UK: Financial Services Industry Update - 6 March 2014

Last Updated: 8 April 2014
Article by Philip Mackay, Aidan Campbell, Karagh Gilliatt and Kyle Abrey

A look at developments in the financial services industry in the week to 6 March 2014.


PRA March 2014 occasional consultation paper

The PRA has issued an occasional consultation paper (CP5/14) proposing miscellaneous and minor amendments to certain of its rules and guidance, and to supervisory statement SS5/15. The four chapters in CP5/14 will focus on financial conglomerates capital adequacy; proposals to amend the supervisory statement on the internal capital adequacy assessment process (ICAAP) and the supervisory review and evaluation process (SREP) (SS5/13); Shari'ah-compliant liquid assets; and risk management of asset encumbrance. The appendices to CP5/14 provide further information and responses must be submitted by 15 April 2014.

4 March 2014


Bank of England internal investigation into alleged foreign exchange market manipulation

The Bank of England (BoE) has published a press release concerning its internal review into allegations that BoE officials condoned or were informed of manipulation in the foreign exchange (forex) market or the sharing of confidential client information. According to the press release, the BoE has found no evidence to suggest improper practice by BoE staff and no decision has been taken on what disciplinary action should be followed. The Oversight Committee of the Bank's Court of Directors will continue to lead the investigation and has appointed legal counsel to prepare a report available for publication in due course.

5 March 2014


No information to update.


FCA Handbook Notice 9

The FCA has published Handbook Notice 9, which details the changes made to the FCA Handbook under instruments made by the FCA Board on 27 February 2014. This includes the Alternative Investment Fund Managers Directive (Consequential Amendments) Instrument 2014 (FCA 2014/14) which amends the FCA Handbook to reflect the implementation of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD). Parts of the instrument came into force on 28 February 2014, with the remaining provisions coming into force on 1 April 2014 and on 22 July 2014.

3 March 2014


FCA March 2014 update on banks' reviews of sales of interest rate hedging products

The FCA has published its monthly update on banks' reviews of sales of interest rate hedging products (IRHPs). According to the webpage, the FCA have now included granular information about sophisticated customers, customers who have not opted in to the review and about the types of alternative products that some customers are being offered as redress. The FCA has also provided a table which sets out the banks' projections for completion of their reviews.

See also: table

5 March 2014

FCA call for inputs on payment systems regulation

The FCA has published a call for inputs requesting views on the current state of the UK payment systems landscape to help the new payments systems regulator (PSR) develop its regulatory approach and identify early priorities for action. Amongst other things, the call for inputs includes a list of the questions for respondents in chapter 3 and a table in chapter 4 detailing a suggestive timeline of key milestones relating to the PSR. Comments should be made by 15 April 2014.

See also: press release

5 March 2014

FCA reports on findings of thematic review of risks to customers from financial incentives

The FCA has published a report setting out the findings of a thematic review it has carried out to determine whether retail financial services firms are managing the risks to customers from financial incentives (TR14/4). The FCA has found that many firms have exhibited increased awareness and focus on financial incentives but there remain several areas for development. These include the need for closer monitoring of poor behaviour in face-to-face conversations; improving monitoring non-advised sales to ensure staff who are incentivised to sell do not give personal recommendations; and developing oversight of incentives used by appointed representatives.

4 March 2014

FCA reports on thematic work on firms' implementation of new platform rules

The FCA has issued the findings of its thematic review of how firms are preparing for the implementation of the new platforms rules in April 2014. The FCA has also provided a short video and presentation slides. Overall, the FCA's findings suggest that platforms seem well prepared for the introduction of the rules. One area its review focused on was whether or not platforms had given enough consideration to the impact of the changes on their consumers. It found that firms have put significant effort into trying to understand what the changes will mean for their consumers, while still considering the impact on their own business models.

