UK: Weekly Financial Services Regulatory Update - Week To 22.02.13

This weekly update from Clyde & Co’s Financial Services Regulatory Team summarises new developments as reported by the FSA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.

We hope that you will find this update useful. If you have any queries about any of the information in this update or financial services regulatory matters generally, please contact one of the individuals listed in the ‘Contacts’ section of this publication.

If you have any comments on the content or format of the update or if you no longer wish to receive it, or have a colleague who would like to receive it, please mailto:

Consultation papers:

No new developments this week.

Discussion papers:

No new developments this week.

Policy statements:

22 February: FSA refreshed statement regarding CRD IV implementation. The original deadline for the draft European Union legislation to update the framework for capital requirements (known as CRD IV) to enter into force has now passed. Negotiations between the European Parliament, European Commission and Council of Ministers to finalise the legislation are still underway and no alternative date has yet been set by the EU institutions. The provisions of the Regulation will directly apply to firms. Once the finalised legislative text is available at the EU level, the FSA intends to publicly consult on changes to FSA rules. The FSA is proceeding with the necessary preparatory work to be ready to begin collecting data under Common Reporting for the period beginning 1 January 2014, should the legislation and related standards be in force by this date.

Press releases:

19 February: Lloyds Banking Group fined £4.3 million for delayed PPI redress payments. The FSA has fined three Lloyds Banking Group firms, Lloyds TSB Bank Plc, Lloyds TSB Scotland Plc and Bank of Scotland Plc (collectively, the Lloyds Banking Group “LBG”), a total of £4,315,000 for failings in their systems and controls that resulted in up to 140,000 customers receiving delayed payment protection insurance (PPI) redress. Between May 2011 and March 2012, LBG sent 582,206 decision letters to PPI complainants agreeing to pay redress to them. However, a series of failures at LBG meant that not all customers were paid redress within the time frame set out by the FSA. During its investigation the FSA found that:

  • LBG failed to establish an adequate process for preparing redress payments to send to PPI complainants

  • LBG staff engaged on the redress process did not have the collective knowledge and experience to ensure that the process worked properly

  • There was ineffective tracking of PPI redress payments

  • LBG failed to monitor effectively whether it was making all payments of PPI redress promptly and did not gather enough information to identify failings

  • LBG’s approach to risk management when preparing redress payments was ineffective

LBG has since completed a comprehensive review of PPI redress payments to ensure that all customers who are due PPI redress have been paid the correct amount and compensated for any delay in receiving their payment. LBG agreed to settle with the FSA at an early stage of the investigation and therefore qualified for a 30% discount. Without the discount LBG would have been fined £6,164,327.

Press release: communication/pr/2013/017.shtml

Final Notice: lloyds-banking-group.pdf


18 February: Global financial and Eurozone reform: Five questions on a common theme. The FSA has published a speech by Lord Adair Turner (FSA Executive Chairman) at the Swedish Central Bank, on the major reforms made in global financial regulation and the Eurozone, and whether more radical reform is still required for lasting stability. In his speech, Adair Turner addressed five key questions underpinned by the common theme of the intellectual errors which lay behind both over-confidence in the benefits of pre-crisis financial innovation and intensity and the flawed design of the Eurozone project:

1. Are optimal capital ratios higher still than Basel III standards, and if so what should we do about it?

2. Should macro-prudential regulators seek to constrain aggregate economy wide leverage and if so how?

3. How much federalism is needed to make the Eurozone a sustainable and successful monetary union?

4. Are we unnecessarily worried about ‘fragmentation’ of global banking markets?

5. Should banks have the right to cross-border branching under European Union single market rules?

Lord Turner concluded that we cannot rely on free market forces to ensure that the level of leverage in the economy created by freely competitive banks is optimal, nor can we assume that cross-boarder capital flows will always achieve the efficient allocation of capital to ‘viable’ business opportunities. He argued that our decisions on micro and macro-prudential regulation, and on the design of the Eurozone single currency and the Eurozone single market, need to reflect the ways in which the impact of financial markets, debt contracts, fractional reserve banks, and short-term capital flows, diverge from that suggested by neoclassical assumptions of beneficial market completion.

