November Regulatory Update

By Simon Hill | Uncategorized | 0 Comments

FCA seeks views on change and innovation in the unsecured credit market as part of the Woolard Review – 2 November 2020

The FCA has published a Call for Input on change and innovation in the unsecured credit market as part of a review that considers how regulation can better support a healthy, unsecured lending market (referred to as the Woolard Review).

The call for input is oriented around 4 key themes:

  • Drivers and use of credit
  • Change and Innovation in the supply of credit
  • The role of regulation in the supply of credit
  • The impact of COVID-19 and the FCA’s response

The deadline for responses is 1 December 2020. Feedback to the Call for Input will inform Mr Woolard’s report and recommendations to the FCA Board which are expected in 2021.

FCA call for input

Response form

FCA Policy Statement (PS20/13): Amendments to the open banking identification requirements (eIDAS certificate) – 3 November 2020

The FCA has published a Policy Statement summarising responses to its Consultation Paper CP20/18, published on 4 September 2020. The Policy Statement refers to amendments that will be made to Article 34(1) of the UK regulatory technical standards (UK-RTS) for strong customer authentication and secure communication which will require account servicing payment service providers (ASPSPs) to accept at least one other electronic form of identification issued by an independent third party, in addition to continuing to accept eIDAS certificates.

In July 2020, the EBA announced that eIDAS certificates of UK third-party providers would be revoked at the end of the transition period on 31 December 2020.

The changes will mean:

  • UK-based TPPs will likely need to obtain a new certificate to be able to continue to provide open banking services in the UK, post-Brexit
  • Account providers (e.g. banks) will likely need to make technical changes to their systems to enable TPPs to continue accessing customer account information, by accepting an alternative certificate and informing TPPs as soon as possible which certificate(s) they will accept

The amendments will enter into force, along with the UK-RTS, immediately after the end of the transition period for Brexit at 11 pm on 31 December 2020.

FCA Policy Statement

FCA statement

FCA publishes Statement on share trading obligation after end of transition period – 4 November 2020

The FCA has published a Statement on its approach to the share trading obligation (STO) under the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR) after the end of the transition period.

The regulator will use the Temporary Transitional Power (TTP) to avoid disruption and allow firms to continue trading all shares on EU trading venues and systematic internalisers (SIs). Any such EU trading venue will need to be:

  • a UK Recognised Overseas Investment Exchange
  • using the temporary permissions regime, or
  • certain that their activities meet all the conditions required to benefit from the Overseas Persons Exclusion (OPE)

The FCA has stated that transitional directions will be published before the end of the transition period to implement these changes.

FCA statement

FCA press release

UK Finance publishes Sanctions Statutory Instruments review – 4 November 2020

UK Finance has published a “Sanctions statutory instruments review” document to assist banks and other firms in their compliance with UK sanctions legislation, both in the UK and internationally. It refers to various statutory instruments (SIs) derived from the Sanctions and Anti-Money Laundering Act 2018 (SAMLA 2018) as well as new regimes such as the Global Human Rights Sanctions Regulations (SI 2020/680).

A press release has also been published, noting that the paper will be updated as more SIs and amendments are laid, and that an updated version will be published on 30 November 2020.

UK Finance sanctions statutory instruments review

Press release

FCA Policy Statement (PS20/14) – Delay to the implementation of European Single Electronic Format and update on Coronavirus-related measures – 5 November 2020

The FCA has published a policy statement regarding its proposals to delay the mandatory requirements around the European Single Electronic Format (ESEF).

The FCA intends to proceed to push back the requirements to report financial statements in the ESEF format originally planned to apply to financial years starting on or after 1 January 2020. These requirements will now only be mandatory for financial years starting on or after 1 January 2021. However, issuers will still be able to publish and file their financial reports in the ESEF standard voluntarily for financial years starting on or after 1 January 2020 if they choose to do so.

There is no intention from the FCA to delay implementation of the requirement to tag notes to the annual financial statement. This will apply to financial years starting on or after 1 January 2022.

