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

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

    Read more.
  • Committee on Payments and Market Infrastructures Publishes Toolkit for Reducing Wholesale Payments Fraud
    10/22/2019

    The Committee on Payments and Market Infrastructures has prepared a “toolkit” to assist central banks to reduce the risk of wholesale payments fraud related to endpoint security. The Financial Stability Institute at the Bank for International Settlements has also announced that it will make tutorials on wholesale payments security freely available to central banks on request.

    Read more.
  • G7 Working Group Reports on the Impact of Global Stablecoins
    10/18/2019

    The G7 working group on stablecoins has published a report investigating the impact of global stablecoins. The working group is comprised of senior officials from the G7 central banks, the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board, and is chaired by Benoît Cœuré (Chair of the Committee on Payments and Market Infrastructures). 

    Read more.
  • Financial Stability Board to Assess Potential Risks of Stablecoins
    10/18/2019

    The Financial Stability Board has published a report on regulatory issues arising with respect to so-called stablecoins. The FSB defines a stablecoin as "a crypto-asset designed to maintain a stable value relative to another asset (typically a unit of currency or commodity) or a basket of assets" which may be "collateralised by fiat currency or commodities, or supported by algorithms".

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

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

    Read more.
  • UK Payments Regulator Paper on Use of Data in the Payments Industry
    09/10/2019

    Following the publication of a discussion paper in June 2018, the U.K. Payment Systems Regulator has published its response paper on the issue of data in the payments industry. The discussion paper outlined three potential areas where data use could directly affect the PSR's statutory objectives of promoting competition and innovation. These are:
    • Reluctance of end-users to share payments data with third-party providers of other payments-related services (so-called "overlay services"), due to concerns over whether their data will be treated appropriately.

    Read more.
  • UK Conduct Regulator Announces Exemption from Enforcement of Strong Customer Authentication
    08/20/2019

    The U.K. Financial Conduct Authority has announced in a "Dear CEO" letter that it will not take enforcement action against firms that are not compliant with Strong Customer Authentication requirements for electronic payment transactions by the legal deadline of September 14, 2019. The exemption from enforcement will apply only to card-not-present e-commerce transactions. In order to qualify for the exemption, firms must demonstrate that they have taken the necessary steps to comply with UK Finance's plan for implementing SCA by March 14, 2021.

    Read more.
  • Decision on Eurozone Oversight of Systemically Important Payment Systems
    08/16/2019

    A Decision of the European Central Bank has been published in the Official Journal of the European Union. The Decision supplements the ECB's Regulation on the oversight of systemically important payment systems. The Decision sets out the procedures and conditions for a regulator to follow when seeking to obtain information and documents from the operator of a SIPS, requiring a SIPS operator to appoint an independent expert to carry out an investigation or review on the operation of the SIPS or conduct on-site inspections.

    ‚ÄčThe Decision enters into force on September 5, 2019 and applies to the Eurozone regulators of Eurozone SIPS.

    View the ECB Decision.
  • UK Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
    07/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.

    The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.

    The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.

    Read more
  • UK Payments Regulator Consults on Draft Updated Powers and Procedures Guidance
    07/25/2019

    The U.K. Payment Systems Regulator has launched a consultation on the updated Powers and Procedures Guidance and Interchange Fee Regulation Guidance. The Regulator published the original Powers and Procedures Guidance in March 2015 before it became operational. 

    Read more.
  • UK Payment Systems Regulator Revises Timeline for Market Review into the Supply of Card-Acquiring Services
    07/22/2019

    The U.K. Payment Systems Regulator has revised the timeline for its work on the market review into the supply of card-acquiring services. The PSR will publish its interim report for consultation in Q1 2020, instead of by the end of 2019 as initially set out in the Terms of Reference. The postponement has come about as the PSR has identified a number of additional issues that need to be addressed in the review.

    The market review is a response to concerns that the supply of card-acquiring services from specialist providers by merchants (to enable card payments to be accepted and processed on their behalf) may not be working well for some merchants and, ultimately, consumers. The market review is intended to examine the lack of transparency around merchants' fees for accepting card payments and barriers to competition in the card-acquirer services market.

