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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 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
  • 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
  • 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.
  • 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.
  • 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 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.
  • 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.
  • 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.
  • 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.
  • 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 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 publically available.

    Read more.
    TOPICS: COVID-19MiFID II
  • 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.
  • 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.
  • 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
  • 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
  • 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
  • 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.