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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.

  • Banking Standards Board Publishes Good Practice Guidance on Regulatory References
    09/03/2019

    The Banking Standards Board has published a statement of good practice for firms when providing and requesting regulatory references in accordance with the Senior Managers and Certification Regime. The SM&CR for banks and building societies was established in 2016 to improve management within banking sector firms. The regime includes a requirement for firms to request references when determining whether a candidate is suitable for a senior management function, certification function or non-executive director function. 

    Read more.
  • UK Conduct Regulator Concludes No Changes Needed to Banking Senior Managers Regime
    08/05/2019

    The U.K. Financial Conduct Authority has published the findings of its review into the implementation of the Senior Managers and Certification Regime for the banking sector. The SM&CR came into force for banking firms in March 2016 with the aim of making individuals in the banking sector more accountable for their conduct. The FCA conducted the review to determine how the SM&CR has been implemented in the three years since its introduction. The review is intended to aid understanding of the impact of the regime and the FCA does not intend to make any policy changes on the basis of its findings. The FCA's review focuses on the implementation of the existing banking SM&CR, but an expanded SM&CR regime will come into force for all FCA solo-regulated firms from December 9, 2019. Firms falling within scope of the expanded regime should, where appropriate, also take the findings of the FCA's review into account in their implementation of the SM&CR.

    Read more.
  • UK Conduct Regulator Publishes Final Senior Managers & Certification Regime Rules for Extended Regime
    07/26/2019

    The U.K. Financial Conduct Authority has published its final rules extending the Senior Managers and Certification Regime to all FCA solo-regulated firms. The final rules take into account responses to the FCA's consultation paper issued in January 2019, which proposed changes to optimize the expanded regime. 

    Read more.
  • UK Conduct Regulator Consults on Firms' Treatment of Vulnerable Consumers
    07/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on its proposed guidance on how financial services firms should treat "vulnerable" consumers. The consultation will be divided into two stages: the first stage focuses on: (i) whether the draft guidance covers the right issues and provides sufficient clarity to firms on what they should do to improve outcomes for vulnerable consumers; (ii) the potential impact of the guidance on firms' costs and the potential benefit to consumers of the implementation of the guidance; and (iii) whether the guidance is sufficient to ensure firms take appropriate action to treat vulnerable consumers fairly or whether additional policy interventions are required. The second stage will seek input on a revised draft of the guidance, which will take account of feedback received during the first stage, together with a cost-benefit analysis. Responses to the first stage of the consultation should be provided by October 4, 2019.

    Read more.
  • UK's Expanded Senior Managers and Certification Regimes Enter into Force
    07/17/2019

    The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 have been made. The Regulations bring into force, from December 9, 2019, the expanded Senior Managers and Certification Regimes for all Financial Conduct Authority solo-regulated firms authorized under the Financial Services and Markets Act 2000, which include asset managers and investment firms carrying out certain activities. These firms need to complete their initial certification assessments for existing certified staff and new hires by December 9, 2020, although they must have identified certification staff by December 9, 2019. A transitional provision states that the regime will only apply to Claims Management Companies that are authorized by the FCA by December 9, 2019 and to other CMCs on the date that they obtain their authorization.

    Read more.
  • UK Conduct Regulator Publishes New Measure of Market Cleanliness
    07/09/2019

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

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

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

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

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

    Read more.
  • UK Conduct Regulator Publishes Dear CEO Letter on its Wealth Management and Stockbroking Supervision Strategy
    06/13/2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    View the FCA's review webpage.
  • UK Prudential Regulator Fines Senior Managers For Failing to be Open and Cooperative
    11/07/2018

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

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

    Read more.
  • UK Conduct Regulator Evaluates Impact of UK Benchmark Reform Since 2015
    10/22/2018

    The U.K. Financial Conduct Authority has published an evaluation paper on the impact of bringing seven additional benchmarks within the U.K.'s regulatory and supervisory perimeter in April 2015, in response to the recommendations of the Fair and Effective Markets Review.  The necessary changes to the FCA's Handbook and guidance were effected by the Benchmarks (Amendment) Instrument 2015, a legal instrument made by the FCA. In the evaluation paper, the FCA clarifies that this benchmarks-related evaluation does not cover changes due to other policies that affect benchmarks, such as the EU Benchmarks Regulation or principles set by EU or international bodies.