See also: presentation slides

3 March 2014

New FCA webpage on payment systems regulator and payment systems regulation timeline

The FCA has published a new webpage containing information about the new payment systems regulator and a payment systems regulation timeline. For example, the webpage notes that the new payments systems regulatory will be established in April 2014 and incorporated as a subsidiary of the FCA. It will be based in the FCA's offices and the FCA plans to publish a call for inputs on payments systems in March 2014. The useful timeline sets out the steps that will be taken prior to the operational launch in April 2015.

See also: payment systems regulation timeline

3 March 2014

FCA announces CRD IV reporting test environment

The FCA has updated its website to announcing that a reporting test environment is available for firms submitting reports relating to CRD IV (common reporting or COREP). According to the website, all firms affected by CRD IV can register with the FCA, through, to take advantage of the test environment for their reports. The purpose of the test environment is to ensure that the technical construction and the software used by firms are compatible with the FCA's systems.

3 March 2014


No information to update.


No information to update.


No information to update.


No information to update.


No information to update.


BoE writes to Treasury Committee on remuneration code and UK banks' exposure to China

Mark Carney, Governor of the BoE, has written to Andrew Tyrie, Chairman of the House of Commons Treasury Committee, providing information on the PRA's remuneration code and UK banks' exposures to China. The letter explains that the PRA intends to consult on the Parliamentary Commission on Banking Standards (PCBS's) suggestions on amending the existing remuneration code to require firms to apply claw back to "vested" variable remuneration in early March 2014. The PRA also intends to consult on the implementation of a revised remuneration code in light of the PCBS's wider recommendations on remuneration in August 2014.

4 March 2014

IMA Updates (

IMA welcomes the International Forum of Sovereign Wealth Funds to London

The IMA has issued a press release welcoming the news that the International Forum of Sovereign Wealth Funds (IFSWF) is to relocate its Secretariat in London, the world's most international market for investment management. IMA Chief Executive, Daniel Godfrey, commented: "We're delighted that the IFSWF Secretariat will be moving to London, which will help to enrich and expand the international voices and viewpoints represented in our financial centre. Many sovereign wealth funds already appoint UK-based investment managers and this move will help to strengthen the collaboration between sovereign funds and UK investment managers."

6 March 2014

Equity funds remain the best-sellers for tenth consecutive month

The IMA has published its monthly statistics for January 2014 which reveal that net retail sales were over £1bn for the tenth consecutive month at £1.1 billion. Equity was the best-selling asset class, also for the tenth successive month with net retail sales of £464 million and the UK and Europe were the best-selling regions for equity funds. In addition, the statistics indicated that Targeted Absolute Return was the top-selling IMA sector with net retail sales of £343 million – the highest since December 2009.

4 March 2014


No information to update.


No information to update.


Consumer Credit Act 1974 (Green Deal) (Amendment) Order 2014 published

The Consumer Credit Act 1974 (Green Deal) (Amendment) Order 2014 (SI 2014/436) and accompanying explanatory memorandum have been published. The Order makes amendments to the Consumer Credit Act 1974 (CCA) intended to clarify the treatment of Green Deal Plans under the CCA. For example, sections 189B to 189D set out the circumstances in which a Green Deal Plan is a consumer credit agreement and the persons who are to be treated being the creditor and the debtor in relation to a Green Deal Plan. The Order applies to England, Wales and Scotland only.

See also: explanatory memorandum

3 March 2014


European Commission adopts delegated Regulation on criteria to identify material risk takers for CRD IV remuneration purposes

The European Commission published the text of the delegated Regulation it has adopted setting out Regulatory Technical Standards (RTS) on criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile ("material risk takers"). The RTS identify material risk takers at firms within the scope of CRD IV Directive (2013/36/EU) (CRD IV) and the Capital Requirements Regulation (Regulation 575/2013) (CRR)). In broad terms, CRD IV firms are credit institutions and investment firms. Material risk takers at these firms are subject to the CRD IV requirements on variable remuneration, including bonuses. Staff will be identified as material risk takers based on 15 standard qualitative criteria focusing on role and decision-making powers and standard quantitative criteria in relation to levels of total remuneration.

