA's March 2019 Supervisory Statement.
  • UK Conduct Regulator Issues Draft Directions on No-Deal Brexit Temporary Transitional Power
    09/26/2019

    The U.K. Financial Conduct Authority has updated the directions under the temporary transitional power granted to it in preparation for a no-deal Brexit. The TTP was granted to the U.K. regulators under the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 as a means of granting transitional relief from regulatory requirements where the requirements have been introduced or have changed as a result of onshoring financial services legislation. In July 2019, the FCA announced an extension of its use of the TTP from June 30, 2020 to December 31, 2020 in light of the change to the date that the U.K. was due to leave the EU to October 31, 2019. The updated directions reflect that extension as well as prudential instruments that have been published since the draft directions were originally published in March 2019.

    View the FCA's press release and the related documentation.
  • No-Deal Brexit Uncertainty Leads EU to Suspend Assessment of Transparency Requirements on Bond Markets
    09/24/2019

    The European Securities and Markets Authority has confirmed in a letter to the European Commission that it considers it inadvisable to conduct an annual review in 2019 of the Regulatory Technical Standards on the transparency requirements for trading venues and investment firms for bonds, structured finance products, emission allowances and derivatives (sometimes referred to as RTS 2). The requirement for an annual review is stipulated in the Markets in Financial Instruments package, and ESMA's report could lead to legislative changes subjecting more bonds and derivatives to the transparency requirements. ESMA's assessment of RTS 2 would be impacted by the uncertainty arising from Brexit, in particular, the potential for a no-deal Brexit, because the outcome would vary depending on whether U.K. data was included or not.

    ESMA intends to conduct its annual review before July 2020 and to determine the impact on bond market liquidity of the U.K.'s departure from the EU.

    View ESMA's letter to the European Commission.
  • UK Prudential Regulator Consults on Credit Risk
    09/18/2019

    The U.K. Prudential Regulation Authority has launched a consultation 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 consultation is relevant to U.K. banks, building societies and PRA-designated U.K. investment firms. Responses to the consultation need to be submitted by December 18, 2019.

    Read more.
  • UK Conduct Regulator Escalates Awareness of Need for No-Deal Brexit Preparations
    09/11/2019

    The U.K. Financial Conduct Authority has published a press release announcing that it is stepping up its efforts to assist firms to prepare for a no-deal Brexit. Among other things, the FCA will be publishing a series of digital advertisements highlighting the FCA Brexit webpages, and it has set up a dedicated telephone line (0800 048 4255).

    View the FCA's press release.
  • UK Statutory Instrument Published to Onshore the EU Prospectus Regulation For No-Deal Brexit
    09/06/2019

    A U.K. statutory instrument has been published to onshore the EU Prospectus Regulation in the event of a no-deal Brexit. In preparing for an April Brexit, the U.K. had onshored the EU Prospectus Directive in the Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 (known as the "Official Listing instrument"). However, since then the date on which the U.K. is due to leave the EU has changed to October 31, 2019 and the EU Prospectus Directive has been repealed by the EU Prospectus Regulation (as of July 21, 2019).

    Read more.
  • UK No-Deal Brexit Legislation Extends Transitional Provisions for Third-Country Benchmarks
    09/06/2019

    A U.K. statutory instrument has been published to further the U.K.'s financial services legislation preparations in the event of a no-deal Brexit. The statutory instrument – the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 (SI 2019/1212) – provides for, among other things:
    • amending the exit legislation that establishes temporary regimes for EEA e-money and payment services firms to ensure that firms entering the Contractual Run-Off regime can carry out the full range of activities required to discharge any pre-existing contractual obligations;
    • extending the transitional provisions for third-country benchmarks in the Benchmarks (Amendment and Transitional Provisions) (EU Exit) Regulations 2019 by three years to ensure that U.K. firms can use third-country benchmarks until the end of 2022 without the benchmarks needing to be on the Financial Conduct Authority's register;
    • updating cross-references to the Capital Requirements Regulation to take into account the EU amendments to the CRR that became applicable in June 2019; and
    • amending various exit instruments to correct or clarify the original text.

    View the amending regulation and explanatory memorandum.
  • UK Brexit Legislation Published to Onshore the Revised Capital Requirements Regulation
    09/05/2019

    A draft U.K. statutory instrument to onshore into U.K. law, post-Brexit, the revised Capital Requirements Regulation (known as CRR II) has been published – the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (2019 No. 1232). CRR II and the revised Capital Requirements Directive were published in the Official Journal of the European Union on June 7, 2019. Subject to certain exceptions, the Regulation amending CRR will not apply directly across the EU from June 28, 2021. However, some of its provisions are already in force. EU Member States are required to transpose the Directive amending CRD into their national laws and to apply those provisions from December 29, 2020, subject to certain exceptions.

    The new U.K. statutory instrument amends the existing U.K. exit legislation to address deficiencies arising due to the changes made in CRR II, but only those changes that will be applicable by October 31, 2019. These changes relate to new definitions, revisions to the rules on what qualifies as capital, new mandates for technical standards to be prepared and some changes to the Minimum Requirements for Own Funds and Eligible Liabilities (MREL). In addition, the statutory instrument removes the automatic preferential capital treatment for EU exposures introduced by CRR II. This aligns with the position taken in the existing exit legislation. It is anticipated that in the event of a no-deal Brexit, the U.K. regulators may use their temporary powers to suspend the additional capital requirements for such exposures.

    View the amending regulation and explanatory memorandum.

    View details of CRR II.
  • European Commission Issues Communication on Final Preparations for No-Deal Brexit
    09/04/2019

    The European Commission has published a Communication on finalizing preparations for the withdrawal of the U.K. from the EU on November 1, 2019. The Commission stresses the likelihood of a no-deal Brexit on October 31, 2019 and asks all stakeholders to take action now to finalize their plans for the situation, noting that the contingency measures that are in place can only mitigate against some of the more significant disruptions. The Commission warns that a further delay to the date that the U.K. exits the EU should not be assumed, in that a delay may not be requested by the U.K. government nor granted by the EU.

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

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

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