August Regulatory Update
By Simon Hill | Uncategorized | 0 Comments
FCA updates Handling of Complaints statement for firms – 31 July 2020
The FCA has published an updated version of the statement it originally published in May, to clarify its position on complaints handling during the Covid-19 pandemic. The regulator clarifies its position regarding:
- Complaint handling capacity and priorities
- Vulnerable consumers
- Maintaining the quality of complaint handling
- Firms experiencing difficulties
- Claims management companies and referrals to the Financial Ombudsman Service
- The Ombudsman Service’s general approach
- Other considerations for CMCs
- PPI complaints
The FCA reviewed the statement at the end of July and re-published with minor additions, and intend to review again by the end of October.
Updated FCA statement on firms’ handling of complaints in light of COVID-19
EBA launches consultation on proposed revisions to its Guidelines on internal governance – 31 July 2020
The European Banking Authority (EBA) has published for consultation proposed revisions to its Guidelines on internal governance under the Capital Requirements Directive (2013/36/EU) (CRD IV). The EBA originally published the Guidelines in September 2017 and they came into force in June 2018. The proposed changes reflect certain amendments introduced by the Capital Requirements Directive (EU) 2019/878 (CRD V) and the Investment Firms Directive (EU) 2019/2034 (IFD).
Comments to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page. The deadline for the submission of comments is 31 October 2020 and the amended Guidelines are expected to come into force on 26 June 2021.
EBA Consultation Paper on proposed revisions to its Guidelines on internal governance under CRD IV
EBA and ESMA launch consultation to revise joint Guidelines on the assessment of the suitability of members of the management body and key function holders – 31 July 2020
The EBA and the ESMA have published for consultation revised joint Guidelines on the assessment of the suitability of members of the management body and key function holders under the CRD IV and the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II). The proposed revisions reflect changes introduced by the CRD V and the IFD.
The draft joint guidelines cover:
- clarify that the knowledge, experience and skill requirements are important aspects in the assessment of members of the management body and key function holders as they contribute to identifying, managing and mitigating money laundering and terrorist financing risk. The Guidelines also clarify that being a member of affiliated companies or entities does not in itself represent an obstacle for a member of the management body to act independently;
- highlight the importance of having a gender-balanced composition of staff in management positions; and
- provide further guidance on the recovery and resolution framework introduced by the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD). As part of early intervention measures and during resolution, the suitability of newly appointed managers and of the management body collectively is relevant and requires an assessment.
The consultation period ends on 31 October 2020, after which ESMA and the EBA will finalise the Guidelines. EBA and ESMA consultation on joint Guidelines on the assessment of the suitability of members of the management body and key function holders under CRD IV and MiFID II
Operational risk and resilience – Basel Committee consults on new and updated Principles – 6 August 2020
On 6 August 2020, the Basel Committee on Banking Supervision published a consultative document seeking comments on proposed Principles for operational resilience. Given the natural relationship between operational resilience and operational risk, the Basel Committee is also proposing to update its Principles for the sound management of operational risk (PSMOR).
The proposed Principles for Operational Resilience aim to increase banks’ capability to withstand and absorb disruptions arising from potentially severe and adverse events. Among other things, the proposed principles focus on governance, operational risk management, business continuity planning and testing, outsourcing, and IT and cyber security.
The Basel Committee also proposes updates to its Principles for the Sound Management of Operational Risk to:
- align those principles with the recently finalised Basel III operational risk framework;
- update the guidance where needed in the areas of change management and ICT; and
- enhance the overall clarity of the document.
The consultation period closes on 6 November 2020.
Press release: Basel Committee consults on Principles for operational risk and resilience
Basel Committee Principles for Operational Resilience
Basel Committee Principles for the Sound Management of Operational Risk
PSR publishes statement on innovation and competition in real-time payments – 4 August 2020
The Payment Systems Regulator (PSR) has published a statement on driving innovation and competition in real-time payments while maintaining appropriate consumer protection.