    The evaluation has been conducted in line with the FCA's approach to ex-post evaluation of the impact of its work, which it outlined in a discussion paper in April 2018. The FCA has conducted the benchmarks-related evaluation to understand: (i) the impact of the Benchmarks (Amendment) Instrument 2015 on markets and firms' costs; and (ii) whether the FCA's regulatory intervention met its objective of increasing the robustness of benchmarks and restoring market confidence.

    Read more.
  • UK Financial Conduct Authority Consults on Guidance Under the Extended Senior Managers Regime
    10/11/2018

    The Financial Conduct Authority has published a consultation paper on proposed guidance on the Statement of Responsibilities (SoR) and Responsibilities Maps required under the Senior Managers and Certification regimes. The extended SM&CR will apply to all firms authorized under the Financial Services and Markets Act 2000 and regulated by the FCA, as well as EEA and third-country (non-EEA) branches. SM&CR will be extended to FCA solo-regulated firms from December 9, 2019.

    Read more.
  • Global Foreign Exchange Committee Update and Survey on Adoption of the FX Global Code
    10/04/2018

    The Global Foreign Exchange Committee has published an update on the ongoing work of its four priority working groups: (i) the cover and deal working group; (ii) the disclosures working group; (iii) the buy-side outreach working group; and (iv) the working group on embedding the FX Global Code. The GFXC was established in 2017 as a forum for participants in the wholesale foreign exchange markets and its terms of reference include addressing misconduct in FX markets by facilitating adoption of the global principles of good practice enshrined in the FX Global Code.

    The update refers to the recent launch (on September 28, 2018) of a survey by the working group on embedding the FX Global Code. Completed surveys are requested by October 19, 2018. The aims of the survey are to measure awareness and adoption of the FX Global Code among market participants and to inform the GFXC's further work on embedding and integrating the code into the global FX markets. The survey results will be considered at the GFXC's next meeting, which will be held in November.

    View the survey.

    View the press release.
  • New International Guidance Addresses Conflicts of Interest and Conduct Risks in Equity Capital Raisings
    09/18/2018

    The International Organization of Securities Commissions has published a final report setting out Guidance to its members to address the significant potential conflicts of interest arising from the role of intermediaries during key stages of an equity raising. IOSCO consulted on a draft version of the guidance between February and April 2018.

    IOSCO has identified a number of key risks. In the early, pre-offering, phase of an equity raising, conflicts of interest can arise if analysts employed by firms managing the securities offering are at risk of being under pressure to present a positive view of the issuer. During the investor education and price-formation phase, there is a risk that these "connected" analysts may produce conflicted research and conflicts can also be present during the allocation of securities. IOSCO considers that there can be both conflicts of interest and risks of misconduct where staff employed within firms that are managing an equity raising enter into personal transactions related to the capital raising. These issues can damage investor confidence and the effectiveness of the capital markets as route for issuers to raise finance.

    Read more.
  • Bank of England Launches Public Register for the UK Money Markets Code
    09/17/2018

    The Bank of England has announced that its Money Markets Committee has launched a public register to display the statements of commitment from market participants that have agreed to abide by the UK Money Markets Code and would like their statements to be included on the register. The public register is accessible via a dedicated BoE webpage.

    The Code is a voluntary industry code launched in April 2017, written by market participants. It sets out best practice expected from participants in the deposit, repo and securities lending markets and incorporates revised relevant sections of the Non-Investment Products Code, and also a revision and update of the Gilt Repo Code and Securities Borrowing and Lending Code.

    View the public register

    View the Money Markets Code
  • UK Conduct Regulator Bans Former Trader for Euribor Manipulation
    09/14/2018

    The U.K. Financial Conduct Authority has issued a Final Notice to a former employee of a major EU bank, prohibiting him from performing any function in relation to any regulated financial activity. The individual had been employed to trade interest rate derivative products referenced to benchmarks including the Euro Interbank Offered Rate.

    The FCA had previously issued a Decision Notice to the former trader in April 2017 imposing a prohibition and a fine of £6.5 million, following a finding that, between March 2005 and June 2009, the former trader had been knowingly concerned in a contravention by his employer of Principle 5 of the FCA's Principles for Businesses, which requires firms to observe proper standards of market conduct.

