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

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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 ix 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.
  • 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.
  • 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.
  • 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 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.

    Read more.
  • 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.
  • 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.

    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.
  • 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.
  • 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. 

    Read more.
  • 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. 

    Read more.
  • 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 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.

    Read more.
    TOPICS: COVID-19Securities
  • 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.

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

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  • 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
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