FIG Bulletin · 2020. 9. 7. · Securitisation Regulation: technical standards in force 23...
Transcript of FIG Bulletin · 2020. 9. 7. · Securitisation Regulation: technical standards in force 23...
FIG Bulletin
Recent developments
7 September 2020
2
General 4
SMCR extension: SI extending implementation date made 4
PRA and FCA Climate Financial Risk Forum: July 2020 meeting 4
Innovations in payments: BoE speech 5
BoE research agenda 5
Brexit: PRA Dear CEO letter on temporary permissions regime 6
Brexit: FCA temporary permissions regime 6
COVID-19: FCA extends submission deadline for complaints data summary 6
SMCR conduct rules breach reporting and fitness and propriety assessments: FCA guidance 7
Annual financial crime reporting obligation: FCA CP20/17 7
Dormant child trust funds: FCA modification by consent 7
COVID-19: FCA update on digital sandbox pilot 8
UK international regulatory cooperation strategy: BEIS call for evidence 8
FOS ombudsman news issue 153 8
JMLSG AML and CTF guidance updates: HM Treasury approval 8
AI and data protection: ICO guidance 8
Disclosure Regulation: FMLC responds to ESAs consultation on RTS 9
RegTech and FinTech: BIS speech 9
Network for Greening the Financial System: new charter 9
Banking and Finance 10
COVID-19: PRA statement on application of IFRS 9 and capital requirements as mortgage
payment deferrals come to an end 10
COVID-19: PRA ends temporary approach to VAR back-testing exceptions 10
LIBOR transition: RFRWG recommendations on conventions for referencing compounded
in arrears SONIA 11
"5 conduct questions": FCA 2019/20 wholesale banking industry feedback 11
BRRD II: Corrigendum published in OJ 12
3
BRRD: EBA 2019 annual report on resolution colleges 12
CRR: EBA opinion on European Commission amendments to final draft RTS relating to
economic downturn 12
COVID-19: revised EBA 2020 work programme 12
Consumer Finance 13
COVID-19: FCA consults on additional guidance for mortgage firms 13
Payments 14
Global Payments Newsletter, August 2020 14
Securities and Markets 15
Accessing and using wholesale data: FCA extends call for input deadline 15
FCA Market Watch issue 64 15
Securitisation Regulation: technical standards in force 23 September 2020 15
EMIR 2.2: European Commission adopts Delegated Regulation on CCP colleges 16
CSDR settlement discipline: postponed entry into force 16
MIFIR transparency requirements for equity and non-equity instruments: ESMA call for
evidence 17
BMR amending draft Regulation: deadline for comments 17
Continuity of access to FMIs for firms in resolution: FSB questionnaire 17
Insurance 19
COVID-19: final transcripts of FCA business interruption insurance test case 19
PEPP: EIOPA final draft RTS and ITS and technical advice 19
Resolution regimes: FSB key attributes assessment methodology for insurance sector 19
Sustainable Insurance Forum: half-yearly update report 20
Funds and Asset Management 21
Open-ended funds: FCA and BoE review survey on liquidity mismatch 21
AIFMD review: ESMA highlights priority areas 21
COVID-19: ESMA to update risk parameters in guidelines on stress test scenarios under
MMF Regulation 21
4
General
SMCR extension: SI extending implementation date made
The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional
Provisions) (Amendment) Regulations 2020 (SI 2020/929) have been made. These Regulations
amend the Bank of England and Financial Services Act 2016 (Commencement No. 6 and
Transitional Provisions) Regulations 2019 (SI 2019/1136) (the 2019 Regulations) by changing
the implementation date from 9 December 2020 to 31 March 2021 for the following provisions
relating to the extension of the certification regime to solo-regulated firms and claims
management companies:
regulation 2(6) of the 2019 Regulations which brings into force the employee certification
provisions (as defined in regulation 2(8) of the 2019 Regulations) in relation to solo-
regulated firms other than benchmark firms;
regulation 3(2) and (3) of the 2019 Regulations which contains a transitional provision in
relation to claims management companies. Regulation 3(2) and (3) provides that the
commencement of the employee certification provisions on 9 December 2020 under
regulation 2(6) of the 2019 Regulations does not apply until the claims management
company has had full permission from the Financial Conduct Authority (FCA) to carry on
claims management activity for 12 months or has permission to carry on any other
regulated activity. The period of 12 months does not apply if the firm receives full
permission before 9 December 2019. Regulation 2(3)(a)(ii) of SI 2020/929 amends this
period to 15 months and 22 days. This extended period for claims management
companies will align with the revised commencement date of the employee certification
provisions for solo-regulated firms provided for in regulation 2(2) of these Regulations.
The effect is that no claims management company will be required to comply with the
certification regime provisions in advance of any other solo-regulated firm; and
consequential amendments to the date of 9 December 2020 in regulation 3(2) and (3) of
the 2019 Regulations.
The Financial Conduct Authority (FCA) has welcomed the publication of the amending
regulation which it requested in light of COVID-19. The FCA has consulted (in CP20/10) to
change the same date in the FCA Handbook, the deadline for when firms need to have certified
their staff. It states that it received predominantly positive feedback to its consultation which
includes extending to the same deadline the following requirements:
the date the Conduct Rules come into force, for staff who are not Senior Managers or
Certification Staff; and
the deadline for submission of information about Directory Persons to the Register.
