The Financial Stability Board is coordinating with its members to support coordinated action required to preserve global financial stability. National regulators and financial institutions are encouraged to take advantage of regulatory flexibility to protect funding for market participants and the real economy, and international standard setting bodies are working together, including with reference to financial policy responses in their respective jurisdictions, to ensure the financial system can continue to finance growth.
 
View the FSB's announcement.

The European Securities and Markets Authority expects national regulators to de-prioritize their supervision of the new tick-size regime for systematic internalizers under the Markets in Financial Instruments Regulation in light of the challenges posed by COVID-19. Amendments to the MiFIR tick-size regime were introduced by the Investment Firms Regulation and are due to come into effect on March 26, 2020. ESMA's statement demands that national regulators do not prioritize supervisory actions in relation to the new regime from March 26, 2020 until June 26, 2020.
 
View ESMA's statement on regulatory forbearance for new tick-size regime.
 
View details of the Investment Firms Regulation.

The Bank of England has announced a series of supervisory and policy measures designed to help firms prudentially regulated by the U.K. Prudential Regulation Authority (banks, building societies, insurers and large investment firms) and BoE-regulated financial market infrastructures (CCPs, central securities depositories and recognized payment systems) with the impact of COVID-19. 

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The European Securities and Markets Authority has announced that it is extending the consultation response dates to assist market participants as they implement arrangements to ensure business continuity during the coronavirus outbreak.

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The European Securities and Markets Authority has published a statement on the telephone recording obligations in the Markets in Financial Instruments Directive. MiFID II requires records to be kept of all services, activities and transactions undertaken by an investment firm, including recordings of telephone conversations or electronic communications relating to: (i) transactions concluded when a firm deals on own account (proprietary trading); and (ii) the provision of client order services that relate to the reception, transmission and execution of client orders. Firms are also required to implement and maintain a policy for the recording of these telephone conversations.

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The European Securities and Markets Authority has announced a Decision to lower the threshold for disclosing short positions in shares. Effective March 16, 2020, all holders of net short positions in shares traded on an EU regulated market (i.e., exchange) must notify the relevant national regulator if the position reaches or exceeds 0.1% of the issued share capital. Net short position holders must notify the relevant national regulator of any net short position of 0.1% of the issued share capital of a company and of each 0.1% above that threshold.

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The EU Single Resolution Board has announced that SRB staff will commence teleworking from March 16, 2020, following relevant decisions from the European Commission and Belgian government. SRB staff remain contactable via email or phone.

View the SRB's announcement. 

The European Central Bank has announced a series of measures designed to support banks to continue their vital role of funding the real economy in the wake of COVID-19. Banks will be permitted temporarily to operate below the level of capital required by Pillar 2 Guidance, the capital conservation buffer and the liquidity ratio. They will also be permitted partially to use capital instruments that do not qualify as Common Equity Tier 1 capital to meet Pillar 2 Requirements. The ECB hopes that, together with EU national regulators' relaxation of the countercyclical capital buffer, these measures will provide significant capital relief to banks.

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The European Banking Authority has published a statement on actions to mitigate the impact of COVID-19 on the EU banking sector. In the statement, the EBA states that it is working with the European Central Bank and EU national regulators to ease the immediate operational burden on EU banks and recommends that national regulators should use, where appropriate, the flexibility embedded in the regulatory framework.

The EBA views supporting banks' focus on core operations as a priority and has decided to postpone the EU-wide stress test to 2021. However, the EBA will conduct an additional EU-wide transparency exercise to provide updated information on banks' exposures and asset quality. The EBA also recommends that national regulators grant some flexibility on the remittance dates for supervisory reporting by banks.

The EBA states that banks should adopt prudent dividend and other distribution policies, including variable remuneration.

View the EBA's statement.

Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.

The European Systemic Risk Board has appointed Jan Reinder De Carpentier as its new Vice Chair. New board members Pedro Machado and Jesús Saurina have also been appointed. The new appointees will take up their positions on March 1, 2020 and will hold them for five years.
 
View the SRB's announcement.
 
View the Council Implementing Decision giving effect to the appointments of the Vice-Chair and Board Members.

The European Securities and Markets Authority has published an opinion supporting the Italian Commissione Nazionale per le Società e la Borsa’s (Consob) revised accepted market practice on liquidity contracts for the purposes of the Market Abuse Regulation. The Market Abuse Regulation provides certain prohibitions against market manipulation but allows “accepted market practices” (AMPs) as a defense against allegations of market manipulation. To benefit from the defense, it is necessary to establish that a relevant transaction was conducted for legitimate reasons and in accordance with a formally accepted AMP. AMPs must be established by national regulators and notified to ESMA. ESMA will then issue an opinion on the compatibility of the AMP with MAR and whether its establishment would threaten market confidence.
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Christopher Woolard has been appointed Interim Chief Executive of the U.K. Financial Conduct Authority from March 16, 2020. Mr. Woolard is currently the Executive Director of Strategy and Competition and an Executive member of the FCA's Board. He will take on the role when the current FCA Chief Executive Andrew Bailey becomes Governor of the Bank of England. HM Treasury will be running an open process for the role of permanent CEO in due course.

