Worldwide: Financial Regulatory Developments (FReD) – 10 April 2015

Last Updated: 13 April 2015

European Union and International

European Banking Authority (EBA)

EBA publishes equivalence recommendation: EBA has published a recommendation indicating the equivalence of the confidentiality regimes of certain non-EU countries to the EU confidentiality regime. The recommendation should help non-EU countries to participate in supervisory colleges overseeing international banks, led by EU supervisors. The recommendation covers Bosnia and Herzegovina, Brazil, Canada, China, FYR Macedonia, Mexico, Montenegro, Serbia, Singapore, Switzerland, Turkey and the US. The review considered the relevant authorities' treatment of the notion of confidential information, professional secrecy requirements, restrictions on the use and disclosure of confidential information. EBA now asks EU authorities to notify it as to whether they comply or intend to comply with the recommendation by 2 June. (Source: EBA Issues Recommendation on Equivalence of Non-EU Authorities for Participation in Supervisory Colleges)

European Insurance and Occupational Pensions Authority (EIOPA)

EIOPA publishes amended work plan: EIOPA, like ESMA before it, has reprioritised its work plan for the year to align it with its budget. It says it has had to cut 27 projects from the programme completely, and reduced or changed over 40 more. Solvency 2 is its highest priority but EIOPA says the cuts have affected some of its initiatives here. (Source: EIOPA Publishes Amended Work Plan)

European Securities and Markets Authority (ESMA)

ESMA launches MiFIR and EMIR centralised data programmes: ESMA has announced that national supervisors have asked it to provide them with databases that will provide a:

  • central facility in relation to instrument and trading data and the calculation of the Markets in Financial Instruments Regulation (MiFIR) transparency and liquidity thresholds (the Instrument Reference Data Project); and
  • single access point to trade repositories data under the European Market Infrastructure Regulation (EMIR) (the Trade Repositories Project).

ESMA will collect data from 300 trading venues and 5,000 counterparties and make it available to national supervisors. (Source: ESMA Launches MiFIR and EMIR Centralised Data Programmes)

UK Government and Parliament


Treasury Committee looks at secondment risk: Martin Wheatley has written to the Treasury Committee in response to the Committee's concern that retail banks' and asset managers' use of secondees from advisory firms might create a conflict of interest. The letter says FCA has looked at 10 firms and considered their use of free or cheap secondees. It has concluded there is no widespread practice either of acting in this way, or of any consumer detriment and so it will not be investigating further. (Source: Treasury Committee Looks at Secondment Risk)

Bank of England (BoE)

BoE publishes FPC meeting record: BoE has published details of the Financial Policy Committee (FPC) meeting on 24 March. FPC discussed a range of factors impacting the macroeconomic and financial environment, including;

  • global risk, including the dangers to the Eurozone of a Greek default;
  • market liquidity risks;
  • cyber risk;
  • domestic risks, including the rising UK current account deficit;
  • underwriting standards in UK commercial real estate and leveraged loan markets; 
  • banking system resilience, including encouraging CET1 and leverage ration increases among UK banks; and
  • risk to financial stability from climate change, including the move away from fossil fuels, and effects of extreme weather.

As a result of this analysis FPC decided to maintain the countercyclical capital buffer rate for UK exposures at 0%. (Source: Record of the Financial Policy Committee 24 March 2015)

BoE makes FX recommendations: Mark Carney has written to Michael Cross, Chair of the London Foreign Exchange Joint Standing Committee (LFEJSC), regarding the implementation of the Financial Stability Board's (FSB) recommendations for FX benchmarks reform. Mr Carney asks that LFEJSC report on market participants' progress with regards to steps taken:

  • by industry to develop independent netting and execution facilities for transacting fix orders;
  • by market participants to price fixing transactions in a manner that is transparent and consistent with the risk of accepting the transactions;
  • by banks to establish and enforce their internal guidelines and procedures for collecting and executing fixing orders, including separate processes for handling the orders;
  • to ensure no unnecessary information is shared among market-makers about their trading positions;
  • by market-makers to ensure private information is not passed to clients or other counterparties that might enable those counterparties to anticipate the flows of other clients or counterparties, including around the fix;
  • by banks to establish and enforce their internal systems and controls to address potential conflicts of interest arising from managing customer flow;
  • to adopt codes of conduct that describe best practices for trading foreign exchange; and
  • by market participants to more strongly show compliance with the codes of various foreign exchange committees, as well as participants' internal codes of conduct.

Mr Carney requests that the committee report the status of its members as at 30 June and send the report to him by 31 July. (Source: Implementation of FSB Recommendations for FX Benchmark Reforms)

UK Financial Services and Markets Regulators

Financial Conduct Authority (FCA)

Up next from FCA: FCA's latest policy development update highlights, for the next quarter policy statements on:

  • fees and levies;
  • whistleblowing;
  • outstanding issues on the senior manager regime in both May and July; 
  • consumer buy to let mortgages;
  • complaints handling;
  • consumer credit further amendments;
  • guaranteed asset protection competition issues; and 
  • client money rules for insurance intermediaries (before the end of the quarter).