The FCA states that it is now finalising its proposals and intends to publish final rules and
responses to feedback in a Policy Statement in October 2020.
Separately, the FCA has added to its webpage for solo-regulated firms, information on good and
bad practice relating to training staff on the conduct rules and carrying out fitness and propriety
assessments.
PRA and FCA Climate Financial Risk Forum: July 2020 meeting
The Prudential Regulation Authority (PRA) has published a new webpage on the July 2020
meeting of the Climate Financial Risk Forum (CFRF), which it hosts jointly with the FCA.
5
The fourth meeting was held in July 2020. Among other things, the CFRF:
discussed how to publicise and promote use of its June 2020 guide by the financial
services industry; and
agreed that, for the second year of the CFRF, the existing working groups (on risk
management, scenario analysis, disclosure and innovation) will undertake thematic
pieces of work on metrics, data and methodologies. They will also focus on building the
guide by progressing and refining the recommendations, in particular, highlighting how
firms can effectively implement approaches set out in the guide. Once their workplans are
agreed at the next meeting in Q4, the working group memberships will be refreshed to
ensure there is an appropriate variety of skills and experiences.
Innovations in payments: BoE speech
The Bank of England (BoE) has published a speech by Andrew Bailey, BoE Governor, on
innovations in payments, including so-called digital currencies.
Mr Bailey notes that innovation is a good thing, particularly when supported by clear standards
and expectations. The BoE’s Financial Policy Committee (FPC) has set out principles to respond
to the significant changes in the payments landscape. Payments regulation should reflect the
financial stability risk, rather than the legal or technological form, of payment activities. Firms
that are systemically important should be subject to standards of operational and financial
resilience that reflect the risks they pose, with sufficient data available to monitor emerging
risks. While these may sound like common sense points, innovation is increasingly challenging
regulators' ability to ensure they are met.
Mr Bailey comments on the declining use of cash payments, increasingly so during lockdown. He
says that the increased use of non-cash payments places even greater importance on payments
systems, which underlies the BoE's work to upgrade real-time gross settlement (RTGS).
Mr Bailey looks in turn at crypto-assets, e-money and, in greater detail, so-called stablecoins. He
notes that, for stablecoins to be widely used, they must comply with equivalent standards to
those that govern other forms of payment. Mr Bailey refers to the FPC August 2020 Financial
Stability Report, which advised that stablecoins used in systemic payment chains should meet
the standards equivalent to those expected of commercial bank money in relation to stability of
value, robustness of legal claim and the ability to redeem at par in fiat money, noting that not all
stablecoin proposals appear to meet this expectation.
In a UK context, Mr Bailey warns that for a sterling retail stablecoin to operate at scale in the UK,
the BoE will strongly consider the need for an entity to be incorporated in the UK. This is similar
to the requirement for subsidiarisation of banks if they hold UK retail transactional customer
deposits above a de minimis level. However, he adds that since a global stablecoin is a cross-
border phenomenon it can be operated in one jurisdiction, denominated in another's currency
and used by consumers in a third. The regulatory response must therefore match this by being
grounded in internationally agreed standards.
Mr Bailey goes on to consider whether a better outcome would be for central banks themselves to
harness much of the technological innovation and directly digitise cash by creating central bank
digital currencies.
BoE research agenda
The BoE has launched its new agenda for research, which sets out the key areas for new research
over the coming years and a set of priority topics for 2021.
6
The agenda is set out in five areas, with priority topics for 2021 in each. The areas relate to:
the monetary toolkit;
the open economy;
the prudential framework;
the future of finance; and
the transformed world.
The agenda builds on the BoE's original 2015 "one bank research agenda".
Brexit: PRA Dear CEO letter on temporary permissions regime
The PRA has published a Dear CEO letter reminding firms to be operationally ready for the
temporary permissions regime (TPR) at the end of the Brexit transition period, which is due to
end at 11 pm on 31 December 2020.
Firms that have submitted a valid notification or submitted an application for authorisation
under Part 4A of the Financial Services and Markets Act 2000 (and not subsequently withdrawn
it) will automatically enter the TPR. During the TPR, a firm will have a deemed Part 4A
permission to carry on its existing activities for up to a maximum of three years from the end of
the transition period. If a firm is passporting and already has a top-up permission, it will obtain a
deemed variation of that permission.
The PRA stresses that it is important that firms are operationally prepared to enter the TPR and
able to meet the regulatory requirements that will apply to them once in the TPR. To help firms,
the PRA has updated the information on EU withdrawal on its website. The update summarises
its approach to the TPR and highlights the key requirements for UK branches of firms. More
information (including the full requirements) is also set out on a new PRA webpage on the TPR.
The PRA will continue communicating with firms as appropriate to understand the progress of
their preparations. Firms should engage with the PRA on a pro-active basis in the event of
problems. Firms should contact the PRA ([email protected] or call 020
3461 7000) if they do not have a named PRA supervisor.