View the announcement.

Mark Carney, the outgoing Governor of the Bank of England, has been appointed as Finance Adviser for COP26. The role will be to assist the U.K. Government to build a sustainable financial system that supports the transition to a net zero economy. Andrew Bailey will replace Mr. Carney as the Governor of the Bank of England from March 16, 2020.

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The European Securities and Markets Authority has published its Strategic Orientation for 2020-2022, setting out its longer-term objectives for regulating financial markets. The previous Strategic Orientation covered the period from 2016-2020 and so is coming to an end this year. Looking forward, ESMA aims to:

• develop the EU Capital Markets Union by encouraging wider retail investor participation, which would assist with the diversification of funding sources and efficiency of capital markets;
• promote sustainable finance and long-term oriented capital markets as part of the EU's commitment to meet the UN's Sustainable Development Goals by 2030;
• examine the opportunities and risks of digitalization and technology for market participants and regulators;
• guarantee the EU's voice in financial markets, aiming to maintain the openness of EU financial markets and develop EU co-operation with third-country authorities to ensure investor protection and financial stability; and
• encourage proportionality, particularly with respect to SMEs and innovative companies, where ESMA may need to tailor its initiatives to meet its objectives.

View ESMA 2020-2022 Strategic Orientation.

An EU Regulation has been published amending the European Supervisory Authorities' powers under various pieces of EU legislation. The Regulation grants ESMA additional powers to monitor market data and authorize benchmark administrators under the Markets in Financial Instruments Regulation and the Benchmarks Regulation, respectively. It also amends the legislation founding the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, granting them additional powers to facilitate their supervisory duties. The Regulation will enter into force on December 30, 2019. The provisions regarding ESMA's enhanced supervisory powers over market data and benchmarks will apply from January 1, 2022. All other provisions regarding the European Supervisory Authorities' enhanced powers will apply from January 1, 2020.

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The European Parliament has published a resolution on relationships between the EU and third countries concerning financial services regulation and supervision. The resolution follows the publication of a report in August 2018 by the European Parliament’s Committee on Economic and Monetary Affairs setting out its proposal for the European Parliament’s resolution, which comes in the wake of the U.K.’s upcoming exit from the EU. The key factors prompting the resolution include the need to mitigate risks to financial stability arising from a possible no-deal Brexit, the need for clarification of the relationship between third-country markets and the EU’s single market in the interests of broader financial stability and the fact that existing third-country equivalence rules are not currently subject to a single framework.

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The U.K. Chancellor of the Exchequer, Sajid Javid, has announced the appointment of Andrew Bailey as the new Governor of the Bank of England. 

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The International Organization of Securities Commissions has launched a consultation on methods of addressing potential conflicts of interest and other conduct risks that arise from market intermediaries’ participation in the debt capital raising process. Responses should be submitted by February 16, 2020.

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The EU Expert Group on Regulatory Obstacles to Financial Innovation (or ROFIEG) has published a set of Recommendations and a Q&A on the establishment of an accommodative framework for FinTech in the EU. The ROFIEG was established by the European Commission in 2018 to provide expertise on technology in the financial services sector and, in particular, to review the EU’s legal and regulatory FinTech framework.

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A new Regulation amending the revised Markets in Financial Instruments Directive, Market Abuse Regulation and Prospectus Regulation has been published in the Official Journal of the European Union, introducing changes to support small- and medium-sized enterprise growth markets as trading venues. 

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The Financial Stability Board has published two reports on: (i) BigTech in finance and (ii) third-party dependencies on cloud services. The reports form part of the FSB’s ongoing work to analyze structural changes within the financial system in order to harness benefits and mitigate risks.

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The new EU Investment Firms Regulation and Investment Firms Directive have been published in the Official Journal of the European Union. The new legislation aims to create a more tailored regulatory regime for many EU investment firms that reflects the risks inherent in the diverse activities those firms undertake.

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The U.K. FICC Market Standards Board is consulting on its draft Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets. The FMSB is a standards setting body operated by wholesale market participants that was established in 2015. It is mandated to issue Standards that improve conduct in the wholesale Fixed Income, Currencies and Commodities markets. FMSB Member Firms are expected to consider their practices in light of the Standards, but the Standards are not binding and non-compliance will not affect whether a firm is deemed to have met its regulatory obligations.

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The U.K. Financial Conduct Authority has published a consultation paper seeking feedback on its proposals for the extension of the Senior Managers’ Regime to benchmark administrators. The FCA’s SMR was originally implemented for banks in 2016 and was extended to all authorized investment firms in December 2019. Benchmark administrators were only obliged to become FCA-authorized by the end of 2019 pursuant to the EU Benchmark Regulation, and so were granted a one-year extension from the roll-out of the SMR.

