UK: Financial Services Industry Update - 20 March 2014

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

PRA POLICY DOCUMENTS (www.bankofengland.co.uk)

PRA consults on calculation of technical provisions and the use of internal models for general insurers under Solvency II

The PRA has published a consultation paper on the calculation of technical provisions and the use of internal models for general insurers under the Solvency II Directive (2009/138/EC) (CP7/14). CP7/14 looks for comments on a draft supervisory statement that is aimed at firms and groups carrying on general insurance business within the scope of Solvency II. The consultation period ends on 14 April 2014.

17 March 2014

PRA OTHER PUBLICATIONS (www.bankofengland.co.uk)

Bank of England launches strategic plan

The Bank of England (BoE) has published a press release announcing that it has launched its strategic plan following a review lasting six months. The plan will be crucial to the conduct of the BoE's day-to-day business and the execution of its expanded policy responsibilities. Implementation is planned over the next three years and provides a rigorous agenda to transform the BoE into a single, unified institution. In order to assist implementation, fifteen core initiatives have been identified and a number of changes to the BoE's organisational structure have been approved and will take effect on 1 June 2014.

19 March 2014

Nemat Shafik appointed as BoE Deputy Governor for Markets and Banking

The BoE has published a press release reporting that George Osborne, Chancellor of the Exchequer and Mark Carney, BoE Governor, have agreed to appoint Dr Nemat Shafik as BoE Deputy Governor for Markets and Banking. Her tenure will last for 5 years from 1 August 2014 and her role will predominately focus on leading the BoE's work to build fair, efficient and effective financial markets and reviewing and strengthening the BoE's markets and banking areas.

17 March 2014

BoE supervision of financial market infrastructures annual report 2014

The BoE has published its annual report on the supervision of financial market infrastructures (FMIs). It is the first such report since the BoE assumed responsibilities for central counterparties (CCPs) and securities settlement systems in April 2013. Amongst other things, the BoE will prioritise its involvement in credit and liquidity risk, recovering and resolution, operational risk management and the new payments systems regulator (PSR).

17 March 2014

PRA article on role of business model analysis in the supervision of insurers

The BoE has published an article produced by the PRA on the role of business model analysis (BMA) in the supervision of insurers. The PRA uses BMA as part of its forward-looking supervisory approach to help ensure that evolving risks are recognised by insurance companies. The article explains the use of BMA using case studies based on the rise of price comparison websites in the motor insurance markets and the growth of non-standard annuity products for life insurers.

14 March 2014

PRA SUPERVISORY NOTICES/FINAL NOTICES (www.bankofengland.co.uk)

No information to update.

FCA POLICY DOCUMENTS (www.fca.org.uk)

FCA issues modification by consent relating to COBS product information rules

The FCA has issued a modification by consent relating to rules 14.2.16 and 14.2.17 in the Conduct of Business sourcebook (COBS). The rules in COBS 14.2 relate to providing product information to clients. COBS 14.2.16R and 14.2.17R provide for exceptions to the timing rules in connection with distance contracts and voice telephony communications.

20 March 2014

FCA OTHER PUBLICATIONS (www.fca.org.uk)

FCA review findings on delivering independent advice post RDR

The FCA has published a thematic review report, on supervising retail advice: delivering independent advice (TR14/5), as part of its thematic work looking at firms' implementation of certain aspects of the Retail Distribution Review (RDR) requirements. Chapter 4 of the report provides guidance to firms clarifying key aspects of the independence requirements, to help firms wishing to call themselves independent ensure they meet the standard. Amongst other things, the FCA sets out examples of good and poor practice in providing advice on all retail investment products (RIPs) in a relevant market and using panels and platforms, including using multiple platforms.

20 March 2014

FCA winds up boiler room

The FCA has published a press release announcing that the High Court has made a winding up order against First Capital Wealth Ltd (FCW). FCW had been promoting the sale of membership shares in a company called Berkeley Brookes LLC without FCA authorisation. FCW adopted antagonistic and tireless sales tactics and made unsolicited calls to investors that, among other things, claimed investors would receive guaranteed returns of between 25% and 128% following investments of one to three years. It is believed that between June and November 2013, 27 investors together invested approximately £660,000.

20 March 2014

Four new guides for firms on FCA's supervisory approach

The FCA has published four new guides for firms on its approach to supervision for C1 groups; C2 firms and groups; C3 firms and C4 firms. The guidance explains the classification of firms and note that they bring together, and build on, previously published information, setting out what firms can expect from the FCA in terms of supervision, and what the FCA expects from firms, expanding on the details in certain areas.

See also: The FCA's approach to supervision for C1 groups; The FCA's approach to supervision for C2 firms and groups; The FCA's approach to supervision for C3 firms; and The FCA's approach to supervision for C4 firms

19 March 2014

FCA reminds firms that reporting to trade repositories under EMIR does not replace their transaction reporting obligations

The FCA has updated its transaction reporting webpage to refer to the obligation under EMIR (the Regulation on OTC derivative transactions, central counterparties (CCPs) and trade repositories (Regulation 648/2012)) to report to trade repositories. This reporting obligation came into effect on 12 February 2014. The FCA reminds firms that reporting to trade repositories under EMIR does not replace any transaction reporting obligations. Accordingly, firms' transaction reporting obligations remain unchanged and they should continue transaction reporting according to their existing arrangements, submitting their transaction reports using an Approved Reporting Mechanism (ARM) in accordance with Chapter 17 of the Supervision sourcebook (SUP 17).

18 March 2014

FCA and BOE review and republish MoU on supervision of markets and market infrastructure

The FCA has published a memorandum of understanding (MoU) it has entered into with the BoE, including the PRA, setting out the high-level framework under which they will co-operate on the supervision of markets and market infrastructure. The MoU reflects the FCA and PRA's responsibilities for the supervision of financial market infrastructure (FMI) participants supervised by the BoE, together with the FCA's responsibilities for trading venues that rely on, or are connected with, FMIs.

See also: press release

17 March 2014

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