Brexit: FCA temporary permissions regime
The FCA has updated its website on the TPR to make its material easier to navigate. The FCA
also reminds firms that the window for firms and fund managers to notify it that they want to use
the TPR is currently closed, but it will re-open the notification window on 30 September 2020.
This will allow firms and fund managers that have not yet notified it to do so before the end of
the transition period. There will also be an opportunity for fund managers to update their
previously submitted notifications, if necessary. The FCA will communicate further on this in
September 2020.
COVID-19: FCA extends submission deadline for complaints data summary
On 28 August 2020, the FCA updated its webpage on changes to regulatory reporting during the
COVID-19 pandemic. The FCA states that, due to the extensions it has allowed to complaints
data returns, it will allow flexibility in relation to the 31 August 2020 deadline for the publication
of the complaints data summary required under the FCA Handbook (DISP 1.10A.1R).
Firms may apply a two-month extension to this deadline, meaning summary data for complaints
reports submitted to the FCA, covering reporting periods ending between 1 January and 30 June
2020, must be published by firms no later than 31 October 2020.
7
SMCR conduct rules breach reporting and fitness and propriety assessments: FCA guidance
The FCA has published a new webpage on reporting breaches of the conduct rules for solo-
regulated firms under the senior managers and certification regime (SMCR). It has also provided
information to firms on good and bad practice relating to training staff on the conduct rules and
carrying out fitness and propriety assessments.
Under the SMCR, FCA solo-regulated firms must annually report to the FCA whether
disciplinary action has been taken against individuals who are not senior managers for breaches
of the conduct rules. The report is called REP008 and it should be completed and submitted
using Gabriel. The FCA explains when to submit REP008 and what and who to include in the
report. It also sets out information for sole traders and information relating to appeals against
disciplinary action and the personal data provided in REP008.
The FCA has also updated its webpage for solo-regulated firms to provide information on good
and bad practice (referred to as positive and negative indicators) relating to training staff on the
conduct rules and carrying out fitness and propriety assessments.
Annual financial crime reporting obligation: FCA CP20/17
The FCA has published a consultation paper, CP20/17, on extending its annual financial crime
reporting obligation (REP-CRIM) in the FCA Handbook (SUP 16.23) to include firms carrying on
regulated activities that potentially pose a higher money laundering risk.
The FCA is also consulting on removing two activities from REP-CRIM, which it considers are
outside of the scope of the MLRs. These activities are home finance mediation and making
arrangements with a view to transactions in investments.
The consultation closes on 23 November 2020. The FCA intends to issue the final rules and
publish a policy statement in Q1 2021.
The FCA reminds all firms, irrespective of whether they are required to provide REP-CRIM
information, to continue to assess their systems and controls, including through assessments
against relevant financial crime publications, to identify and manage money laundering risks.
Firms should also be able to evidence the steps they have taken to manage that risk.
Dormant child trust funds: FCA modification by consent
The FCA has published a direction relating to a modification by consent of rule 8.1.1R in the
Conduct of Business sourcebook (COBS). The modification will enable Child Trust Fund (CTF)
providers to move matured CTFs to a protected account ISA or by bulk transfer to a new
provider, when reasonable steps have been carried out to contact the client, but the client is
deemed "gone away" or uncontactable.
HMRC legislation requires CTF providers to move any dormant CTFs to protected account ISAs,
but the FCA's requirements under COBS 8.1.1R, COBS 8.1.2R and COBS 8.1.3R may make this
difficult unmodified.
The modification is valid for five years from the start date of the direction unless subsequently
withdrawn.
8
Firms wishing to take advantage of the modification by consent should email
[email protected]. The FCA will then write to confirm that the modification has
been granted and publish each modification direction it grants on its website.
COVID-19: FCA update on digital sandbox pilot
On 2 September 2020, the FCA published an update on its pilot of a digital sandbox to support
innovative firms to test and develop proofs of concept in a digital testing environment around
three use cases relating to COVID-19:
detecting and preventing fraud and scams;
supporting the financial resilience of vulnerable consumers; and
improving access to finance for small and medium-sized enterprises.
The FCA reports that its DataSprint event held in July and August 2020 brought together 120
participants from across regulated firms, start-ups, academia, professional services, data
scientists and subject matter experts. They collaborated on developing synthetic financial
datasets to be used in the FCA's forthcoming digital sandbox pilot.
The FCA states that over 50 participants have continued working since the DataSprint, refining
and expanding the data assets produced. In the coming weeks, once this work is completed, it
will open applications for the digital sandbox.
UK international regulatory cooperation strategy: BEIS call for evidence
The Department for Business, Energy & Industrial Strategy (BEIS) has launched a call for
evidence on the UK's international regulatory cooperation strategy.
BEIS seeks input to help identify priorities for regulatory cooperation and how the government
can best support the international engagement activities of UK bodies.
The call for evidence closes on 25 November 2020.
FOS ombudsman news issue 153
The Financial Ombudsman Service (FOS) has published issue 153 of Ombudsman News, which
gives its quarterly complaints data, an insight summary on complaints resulting from COVID-19
and its impact on consumers and SMEs, and information for financial businesses about the
FOS's approach to complaints caused or affected by COVID-19.