See also: press release

4 March 2014

European Commission response to House of Commons reasoned opinion on subsidiarity concerns on proposed Benchmark Regulation

The UK Parliament has published the European Commission's response to the House of Commons' reasoned opinion in December 2013 that the proposed Benchmark Regulation does not comply with the principle of subsidiarity. The Commission has responded noting it had provided adequate reasons as to why the proposal can be better achieved at EU level both in the explanatory memorandum and the impact assessment accompanying the proposal. In conclusion, the Commission states that the proposal is justified in terms of subsidiarity and that a European framework for the provision and use of benchmarks is necessary to ensure the robustness and reliability of benchmarks provided and used in the EU and to prevent manipulation.

3 March 2014


Council of EU publishes adopted text of recast DGSD

The Council of the EU has published the text of the proposed Directive recasting the Deposit Guarantee Schemes Directive (94/19/EC) (recast DGSD) which it adopted on 3 March 2014. The final version of its statement of its reasons for adoption has also been published.

The European Parliament will now to able to adopt the DGSD without amendment at second reading at its plenary session between 14 and 17 April 2014. The new Directive will enter into force once it has been signed by both the Parliament and the Council and published in the Official Journal of the EU (OJ).

See also: final version statement

5 March 2014

ECON statement on progress of negotiations on SRM Regulation

The European Parliament has published a statement made by Sharon Bowles, the chair of the Committee on Economic and Monetary Affairs (ECON), and other leading ECON members on the progress of negotiations on the proposed Regulation establishing a single resolution mechanism (SRM Regulation). In the statement, the Council voices regret that it did not "improve its position" on the SRM Regulation in its meeting on 18 February as the European Economic and Financial Affairs Council (ECOFIN) and identifies the issues on which the Council and the Parliament remain "far apart", including the decision-making process and single resolution fund.

5 March 2014

Council of EU note on IMD2 following European Parliament's adoption of amendments

The Council of the EU has published an information note (dated 3 March 2014) from its General Secretariat to the Permanent Representatives Committee (Part 2) (COREPER) regarding the outcome of the European Parliament's first reading of the proposed Directive amending the Insurance Mediation Directive (2002/92/EC) (IMD) (known as IMD2). The information note states that Parliament adopted six amendments in plenary. The text of the amendments is set out in the Annex to the note.

5 March 2014

Council of the EU Presidency compromise proposal on MLD4 dated 28 January 2014

The Council of the EU has published a compromise proposal (5786/14) (dated 28 January 2014) on the European Commission's proposed Directive to amend and replace the Third Money Laundering Directive (2005/60/EC) (MLD3 or 3MLD) in relation to the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (known as the Fourth Money Laundering Directive or MLD4).

3 March 2014

ECON and LIBE publish report on MLD4

The European Parliament's Committee on Economic and Monetary Affairs (ECON) and its Committee on Civil Liberties, Justice and Home Affairs (LIBE) have published a report on the MLD4.

The report sets out improvements to the text including clarification of money laundering risk evaluation at EU level and modification to the operations of business registers in member states so that the registers include beneficial ownership information that would help both authorities and businesses to verify those persons that actually gain from the business transactions. The committees' amendments will be put to a vote by the Parliament at its 10 to 13 March 2014 plenary session.

3 March 2014


No information to update.


EBA report on impact of differences in CRR and Basel III leverage ratio definitions

The EBA has published a report setting out a policy analysis and quantitative impact assessment of aligning the current CRR definition of the leverage ratio exposure to the Basel III standard published by the Basel Committee on Banking Supervision (BCBS) in January 2014. The report sets out the main differences between the current CRR leverage ratio and the Basel II ratio, with a view to informing the European Commission for the purpose of its delegated act on the definitions for the leverage ratio as per article 456(1)(j) of the CRR. The report is divided into useful chapters highlighting the main events of the previous years, caveats on methodology and detail policy analyses and quantitative impact assessments.

See also: press release

5 March 2014

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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