UK: Financial Regulatory Developments (FReD) - April 12, 2013

Last Updated: 16 May 2013


  • ESMA publishes 2013 regulatory work programme
  • Commission on Banking Standards publishes HBOS report
  • PRA consults on fees
  • FCA consults on fees


Financial Stability Board (FSB)

FSB launches peer review on overreliance on CRAs: FSB launches peer review on overreliance on CRAs: FSB is undertaking a thematic peer review into the application of the October 2010 FSB Principles for reducing mechanistic reliance on credit rating agencies' (CRAs) ratings. The review will focus on the experience at assessing, removing and replacing references to CRAs in laws and regulation, and on how national authorities are encouraging firms to develop and disclose their own capacity for credit risk assessment and due diligence. (Source: Thematic Peer Review on Reducing Reliance on CRAs – Questionnaire )

Contact: Edward Hickman or Lauren Donnelly

Council publishes RRD compromise text: The Presidency of the Council has now released the 14 February compromise text on the bank Recovery and Resolution Directive (RRD). (Source: RRD Compromise Text)

Contact: Rosali Pretorius or Andrew Barber

Council publishes MiFID 2 compromise text: The latest compromise text for the recast Markets in Financial Instruments Directive (MiFID 2) deletes article 16(a), which required that trades in shares admitted to trading took place on a regulated market, multilateral trading facility, organised trading facility or systematic internaliser. The provisions on consolidated tape have been reinstated. (Source: MiFID 2 Presidency Compromise)

Contact: Rosali Pretorius or James Brennan

European Parliament (EP)

EP postpones voting dates: EP has postponed its plenary sitting date for voting on the Mortgage Credit Directive (MCD) to 10 June, and for voting on the Central Securities Depositories Regulation (CSDR) to 8 October. The vote on the Directive on Criminal Sanctions for Market Abuse (CSMAD) and the Market Abuse Regulation (MAR) will take place on 2 July, while the vote on the Single Supervisory Mechanism (SSM) remains scheduled for 21 May.(Source: OEIL File for MCD, OEIL File for CSDR, OEIL File for MAR and OEIL File for SSM)

Contact: Emma Radmore or Juan Jose Manchado

European Commission (Commission)

Commission investigates inter-bank fees: The Commission has started formal proceedings to investigate whether MasterCard may be hindering competition in the European Economic Area with regard to payment cards. Its investigation will consider three specific aspects of how inter-bank fees operate when MasterCards are used. (Source: Commission Investigates Inter-Bank Fees)

Contact: Alex Haffner or Andrew Barber

European Securities and Markets Authority (ESMA)

ESMA publishes 2013 regulatory work programme: ESMA's 2013 regulatory work programme, which ties in with its work programme published in October 2012, lists 199 regulatory initiatives. The initiatives follow key legislative instruments, and relate mainly to:

  • the proposed new MiFID 2 and Regulation (MiFIR);
  • the proposed MAR;
  • the proposed CSDR;
  • the European Market Infrastructure Regulation (EMIR); and
  • investment funds legislation.

(Source: ESMA Publishes 2013 Regulatory Work Programme)

Contact: Emma Radmore or Juan Jose Manchado

ESMA publishes market making exemption translations: ESMA has published the official translations of its guidelines on exemptions for market making and primary dealers under the Short Selling Regulation (SSR). National supervisors now have two months to confirm to ESMA that they intend to comply with the guidelines or to explain any way in which they will not. ESMA expects supervisors to comply and wants the guidelines to become effective from 2 June. (Source: ESMA Publishes Market Making Exemption Translations)

Contact: Matthew Sapte or Lauren Donnelly

European Insurance and Occupational Pensions Authority (EIOPA)

EIOPA consults on complaints-handling guidelines: EIOPA is consulting on a set of guidelines for complaints-handling by insurance intermediaries. The guidelines complement existing guidance that applies to insurers and are intended to address the current asymmetry of procedures depending on whether customers complain to an insurer or an intermediary. EIOPA proposes a proportionate approach to the systems and controls intermediaries should have in place, depending on the nature and scale of their business. Consultation closes on 28 June and EIOPA wants to have the standards in place, on the usual "comply or explain" basis, by the autumn. (Source: EIOPA Consults on Complaints-Handling Guidelines)

Contact: Emma Radmore or Andrew Barber

EIOPA consults on long-term investments: EIOPA has published a discussion paper presenting its preliminary findings on its enquiry into the calibration and design of regulatory capital requirements for insurers' long-term investments. The asset classes covered in the analysis include infrastructure and projects, SMEs and social businesses and securitisations. A final report in July will take into account the work on long-term guarantees, and together they will shape a possible reform of Solvency 2. (Source: Discussion Paper on Standard Formula Design and Calibration for Certain Long-Term Investments)