FCA Policy Statement 20/14 on delays to ESEF implementation and update on COVID-19 temporary measures

Disclosure guidance and transparency rules sourcebook (electronic reporting format) Instrument 2020

FCA updated webpage

EEA regulators’ information – FCA publishes a new webpage – 6 November 2020

The FCA has published a new webpage which provides links to dedicated Brexit websites hosted by financial regulators in EEA member states. The FCA observes that this list is not exhaustive and will be updated as it receives further information.

FCA webpage

Companies House publishes guidance on people with significant control – 9 November 2020

Companies House has published guidance for firms to identify and record the people with significant control (PSCs). The guidance includes help on how to identify the PSCs and the conditions which need to be met for a person to qualify as a PSC, as well as details of the information which must be recorded for any PSCs of a firm.

Other areas covered by the guidance include what is required if PSC information changes, information a firm’s PSC register, and what happens if a firm fails to meet the requirements.

Guidance – People with significant control

HM Treasury publishes equivalence decisions for EEA States – 9 November 2020

HM Treasury has published a policy paper detailing information on the equivalence decisions that the UK is making for EEA states.

16 of the equivalence decisions are being made by directions under The Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/541) and one equivalence decision is being made by Statutory Instrument (‘SI’) – under The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (S.I. 2018/1184).

HM Treasury notes that equivalence decisions have been made in the following areas:

  • EMIR (Article 13) – Intragroup transactions exemption: under this decision, UK firms will be able to apply for the margining and/or clearing exemption for intragroup transactions under the UK European Market Infrastructure Regulation (648/2012/EU) (UK EMIR) where their intragroup counterparty is located in the EEA and, if granted, may benefit from the exemption on a non-time limited basis.
  • EMIR (Article 2A) – Regulated markets: under this decision, UK firms will be able to consider EEA trading venues as regulated markets under Article 2A of UK EMIR. This confirms the classification of derivative transactions on these markets in relation to requirements under UK EMIR.
  • CRR (Articles 107(3), 114(7), 115(4), 116(5), 132(3), 142(2), 391) – EEA Exposures: under these seven equivalence decisions, UK firms subject to UK Capital Requirements Regulation (575/2013/EU) (CRR) will not be subject to increased capital requirements as a result of their EEA exposures.
  • Solvency II (Articles 378, 379 and 380 ) – Reinsurance and capital treatment: these three decisions ensure that for the purposes of UK Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency II Directive (2009/138/EC), (i) the solvency regime of each EEA state that applies to certain reinsurance activities is equivalent to that laid down in the relevant UK law; (ii) the solo prudential regime of each EEA state is equivalent to that laid down in the relevant UK law; and (iii) the groups prudential regime of each EEA state is equivalent to that laid down in the relevant UK law.
  • CSDR (Article 25) – Central securities depositories: this decision determines that central securities depositories (CSDs) in each EEA state comply with legal requirements which are equivalent to the UK Central Securities Depositories Regulation (909/2014/EU) (UK CSDR) and are appropriately supervised in the relevant EEA state. With equivalence granted, the Bank of England can then assess CSDs in the EEA for recognition (subject to establishing co-operation arrangements with the relevant EEA authorities), allowing those CSDs, once recognised, to continue to service UK securities and to exit the transitional regime.
  • BMR (Article 30) – Benchmarks register: under this decision, for the purposes of UK Benchmarks Regulation (2016/1011/EU) (UK BMR), EEA benchmark administrators will be able to access UK markets and UK supervised entities can continue to use their benchmarks on that basis.
  • SSR (Article 17) – Market making exemption: under this decision, for the purposes of UK Short Selling Regulation (236/2021/EU) (UK SSR), EEA market makers will be eligible to make use of the exemption in Article 17 of UK SSR (which disapplies certain short selling restrictions and reporting requirements) subject to complying with certain regulatory requirements.
  • CRAR (Article 5) – Certification: under this decision, for the purposes of the UK Credit Rating Agencies Regulation (462/2013/EU) (UK CRAR), EEA credit rating agencies registered with the European Securities and Markets Authority (ESMA) and whose credit rating activities are not of systemic importance to the financial stability or integrity of the UK financial markets may apply for certification with the FCA. UK firms using ratings for regulatory purposes will be able to use credit ratings issued by an EEA CRA that is certified with the FCA and has no presence or affiliation in the UK.