FCA has not yet given a publication date for feedback on its consultations on approved persons and accountability in the banking and insurance sectors. (Source: Policy Development Update No 21)

FCA includes pensions conversion advice within FOS: FCA has made a change to the Dispute Resolution module of its Handbook to bring complaints arising from the new regulated activity of advising on pensions conversion and transfer within the scope of FOS' compulsory jurisdiction from 6 April. (Source: FCA Includes Pensions Conversion Advice Within FOS)

Prudential Regulation Authority (PRA)

PRA issues policy statements: PRA has issued:

  • feedback and a Statement of Policy on policyholder protection. The statement covers:
    • compensation limits: following consultation, PRA has decided not to introduce a cap on large claims, to leave general insurance compensation as proposed, but to increase the compensation on all long-term insurance products to 100%; 
    • successor firms: the Financial Services Compensation Scheme (FSCS) will protect policyholders who have outstanding protected claims against an insurer whose claims were within FSCS scope before the policies transferred to a successor firm; and
    • assignment and subrogation: FSCS will have new powers of automatic and electronic assignment and automatic subrogation of policyholders' rights, which it can use when seeking redress from failed insurers and third parties.

PRA has made Policyholder Protection rules and a Lloyd's direction and rule alongside a Statement of Policy setting out its expectations of FSCS; and

  • documents on depositor guarantees and the dormant accounts scheme together with feedback on previous papers and a further consultation on a few points arising from them. PRA has made:
    • the Depositor Protection, Dormant Accounts Scheme, Management Expenses, and Base Costs and Management Expenses in respect of Relevant Schemes parts of the PRA Rulebook;o consequential minor changes to existing rules;
    • a supervisory statement setting out PRA's expectations in respect of Depositor Protection part of the PRA Rulebook; and
    • statements of policy setting out PRA's expectations of FSCS in respect of Depositor Protection and Dormant Accounts Schemes parts of the PRA Rulebook. 

It asks for comment on the further consultation by 1 May. (Source: PRA Policy Statements on Policyholder Protection and Depositor Protection

PRA updates Solvency 2 approval forms: PRA has published a set of new forms for Solvency 2 approvals, following the European Commission's publication of its Set 1 Implementing Technical Standard. There are 11 new forms. (Source: PRA Updates Solvency 2 Approval Forms)

PRA publishes Part 2 of its Rulebook: PRA has published a policy statement on its creation of the next part of its Rulebook. PRA intends its Rulebook to replace the provisions currently shared with the FCA's Handbook by summer 2015. Part 2 contains:

  • Rulebook glossary terms;
  • verification of standing data rules;
  • general provisions rules;
  • internal governance rules; and 
  • Handbook consequentials.

Alongside these rules, PRA has published: 

  • supervisory statements on internal governance, functions relating to building societies and supervision of building societies' treasury and lending activities; and
  • a statement of policy on its approach to insurance business transfers.

It has also published a derivation and destination table mapping the Handbook rules to the PRA Rulebook. The new rules all took effect on 2 April. (Source: PRA Publishes Part 2 of its Rulebook)

Financial Ombudsman Service (FOS)

FOS publishes ADRD resource: FOS has published an online tool, in the form of an FAQ guide, to the alternative dispute resolution directive (ADRD). The FAQ provides information on the effect of the ADRD, how it will operate in practice and how it will affect the work of FOS. (Source: Our Future Service – and Where the ADRD Fits in)

Other Regulators/Authorities/Industry Associations

International Organisation of Securities Commissions (IOSCO)

IOSCO consults on trading venue and market intermediary risk management: IOSCO has published two consultation papers looking at risk management in trading venues and market intermediaries, with a focus on finding any gaps in business continuity and recovery planning:

  • the consultation on mechanisms for trading venues to effectively manage electronic trading risks and plans for business continuity sets out recommendations to help regulators ensure that trading venues can manage effectively a broad range of evolving risks. It also proposes sound practices the venues should consider when developing and implementing risk mitigation mechanisms and business continuity plans;
  • the consultation on market intermediary business continuity and recovery planning sets out standards and sound practices for regulators when supervising intermediaries but IOSCO suggests it will be useful for intermediaries to use in their planning also.

IOSCO asks for comments by 6 June. (Source: IOSCO Consults on Trading Venue and Market Intermediary Risk Management)

International Swaps and Derivatives Association (ISDA)

ISDA plans centralised swaps clearing principles: ISDA has published a set of principles it believes should help centralised swaps clearing. The key principles reflect:

  • that the trading liquidity of a derivatives contract (and consequently the regulatory obligations to which the contract is subject) should be determined by reference to specific objective criteria, and based on concrete, transparent and objective standards which make it clear to participants when a bilateral swap should move to become a cleared one;
  • that derivatives contracts subject to the trading obligation should be tradable trade on a number of different types of centralised venues, so contracts can be traded across jurisdictions without costly duplicative compliance obligations and regulatory arbitrage; and
  • that trading venues must offer flexible execution mechanisms that take into account the trading liquidity and unique characteristics of a particular category of swap. 

ISDA notes the US Swap Execution Facility (SEF) rules will need to change to comply with these principles. (Source: ISDA Plans Centralised Swaps Clearing Process)

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

BIS updates Basel III FAQ: BIS has updated its FAQs on Basel III monitoring. There are 10 new items which have been inserted. (Source: FAQs on Basel III Monitoring)

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