Contact: Rosali Pretorius or Edward Hickman

Bank for International Settlements (BIS) / Basel Committee on Banking Supervision (Basel Committee)

Basel Committee reports on Basel implementation: As part of its Regulatory Consistency Assessment Programme, the Basel Committee has published tables showing the status of adoption of Basel regulations as of the end of March 2013. The EU, Indonesia, South Korea, Turkey and the US are the only member jurisdictions which have not yet published final rules to adopt Basel 3. (Source: Progress Report on Implementation of the Basel Regulatory Framework)

Contact: Rosali Pretorius or Juan Jose Manchado



Commission on Banking Standards publishes HBOS report: The Parliamentary Commission on Banking Standards has published its report into the failures that led to HBOS's demise. Among other failures, the report points at weaknesses in HBOS's federal model of internal control, where the assessment of exposure to future credit risks was dominated by the executives of the individual divisions. The report also criticises the role of the regulator, which should have engaged its senior leadership in HBOS's supervision and considered the fundamental risks of the bank. The report recommends that the regulator consider barring the former leaders of HBOS from undertaking any future role in the financial sector. Only one so far has faced regulatory sanction, while the rest have only seen their Approved Person status lapse. The Commission on Banking Standards will propose, in its final report, measures to make directors of failed financial institutions accountable. (Source: Failure of HBOS Linked to "Colossal Failure of Senior Management and the Board" )

Contact: Andrew Barber or Katharine Harle

Department for Business Innovation and Skills (DBIS)

Unfair surcharges regulations take effect: DBIS has reminded firms that the ban on excessive charges for people who use debit or credit cards to buy goods and services took effect from 6 April. The Regulations require any payment surcharges to be representative of the actual processing cost involved and require traders to ensure they do not charge more than this. (Source: Consumer Rights (Payment Surcharges) Regulations 2012 Take Effect)

Contact: Andrew Barber or Emma Radmore

HM Treasury (Treasury)

Treasury updates sanctions: Treasury has updated its sanctions lists in relation to Zimbabwe, Al-Qaida and the Democratic People's Republic of Korea. The changes relating to Zimbabwe effectively suspend most of the current designations against persons and entities under that regime. (Source: The Zimbabwe (Financial Sanctions) (Suspension) Regulations 2013) and Treasury Financial Sanctions Index)

Contact: Emma Radmore or Andrew Barber


Bank of England (BoE) / Financial Policy Committee (FPC)

FPC publishes record of March meeting: FPC has published the record of its meeting held on 19 March. Together with its recommendations to strengthen UK banks' capital along stricter risk weights, asset value and redress calculations, FPC also asked PRA to:

  • apply higher capital requirements where there is high leverage and/or concentration of exposures to vulnerable assets;
  • ensure that contingent capital is clearly capable of absorbing losses in a going concern;
  • ensure that UK banks have plans to transition to Basel 3 requirements; and
  • undertake regular stress testing of the UK banking system.

Among extant recommendations, FPC noted it had already encouraged banks to report their leverage ratios from the beginning of 2013. (Source: Record of the FPC Meeting)

Contact: Rosali Pretorius or Juan Jose Manchado

Financial Conduct Authority (FCA)

FCA consults on fees: FCA has published its annual funding requirement (AFR) for 2013-14 and its proposed fees for firms. Overall the AFR for FCA is £432.1 million and the combined FCA/PRA AFR is £646.3 million. For the fourth year running the gross minimum fee for firms (currently paid by 42% of FCA firms) will remain unchanged at £1,000. Medium-sized firms' fees will increase proportionately to their business. Larger firms will see the greatest increases which reflect the resources FCA needs to apply to conduct and prudential supervision of high impact firms. Its fees for the supervision of the conduct of dual-regulated firms will form a major part of the fee base. It has introduced a new category for prudential supervision levies for solo regulated firms. FCA plans to channel most of the fees towards:

  • focusing on good consumer outcomes;
  • tackling market abuse;
  • promoting competition within the industry;
  • addressing ongoing misconduct; and
  • carrying forward initiatives such as the retail distribution and mortgage market reviews, and continuing to engage with EU institutions.