    Read more.
  • US Federal Deposit Insurance Corporation Announces Modifications to its Statement of Policy Regarding Section 19 of the Federal Deposit Insurance Act
    08/20/2018

    The U.S. Federal Deposit Insurance Corporation issued modification to its Statement of Policy with respect to Section 19 of the Federal Deposit Insurance Act, which (among other things) prohibits persons with convictions for certain criminal offenses, or those who have entered into pretrial diversion or similar programs with respect to the same, from participating in the affairs of a FDIC-insured financial institution without prior approval of the FDIC.

    Read more.
  • UK Conduct Regulator Confirms Policy on Recognizing Industry Codes of Conduct in Unregulated Markets
    07/20/2018

    The U.K. Financial Conduct Authority has published a Policy Statement outlining its final policy and rule amendments on its approach to recognizing industry codes of conduct in unregulated markets, including the process and criteria for doing so. In the FCA's view, industry codes of conduct can be useful in helping firms to communicate what is expected of individuals to meet their conduct obligations under the Senior Managers and Certification Regimes. The SM&CR, which currently only applies to banks, credit unions, building societies and large investment firms (including EEA branches), will be extended to insurers from December 2018 and to all other FCA-regulated firms from December 2019.

    The FCA consulted in November 2017 on proposals to formally recognize industry codes of conduct in markets that are outside the regulatory perimeter and to publish a list of recognized industry codes on its website. The consultation set out the criteria to be met for recognition of industry codes and proposed that recognition would apply for a renewable period of three years.

    Read more.
  • FICC Markets Standards Board Consults on Statement of Good Practice on Algorithmic Trading
    07/11/2018

    The FICC Markets Standards Board has launched a consultation on a transparency draft of a Statement of Good Practice on algorithmic trading in the wholesale fixed income, commodity and currency markets. The draft SGP forms part of the FMSB's work to build up a body of Standards and Statements of Good Practice to improve conduct and raise standards in the wholesale FICC markets. The FMSB Standards and SGPs do not impose legal or regulatory obligations on FMSB members, nor do they take the place of regulation. Instead, an SGP is intended to be considered to the extent it is possible to follow it in compliance with applicable laws.

    For the purposes of the consultation paper, "algorithmic trading" is defined as trading in instruments where a computer algorithm, with limited or no human intervention, automatically determines individual parameters of orders, such as whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission.

    Read more.
  • UK Conduct Regulator Chair Supports New Standards for Data Ethics
    07/11/2018

    Charles Randell, Chair of the Financial Conduct Authority and Payment Systems Regulator,delivered a speech on big data, regulation and data protection entitled, "How can we ensure that big data does not make us prisoners of technology?"

    Discussing the risks associated with big data and artificial intelligence, Mr. Randell highlighted that in order to innovate ethically, thought needs to be given to the questions posed by big data, AI and behavioural science. In particular, the FCA Chair is concerned that technical innovation could increase social exclusion and reduce access to financial services if it was used, for example, to identify the most profitable or most risky customers.

    Read more.
  • UK Conduct Regulator Issues Near-Final Rules on Extension of Individual Accountability Regime to All Financial Services Firms
    07/04/2018

    The U.K. Financial Authority has published Policy Statements confirming the rule changes it will apply to extend the application of the Senior Managers & Certification Regimes to all FCA solo-regulated firms (that is, firms for which the FCA is both conduct and prudential regulator). At this stage, the rules are near-final as they are subject to commencement regulations that will be made by HM Treasury and they may also be amended by subsequent changes related to, for example, Brexit or SM&CR optimizations. The FCA also plans to consult separately on rules for benchmark-related activities.

    The extended SM&CR will apply to all firms authorized under the Financial Services and Markets Act 2000 and regulated by the FCA, as well as EEA and third country (non-EEA) branches. SM&CR will be extended to FCA solo-regulated firms from December 9, 2019.

    While insurance intermediaries, which are solo-regulated by the FCA, will fall within the FCA's new rules, the FCA and the Prudential Regulation Authority have separately published policy statements on the extension of the SM&CR to insurers.

    Read more.
  • UK Regulators Finalize Rule Changes For Extending Individual Accountability Regime to Insurers
    07/04/2018

    The U.K. Financial Conduct Authority and Prudential Regulation Authority have published Policy Statements confirming the near-final and final rule changes they will apply to extend the application of the Senior Managers & Certification Regimes to insurers. The Policy Statements do not make an changes to the prudential rules implementing Solvency II or to the wider U.K. regulatory framework for insurers.

