UK: Financial Regulatory Developments (FReD) - 26 April, 2013

Last Updated: 17 May 2013


  • FSB updates on regulatory reform 
  • Council and EP agree MCD 
  • Lawmakers write to Lew on extra-territoriality 
  • UK raises legal challenge against FTT 
  • FCA publishes regulatory failure approach 
  • PRA publishes investigations policy

European Union and International

Financial Stability Board (FSB)

FSB updates on regulatory reform: FSB has reported to G20 on the progress of the regulatory reform programme. As usual, it summarises progress in each priority area. This report has particular emphasis on reforming resolution regimes and resolution planning for Global Systemically Important Financial Institutions (G-SIFIs). The G20 finance ministers and central bank governors welcomed the report. (Source: FSB Updates on Regulatory Reform)

Contact: Rosali Pretorius or Juan Jose Manchado

FSB announces progress in G-SIB data collection: FSB has announced the rollout of the framework for harmonised collection and sharing of data on interconnectedness of global systemic important banks (G-SIBs). Participating regulators will have access to the data through an international data hub hosted by the Bank for International Settlements (BIS). (Source: FSB Data Gaps Initiative on a Common Data Template for G-SIBs)

Contact: Rosali Pretorius or Andrew Barber 

Council of the European Union (Council)

Council confirms support to SSM agreement: The Council has approved the agreement reached with EP on the regulations establishing a Single Supervisory Mechanism (SSM) for the European Union. The Irish Presidency confirmed its delight at the agreement and said the formal agreement is accompanied by a political declaration that reaffirms Member States' commitment to urgent completion of the banking union. (Source: Bank Supervision: Council Confirms Agreement with EP)

Contact: Emma Radmore or James Brennan

Council and EP agree MCD: The Council and EP have reached trilogue agreement on the Mortgage Credit Directive (MCD). In their respective statements they have highlighted that the MCD will create the framework for a European-wide mortgage market accessible to firms via a European passport. The Directive establishes, among other obligations, that of providing customers with a standardised information sheet (ESIS) and of disclosing links between intermediaries and creditors, so as a general ban on tying practices. The EP plenary and Member States must now vote through the agreed text. (Source:  Statement by Commissioner Michel Barnier Following the Agreement in Trilogue on the Mortgages Directive and Home loans: Better Protection for Buyers)

Contact: Andrew Barber or Emma Radmore

European Commission (Commission)

Commission proposes ABC policy disclosure: The Commission has published a proposal to amend accounting legislation for large companies to improve disclosure on social and environmental matters. Among the policies, risks and results companies will have to disclose are those on anti-bribery and corruption. The proposals would apply to companies with more than 500 employees. The Commission plans a "comply or explain" approach so that companies which have no policies in a particular area will have to explain why they do not. (Source: Commission Proposes ABC Policy Disclosure)

Contact: Emma Radmore or Dominic Sedghi

Lawmakers write to Lew on extra-territoriality: Several finance ministers and the EU commissioner for the internal market have written to Jack Lew, US Treasury Secretary, urging the US to respect principles for cross-border regulation of OTC derivatives. They argue for substituted compliance as a means to avoid duplicative or conflicting requirements affecting cross-border OTC activity. Imposition of registration requirements on foreign firms should be limited to specific cases where it is justified to require so. (Source: Cross-border OTC Derivatives Regulation)

Contact: Rosali Pretorius or James Brennan

Commission to adopt bank accounts proposal: The Commission is due to adopt a proposal for a Directive on bank accounts on 8 May. (Source: Commission to Adopt Bank Accounts Proposal

Contact: Andrew Barber or Emma Radmore

European Parliament (EP)

EP publishes texts of CRD4 agreement: EP has published the text of the final version of the Capital Requirements Directive and Regulation (CRD4/CRR) agreed with EP in March. (Source:  CRD4 Text and CRR Text)

Contact: Rosali Pretorius or Juan Jose Manchado

UK Government and Parliament

UK Government

UK raises legal challenge against FTT: The UK Government has initiated proceedings before the Court of Justice of the European Union against the Financial Transactions Tax (FTT). The Swedish Parliament has also sent an opinion to the European institutions stating that the FTT proposals breach the subsidiarity principle. (Source:  TheCityUK Supports UK Government's Legal Challenge on Financial Transaction Tax and Reasoned Opinion by the Swedish Parliament on the Proposal for an FTT)

Contact: Rosali Pretorius or Juan Jose Manchado


Banking Reform Bill finishes Committee stage: The Financial Services (Banking Reform) Bill has finished its Committee stage in the House of Commons and will now move to the report stage. Parliament has published a version of the Bill as amended in the Public Bill Committee. (Source:  Banking Reform Bill Finishes Committee Stage and Banking Reform Bill as amended in Public Bill Committee)

Contact: Andrew Barber or Emma Radmore

HM Treasury (Treasury)

Treasury publishes interim SAR report: Treasury has published the interim report resulting from the first phase of the independent review of the Investment Bank Special Administration Regulations (SAR) 2011. The report finds that:

  • the SAR has benefitted the three firms using it so far, and should therefore be retained;
  • the statutory objective of returning client assets should extend to their transfer, so that it could be fulfilled by transferring clients' relationships and positions;
  • the bar date mechanism should also be available for setting a deadline to the filing of client money claims;
  • administrators should have limited immunity;
  • firms need to improve the quality of record-keeping, reconciliation and clarity as to entitlement to assets; and
  • there could be quicker payment by the Financial Service Compensation Scheme, or its funds could be used to facilitate transfers of business to another firm.