Bulletins and newsletters:

22 February: Primary Market Bulletin Issue 5. The FSA has published the fifth edition of its Primary Market Bulletin, which presents new technical and procedural guidance for inclusion in the UKLA Knowledge Base and provides some general information updates from the UKLA. The proposed guidance relates to the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules. The bulletin sets out relevant background information and summarises the proposed guidance for 11 changes that the FSA is consulting on, including:

  • Amendments to two Procedural Notes

  • Introduction of five new Technical Notes

  • Amendments to three Technical Notes

  • The deletion of one Technical Note

Subject to feedback received, the FSA intends to publish the Notes in the UKLA Knowledge Base. Comments on the proposed guidance must be submitted via email by 8 April 2013.

Final notices:

See above in relation to the Final Notice for the Lloyds Banking Group.

Application refusals:

No new developments this week.

Approved person refusals:

No new developments this week.

Research publications:

No new developments this week.

Consumer research:

No new developments this week.

Other FSA publications:

22 February: Policy development (issue 156). The FSA has published issue 156 of its policy development update setting out: publications it has issued since the last edition, recent Handbook-related and other developments, other publications, and an updated timetable for forthcoming publications.

22 February: Handbook Notice 127. On 21 February 2013 the FSA Board made changes to the Handbook in two instruments, FSA 2013/4 and FSA 2013/5, which come into force on 1 April 2013 and 6 March 2013 respectively.

  • FSA 2013/4 makes a number or technical adjustments to fees under listing rules, clarifies existing practice, removes the 30% discount on fees paid by wholesale depositors and which is also applied to the Money Advice Service levy, and brings into line invoicing arrangements for certain fee-payers.

  • FSA 2013/5 makes changes to the Conduct of Business sourcebook (COBS) to clarify guidance related to rules on new business connected to with-profits funds (FSA 2013/5).

19 February: Handbook Release 134. The FSA has published its Handbook Release 134 containing pages to be inserted into the Handbook to bring it up to date. The changes are to the Prudential Sourcebook for Banks, Building Societies and Investment Firms, supervision, the Glossary of definitions and specialist sourcebooks on collective investment schemes and recognised investment exchanges and clearing houses.

19 February: Andrew Bailey appointed as Deputy Governor for Prudential Regulation and CEO of the Prudential Regulation Authority. The Chancellor of the Exchequer has announced that Andrew Bailey, Executive Director of the Bank of England and Managing Director of the FSA’s Prudential Business Unit, has been approved by Her Majesty the Queen to become Deputy Governor at the Bank of England responsible for Prudential Regulation and the Chief Executive Officer (CEO) of the Prudential Regulation Authority (PRA). As Deputy Governor for Prudential Regulation and CEO of the PRA, Andrew Bailey will also be a member of the Bank’s Court of Directors, the PRA Board, the Financial Policy Committee, and the Board of the Financial Conduct Authority.

18 February: Analysis of activity in the energy markets 2012. The FSA has published its annual analysis of activity in the energy markets for 2012. The findings are for the 12 months of trading to 31 July 2012. The analysis shows that there is no dominant route to market across the six asset classes under consideration, however, screen trades are broadly the preferred route to market in a number of the markets surveyed. Notably, the notional value of three of the six asset classes surveyed (European power, UK gas and UK emissions) has fallen. The biggest increase in notional market value of the period was in the European gas market that also saw the entry of an additional broker. The FSA also announced that it intends this to be the last annual analysis that it will produce, as the data presented in it is now available in a more complete form from other sources.

15 February: Consultation on guidance under section 234F relating to super complaints and section 234D references. The FSA has published two pieces of draft guidance relating to super complaints, as required by section 234F of the Financial Services and Markets Act 2000. The FSA is seeking feedback on this guidance on section 234C relating to super complaints, and section 234D relating to references. The respective pieces of guidance set out the FSA’s views about presenting a reasoned case for a super-complaint under section 234C or a reference under section 234D. Responses must be sent by email and received by 7 March 2013.

UKLA publications:

No new developments this week.

Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):

No new developments this week.

Financial Ombudsman Service (FOS):

No new developments this week.

London Stock Exchange (LSE):

No new developments this week.

Legislative updates

No new developments this week.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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