JMLSG AML and CTF guidance updates: HM Treasury approval
The Joint Money Laundering Steering Group (JMLSG) has confirmed that it has received HM
Treasury ministerial approval for the updates to its anti-money laundering (AML) and counter-
terrorist financing (CTF) guidance that it published in June and July 2020.
AI and data protection: ICO guidance
The UK Information Commissioner's Office (ICO) has published guidance on artificial
intelligence (AI) and data protection. The guidance is intended to provide organisations that are
either using or developing AI technologies, with practical recommendations on the steps they
should take to comply with data protection law.
Read more in our briefing: UK ICO issues new guidance on AI and data protection.
9
Disclosure Regulation: FMLC responds to ESAs consultation on RTS
The Financial Markets Law Committee (FMLC) has published a response to the European
Supervisory Authorities' (ESAs) April 2020 joint consultation paper on proposed regulatory
technical standards (RTS) under the Sustainable Finance Disclosure Regulation (Disclosure
Regulation).
The FMLC draws attention to the divergence in relation to international standards on
sustainability-related disclosure requirements, which creates uncertainty in relation to reporting
obligations vis-à-vis cross-border investment activities. It notes that there is also some
divergence across EU law in relation to disclosure obligations set out under the Disclosure
Regulation, the Non-Financial Reporting Directive and the Taxonomy Regulation.
The FMLC has therefore urged the ESAs to ensure that the RTS are aligned closely to the
objectives set out in the Disclosure Regulation. In the future, when the EU legislation in this
area is reviewed, the FMLC suggests it would be beneficial for the objectives and requirements
imposed on financial markets participants by each piece of legislation to be aligned with the
others.
RegTech and FinTech: BIS speech
The Bank for International Settlements (BIS) has published a speech by Benoît Cœuré, Head of
the BIS Innovation Hub, emphasising that RegTech and FinTech are high on the BIS' agenda and
discussing the potential benefits and challenges they pose for regulatory authorities and financial
institutions.
Network for Greening the Financial System: new charter
The Network for Greening the Financial System (NGFS) has published its new charter and
announced the creation of two new workstreams. The NGFS is a group of central banks and
supervisors, which on a voluntary basis are willing to share best practices and contribute to the
development of environment and climate risk management in the financial sector, and to
mobilise mainstream finance to support the transition toward a sustainable economy.
The NGFS has identified lack of data as a crucial element for effective climate-related and
environmental risk analysis. The NGFS has therefore set up a new workstream to identify what
data is missing and determine whether it can be obtained, and a second workstream to identify
NGFS research topics and to ensure smooth co-ordination of research efforts.
10
Banking and Finance
COVID-19: PRA statement on application of IFRS 9 and capital requirements as mortgage payment deferrals come to an end
On 26 August 2020, the UK Prudential Regulation Authority (PRA) published a statement to
clarify its approach to International Financial Reporting Standard 9 (IFRS 9) and regulatory
capital requirements.
The PRA statement follows the updated proposals published by the Financial Conduct Authority
(FCA) on retail mortgage payment deferrals in light of COVID-19 (see our briefing: Mortgages
and COVID-19: FCA draft guidance on further support after payment deferral period ends). The
FCA draft guidance states that, at the end of the existing COVID-19 specific payment deferrals, if
borrowers are unable to resume payments in full immediately with all deferred sums either paid
in full or capitalised, tailored forbearance arrangements provided in accordance with the draft
updated guidance should be considered.
The PRA explains that such tailored forbearance arrangements are likely to be as good an
indicator of significant increases in credit risk (SICR), credit impairments or defaults as
forbearance was before the pandemic. Before COVID-19, loans subject to forbearance would not
automatically have been treated as having experienced a SICR or become credit impaired or in
default, and that will also be the case with tailored forbearance provided in accordance with the
draft updated guidance.
The PRA states that, although in some cases the position will be clear-cut, in other cases a
judgment will need to be made. The guidance in the PRA's June 2020 letter on a framework for
making holistic assessments of loans subject to payment deferrals for indicators of SICR or credit
impairment will be relevant when making that judgment.
The PRA's earlier guidance stating payment deferrals are not necessarily good indicators of
SICR, credit impairments or defaults may, however, continue to be relevant to payment deferrals
used outside of the UK, depending on the facts and circumstances involved (including the
availability of the deferrals and the circumstances in which they are used). The earlier guidance
on holistic assessments of loans also continues to be relevant where firms have limited data to
assess the individual financial circumstances of the borrower.
The PRA's March and June letters address other matters and some of that guidance also
continues to be relevant; in particular, the guidance in the March letter on the treatment of
borrowers that breach covenants due to COVID-19, on IFRS 9 expected credit loss (ECL) model
risk, and on the need for post-core ECL model adjustments.
The PRA considers the guidance in the statement to be consistent with IFRS 9 and the Capital
Requirements Regulation (CRR). However, it is the responsibility of firms to satisfy themselves
that they have prepared their annual and interim financial reports in accordance with the
applicable reporting frameworks and for auditors to reach their own audit or review conclusions
about those reports. Similarly, it is for firms to ensure they comply with the requirements of
CRR.