    View the PSR's announcement.
  • European Banking Authority Reports on Regulatory Perimeter, Regulatory Status and Authorization of Fintech Activities
    07/18/2019

    Fulfilling its mandate under the European Commission's FinTech Action Plan to map the current authorization and licensing approaches for innovative FinTech business models in Europe, the European Banking Authority has published a report on the regulatory perimeter, regulatory status and authorization of FinTech activities under its remit, in particular the banking, payment services and electronic money services sectors. The European Securities and Markets Authority published its related report on July 12, 2019.

    Read more.
  • UK Payment Systems Regulator Launches Consultation on Supply of Card-Acquiring Services
    07/11/2019

    The U.K. Payment Systems Regulator has launched a consultation on the PSR's proposed approach to assessing the profitability of card-acquiring service providers for U.K. merchants and consumers. The Consultation Paper may be of particular interest to providers of card-acquiring services, merchant trade bodies and merchants, as well as card scheme operators and issuers. Responses to the consultation should be submitted by August 1, 2019. Following the consultation, the PSR intends to publish a report setting out its interim conclusions on the supply of card-acquiring services.

    Read more.
  • European Banking Authority Publishes Report on FinTech's Impact on Payment and Electronic Money Institutions' Business Models
    07/08/2019

    The European Banking Authority has published a report on the impact of financial technology on the business models of payment and electronic money institutions. The report aims to provide an overview of the current FinTech landscape and raise awareness of the main trends affecting business models. It follows major developments in the industry including the introduction of the revised Payment Services Directive (known as PSD2), the emergence of new market entrants offering innovative products and the growth of instant and mobile payment methods.

    Read more.
  • UK Conduct Regulator Presses Non-Bank Payment Service Providers for Compliance with Safeguarding of Customer Funds Requirements
    07/04/2019

    The U.K. Financial Conduct Authority has published the outcome of its multi-firm review into the safeguarding arrangements of customer funds by non-bank payment service providers. The FCA assessed how 11 non-bank PSPs complied with the requirements for safekeeping of customer funds under the U.K.'s Payment Services Regulations 2017 and Electronic Money Regulations 2011. These Regulations require authorized payment institutions and e-money institutions to take measures to safeguard their customers' funds, including segregating relevant funds and performing reconciliations, to ensure that in the event of the insolvency of the firm, the client's funds can be returned in a timely and orderly way. The FCA has provided guidance on complying with the requirements in the relevant Approach Document. Customer funds held by these types of institutions are not protected by the Financial Services Compensation Scheme.

    Read more.
  • UK Financial Conduct Authority Issues Response to EU Opinion on Strong Customer Authentication
    06/28/2019

    The U.K. Financial Conduct Authority has issued a statement confirming its intended approach to enforcing firms' compliance with EU "strong customer authentication" rules that will apply across the EU from September 14, 2019.

    Read more.
  • UK Payment Systems Regulator Publishes Progress Report on Access to and Governance of Payment Systems
    06/27/2019

    The U.K. Payment Systems Regulator has published its fourth report on developments in access to payment systems and the governance of those systems.

    Read more.
  • European Banking Authority Publishes Opinion on Strong Customer Authentication Under Payment Services Directive
    06/21/2019

    The European Banking Authority has published an Opinion on market approaches to payment authentication that will be deemed compliant with the new rules on strong customer authentication coming into force later this year.

    Read more.
  • European Commission Publishes Report on Implementation of Wire Transfer Regulation
    06/20/2019

    The European Commission has published a report detailing: (i) the extent to which Member States have implemented the sanctions and monitoring sections of the EU Wire Transfer Regulation; and (ii) the particular sanctioning activities that national regulators have adopted under the Regulation. The Commission was obliged to provide the report to the European Parliament and Council of the European Union under the Wire Transfer Regulation. Although Member States are not obliged to take specific steps in response to the report's findings, the Commission concludes the report by stating its intention to continue to support Member States in their implementation of the Wire Transfer Regulation and reserves the right to take further measures to ensure the Regulation is correctly implemented by all Member States.

    Read more.
  • Bank of England Publishes Report on the Future of the UK Financial System and the Bank's Priorities for the Future
    06/20/2019

    Huw van Steenis, the Bank of England financier appointed by the BoE in 2018 to review the future of the U.K. financial system, has published his "Future of Finance" report, setting out a vision for the medium-term future of the U.K. financial system and the BoE's role in supporting that. The report was based on consultations with entrepreneurs, financiers, tech firms, global investors, consumer groups, charities, policymakers and business leaders across the U.K. and overseas. In response, the BoE has published a document which sets out the actions it intends to take to deal with the challenges and opportunities identified in the report.