    The extended SM&CR will apply from December 10, 2018, subject to commencement regulations being made by HM Treasury. The SM&CR will apply to all insurers and reinsurers regulated by the FCA and the PRA. The Policy Statements will be of specific interest to Solvency II firms (that is, all firms within the scope of the U.K. rules implementing the Solvency II Directive), insurance special purpose vehicles (undertakings with permission to carry on the regulated activity of insurance risk transformation), insurers outside the scope of the Solvency II Directive (so-called Non-Directive Firms) and small run-off firms (all insurers with less than £25 million technical provisions that no longer have permission to write or acquire new business).

    Read more.
  • New UK Standard on Risk Management Transactions for New Issuances for the Fixed Income Markets
    07/03/2018

    The U.K. Fixed Income, Currency and Commodities Markets Standards Board has published a new Standard on Risk Management Transactions for New Issuances for the Fixed Income markets.

    The FMSB has created several Standards to improve conduct in the FICC markets since its establishment in 2015 in response to the Fair and Effective Markets Review conducted by HM Treasury, the Bank of England and the Financial Conduct Authority. FMSB members commit to applying the FMSB Standards but the Standards do not impose legal or regulatory obligations.

    The new Standard describes expected behaviors to improve the practice and awareness regarding risk management activities conducted in and around the new issuance of bonds and includes 12 Core Principles. Following its consultation at the end of 2017 on the proposed Standard on Risk Management Transactions for New Issuances, the FMSB has made some minor changes, including providing more detail on the nature of the conduct risks and amending the Principle on dissemination of information (Core Principle 9).

    Read more.
  • UK Regulator Provides Update on its Retail Banking Business Model Review
    06/27/2018

    The U.K. Financial Conduct Authority has published a Progress Report on its Strategic Review of Retail Banking Business Models. The FCA launched the Review in April 2017 and published a purpose and scope document in October 2017. The FCA is conducting the Review to gain a picture of how profits are generated by the sector, of the relative competitive advantages and disadvantages of different business models and of barriers to entry and expansion. The Review covers retail banking services to personal and small business customers. It focuses on the products and services that are used on a regular basis by large numbers of consumers and small businesses. This includes current accounts, savings products, mortgages, personal loans, credit cards, and business finance.

    The FCA explains that its early analysis indicates that a key component of the competitive advantage enjoyed by retail banks to date has been the combination of personal current accounts and large branch networks. This combination has brought a number of benefits including a funding cost advantage (from personal current accounts paying zero interest or lower interest than other providers), significant additional income from fees and charges on personal current accounts (including overdrafts), the opportunity to cross-sell lending products to personal current account holders and the ability to cross-sell business accounts and associated business savings balances.

    Read more.
  • Federal Reserve Bank of New York President John C. Williams Discusses Banking Culture Reform
    06/18/2018

    The Federal Reserve Bank of New York’s new President, John C. Williams, discussed banking cultural reform at the FRBNY’s annual Governance and Culture Reform Conference.  His speech kicked off a full day of panels discussing various aspects of bank culture reform.  President Williams noted that while the economy and regulation of the financial system have improved markedly since the financial crisis, more work needs to be done with respect to promoting good bank culture.  President Williams highlighted that bank culture is often overlooked, especially in prosperous times when hard numbers, such as profits, losses, capital and liquidity, often look very positive.  With respect to reform, President Williams suggested that effectuating change in bank culture is a multi-year process, and that maintaining good bank culture is an ongoing exercise that requires clearly defined expectations and values, a board and management who are committed to maintaining and promoting high standards of conduct and culture and an environment that empowers employees to speak up when they have concerns.

    View full text of President Williams’s remarks.
  • Proposed UK Good Practice on Information Confidentiality for the FICC Markets
    06/01/2018

    The U.K. Fixed Income, Currency and Commodities Markets Standards Board has published for consultation a Transparency Draft of a new Statement of Good Practice on Information and Confidentiality for fixed income and commodities markets. The proposed Statement of Good Practice will apply in the European Fixed Income and Commodities markets. It is not intended to apply to the FX markets to which the FX Global Code applies, or to the precious metals markets, which are covered by the Precious Metals Code. The aim of the proposal is to clarify data sharing in the relevant markets and dealing with confidential information within a firm, including what information should not be shared with parties outside of a firm and what can be revealed when discussing "market color." The proposed Statement of Good Practice consists of nine Statements of Good Practice and an explanation of the rationale for each statement.