COVID-19: PRA ends temporary approach to VAR back-testing exceptions
On 27 August 2020, the PRA published a statement announcing that, in light of the amendments
to the CRR in response to COVID-19 (the CRR "Quick Fix"), the PRA intends to terminate the
temporary approach to value-at-risk (VAR) back-testing exceptions it announced in March 2020.
11
From 1 October 2020 onwards, firms should no longer apply any commensurate reduction in
risks-not-in-VAR (RNIV) capital requirements.
For back-testing exceptions that occur between 1 January 2020 and 31 December 2021 that do
not result from deficiencies in their internal model, firms should now apply to the PRA in
accordance with Article 500c of the CRR to exclude those exceptions from the calculation of their
back-testing addend.
LIBOR transition: RFRWG recommendations on conventions for referencing compounded in arrears SONIA
The Working Group on Sterling Risk-Free Reference Rates (RFRWG) has published a
statement of recommendations on standard market conventions to support the use of SONIA in
loan markets for Sterling Bilateral and Syndicated Facilities, including Multicurrency Syndicated
Facilities where there is a sterling currency option.
SONIA compounded in arrears is the RFRWG's recommended alternative to Sterling LIBOR.
The recommendations (which are non-binding) aim to enable and expedite the transition away
from the use of LIBOR.
In summary, the recommendations are:
SONIA remains the RFRWG's recommended alternative to Sterling LIBOR, implemented
via a compounded in arrears methodology, and loan markets should now move
consistently towards this;
use of a five banking days' lookback without observation shift. This aligns with the
approach recommended by the Alternative Reference Rate Committee for US dollar loan
markets and is most likely to be made rapidly available. While this approach is the
recommendation, where lenders are also able to offer lookback with an observation shift
this remains a viable and robust alternative;
where an interest rate floor is used, the RFRWG recognises that it may be necessary to
apply the floor to each daily interest rate before compounding; and
accrued interest should be paid at the time of principal prepayment.
"5 conduct questions": FCA 2019/20 wholesale banking industry feedback
The FCA has published its report, "5 Conduct Questions: Industry Feedback for 2019/20". The
five conduct questions form part of the FCA's strategy for supervising wholesale banks.
Key messages from the report include:
conduct and culture change programmes are having a positive effect;
while awareness of conduct risk is higher, skills to identify these risks must improve. This
is especially important in the evolving "work from home" operating model predominately
in use;
psychological safety for day-to-day "speaking up and challenge" still needs attention from
staff at all levels;
remuneration strategies that focus on the "how" as well as the "what" are a positive
development but more can be done to fully harness strategic benefits; and
corporate purpose and principles have become confused. CEOs and line managers can
help clarify how these terms link to individual roles and responsibilities.
12
The FCA states that COVID-19 has created new and greater conduct risks. It will be important for
firms to engage staff at home in the effort to identify potential sources of harm in their individual
environments.
BRRD II: Corrigendum published in OJ
A corrigendum to the English version of Directive (EU) 2019/879 amending the Bank Recovery
and Resolution Directive (2014/59/EU) (BRRD II) has been published in the Official Journal of
the EU (OJ).
The Corrigendum amends the references to Article 12 of the Capital Requirements Regulation
(CRR) in Article 45h(2) of BRRD II to Article 12a of the CRR.
BRRD: EBA 2019 annual report on resolution colleges
The European Banking Authority (EBA) has published its 2019 annual report on resolution
colleges. Resolution colleges are required under the Bank Recovery and Resolution Directive
(BRRD). The report sets out the EBA's observations of the efficiency, effectiveness and
consistency of the functioning of resolution colleges during 2019.
CRR: EBA opinion on European Commission amendments to final draft RTS relating to economic downturn
The EBA has published an opinion on the European Commission's amendments relating to the
EBA's final draft regulatory technical standards (RTS) on the specification of the nature, severity
and duration of an economic downturn under Articles 181(3)(a) and 182(4)(b) of the CRR.
The EBA's opinion identifies three substantive changes introduced by the Commission. These
relate to:
the deletion of the requirement stating that the economic indicators relating to one
downturn period should be significantly correlated. The EBA is of the view that this
requirement should be re-introduced;
the introduction of a proportionality principle for the cost of data (Recital 10 and Article
2), which alters the agreed policy. The EBA suggests some re-drafting to clarify the
relevant data sources; and
removing the possibility of considering a shorter time series than 20 years for economic
indicators relating to an EU member state that joined the EU less than 20 years ago. The
EBA agrees to the Commission's proposal, despite the substantive nature of the change.
In addition, the EBA has identified a number of non-substantive and drafting changes that, in its
view, may unintendedly hamper the clarity of the text. Therefore, the EBA is proposing
alternative drafting suggestions.
COVID-19: revised EBA 2020 work programme
On 14 August 2020, the EBA published a revised work programme for 2020, which it has
amended to reflect the projects it has postponed due to COVID-19. The EBA also summarises the
actions it has taken in response to COVID-19.
13
Consumer Finance
COVID-19: FCA consults on additional guidance for mortgage firms
On 26 August 2020, the UK Financial Conduct Authority (FCA) published a guidance
consultation setting out additional guidance for mortgage firms in light of COVID-19. The short
consultation closed on 1 September 2020.