    Read more.
  • Financial Stability Board Publishes Report on Decentralized Financial Technologies
    06/06/2019

    The Financial Stability Board has published a report on the use of decentralized financial technologies and the implications these may have for financial stability, regulation and governance. The report has been delivered to G20 Finance Ministers and Central Bank Governors ahead of the G20 meeting on June 8-9, 2019.

    Read more.
  • Financial Stability Board Delivers Report on Crypto-Assets
    05/31/2019

    The Financial Stability Board has published a report on crypto-assets outlining the actions being undertaken by various international organizations in response to the challenges posed by crypto-assets and the FSB's own proposed course of action for the year ahead. The report will be delivered to G20 Finance Ministers and Central Bank Governors at the next G20 meeting in Japan on June 8-9, 2019.

    Read more.
  • UK Consultation on Legal Uncertainty in the Application of English Private Law to Cryptoassets, Distributed Ledger Technology and Smart Contracts
    05/09/2019

    The UK Jurisdiction Taskforce has published a consultation paper on key issues of legal uncertainty regarding cryptoassets, distributed ledger technology and smart contracts. The UKJT is involved in preparing an authoritative legal statement on the status of cryptoassets and smart contracts under English private law. The final statement will consider whether English private law sufficiently covers cryptoassets, DLT and smart contracts and where legal uncertainty may arise. The issues in the consultation are limited to English private law and do not include any issues on regulatory characterization, taxation, criminal law, partnership law, data protection, consumer protection, settlement finality, regulatory capital, anti-money laundering or counter-terrorist financing.

    UKJT is part of the LawTech Delivery Panel, which was established in 2018, with the aim of identifying barriers and opportunities for growth. The consultation closes on June 21, 2019.

    View the consultation paper.
  • Consultation and Draft Direction on Confirmation of Payee System Issued by UK's Payment Systems Regulator
    05/09/2019

    The Payment Systems Regulator, the regulatory body responsible for monitoring the payment systems industry in the U.K., has published a second consultation paper requesting feedback on its proposals for a mandatory "Confirmation of Payee" service, together with a draft direction setting out deadlines by which the six largest payment services providers should provide such services. The Confirmation of Payee service is being developed to assist in the PSR's fight against "Authorised Push Payment" scams - involving theft of money via fraudulent payment requests made to individuals and businesses - and accidental misdirected payments, which together cause millions of pounds in losses to individuals and businesses annually. Certain payment service providers have committed to introducing a Confirmation of Payee process. However, the PSR considers that progress on doing so has been too slow. The consultation closes on June 05, 2019.

    Read more.
  • EU Opinion on the Nature of Passports of Payment and Electronic Money Institutions Using Agents and Distributors
    04/24/2019

    The European Banking Authority has published an opinion on the nature of passport notifications for agents and distributors under the revised Payment Services Directive, the Electronic Money Directive and the Fourth Money Laundering Directive. The Opinion is addressed to national regulators in the EU of payment institutions and electronic money institutions but is also useful for PIs and EMIs providing services on a cross-border basis within the EU.

    Read more.
  • European Banking Authority Publishes Revised Guidelines on Outsourcing Arrangements
    02/25/2019

    The European Banking Authority has published revised Guidelines on outsourcing arrangements. The guidelines are intended to update and replace outsourcing guidelines issued in 2006 (by the EBA's predecessor, the Committee of European Banking Supervisors) on outsourcing by credit institutions. The EBA Guidelines have a wider scope, applying to all financial institutions that are within the scope of the EBA's mandate, namely credit institutions and investment firms subject to the Capital Requirements Directive, as well as payment institutions and electronic money institutions. The investment firms within scope, provided that the new Investment Firm Regulation and Directive and related changes to CRD and the Capital Requirements Regulation have entered into force, will only be the largest investment firms (Class 1 Investment Firms). The Guidelines also integrate the recommendation on outsourcing to cloud service providers that was published by the EBA in December 2017. Both the 2006 guidelines and the December 2017 recommendations will be repealed when these new Guidelines enter into force.

    Read more.
  • UK Conduct Regulator Consults on Guidance on Crypto-Assets and the UK Regulatory Perimeter
    01/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.