FCA asks for comments by 9 June. (Source: FCA Consults on Fees CP13/1**)

Contact: Rosali Pretorius or Emma Radmore

FCA updates business plan: FCA has published an addendum to its business plan originally published on 25 March. The addendum changes the date for completion of the review of financial incentives to early 2014. (Source: FCA Updates Business Plan)

Contact: Emma Radmore or Juan Jose Manchado

FCA publishes claims management MoU: FCA has published its Memorandum of Understanding (MoU) with the Claims Management Regulator. (Source: FCA/CMR MoU)

Contact: Emma Radmore or Andrew Barber

FCA updates on authorisations: FCA has published further updates explaining how it will require applicants to email application forms using a new facility as well as providing paper copies, and a chart helping applicants to assess whether their proposed activities will require them to become authorised as banks, or whether a less onerous alternative would be more appropriate. (Source: FCA Updates on Authorisation Process and FCA Chart on Banking Business)

Contact: Emma Radmore or Andrew Barber

FCA advises on Cyprus banks: FCA has confirmed that Laiki Bank cash deposits in the UK have been transferred to the Bank of Cyprus UK. This means Laiki Bank UK customers with current accounts or savings accounts in credit can access their money as normal. Laiki Bank UK mortgage, credit card and loan customers as well as accounts in overdraft have been transferred to the Bank of Cyprus, Cyprus. FCA's guidance explains what these customers should do now. (Source: FCA Advises on Cyprus Banks)

Contact: Rosali Pretorius or James Brennan

FCA signs MoU with LSB: The MoU between FCA and the Lending Standards Board (LSB) addresses co-operation between the supervisors where they have mutual regulatory interest in certain areas related to overdrafts and credit cards. (Source: MoU between FCA and LSB)

Contact: Andrew Barber or Emma Radmore

FCA investigates IT failures: FCA has announced it has started an enforcement investigation into the IT glitches at RBS in June and July 2012. (Source: FCA Investigates IT Failures)

Contact: Emma Radmore or Andrew Barber

Prudential Regulation Authority (PRA)

PRA consults on fees: PRA's consultation on fees, like FCA's, confirms that some firms will still pay the minimum amount. It sets out the PRA fee-blocks and the amounts it will allocate to them, and confirms that some firms will need to pay half their fee allocation up front. Deposit acceptors will see the largest increases and be the most costly category. It will also continue the special project fee for Solvency 2 implementation costs. PRA says it will not apply any "financial penalty" discount, as it has not yet imposed any financial penalties. However, it is consulting on introducing this discount in future. PRA asks for comments by 9 June. (Source: PRA Consults on Fees)

Contact: Rosali Pretorius or Emma Radmore

PRA updates approved persons forms: PRA has updated several forms relating to approved persons. (Source: PRA Updates Approved Persons Forms)

Contact: Emma Radmore or Andrew Barber


London Stock Exchange Group (LSEG)

LSEG acquisition of LCH.Clearnet advances towards completion: LSEG and LCH.Clearnet have announced that the level of acceptance by LCH.Clearnet shareholders of LSEG's revised offer has surpassed the maximum possible shareholding by LSEG, which is set at 57.8% of LCH.Clearnet share capital. Completion of the revised offer is expected in the second quarter of 2013. (Source: Closing of LSEG's Offer for LCH.Clearnet)

Contact: Rosali Pretorius or James Brennan


Infoline AIFMD Level 2 Implementation: Rosali Pretorius is leading a workshop at Infoline's conference on implementation of the AIFMD on 22 April.

The Effects of April Fools' Day: How are you adapting to PRA and FCA? Our Financial Services and Funds and Financial Markets Dispute Resolution teams are pleased to offer our clients and contacts a free seminar we are running with Financial Services Compliance on 30 April. Please register soon as numbers are limited.

Compliance Management and Practice: Emma Radmore and Andrew Barber are speaking at the Compliance Register's training course on Compliance Management and Practice on 6 June. This one-day intensive training course is limited to 12 delegates. Dentons clients and contacts can take advantage of a discounted price of £290 + VAT by quoting "Dentons" in a covering email.

Private Equity Regulation, Tax and Accounting: Rosali Pretorius is speaking on Regulation Affecting Investors' Ability to Invest in Private Equity at the Infoline conference on Private Equity Regulation, Tax and Accounting on 30 April to 2 May 2013. FReD readers can register for a 20% discount by quoting VIP Code: KM62569EMSPK.


Investment Services and Markets Reform

Don't be an April Fool: prepare for FSMA at legal cut-over: Emma Radmore has written an article for Compliance Monitor on preparations for the change in UK regulatory structure.

Last Lap to Legal Cut-Over: Emma Radmore has written an article for Compliance Monitor on FSA's first two consultations on preparing for the new regulatory regime.

Enforcement and Litigation

Having Your Cake and Eating It: FOS Award is no Bar to Issuing Proceedings: Katharine Harle has written an article for Compliance Monitor on the High Court award in Clark and another v. In Focus Asset Management & Tax Solutions Ltd.

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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