The FCA recognises that many mortgage consumers will continue to be or will be newly affected
by COVID-19 once the current raft of support measures comes to an end (currently scheduled for
31 October 2020). The FCA also anticipates customers who have benefitted from payment
deferral under the existing regime will continue to need more tailored support once it has
finished. The FCA draft guidance indicates how it expects firms to deal with these customers.
Read more in our briefing: Mortgages and COVID-19: FCA draft guidance on further support
after payment deferral period ends.
The proposed guidance is expected to come into effect on 1 November 2020 (unless the existing
guidance is extended).
14
Payments
Global Payments Newsletter, August 2020
The latest edition of our Global Payments Newsletter is now available. It reports on key
developments of interest to the payments sector, including:
United Kingdom: HM Treasury publishes a Call for Evidence for Payments Landscape
Review, seeking industry input on how payment systems could be improved. The
deadline for submissions is 20 October 2020.
Canada: The Financial Data Exchange, an industry-led initiative to develop an API
standard for open banking, launches.
Europe: The European Data Protection Board consults on guidelines on the interaction
between PSD2 and the GDPR, which covers topics such as the meaning of "explicit
consent". The deadline for submitting feedback is 16 September 2020.
15
Securities and Markets Accessing and using wholesale data: FCA extends call for input deadline
The UK Financial Conduct Authority (FCA) has extended the deadline for responses to its call for
input on the use and value of data and advanced analytics in wholesale financial markets, now
and in the future. The deadline has been further extended to 7 January 2021.
The FCA notes that the roundtables that had been due to be held at the end of April have also
been postponed. It will confirm on its website timings for the rescheduled roundtables later in
the year as well as the timings for its feedback statement.
FCA Market Watch issue 64
The FCA has published issue 64 of Market Watch, its newsletter on market conduct and
transaction reporting issues. In issue 64, the FCA provides information to help MiFID II firms
prepare for the end of the Brexit transition period on 31 December 2020.
The FCA reminds firms that they must ensure that their Approved Reporting Mechanisms must
comply with the changes to their regulatory obligations by the end of the transition period. Firms
that are unable to comply fully with the transaction reporting regime immediately following the
end of the transition period will need to be able to back-report missing, incomplete or inaccurate
transaction reports as soon as possible.
The FCA also confirms that, as part of the development of a post-exit MiFID regime, industry
testing for the FCA's Financial Instruments Transparency System (FCA FITRS) will open on 5
October 2020. The FCA's Financial Instruments Reference Data System (FCA FIRDS) is still
available for testing. The FCA has dedicated webpages on both the FCA FITRS and FCA FIRDS.
Securitisation Regulation: technical standards in force 23 September 2020
The following delegated and implementing regulations laying down technical standards for
securitisations have been published in the Official Journal of the EU:
Commission Implementing Regulation (EU) 2020/1227 of 12 November 2019 laying
down implementing technical standards with regard to templates for the provision of
information in accordance with the STS notification requirements;
Commission Implementing Regulation (EU) 2020/1225 of 29 October 2019 laying down
implementing technical standards with regard to the format and standardised templates
for making available the information and details of a securitisation by the originator,
sponsor and SSPE;
Commission Implementing Regulation (EU) 2020/1228 of 29 November 2019 laying
down implementing technical standards with regard to the format of applications for
registration as a securitisation repository or for extension of a registration of a trade
repository pursuant to Regulation (EU) 2017/2402 of the European Parliament and of
the Council;
Commission Delegated Regulation (EU) 2020/1226 of 12 November 2019 supplementing
Regulation (EU) 2017/2402 of the European Parliament and of the Council and laying
down regulatory technical standards specifying the information to be provided in
accordance with the STS notification requirements;
Commission Delegated Regulation (EU) 2020/1229 of 29 November 2019 supplementing
Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard
to regulatory technical standards on securitisation repository operational standards for
16
data collection, aggregation, comparison, access and verification of completeness and
consistency;
Commission Delegated Regulation (EU) 2020/1230 of 29 November 2019 supplementing
Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard
to regulatory technical standards specifying the details of the application for registration
of a securitisation repository and the details of the simplified application for an extension
of registration of a trade repository; and
Commission Delegated Regulation (EU) 2020/1224 of 16 October 2019 supplementing
Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard
to regulatory technical standards specifying the information and the details of a
securitisation to be made available by the originator, sponsor and SSPE.
The regulations enter into force on 23 September 2020. The European Securities and Markets
Authority (ESMA), has confirmed that the different elements of the new regime under the
Securitisation Regulation (SR) will come into force on 23 September 2020.
The publication of the technical standards triggers:
opening of applications for entities to register as Securitisation Repository (SecRep).
Entities which wish to be registered as a SecRep by ESMA can submit their applications
from 23 September 2020. Until ESMA has registered at least one SecRep, information
that should be made available by reporting entities to SecReps on public securitisations
must be made make it available via a website which meets certain requirements; and
entry into force of new disclosure templates developed by ESMA. These must be used to
make any new information available about a securitisation in accordance with Article 7 of
the Securitisation Regulation. ESMA has published guidance on how to fill in the
disclosure templates in its Q&A Document on Securitisation Topics. XML schema and
validation rules as well as reporting instructions for these templates are available on
ESMA's website.