    The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.

    Read more.
  • European Banking Authority Reports on EU Regulatory Perimeter for Crypto-Assets
    01/09/2019

    The European Banking Authority has published a report on the application and suitability of the EU bank regulatory framework for crypto-assets. The report is in response to the European Commission's request in its FinTech Action Plan 2018. The report confirms that EU activities related to crypto-assets are fairly low and do not present any financial stability risks. The European Securities and Markets Authority also published a similar report covering Initial Coin Offerings issues within its remit on the same day.

    The EBA's report sets out the EBA's findings, the issues arising from the results, the EBA's advice to the Commission and the steps that the EBA intends to take in 2019. The EBA mapped the applicability to crypto-assets and crypto-asset activities of the EU Anti-Money Laundering Directive, the Capital Requirements Directive and Regulation, the second Electronic Money Directive and the second Payment Services Directive.

    Read more.
  • UK Regulator Consults on Technical Standards for Strong Customer Authentication in Payments as Preparation for a No-Deal Brexit
    12/19/2018

    The U.K. Financial Conduct Authority has launched a consultation on the proposed Technical Standards on strong customer authentication and common and secure open standards of communication (referred to as the U.K. SCA RTS). The U.K. SCA RTS would apply in the U.K. from September 14, 2019 in the event of a no-deal Brexit. The FCA's proposals will apply to payment service providers, including banks, building societies, e-money issuers, payment institutions, registered Account Information Services (AIS) and Payment Initiation Services (PIS) service providers. Responses to the consultation should be submitted by February 19, 2019. The FCA intends to publish the final Technical Standards in April 2019.

    The EU SCA Regulatory Technical Standards (Commission Delegated Regulation (EU) 2018/389), which supplement the EU Payment Services Directive, came into force on March 14, 2018. The EU SCA RTS impose obligations on PSPs to increase the security of customers' payments made by card and other means and set out requirements on account servicing payment service providers (ASPSPs) relating to the third party providers of Account Information Services and Payment Initiation Services. The EU SCA RTS will apply directly across the EU from September 14, 2019.

    The FCA is proposing to make the U.K. SCA RTS substantially similar to the EU SCA RTS so as not to disrupt and confuse the substantial preparations that industry has already made to implement the EU requirements. In the event of a no-deal Brexit, the U.K. SCA RTS will supplement the U.K. Payment Services Regulations 2017, as amended by the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018. Without the U.K. SCA RTS, the revised-for-Brexit PSRs would be ineffective as they require compliance with U.K.SCA RTS.

    View the consultation paper (CP18/44).
  • European Commission Publishes Commission Delegated Regulation on the Electronic Central Register Under Payment Services Directive
    11/29/2018

    The European Commission has adopted Regulatory Technical Standards on the development, operation and maintenance of the electronic central register and access to the information it contains under the Payment Services Directive 2015, known as PSD2. The register will contain details of authorized payment institutions, certain exempt persons and their agents and it will identify the payment services for which each payment institution is authorized or exempt person is registered. PSD2 took effect on January 13, 2018. The electronic central register established by these RTS will be the responsibility of the European Banking Authority. It is intended that these RTS, once published in the Official Journal of the European Union, will be binding and directly applicable in all Member States from twenty days after publication.

    View the Commission Delegated Regulation.
  • UK Payment Systems Regulator Consults on Brexit-Related Changes to Onshore Regulatory Technical Standards Under the Interchange Fees Regulation
    11/29/2018

    The U.K. Payment Systems Regulator has launched a consultation on its proposals to onshore the Regulatory Technical Standards supplementing the EU Interchange Fee Regulation to ensure the RTS can still operate effectively once the U.K. has left the EU. The consultation will primarily be relevant for card schemes subject to the IFR, parties contracting with card schemes and/or processing entities (e.g. issuers, acquirers) and third-party card payment processors.
     
    The PSR is empowered by HM Treasury, under the Financial Regulators’ Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018, to correct deficiencies in the RTS and to maintain them after exit day. The RTS set out detailed requirements for payment card schemes and processing entities, to ensure there is the requisite level of independence in accounting, organization and decision-making processes. The PSR proposes to amend the RTS in line with the draft Interchange Fee (Amendment) (EU Exit) Regulations 2018, published by HM Treasury on November 16, 2018 to onshore the IFR. The PSR's consultation paper includes a draft of the Technical Standards (Interchange Fee Regulation) (EU Exit) instrument 2019.
     