Each decision will enter into force immediately after the transition period has ended and, at that time, they shall each have effect as if made under the relevant provisions of retained EU law, whether they were granted by direction or statutory instrument.

HM Treasury equivalence decisions

FCA publishes response to HM Treasury equivalence decisions – 9 November 2020

The FCA has responded to HM Treasury’s announced intention to make equivalence decisions in respect of the EEA states across a number of financial services areas. The FCA observes that the decisions cover areas where the FCA is the lead regulator, including:

  • EMIR (Article 13) – Intragroup transactions exemption;
  • EMIR (Article 2A) – Regulated markets;
  • Short Selling Regulation (SSR) (Article 17) – Market making exemption;
  • Credit Rating Agencies Regulation (CRAR) (Article 5) – Certification; and
  • Benchmarks Regulation (BMR) (Article 30).

The FCA summarises the impact of these particular decisions on firms and sets out what action firms need to take in order to benefit from the decisions.

FCA statement

Payment Services and Electronic Money (Amendment) Regulations 2020 – statutory instrument approved by Parliament – 16 November 2020

The Payment Services and Electronic Money (Amendment) Regulations 2020 have been published, alongside an explanatory memorandum. The Regulations amend the Electronic Money Regulations 2011 and the Payment Services Regulations 2017 in order to apply sections 93(4) and 233-236 of the Banking Act 2009, with modifications, to authorised electronic money institutions, small electronic money institutions, authorised payment institutions and small payment institutions.

This will allow HM Treasury to make regulations to modify insolvency law with respect to these institutions, including setting up a bespoke insolvency regime applicable to them.

These changes have resulted from the fact that, in recent years, insolvencies in these sectors have led to consumers receiving reduced monies after the cost of distribution and the fact they have taken a number of years to be resolved.

HM Treasury intends to use the powers under the Regulations to create a Special Administration Regime for payments and e-money institutions, giving insolvency practitioners administering the insolvencies of payments or electronic money institutions an expanded toolkit.

The regulations will come into force on 8 December 2020.

The Payment Services and Electronic Money (Amendment) Regulations 2020

Explanatory memorandum

FCA updates webpage on regulatory reporting – 17 November 2020

The FCA has updated its webpage on changes to regulatory reporting during the COVID-19 pandemic. The updated webpage explains that the final date when the FCA allowed reporting deadline flexibility was 30 September 2020, and all regulatory returns scheduled for submission from 1 October 2020 should be submitted by their usual deadlines and will be subject to an administrative fee if late.

FCA webpage

NCA publishes Annual Report on SARs – 19 November 2020

The National Crime Agency has published its annual report on suspicious activity reports, which stats that the UK Financial Intelligence Unit (UKFIU) received and processed a record number of SARs (575,085) and an increased number of requests for a defence against money laundering or terrorist financing (DAML) (62,408).

According to the report, assessment, and fast-tracking of SARs to law enforcement agencies remained an important growth area for the UKFIU, which helps ensure maximum value of SARs intelligence is exploited.

The statistics in the report show the importance of the SARs regime in providing information to UK authorities, and the increase in DAML requests reflects an increase in the awareness of money laundering risks.

NCA SARs annual report 2020

Regulatory fees and levies: policy proposals for 2021/22 – 19 November 2020

The FCA has published a consultation paper (CP20/22) on its policy proposals for regulatory fees and levies in 2021/22.

The consultation period closes on 22 January 2021. The FCA intends to publish its feedback and final rules in a Handbook Notice in March 2021.

FCA Consultation Paper CP20/22 – Regulatory fees and levies: policy proposals for 2021/22

FCA publishes finalised guidance for consumer credit firms in relation to COVID-19 and support for consumers – 19 November 2020

The FCA has published finalised guidance for firms to enhance support to consumer credit borrowers facing difficulties due to COVID-19. This guidance follows a consultation launched on 4 November 2020 and amends previous guidance published in July and September 2020.