EMIR 2.2: European Commission adopts Delegated Regulation on CCP colleges
The European Commission has adopted a Delegated Regulation containing draft regulatory
technical standards (RTS) for central counterparty (CCP) colleges under EMIR 2.2, the
Regulation amending the supervisory regime for CCPs under the European Market
Infrastructure Regulation (EMIR).
The draft RTS amend Commission Delegated Regulation (EU) No 876/2013 (RTS on colleges for
CCPs) and reflect the changes to Article 18(6) of EMIR introduced by EMIR 2.2, which came into
force on 1 January 2020.
CSDR settlement discipline: postponed entry into force
On 24 August 2020, Delegated Regulation (EU) 2020/1212 amending Delegated Regulation
(EU) 2018/1229 supplementing the Central Securities Depositories Regulation (CSDR) with
regard to RTS on settlement discipline was published in the Official Journal of the EU.
Delegated Regulation (EU) 2018/1229 was due to enter into force on 13 September 2020.
However, this has been postponed and it will now enter into force on 1 February 2021. Delegated
Regulation (EU) 2020/1212 came into force on 27 August 2020.
Since proposing this delay, ESMA has concluded that the severe impact of COVID-19 indicates
that it would be extremely difficult for market stakeholders to comply with the requirements of
the RTS on settlement discipline by 1 February 2021. Therefore, in response to a request from
17
the Commission, ESMA has now published its final report (dated 26 August 2020) on draft RTS,
definitively postponing the date of entry into force of the settlement discipline regime under the
CSDR until 1 February 2022.
As the proposed amendment is limited in scope and reflects the input provided by market
participants calling for the delay, ESMA has not consulted on the draft RTS.
Following the endorsement of the draft RTS by the Commission, the Delegated Regulation will
be subject to the non-objection of the European Parliament and the Council of the EU.
MIFIR transparency requirements for equity and non-equity instruments: ESMA call for evidence
ESMA has published a call for evidence in the context of its review of transparency requirements
for equity and non-equity instruments under the Market in Financial Instruments Regulation
(MiFIR).
ESMA seeks input and views on the practical issues related to the application of Commission
Delegated Regulation (EU) No 2017/587 (RTS 1) and Commission Delegated Regulation (EU) No
2017/583 (RTS 2) since the implementation of MiFID II/MiFIR. ESMA would also like to receive
feedback on any technical issue and policy gap that market participants have encountered at
implementation level, as well as unclear provisions.
The deadline for responding to the call for evidence is 31 October 2020. ESMA will consider the
feedback received to prepare a consultation paper for the RTS 1 and 2 review, which will follow
in 2021.
BMR amending draft Regulation: deadline for comments
The European Commission has updated its webpage on the proposed Regulation amending the
Benchmarks Regulation (BMR) as regards the exemption of certain third-country foreign
exchange benchmarks and the designation of replacement benchmarks for certain benchmarks
in cessation. The Commission adopted the proposed Regulation on 24 July 2020. It is asking for
comments on it by 6 October 2020.
Continuity of access to FMIs for firms in resolution: FSB questionnaire
The Financial Stability Board (FSB) has published a common template questionnaire for
gathering information about the continuity of access to financial market infrastructures (FMIs)
for firms in resolution.
All FMIs are encouraged to complete the questionnaire. Responses should be published or
otherwise made available to firms that use the FMI services and to the resolution authorities to
inform their resolution planning. The FSB says the use of the template could reduce the “many to
one” nature of inquiries from banks and authorities to FMIs, streamline the provision of this
information from FMIs to firms and authorities, and streamline the information gathering
process for firms who are members of multiple FMIs.
In the questionnaire, the FSB sets out an indicative timeline for FMIs to provide a standardised
set of responses, which FMIs are encouraged to consider. The FSB advises that it can hold
information sessions where industry will be welcome to ask questions about content and process.
The FSB will host a webinar for stakeholders, on 23 September 2020, to explain the
questionnaire and answer any questions. During the course of 2021, it intends to review the
18
experience of using the questionnaire. The FSB explains that FMIs, banks and other stakeholders
will have the opportunity to provide feedback and suggestions on the questionnaire itself and the
process. The questionnaire will be updated, if appropriate.
19
Insurance COVID-19: final transcripts of FCA business interruption insurance test case
On 18 August 2020, the FCA updated its webpage on the High Court business interruption
insurance test case to link to the final transcripts for each day of the trial.
PEPP: EIOPA final draft RTS and ITS and technical advice
Following consultation, the European Insurance and Occupational Pensions Authority (EIOPA)
has published its final draft regulatory technical standards (RTS) and implementing technical
standards (ITS) and its advice on Delegated Acts to implement the framework for the design and
delivery of the Pan-European Personal Pension Product (PEPP) under the PEPP Regulation.