The final report will be published in July 2013. It will analyse the interaction between the SAR review and FCA's review of the Client Assets Sourcebook (CASS) and the segregation and porting provisions under the European Market Infrastructure Regulation (EMIR). Other areas for further exploration in the final report include whether client claims should have preference over unsecured creditors and what lessons can be learnt from Lehman and MF Global administrations and related case law. (Source: Review of Investment Bank Special Administration Regulations 2011: by Peter Bloxham)

Contact: Rosali Pretorius or Andrew Barber

Bank of England (BoE)

Tucker speaks on CCP safety:CCPs in Evolving Capital Markets

Contact: Rosali Pretorius or James Brennan

UK Financial Services and Markets Regulators

Financial Conduct Authority (FCA)

FCA publishes regulatory failure approach: FCA has published its approach to investigating and reporting on regulatory failure. The paper makes clear the circumstances in which FCA will investigate possible instances of failure and report to Treasury. The Financial Services Act 2012 (FS Act) imposed two conditions which, if met, would mean FCA should launch an investigation. These are:

  • a significant failure to secure appropriate consumer protection, or a failure that could have had a significant adverse impact on UK financial system integrity or market competition; and
  • a serious failure of the regulatory system or of FCA might have caused the events, or made them worse.

The report looks at what a regulatory failure is, the powers of Treasury to require reports and FCA's right to suspend or postpone an investigation. It also sets out what the report must include, such as the lessons FCA could learn. PRA has separately published its approach to meeting these requirements (see below). (Source: FCA Publishes Regulatory Failure Approach)

Contact: Felicity Ewing or Katharine Harle

FCA charges over land banking: FCA has charged eight men over the illegal activities of three land banking companies between 2008 and 2011. The charges follow previous action from the Financial Services Authority and include offences arising from carrying on a regulated activity without authorisation. (Source: FCA Charges over Land Banking)

Contact: Andrew Barber or Emma Radmore

FCA bans SIPP director: FCA has censured and banned the director of a SIPP scheme operator for breaches of Statements of Principle 6 and 7. FCA found that he disregarded compliance issues, including the requirements under the CASS and the need to conduct due diligence on the assets the SIPP was invested in. (Source: Final Notice – Kevin Peter Wells)

Contact: Emma Radmore or Andrew Barber

FCA agrees bank action on unclear SVR increase: FCA has agreed with Santander UK plc that the bank will contact mortgage customers about unclear information it gave before it increased the cap on its standard variable rate (SVR). The change happened in 2008. The letters will explain what happened, what should have happened and how customers should complain if they feel they have lost out financially. FCA commented that only a small number of those contacted are likely to be entitled to redress. (Source: FCA Agrees Bank Action on Unclear SVR Increase)

Contact: Andrew Barber or Emma Radmore

FCA speaks on culture: Clive Adamson spoke on how culture should drive the behaviour of firms and how firms can incentivise and encourage their employees to achieve the right regulatory outcomes. (Source: FCA Speaks on Culture)

Contact: Emma Radmore or Andrew Barber

FCA proposes guidance on control of trading venue members: FCA is consulting on proposed guidance on the oversight by recognised investment exchanges and multilateral trading facilities of the systems and controls their members use to comply with the venues' rulebooks. It asks for responses by 21 May. (Source: Special Member Controls Edition)

Contact: Rosali Pretorius or James Brennan

Prudential Regulation Authority (PRA)

PRA publishes investigations policy: PRA has published a Policy Statement on conducting statutory investigations. The policy explains:

  • when PRA is required to undertake these investigations;
  • its objectives and when these trigger the requirement for it to investigate regulatory failure;
  • how it will conduct investigations;
  • when PRA may postpone or suspend investigations; and
  • the involvement of Treasury in matters of public interest and Treasury's powers to give directions to PRA.

(Source: PRA Policy Statement: Conducting Statutory Investigations)

Contact: Felicity Ewing or Katharine Harle

Financial Services Compensation Scheme (FSCS)

FSCS sets 2013/14 levy: FSCS has proposed its levy for 2013/14. The levy will be £285 million, which is lower than last year. Only the investment intermediation class will face an increased levy with other classes paying less. (Source: FSCS Sets 2013/14 Levy)

Contact: Emma Radmore or Juan Jose Manchado

Other Regulators/Authorities/Industry Associations

International Organisation of Securities Commissions (IOSCO)

IOSCO and BIS to monitor principles or market infrastructures: IOSCO and the Committee on Payment and Settlement Systems (CPSS) of BIS have launched an assessment of member jurisdictions' implementation of the Principles for Financial Market Infrastructures (PFMIs), adopted by IOSCO and CPSS in April 2012. (Source: CPSS and IOSCO Monitor the Implementation of PFMIs)

Contact: Rosali Pretorius or James Brennan

IOSCO consults on retail structured products: IOSCO is consulting on a regulatory toolkit for IOSCO members to use when regulating retail structured products (RSP) such as structured notes, funds and deposits. The toolkit covers potential regulation of:

  • an overall regulatory approach to RSP;
  • RSP design and issuance;
  • RSP disclosure and marketing;
  • RSP distribution; and
  • post-sale practices.

IOSCO asks for comments by 13 June. (Source: IOSCO Consults on RSPs)

Contact: Andrew Barber or Emma Radmore

IOSCO updates market manipulation report: IOSCO has updated its report on investigating and prosecuting market manipulation to address how technological changes have led to new types of manipulative conduct. The report also considers the likely effects of the changes to the Market Abuse Directive in widening the scope of the current EU market abuse regime. IOSCO also issued its final report on the technological challenges to effective market surveillance. (Source: IOSCO Updates Market Manipulation Report and IOSCO Reports on Technological Challenges)

Contact: Rosali Pretorius or Tom Harkus 

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