    Comments on the consultation are invited by December 17, 2018. The PSR intends that the finalized version of the EU Exit instrument will take effect on exit day in the event of a no deal scenario.
     
    View the consultation paper (PSR CP 18/3).
     
    View details of the draft Interchange Fee (Amendment) (EU Exit) Regulations 2018.
     
  • UK Conduct Regulator Publishes Second Consultation on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
    11/26/2018

    The U.K. Financial Conduct Authority has published a second consultation on proposed changes to the FCA Handbook and guidance to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect on exit day if the U.K. enters into a transitional period.

    The consultation includes the FCA's further proposals in relation to those Binding Technical Standards that it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterwards. Since the FCA's first consultation on Brexit-related Handbook changes in October 2018, HM Treasury has published further policy notes and/or financial services "onshoring" statutory instruments with proposed amendments to retained EU law. Many of the FCA's proposals on the BTS are consequential in nature and follow the amendments proposed in the statutory instruments.

    Read more.
  • UK Legislation Made for Onshoring the EU SEPA Regulation
    11/19/2018

    The Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018 were made on November 19, 2018 and will enter into force on the day the U.K. exits the EU. The Regulations are relevant for all Payment Service Providers – banks, payment institutions, e-money institutions and registered Account Information Service Providers.

    Read more.
  • Draft UK Legislation Published to Onshore the EU Interchange Fee Regulation for Brexit
    11/16/2018

    HM Treasury has published a draft version of the Interchange Fee (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations will primarily affect payment system operators, payment service providers (including banks and building societies) and the businesses and individuals who rely on card payment systems. The Payment Systems Regulator will consult separately on consequential changes to its guidance on the IFR once the draft Regulations are made. The PSR will also be responsible for correcting deficiencies in the Binding Technical Standards made under the IFR.

    The draft Regulations amend the EU Interchange Fee Regulation that will be retained on Brexit and the Payment Card Interchange Fee Regulations 2015. The changes are designed to ensure that current laws on interchange fees continues to operate effectively in the U.K. once the U.K. has left the EU.

    Read more.
  • Three Central Banks Explore Advantages of Wholesale Central Bank Digital Currencies
    11/15/2018

    The Bank of England, the Bank of Canada and the Monetary Authority of Singapore have published a joint report entitled, "Cross-Border Interbank Payments and Settlements." Referring to current industry projects to address existing problems in cross-border payments affecting end-users, commercial banks and central banks, the report analyzes these issues and discusses proposed new models for processing cross-border transactions. The report sets out three models for cross-border payments and settlements and discusses the key considerations and dependencies of each model. Each model is then assessed against the existing identified challenges in cross-border payments.

    Model 1 is based on existing plans to enhance the current systems within and across jurisdictions, which is considered to be the baseline for discussions. Model 2 is based on an expanded role for domestic real-time gross settlement infrastructure, which would be "super-correspondents" in settling cross-border payments and would replace existing correspondent banks. Model 3 has three variations, all of which are based on cross-border payments between banks being settled with wholesale central bank digital currencies (W-CBDCs). The three variations are: (i) W-CBDCs that can be held and exchanged only in their home jurisdiction; (ii) W-CBDCs held and exchanged within and beyond their home jurisdictions; and (iii) a single universal W-CBDC backed by a basket of currencies issued by participating central banks.

    Read more.
  • UK Post-Brexit Legislation Published to Onshore the EU Payment Accounts Directive for Brexit
    10/31/2018

    HM Treasury has published a draft of the Payment Accounts (Amendment) (EU Exit) Regulations 2018, along with explanatory information.

    The draft Regulations will amend the U.K. Payment Accounts Regulations 2015, which implemented the EU Payment Accounts Directive in the U.K., to remove references to EU institutions and to remove requirements which were intended to improve the functioning of the EU's internal market.

    The draft Regulations will affect all Payments Service Providers that offer payment accounts, and, in particular, the U.K.'s nine designated providers of basic bank accounts. Consumers of payment accounts will also be affected, in particular those who hold basic bank accounts. HM Treasury states that it expects the changes for payment account providers and consumers to be minimal.