EIOPA submitted the following draft legal instruments and technical advice to the European
Commission under cover of a letter addressed to Vice-President, Valdis Dombrovskis:
Commission Delegated Regulation supplementing the PEPP Regulation regarding RTS
specifying the requirements on information documents, on the costs and fees included in
the cost cap and on risk-mitigation techniques for the PEPP;
Commission Implementing Regulation laying down ITS for the application of the PEPP
Regulation regarding the format of supervisory reporting to the competent authorities
and the co-operation and exchange of information between competent authorities and
EIOPA;
Technical Advice on delegated acts supplementing the PEPP Regulation by specifying
additional information regarding supervisory reporting; and
Technical Advice on delegated acts to supplement the PEPP Regulation regarding the
criteria and factors to be applied by EIOPA relating to EIOPA's product intervention
powers.
EIOPA has also published:
an impact assessment;
description of a stochastic model for a holistic assessment of the risk profile and potential
performance; and
a research report relating to the graphic design work and consumer testing in the
development of the PEPP KID and Benefit Statement.
Resolution regimes: FSB key attributes assessment methodology for insurance sector
The Financial Stability Board (FSB) has published a methodology for assessing the
implementation of the FSB "Key Attributes of Effective Resolution Regimes for Financial
Institutions" in the insurance sector.
The FSB notes that the Key Attributes constitute an "umbrella" standard for resolution regimes
for all types of financial institutions. However, not all attributes are equally relevant for all
sectors and some Key Attributes require adaptation and sector-specific interpretation. This
assessment methodology guides the assessment of a jurisdiction's compliance with the Key
Attributes with respect to the insurance sector.
The FSB has also published a note explaining the application of the insurance Key Attributes
Assessment Methodology and the Key Attributes during the period of suspension of the
20
designation of global systemically important insurers (G-SIIs). In light of the finalised holistic
framework for systemic risk in the insurance sector published by the International Association of
Insurance Supervisors (IAIS) in November 2019, the FSB and IAIS decided to suspend G-SII
identification from the beginning of 2020. The note states that the Key Attributes continue to
apply during the suspension period to any insurer that could be systemically significant or
critical in failure. National authorities may apply to certain insurers the requirements specific to
G-SIIs. These are the requirements for a crisis management group, institution-specific cross-
border cooperation agreements and resolvability assessments.
The FSB will, in November 2022, based on the initial years of implementation of the holistic
framework, review the need to either discontinue or re-establish its annual identification of G-
SIIs in consultation with the IAIS and national authorities.
Sustainable Insurance Forum: half-yearly update report
The Sustainable Insurance Forum (SIF) has published its half-yearly update report on the work
undertaken by SIF and its members during January to June 2020.
The report includes individual updates from 14 member regulators on recent sustainable
insurance initiatives and activities, as well as noting two important recent SIF publications: an
Issues Paper on TCFD and a Question Bank on climate change risks for the insurance sector.
Read more in our briefing: The Sustainable Insurance Forum (SIF) has published its half-yearly
update report.
21
Funds and Asset Management
Open-ended funds: FCA and BoE review survey on liquidity mismatch
On 26 August 2020, the UK Financial Conduct Authority (FCA) updated its COVID-
19 webpage to announce that it has launched a joint survey with the Bank of England (BoE) to
review liquidity mismatch in open-ended funds.
In Q4 2019, the Financial Policy Committee (FPC) judged that the mismatch between
redemption terms and the liquidity of some funds' assets could become a systemic risk. It said
there should be greater consistency between these, with specific focus on three principles:
measures of liquidity;
pricing; and
redemption notice period.
The review will consider how a framework around the above principles could be designed.
As part of the FCA's ongoing joint review with the BoE, the FPC supported an initial data
collection survey in Q1 2020. This survey was postponed in March due to COVID-19. However,
the FPC recently supported resuming this work.
The survey is a voluntary exercise and the data will provide an important element for the joint
review. Asset managers included in the survey are being asked to respond to the questions on a
best-effort basis by 30 September 2020.
AIFMD review: ESMA highlights priority areas
The European Securities and Markets Authority (ESMA) has published a letter (dated 18 August
2020) it has sent to the European Commission, highlighting the areas where it considers
improvements could be made to the Alternative Investment Fund Managers Directive (AIFMD).
The letter is written in the context of the Commission's impending review of the AIFMD.
Annex I to the letter sets out the key areas in the legislative framework where ESMA proposes
that amendments are made. Annex II to the letter sets out more specifically ESMA's proposed
changes to the AIFMD in relation to the reporting regime and data use. ESMA comments that, in
many cases, its proposals also require consideration of changes to the current UCITS framework.
COVID-19: ESMA to update risk parameters in guidelines on stress test scenarios under MMF Regulation
On 27 August 2020, ESMA published a statement announcing that it intends to update the 2019
guidelines on stress test scenarios produced under the Money Market Funds Regulation (MMF
Regulation) to modify the risk parameters to reflect recent market developments relating to
COVID-19. ESMA expects to publish the 2020 update of the guidelines in Q4 2020. The updated
guidelines will then be translated, and the changes will apply from two months after the
publication of the translations.
ESMA confirms that the 2019 guidelines will continue to apply pending the application date for
the 2020 update. This includes the existing calibrated scenarios and the internal stress test
exercise to be carried out by managers of MMFs.
22