    The consultation closes on August 31, 2018. The FMSB intends to publish the final Statement of Good Practice shortly thereafter. The Statements of Good Practice are not part of the FMSB Standards and are not binding on FMSB members, but reflect the FMSB's view of what constitutes good or best practice in the areas covered.

    View the consultation paper.
  • UK Authorities Publish Progress Report on the Fair and Effective Markets Review
    05/24/2018

    The Bank of England, the Financial Conduct Authority and HM Treasury have published a progress report on the Fair and Effective Markets Review, outlining the progress made in responding to the FEMR recommendations that were originally published in June 2015 and followed by an implementation report in June 2016.

    The three authorities commend the significant progress that has been made by firms, both collectively and individually, in driving up standards in the Fixed Income, Currency and Commodities Markets since the implementation report. The progress report sets out the assessment of the three authorities of the impact of the FEMR's recommendations.

    Read more.
  • Financial Stability Board Consults on Reporting on the Use of Compensation Tools to Address Misconduct Risk
    05/07/2018

    The Financial Stability Board has published proposed Recommendations for consistent national reporting of data concerning the use of compensation tools to address misconduct risk in significant financial institutions. The FSB is proposing a supervisory framework for the collection and reporting of data, which can be used by supervisors for monitoring and analyzing the effectiveness of compensation frameworks in addressing misconduct risk. The information so collected is intended to assist supervisors to understand and review: (i) the importance of individual conduct within the firm's incentive compensation framework and the role of compensation policy in establishing a sound risk and conduct culture; and (ii) the use of compensation tools in practice and their role in ensuring accountability when misconduct occurs.

    Read more.
  • Financial Stability Board Publishes Toolkit to Abate Misconduct Risk
    04/20/2018

    The Financial Stability Board has published a report, "Strengthening Governance Frameworks to Mitigate Misconduct Risk: A Toolkit for Firms and Supervisors." The report is part of the FSB's work on measures to reduce misconduct in the financial sector and follows the FSB's stocktake of endeavors by international bodies, national authorities, industry associations and firms.

    The Toolkit is designed to provide firms and authorities with a set of tools that can be used, taking into account the applicable legislative, judicial and regulatory frameworks. Rather than creating an international standard or adopting a prescriptive approach, the FSB's Toolkit allows firms and supervisors to decide whether and how to use the Toolkit to address misconduct risk. The FSB also states that firms and their supervisors can use individual tools separately or in combination.

    The Toolkit comprises 19 tools, divided into three categories and assigned between firms and national authorities.

    Read more
  • UK Financial Conduct Authority Publishes its 2018/19 Business Plan
    04/09/2018

    The Financial Conduct Authority has published its Business Plan for 2018/19 which sets out its key priorities for the coming year. The FCA confirms that it will continue to focus on issues relating to the U.K.'s withdrawal from the EU by working with the Government, ensuring appropriate transition measures for EEA firms, working towards operational readiness and cooperating at international level.

    The FCA divides the remainder of its priorities into cross-sector priorities and sector priorities. There are seven cross-sector priorities: firms' culture and governance; financial crime and anti-money laundering; data security, resilience and outsourcing; innovation, big data, technology and competition; treatment of existing customers; long-term savings, pensions and intergenerational differences; and high-cost credit. There are seven sector priority areas: wholesale financial markets; investment management; retail lending; pensions and retirement income; retail investments; retail banking; and general insurance and protection. The FCA also published Sector Views for each of these sectors which provide an FCA view of how each sector was performing as of mid-2017.