    Read more.
  • European Banking Authority Sets Out Its Work Priorities for 2019
    10/23/2018

    The European Banking Authority has published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
     
    1. Leading the Basel III implementation in the EU.
    2. Understanding risks and opportunities arising from financial innovation.
    3. Collecting, disseminating and analyzing banking data.
    4. Ensuring a smooth relocation of the EBA to Paris.
    5. Fostering the increase of the loss-absorbing capacity of the EU banking system.

    The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the work programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.

    View the EBA's 2019 Work Programme.
  • UK Conduct Regulator Consults on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
    10/10/2018

    The U.K. Financial Conduct Authority has published its first consultation on proposed changes to the FCA Handbook to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect if the U.K. enters into a transitional period after exit day.

    The consultation includes the FCA's proposals in relation to the Binding Technical Standards it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterward. These are the retained EU "Level 2" delegated and implementing regulations that set out regulatory technical standards and implementing technical standards. The consultation also sets out the FCA's proposed approach to non-legislative "Level 3" materials such as guidelines, recommendations and opinions that will also be onshored.

    The FCA states in the consultation that the majority of the proposed changes are consequential in nature and follow the amendments to retained EU law that HM Treasury is proposing, as set out in the series of financial services-related statutory instruments being made under the European Union (Withdrawal) Act 2018.

    Read more.
  • UK Conduct Regulator Consults on Post-Brexit Temporary Permissions Regime for EEA Firms and Funds
    10/10/2018

    The U.K. Financial Conduct Authority has published a consultation on its proposed approach to a Temporary Permissions Regime for EEA firms and investment funds that currently provide services in the U.K. - either via a branch or cross-border - pursuant to a single market passport. The proposed TPR is designed to minimize the potential harm caused by an abrupt loss of the passport in a "no-deal" scenario, in which the U.K. exits the EU without a ratified Withdrawal Agreement, which would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The TPR will enable EEA firms and investment funds to continue to provide services in the U.K. for a limited period following exit day.

    The proposed TPR will take effect on March 29, 2019 in the event of no deal. Should the U.K. and EU negotiations lead to ratification of the Withdrawal Agreement, the TPR will not enter into force. Instead, during the transitional period, firms and investment funds would continue to have access to the same passporting arrangements as they do now.

    Read more.
  • UK Regulator Finds E-Money Firms Have Effective Anti-Money Laundering Controls
    10/03/2018

    The Financial Conduct Authority has published a report on the outcome of its thematic review into money laundering and terrorist financing risks in the e-money sector. The report focuses on e-money products, including prepaid cards and digital wallets. The FCA assessed the anti-money laundering and counter-terrorist financing controls of 13 authorized Electronic Money Institutions and registered small Electronic Money Institutions. The review included consideration of business models that involve distributing e-money through agents and distributors.

    The FCA's review did not cover activities that are not regulated by the FCA (for instance, gift cards that can be used only within a limited network or prepaid products denominated in a cryptocurrency) or money remittance services provided by the EMIs.

    Read more.
  • US Federal Reserve Board Seeks Comment on Facilitating Faster Payments
    10/03/2018

    The U.S. Board of Governors of the Federal Reserve System published a notice and request for comment with respect to potential measures that could be taken to improve the efficiency and speed of payment services, specifically regarding the facilitation of real-time interbank settlement of “faster payments”—a term generally used to convey a future payment and settlement system that is fast, convenient and accessible.  The notice highlights that while traditional payment methods, such as checks, ACH payments, and credit card transactions have created a payment systems infrastructure that is universal, safe and reliable, this does not necessarily translate into speed and efficiency.  The notice suggests that the current system has resulted in a gap between the speed and efficiency of the payment systems infrastructure and user expectations.  The notice provides background regarding Federal Reserve Board initiatives associated with faster payments, including its Strategies for Improving the U.S. Payment System initiative and Faster Payments Task Force, provides an overview of the faster payments construct, and introduces potential faster payment models, including deferred net settlement of interbank obligations and real-time gross settlement of interbank obligations.  The notice also discusses potential actions that the Federal Reserve Board could undertake to support faster payments, including the development of “24x7x365” real-time interbank settlement and the creation of a liquidly management tool to help promote, support and drive participation in real-time interbank settlement.