The guidance sets out that:

  • Those who have not yet had a payment deferral will be eligible to apply for payment deferrals of up to 6 months in total.
  • Those who currently have a payment deferral will be eligible to apply for a further deferral, as long as the total length of deferrals does not exceed a maximum of 6 months in total.
  • Those who have previously had a payment deferral of less than 6 months will also be eligible to apply for a further payment deferral, as long as the deferrals do not exceed 6 months in total.
  • A firm may assess that a payment deferral is obviously not in a customer’s interest. In such cases, the firm should instead provide tailored support appropriate to the customer’s circumstances.
  • Consumers who have already had 6 months of payment deferrals or who are in arrears or receiving tailored support, will not be eligible for a further payment deferral. Instead, firms will provide tailored support appropriate to their circumstances. This may include the option to defer further payments.
  • High-cost short-term credit consumers, such as those with payday loans, will be eligible for a payment deferral of 1 month.

Personal loans and coronavirus – payment deferral guidance

Consumer credit and coronavirus – tailored support guidance

Motor finance agreements and coronavirus – payment deferral guidance

Credit cards (including retail revolving credit) and coronavirus – payment deferral guidance

Rent-to-own, buy-now pay-later, pawnbroking and coronavirus – payment deferral guidance

High-cost short-term credit and coronavirus – payment deferral guidance

Press release

Handbook Instrument: COVID-19 Consumer Credit Instrument 2020 (FCA 2020/68)

FCA publishes statement and two consultation papers on LIBOR transition – 18 November 2020

The FCA has published a statement and two consultations on its intended policy in relation to its proposed new powers under the onshored EU Benchmarks Regulation ((EU) 2016/1011) (BMR) as amended by the Financial Services Bill. This co-ordinates with statements published by the ICE Benchmark Administration (IBA) and the International Swaps and Derivatives Association (ISDA) (see items above and below respectively in this section).

The FCA’s intended policy assumes that the financial services bill will be passed in its current form, though the final nature of those powers could change as the bill makes its way through parliament. The statement sets out the FCA’s potential approach to its proposed new powers, and has published 2 consultations regarding:

  • Designating an unrepresentative benchmark using new powers under proposed Article 23A.
  • Requiring changes to a critical benchmark, including its methodology, using new powers under proposed Article 23D.

Comments on both consultations are welcomed until 18 January 2021, after which the FCA will publish relevant statements of policy on its website.

FCA consultation paper on proposed policy with respect to the designation of benchmarks under Article 23A

FCA consultation paper on proposed policy with respect to the exercise of the FCA’s powers under new Article 23D

FCA overview documents on Benchmarks Regulation and proposed amendments under the Financial Services Bill

FCA press release on IBA announcement and new benchmarks powers consultation

FCA clarifies investment managers’ options for reporting income – 18 November 2020

The FCA has published a new webpage for investment managers clarifying the process for reporting income for Financial Services Compensation Scheme (FSCS) levy calculations.

The process relates to the requirements on asset managers to report ‘look through’ income. The FCA explains that, when calculating annual eligible income, the options are to: (i) only include such annual income if it is attributable to business in respect of which the FSCS may pay compensation; or (ii) include all such annual income. Therefore, firms must include income which they know relates, or may relate, to eligible claimants. Where a firm cannot identify whether the underlying beneficiary is an eligible claimant, income derived from that business must be included.

FCA webpage

FCA publishes further information on RegData platform – 24 November 2020

The FCA has published further information regarding RegData, its new data collection platform, which outlines the enhancements it has made to the platform in response to feedback from firms and other users of Gabriel.

The enhancements made to the platform include:

  • better access to the system, its speed and support for firms;
  • improvements to firms’ reporting schedules and submission history; and
  • better guidelines when submitting data and enhancements to the data validation feature.

FCA announces benefits of RegData

Updated webpage on RegData