    Read more
  • European Supervisory Authorities Issue Final Report on Financial Institutions' Use of Big Data
    03/15/2018

    The Joint Committee of the European Supervisory Authorities has published a final report on the use of Big Data by financial institutions. The Final Report has been prepared following feedback to a discussion paper published in December 2016 by the Joint Committee’s sub-Committee on Consumer Protection and Financial Innovation. “Big Data” is the term used to refer to situations where high volumes of different types of data, produced with high velocity from a wide variety of data sets and sources, is processed (often in real time) by IT tools, such as powerful processors, software and algorithms. Big Data tools have been in use for several years in some sectors, but less so in others. Nevertheless most respondents to the ESAs’ discussion paper agreed that Big Data may have an impact on almost all financial institutions and on their products and services. The use of Big Data techniques can help financial institutions to improve their understanding of customers’ preferences and their interactions with customers and clients. This can enable them to tailor products to their target markets and support effective product governance. However, the use of Big Data also entails risk.

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  • UK Banking Standards Board Publishes Annual Review for 2017-2018
    03/14/2018

    The U.K. Banking Standards Board has published its Annual Review for the year 2017-2018. The BSB is a non-statutory organization established in April 2015 to help raise standards of behaviour and competence across the U.K. banking sector. Voluntary membership of the BSB is open to all banks and building societies operating in the U.K. The Annual Review sets out the key findings of the second annual assessment exercise conducted at member firms.

    The BSB uses quantitative and qualitative data to assess firms against an Assessment Framework to establish how far each of nine characteristics is demonstrated within each firm. These characteristics are: honesty; competence; reliability; responsiveness; personal/organizational resilience; accountability; openness; respect; and shared purpose. The quantitative aspect of the assessment consists of an employee survey asking 37 core questions that allow comparison across and between firms and over time. The qualitative aspect incorporates views and perspectives from all levels and parts of the firm, obtained by various means, including written submissions, interviews and focus groups.

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  • UK Banking Standards Board Publishes Principles for Strengthening Professionalism
    03/12/2018

    The Banking Standards Board has published the "BSB Statement of Principles for Strengthening Professionalism - The role of the firm", which is a guiding statement of principles intended to assist banks and building societies to strengthen professionalism in the banking sector. The BSB has defined professionalism in UK banking as "attitudes, judgement and high standards of behaviour, knowledge and skill expected of individuals working in banking". The Statement consists of six principles, each of which is supported by action points on how the principle can be achieved.

    The Statement does not impose any legal or regulatory obligations on firms or replace any regulation. It is intended to assist firms in structuring their own practices and to build on regulatory initiatives, such as the Senior Managers and Certification Regimes.

    View the BSB Statement.
  • Financial Stability Board Issues Supplementary Guidance to its Principles and Standards on Sound Compensation Practices
    03/09/2018


    The Financial Stability Board has published the finalized version of its Supplementary Guidance on its Principles and Standards on Sound Compensation Practices, following feedback to a consultation it launched in June 2017. The Supplementary Guidance relates to the use of compensation tools to address misconduct risk. Misconduct, for the purposes of the Supplementary Guidance, should generally be understood as conduct that falls short of expected standards, including legal, professional, internal conduct and ethical standards.

    The Supplementary Guidance is consistent with the FSB’s existing Principles and Standards on Sound Compensation Practices and provides guidance on better practice for addressing misconduct risk without adding any new or additional principles or standards. It is broken down into sections covering: (i) governance of compensation and misconduct risk; (ii) effective alignment of compensation with misconduct risk; and (iii) supervision of compensation and misconduct risk. FSB members are asked to apply the Supplementary Guidance to significant institutions and in a way consistent with the law and regulation of their jurisdictions.

    View the Supplementary Guidance.

  • UK Regulator to Consult on Expanded Financial Services Register under the Senior Managers & Certification Regimes
    02/26/2018

    The Financial Conduct Authority has announced that it will be putting forward proposals for aligning the Financial Services Register with the expanded Senior Managers & Certification Regimes. The SM&CR has been in place for banks, building societies, credit unions and PRA-designated investment firms since March 2016, whilst certain insurers have been subject to the separate Senior Insurance Managers Regime. The remainder of authorized firms have continued to be subject to the Approved Persons Regime. The FCA recently consulted on expanding the existing SM&CR to all other authorized firms.

    Under the SM&CR, the FCA only approves Senior Managers and it is only these individuals that appear in the FS Register. The Certification Regime requires firms to certify that all individuals in roles which pose a risk of significant harm are "fit and proper".

    Feedback on the proposals to extend the SM&CR indicated that there would be public value in including details of certification of employees and other important individuals at firms in the FS Register. The FCA intends to consult in the Summer on implementing that feedback. If these proposals are implemented, non-executive directors, financial advisers, traders and portfolio managers would appear in the revised FS Register.