    View full text of the request for comments.
  • UK Conduct Regulator Consults on its Approach to Technical Standards and Guidelines Under the Revised Payment Services Directive
    09/17/2018

    The U.K. Financial Conduct Authority has launched a consultation on its approach to implementing Regulatory Technical Standards and related Guidelines developed by the European Banking Authority to supplement provisions of the revised Payment Services Directive. The FCA's consultation focuses in particular on the RTS for strong customer authentication and common and secure open standards of communication. These RTS impose obligations on payment service providers to increase the security of customers' payments made by card and other means and also set out requirements on account servicing payment service providers (ASPSPs) relating to the third party providers of Account Information Services (AIS) and Payment Initiation Services (PIS) that were brought within the regulatory regime by PSD2.

    The consultation includes proposals on new fraud reporting requirements reflecting PSD2 fraud reporting guidelines published by the EBA in July 2018. The FCA is also consulting on proposed changes to its Payment Services and E-Money Approach Document to reflect other legislative changes and clarify its expectations.
    The EBA consulted between June and August 2018 on proposed Guidelines on aspects of the RTS. The FCA's proposed implementation approach is premised on the assumption that the final Guidelines will be largely as consulted on and the FCA will adjust its approach if necessary when the finalized Guidelines are published.

    Read more.
  • US Federal Reserve Board Issues Final Rule Amending the Liability Provisions of Regulation CC
    09/12/2018

    The U.S. Board of Governors of the Federal Reserve System announced a final rule amending the liability provisions of Subpart C of Regulation CC to address instances where there is a dispute between banks as to whether a check has been altered or is a forgery, and the original check is not available for inspection.  The final rule creates a rebuttable presumption of alteration (as that term is used in the UCC) with respect to disputes that arise between banks regarding substitute or electronic checks.  The presumption is rebuttable either by proving by a preponderance of the evidence that the substitute or electronic check is forged (i.e., derives from an original check that was issued with an unauthorized signature of the drawer) or does not contain an alteration.  The presumption of alteration does not apply if a copy of the original check is available for inspection by all parties or where one bank sent the original check to the other bank, even if the check was subsequently truncated and destroyed.  The final rule will take effect on January 1, 2019.

    View full text of the final rule.
  • UK Financial Conduct Regulator Proposes to Apply Principles and Conduct Rules to Payment Service Providers and Electronic Money Firms
    08/01/2018

    The U.K. Financial Conduct Authority has launched a consultation on general standards and communication rules for the payment services and e-money sectors.

    Payment Service Providers and e-money firms are authorized or registered under the Payment Services Regulations 2017 and Electronic Money Regulations 2011, respectively. The Payment Services Regulations 2017 brought certain of these firms within the scope of the FCA's rulemaking powers.

    Read more.
  • Final Draft EU Technical Standards on Home-Host Regulatory Cooperation Under the Revised Payment Services Directive
    07/31/2018

    The European Banking Authority has published a final report and final draft Regulatory Technical Standards under the revised Payment Services Directive on cooperation between national regulators in home and host states of a payment institution that operates cross-border in the EU. PSD2 took effect on January 13, 2018. The final report summarizes the feedback the EBA received to the proposed draft RTS and sets out the EBA's responses. The EBA confirms that it has made a number of the changes to the text of the final draft RTS as a result of the feedback.

    The final draft RTS specify the framework for cooperation between supervisors of payment institutions operating on a cross-border basis, including the method for cooperation and details of information that should be provided between regulators. The final draft RTS also specify the means, details and frequency of reporting that a host national regulator may request from payment institutions concerning activities carried out in its territory through agents or branches. The final draft RTS will further apply to the framework for cooperation, and for the exchange of information, between national regulators for electronic money institutions providing services cross-border in the EU.

    The EBA has submitted the final draft RTS to the European Commission for endorsement. The final RTS will apply across the EU twenty days after publication in the Official Journal of the European Union.

    View the final report and final draft RTS.
  • UK Payment Systems Regulator Reports on the UK Contactless Mobile Payment Sector
    07/31/2018

    The U.K. Payment Systems Regulator has published a Report setting out its understanding of the Contactless Mobile Payments sector, following information-gathering during 2016 and 2017. CMPs are in-store payments made by consumers, using apps installed on their mobile devices, usually using Near Field Technology for communication between the mobile device and the retailer's point-of-sale terminal and with payment security enabled via a "tokenization" process.

