LIBOR transition: FCA statement and Q&As on conduct risk

The FCA has published a webpage on conduct risk during LIBOR transition, including some Q&As for firms.

The FCA summarises the impact of LIBOR transition for firms and, in this context, provides Q&As for firms, relating to:

  • governance and accountability;
  • replacing LIBOR with alternative rates in existing contracts and products, and treating customers fairly;
  • offering new products with risk-free rates or alternative rates;
  • communicating with customers about LIBOR and alternative rates and products; and
  • firms investing on customers' behalf and LIBOR transition.

Gender diversity in UK financial services: FCA research note

The FCA has published a research note on gender diversity in UK financial services which addresses the following questions:

  • What is the level of gender diversity in UK financial services?
  • How has it changed over time?
  • How does it vary by role type, firm, and sector?

Research notes may not necessarily represent the position of the FCA, but the FCA uses them to inform its views.

Cryptoassets and smart contracts: UK Jurisdiction Taskforce legal statement

Following a consultation, the UK Jurisdiction Taskforce (a taskforce of the LawTech Delivery Panel) has published a legal statement on the status of cryptoassets and smart contracts.

Its first key finding is that cryptoassets have all the legal characteristics of property and are, as a matter of English legal principle, to be treated as property. This conclusion is likely to have important consequences in areas relating to succession on death, the vesting of property in personal bankruptcy and the rights of liquidators in corporate insolvency. However, despite being property, cryptoassets are not things in possession because they are "virtual" and cannot therefore be possessed. The main implications of this are that cryptoassets:

  • do not constitute "goods" for the purposes of the Sale of Goods Act 1979, which operates on the assumption that "goods" are capable of being possessed;
  • cannot be the object of a bailment because by nature, bailment requires the transfer of possession; and
  • are limited in terms of what types of security can be granted over them. Pledges and liens can only be created if it is possible to transfer possession of the asset, meaning that cryptoassets cannot be the object of a pledge or lien.

Its second key finding is that smart contracts are capable of satisfying the requirements of English law contract formation principles and can therefore be interpreted and enforced using ordinary and well-established legal principles. Subsequently, such contracts can be enforced by the courts. Further, a statutory signature requirement is highly likely capable of being met by means of a private key encryption.

The UK Jurisdiction Taskforce hopes that these findings will bring some legal certainty in this area, thus improving market confidence. These findings are, as yet, untested in the English courts although they are likely to have persuasive authority. Ultimately, stakeholders are likely to want to see appropriate legislation and regulation brought into force to address these issues.

CMU high-level forum

The European Commission has published a press release announcing the composition of a high-level forum on the capital markets union (CMU). The forum is an expert group that will feed into work on future CMU policies.

FSB report highlights need to address remaining resolution gaps

The Financial Stability Board (FSB) has published its 2019 resolution report. The report provides an update on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work. The FSB concludes that authorities and firms need to be mindful of any remaining gaps as they work towards making resolution strategies and plans operational in all sectors.

Particular issues the FSB flags include:

  • a policy priority for the FSB is the further strengthening of the resilience and resolvability of central counterparties. The FSB will consult on further guidance during the second quarter of 2020;
  • while global systemically important banks have been made more resolvable through the build-up of total loss-absorbing capacity (TLAC) and other measures, challenges remain. Authorities need to determine the appropriate balance between group-internal distribution of TLAC and non-pre-positioned resources. In addition, access to temporary liquidity in the relevant currencies and in adequate amounts when and where needed by firms going through resolution requires ex ante preparation by firms and authorities; and
  • resolvability monitoring in the insurance sector highlighted challenges stemming from group-internal interconnectedness.

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