    View the FCA's statement.

    View the proposals to extend the SM&CR.
  • International Standards Body Seeks to Tackle Conflicts of Interest and Conduct Risks in Equity Capital Raisings
    02/21/2018

    The International Organization of Securities Commissions has published a consultation report in which it seeks feedback on proposed Guidance to address the significant potential conflicts of interest arising from the role of intermediaries during key stages of an equity raising.

    IOSCO has identified a number of key risks. In the early, pre-offering, phase of an equity raising, conflicts of interest can arise where analysts employed by firms managing the securities offering may be under pressure to present a positive view of the issuer. During the investor education and price-formation phase these "connected" analysts may produce conflicted research and conflicts can also be present during the allocation of securities. There can be both conflicts of interest and risks of misconduct where staff employed within firms that are managing an equity raising enter into personal transactions. These issues can damage investor confidence and the effectiveness of the capital markets as route for issuers to raise finance.

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  • UK Banking Standards Board Publishes Further Guidance on the Certification Regime
    02/20/2018

    The U.K. Banking Standards Board has published further Supporting Guidance to its Statement of Good Practice on the Certification Regime: Fitness and Propriety Assessment Principles (known as Statement of Good Practice 1). The new Supporting Guidance, "Establishing Pass/Fail Criteria and Evidencing the F&P Assessment" (known as Supporting Guidance 2), aims to assist firms and other persons assessing fitness and propriety in making certification decisions, particularly in borderline cases. The Certification Regime is part of the regulatory reforms introduced in the U.K. to strengthen individual accountability (namely, the Senior Managers Regime, the Certification Regime and the Conduct Rules). It requires firms to certify that all individuals in roles which pose a risk of significant harm are "fit and proper." The U.K. regulators are proposing to extend the Certification Regime to all other regulated firms. The BSB was launched in April 2015 as an industry initiative to help raise standards of behavior and competence in the banking sector.

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  • Federal Reserve Bank of New York President Dudley Participates in Banking Culture Panel Discussion
    02/07/2018

    William Dudley, President of the Federal Reserve Bank of New York, participated in a panel discussion entitled “Banking Culture - Still Room for Improvement?”  Mr. Dudley commented that there has been significant progress and improvement in bank culture, but noted that there is room for making even further progress.  The discussion also highlighted that regulation and compliance are complements, not substitutes, for good institutional culture.  Mr. Dudley also noted that while many often think that supervision by regulators and firm profitability are in conflict, in reality these two forces are aligned.  The panel discussed that good culture can provide a competitive advantage with respect to recruiting, given changing priorities among the growing millennial workforce, the importance that bank culture plays in the health and maintenance of a financial institution’s reputation, and how a good culture also promotes bottom-line success.  The panel did note, however, that changing culture in large and complex financial institutions can be a very difficult task, and stressed that good firm culture needs to be promoted from the top down.

    View full transcript of the panel discussion.
  • European Securities and Markets Authority Issues Final Guidelines on CCP Conflicts Management
    02/07/2018


    The European Securities and Markets Authority has published a Final Report setting out Guidelines for compliance, by central counterparties authorized under the European Market Infrastructure Regulation, with their obligations to manage conflicts of interest under EMIR and related Regulatory Technical Standards. ESMA was not directly mandated by provisions in EMIR to prepare the Guidelines. Instead, ESMA has prepared the Guidelines pursuant to the wider mandate in its founding regulation to ensure common, uniform and consistent application of the relevant provisions of EMIR and the RTS.

    The Final Report summarises the feedback ESMA received to its consultation on draft Guidelines, which ran between June 1, 2017 and August 24, 2017, and sets out the final form of the Guidelines. After clarifying the concept of conflicts of interest in the context of a CCP's commercial relationships, the Guidelines summarize the organisational arrangements CCPs should have in place, along with additional measures that apply in a group context. Finally the Guidelines specify a procedure for conflicts of interest management.

    The Guidelines apply to all EU national regulators that supervise CCPs, and will take effect on April 7, 2018. This date is also the deadline for national regulators to inform ESMA whether they comply or intend to comply with the Guidelines, with reasons for non-compliance. All CCPs must report to their national regulator on their compliance with the Guidelines.

    View the Guidelines (ESMA70-151-1094).

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