The statement shares the PSR’s thinking on topics such as:
- consumer protection
- the role of innovation
- open banking and potential growth of FPS
PSR statement on driving innovation and competition in real-time payments
Lending Standards Board publishes update and announces the FCA’s continued recognition – 5 August 2020
The Lending Standards Board (LSB) has published an updated version of its Standards of Lending Practice for business customers, as well as supporting updates to its Information for Practitioners. The LSB has also announced the FCA’s continued recognition of those Standards and of the Information for Practitioners in relation to products offered under the government’s Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).
The FCA’s rational for the recognition of industry codes for certain unregulated activities is that, where firms’ behaviour is in line with an FCA-recognised code, this will tend to indicate that they are complying with applicable FCA market conduct rules when they undertake unregulated activities.
Updated LSB Standards of Lending Practice for business customers in light of CBILS and BBLS
Draft LSB Standards of Lending Practice for business customers
Bank of England publishes Financial Stability Report – 6 August 2020
The Bank of England has published the Financial Stability Report for August 2020, alongside charts relating to aspects of the UK financial system, including spending in the UK economy and bank lending.
Written by the Financial Policy Commitee (FPC), the report maintains that “banks have the capacity, and that it is in the collective interest of the banking system, to continue to support businesses and households” during the pandemic.
As well as this, the FPC states that it supports the work of UK authorities to consider reforms to payments regulation and welcomes the launch of the Call for Evidence by HM Treasury as part of its Payments Landscape Review.
The Bank of England has also separately published a record of the FPC meetings held on 29 July and 3 August 2020, together with a summary.
The FPC’s next policy meeting will be on 30 September 2020.
Bank of England Financial Stability Report for August 2020
Bank of England Monetary Policy Report and Financial Stability Report Opening remarks
FCA Consultation Paper CP20/14: Updating the Dual-regulated firms Remuneration Code to reflect CRD V
The FCA has published a Consultation Paper (CP20/14) setting out proposals to update its Dual-regulated firms Remuneration Code to reflect amendments to remuneration requirements introduced by CRD V. The UK is required to transpose certain elements of CRD V because the transposition deadline is before the end of the Brexit transition period.
The Consultation proposes changes to:
- the Dual-regulated firms Remuneration Code (SYSC 19D), including to the rules on material risk takers, proportionality, deferral and clawback
- the non-Handbook guidance ‘General Guidance on Proportionality – the Dual-regulated firms Remuneration Code’
- the non-Handbook guidance ‘Remuneration Codes (SYSC 19A and SYSC 19D) – Frequently Asked Questions on remuneration’
The FCA will not apply the CRD V remuneration requirements to solo-regulated investment firms; they remain subject to the existing rules in the IFPRU Remuneration Code or BIPRU Remuneration Code, as appropriate, and should continue to apply their existing remuneration regime until the new UK prudential regime for investment firms is in place.
The consultation period closes on 30 September 2020, following which the FCA intends to publish a Policy Statement before the CRD V transposition deadline of 28 December 2020.
FCA Consultation Paper CP20/14: Updating the Dual-regulated firms Remuneration Code to reflect CRD V
FCA publishes findings of multi-firm review of relending and additional borrowing practices regarding high-cost credit – 6 August 2020
The FCA has published the findings of its multi-firm review of relending or repeat borrowing practices by firms offering high-cost credit. The review highlights concerns about some firms’ poor practices in this context and sets out the FCA’s expectations regarding the fair treatment of relevant customers.
Among other things, the FCA states that:
- firms should ensure that relending leads to positive customer outcomes and does not cause harm;
- firms should ensure that they undertake appropriate affordability assessments for repeat borrowers, in line with the FCA’s expectations;
- it expects firms to review their lending practices and operations to ensure they are appropriately discharging their obligations to lend responsibly;
- firms should ensure that their marketing materials comply with financial promotion rules, do not mislead consumers and enable consumers to make informed decisions;
- it expects firms to assess their use of online accounts to offer additional credit to customers to ensure that customers receive good outcomes; and
- it expects firms not to charge early settlement charges when a customer refinances their loan.
The FCA expects firms to review their relending operations in light of the findings and make any necessary changes to improve customer outcomes.