    The PSR conducted two calls for information in 2016 and 2017, to increase its understanding of:
    • whether the way CMPs operate and the way they are being offered in the U.K. potentially affects competition, innovation and the interests of people and organizations that use payment systems (and, if so, how); and
    • whether there were any restrictions affecting the provision of tokenization services.

    The Report explains how CMPs work from a functional and technical perspective, outlines the main participants and their respective roles, summarizes the PSR's consideration of particular issues and proposes next steps.

    Read more.
  • UK Payment Systems Regulator Will Review Supply of Card-Acquiring Services
    07/24/2018

    The U.K. Payment Systems Regulator has published for consultation its draft terms of reference for a planned market review into the supply of card-acquiring services in the U.K. Merchants that accept card payments from customers purchase card-acquiring services from specialist providers to enable card payments to be accepted and processed on their behalf. The market review is a response to concerns raised by stakeholders that the supply of these services may not be working well for some merchants and, ultimately, consumers.

    The market review will examine: (i) the nature and characteristics of card-acquiring services; (ii) the providers of these services and how their market shares have developed historically; (iii) how merchants buy card-acquiring services; (iv) the availability of credible alternatives to card-acquiring services for some or all merchants; and (v) how competition is working in the sector, including looking at issues around the fees merchants pay and the quality of service they receive.

    The PSR is inviting feedback on its draft terms of reference until September 14, 2018. The PSR intends to publish finalized terms of reference, including a timetable for the review, before the end of 2018.

    View the draft terms of reference for the review (MR 18/1.1).
  • Bank of England Confirms its Renewed Real-Time Gross Settlement System Can Interface With DLT
    07/23/2018

    The Bank of England has published the outcomes from a "Proof of Concept" it ran to understand how its renewed Real-Time Gross Settlement service could be capable of supporting settlement in systems operating on innovative payment technologies, such as those built on Distributed Ledger Technology. The BoE has operated the RTGS service since 1996 to provide a safe and reliable means of settling high-value cash payments in real time in sterling central bank money. The BoE published a blueprint for renewal of the RTGS in May 2017, setting out how it proposed to overhaul the system to ensure higher resilience, broader access, wider interoperability, improved user functionality and strengthened end-to-end risk management of the high-value payment system.

    Read more.
  • EU Final Guidelines on Fraud Reporting Under the Payment Services Directive
    07/18/2018

    The European Banking Authority has published final Guidelines on fraud reporting under the revised Payment Services Directive. PSD2 aims to increase the security of electronic payments and decrease the risk of fraud. The Directive, which has applied since January 13, 2018, requires Payment Service Providers to provide, at least on an annual basis, data on fraud relating to different means of payment to their national regulator. The regulators must in turn provide such data in aggregated form to the EBA and the European Central Bank. Existing data reporting practices vary across the EU. The EBA has worked with the ECB to develop these Guidelines to ensure that data is reported consistently and that the data is comparable and reliable.

    The final Guidelines are addressed to PSPs, except account information service providers, and to their national regulators. The Guidelines cover payment transactions that have been initiated and executed, including the acquiring of payment transactions for card payments, identified by reference to: (a) fraudulent payment transactions data over a defined period of time; and (b) payment transactions over the same defined period. The Guidelines also set out how national regulators should aggregate the data.

    Read more.
  • UK Financial Conduct Authority Updates Guidance on its Approach to Payment Services and Electronic Money
    07/06/2018

    The U.K. Financial Conduct Authority has updated its Approach Document on payment services and electronic money, to reflect final guidelines issued in December 2017 by the European Banking Authority on security measures for mitigating operational and security risks under the revised Payment Services Directive. The changes will affect all payment service providers. The FCA has also updated its webpage on reporting requirements for payment services providers and e-money issuers to reflect these changes. The webpage includes a link to the revised version of the FCA's REP018 (operational and security risk) reporting form.

    The FCA will expect payment services providers to comply with the EBA guidelines, which cover issues such as operational and security risk management framework governance, the use of models, outsourcing and how functions, processes and assets should be identified, classified and risk-assessed. The EBA guidelines also cover security of data integrity, systems and confidentiality as well as physical security and asset control and communication of the security measures to payment service users. PSPs will be expected to report at least annually to the FCA on their operational and security risk management frameworks.

    Read more.
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