FCA multi-firm review relending and additional borrowing by high-cost credit firms
HM Treasury publishes AML and CTF supervison report
HM Treasury has published its eighth annual supervision report on anti-money laundering (AML) and counter-terrorist financing (CTF) for 2018/19. The report includes self-reported data about supervisory activity undertaken in 2018-19 across the UK’s AML/CTF regime, which was provided to HM Treasury by supervisors in their annual returns.
HM Treasury annual supervisory report on AML and CTF for 2018/19
EBA provides clarity on the implementation of the reporting and disclosure framework in the context of COVID-19 measures
The European Banking Authority (EBA) has published some frequently asked questions related to the implementation of its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
The technical clarifications provided by the EBA will assist supervisors and credit institutions in the implementation of the Guidelines.
Due to the significant number of issues that have arisen, and may continue to arise, in the context of the EBA’s monitoring of the implementation of COVID-19 policies, the EBA expects to update the Report at a later stage.
EBA report on the implementation of selected COVID-19 prudential policies
Bank of England publishes go-live date for enhanced ISO 20022 messaging standard – 10 August 2020
The Bank of England has updated its webpage on the implementation of the CHAPS enhanced ISO 20022 payment messaging standard, to confirm that it plans to go-live with the enhanced messaging standard in April 2022. This follows the Bank of England’s industry review of its approach to the adoption of the CHAPS enhanced ISO 20022 messages in July 2020, which form part of the Bank of England’s real-time gross settlement (RTGS) renewal programme.
The Bank confirms that it plans to go-live with the enhanced messaging standard in April 2022, as currently planned, but on a “like-for-like” basis in order to help direct participants manage the truncation issues ahead of SWIFT’s adoption of ISO 20022 in late 2022. The Bank plans to enable enhanced data to be sent and received during the first half of 2023 and is undertaking further analysis on whether this should occur before or after the planned cutover to the new RTGS programme in April 2023.
The Bank intends to publish an update and further supporting documentation in September 2020.
FCA publishes updated guidance for insurance and premium finance firms in light of COVID-19 – 11 August 2020
The FCA has published published a Feedback Statement (FS20/13) and accompanying updated guidance for insurance and premium finance firms when dealing with customers experiencing temporary financial difficulties as a result of COVID-19. This follows the FCA’s initial guidance for such firms, published in May 2020, and its consultation on its draft updated guidance in July 2020.
The guidance sets out measures to help customers who hold insurance and premium finance products and who are in temporary financial difficulty because of coronavirus. The measures are:
- re-assess the risk profile of the customer;
- consider whether there are other products the firm can offer which would better meet the customer’s needs;
- work with the customer to avoid the need for cancellation of necessary cover; and
- in addition to waiving cancellation fees, waive any fees associated with adjusting the customer’s policy in line with the assessments outlined above.
The updated guidance applies from 11 August 2020. Unless renewed or updated, the majority of the FCA’s guidance will expire on 31 October 2020, save for provisions relating to residual issues for customers coming to the end of payment deferrals after that time.
FCA finalised updated guidance for insurance and premium finance firms in light of COVID-19
FCA updates and publishes new webpage on Conduct Rules and Annual Reporting for solo-regulated firms – 13 August 2020
The FCA has published a webpage on new annual reporting requirements for solo-regulated firms under the Senior Managers and Certification Regime (SMCR). Relevant firms are required to inform the FCA about any disciplinary action taken against individuals, who are not senior managers, for breaches of the Conduct Rules.
Firms must report whether they have taken disciplinary action against individuals who are not Senior Managers for breaches of the Conduct Rules and, if so, the details of the breach.
This includes:
- details about the individual who has committed the breach
- details about what Conduct Rules have been breached
- details about the disciplinary action taken
The REP008 has been added to all solo-regulated firms’ Gabriel schedules, and will need to be submitted annually, even if there has been no breaches of the conduct rules.
The FCA has also separately updated its webpage on the SMCR for solo-regulated firms to include new tables illustrating examples of good and poor practice in relation to the FCA’s expectations on fitness and propriety assessments and the Conduct Rules.
FCA webpage on new annual reporting requirements for solo-regulated firms under the SMCR
FCA webpage on SMCR for solo-regulated firms
FCA publishes transcripts of High Court BI insurance test case – 18 August 2020
The FCA has updated its webpage on the progress of its High Court test case, which seeks a declaratory judgment about the meaning and effect of the wording of certain business interruption (BI) insurance policies in light of COVID-19.
The webpage now includes the final transcripts for each day of the trial. The trial ran for eight days, ending on 30 July 2020. The exact date of judgment is not known, but it might be available by the middle of September 2020.
FCA webpage on its High Court test case on the validity of BI insurance claims in light of COVID-19
ESMA RECOMMENDS PRIORITY TOPICS IN AIFMD REVIEW – 19 August 2020
The European Securites and Markets Authority has published a letter from Steven Maijoor (Chair of ESMA) to Valdis Dombovskis (Vice President of the European Commission) highlighting areas that ESMA believes should be prioritised under the Commission’s review of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD).
ESMA’s letter includes recommendations for changes in 19 areas including harmonising the AIFMD and UCITS regimes; delegation and substance; liquidity management tools; leverage; the AIFMD reporting regime and data use; and the harmonisation of supervision of cross-border entities.
ESMA also notes that its proposals may also require amendments to the legislative framework under the UCITS Directive (2009/65/EC).
ESMA letter to the European Commission on its review of AIFMD
EBA publishes response to European Commission consultation on AML and CTF – 19 August 2020
The European Banking Authority (EBA) has published its response to the European Commission’s consultation on the development of its anti-money laundering (AML) and counter-terrorist financing (CTF) action plan, published in May 2020.
The EBA recommends that the Commission:
- harmonise the EU’s legal framework to reduce the risk of gaps created by divergent approaches to incorporating EU AML/CFT law into national law;
- combine an ongoing role for national AML/CFT authorities with an EU-level AML/CFT supervisor in a hub and spoke approach that builds on national AML/CFT authorities’ expertise and resources, and complement this with effective EU-level oversight for a consistent approach with comparable outcomes;
- leverage on the EU’s existing AML/CFT infrastructure, including the EBA’s policy, data and information technology resources as well as the EBA’s European and international supervisory cooperation networks.
The EBA will continue to provide technical input into the debate as it progresses, including on the details of the new supervisory architecture.
EBA response to the European Commission public consultation on AML/CFT action plan
JMLSG confirms HM Treasury approval of its revised sectoral guidance on AML and CTF – 19 August 2020
The Joint Money Laundering Steering Group (JMLSG) has confirmed that its revised sectoral guidance on amendments introduced by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (SI 2019/1511), published in June 2020, and its revised sectoral guidance on pooled client accounts, cryptoasset exchanges and custodian wallet providers, published in July 2020, has received ministerial approval from HM Treasury.
Press release: HM Treasury approves JMLSG revised sectoral guidance
FCA updates webpage on Temporary Permissions Regime- 20 August 2020
The FCA has updated its webpage on the temporary permissions regime (TPR) to improve navigation. It reiterates that it will re-open the notifications window for the TPR on 30 September 2020.
More helpful guidance can be found on the page, with links to pages covering:
- which firms and investment funds can use the TPR
- the rules which will apply to firms and fund operators in the TPR
- the notification process for firms (including information on withdrawing a TPR notification)
- considerations for firms leaving the TPR
- the notification process for funds
- TPR fees that your firm or investment fund will need to pay
- the financial services contracts regime
Financial Ombudsman Service publishes summary of complaints resulting from COVID-19
The Financial Ombudsman Service has published Issue 153 of Ombudsman News, which includes an an insight summary focusing on complaints resulting from COVID-19 and its impact on consumers and small and medium-sized enterprises.
FOS summary of complaints resulting from COVID-19
Extension of FCA’s annual financial crime reporting obligation – 24 August 2020
The FCA has published a Consultation Paper (CP20/17) setting out its proposed plans to extend the scope of the Annual Financial Crime Report (REP-CRIM) obligations to include firms that carry on regulated activities considered to pose a higher money laundering risk. This extension will apply irrespective of a firm’s revenue threshold.
The FCA has stated the consultation period will end on 23 November 2020.
CP 20/17: Extension of Annual Financial Crime Reporting Obligation