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The European Banking Authority has published draft amended Regulatory and Implementing Technical Standards regarding the exercise of credit institutions’ rights to freedom of establishment and freedom to provide services (i.e. passporting rights) under the Capital Requirements Directive. The EBA reviewed the original Technical Standards in 2018 and found several areas for improvement that would enhance the quality and consistency of passport notifications and the ability of EU national regulators to use them. It has produced the draft amended standards with a view to updating the information requirements that must be notified by a credit institution to its home national regulator. Responses to the consultation should be submitted by February 13, 2020.

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The European Commission has published the results of its “fitness check” of EU supervisory reporting requirements.  The reporting requirements imposed by EU and national regulatory authorities require regulated institutions to provide information to their respective authorities regarding their financial condition and activities. The European Commission assessed the effectiveness, coherence, relevance and efficiency of existing reporting requirements in order to identify areas that may be simplified or streamlined.

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The U.K. Financial Conduct Authority has extended the date by which firms must implement Brexit contingency plans following the extension of the Brexit deadline from October 31, 2019 to January 31, 2020. Firms and funds should now notify the FCA for entry into the temporary permissions regime by January 30, 2020 and fund managers have until January 15, 2020 to notify the FCA if they wish to change their existing notification. Firms should continue to comply with transaction and trade reporting requirements under the Markets in Financial Instruments Directive and European Market Infrastructure Directive, respectively.
 
View the FCA's statement on contingency planning deadlines.

The European Banking Authority has published the second in a series of three opinions on the implementation of the Deposit Guarantee Scheme Directive in the EU. This opinion relates to DGS payouts. The first opinion related to the eligibility of deposits, coverage level and cooperation between deposit guarantee schemes and was published in August 2019. The third opinion will cover DGS funding and the uses of DGS funds. The opinions have been prepared to assist the European Commission in its obligation to report on the implementation of the DGSD.

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The Legal Entity Identifier Regulatory Oversight Committee has launched a consultation on the allocation of LEIs to government entities. LEIs are reference codes allocated to legal entities for the purposes of unique identification in financial transactions and for other public sector uses. General government entities are eligible for LEIs as they are legal entities, but many (such as Ministries, Agencies and Republics) are not incorporated or do not otherwise have legal personality

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The European Central Bank has published a report on the risk management implications of the upcoming move away from the Euro Overnight Index Average (the overnight reference rate for the euro) and EURIBOR (the term reference rate for the euro) to alternative risk-free rates. Both EONIA and EURIBOR were identified as critical benchmarks for the purposes of the EU Benchmarks Regulation. 

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The Financial Stability Board has published a letter to G20 Finance Ministers and Central Bank Governors describing the progress of post-financial crisis reforms and key focus areas for the future. Over the past ten years, the FSB has proposed a number of reforms to the global financial system, working with international organizations on implementation to improve financial stability.

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The U.K. government has published a response to the Treasury Committee's report on the Financial Conduct Authority's perimeter of regulation. The Committee's Report is part of its ongoing inquiry, The Work of the Financial Conduct Authority, which is considering: (i) the timeliness in which the FCA is able to take action; (ii) the transparency of the FCA's work and decisions; and (iii) the scope of the FCA's regulatory perimeter.

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The Joint Committee of the European Supervisory Authorities has published its 2020 work program, outlining revisions to the Joint Committee’s scope of work and the matters it will focus on in 2020. The Joint Committee consists of representatives from the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority, the European Commission and the European Systemic Risk Board. 

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The European Securities and Markets Authority has published its Annual Work Programme for 2020. The Work Programme sets out ESMA’s focus areas for 2020 and provides details of expected outputs within each of the areas. In 2019, the European Council, Parliament and Commission agreed on new tasks for ESMA, meaning that ESMA will take on an enhanced role in areas including direct supervision, supervisory convergence and investor protection. The final Regulations amending the scope of the European Supervisory Authorities’ work mandates are expected to be published in the second half of 2019.

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The U.K. Financial Conduct Authority has appointed Sheree Howard as its new Executive Director of Risk and Compliance Oversight, replacing Barbara Frohn, who left the FCA earlier this year. Ms. Howard joined the FCA as a Senior Adviser in December 2017. Her new role as part of the Executive Committee will see her advising the FCA’s Board on the breadth of risk in the organization.
 
View the FCA's announcement.

A U.K. statutory instrument has been published amending the existing U.K. legislation that gives effect to the EU Benchmarks Regulation. The new statutory instrument – the Financial Services and Markets Act 2000 (Benchmarks) (Amendment) Regulations 2019 – amends the definition of a “Miscellaneous Benchmarks Person” under the existing regulation and clarifies the scope of the U.K. Financial Conduct Authority’s powers to impose requirements on Miscellaneous Benchmark Persons. The amendments will come into force on October 14, 2019.

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The U.K. High Court of Justice has ruled that the identities of the underlying lenders in a series of loans made through a peer-to-peer lending platform should not be disclosed to the claimant borrower. Milne v Open Access Finance Ltd considers a claim brought by a solicitor who took out a series of loans over several years with Open Access Finance, a peer-to-peer lender. The claimant is seeking relief from his obligation to repay the £170,000 worth of loans extended to him, damages for misleading actions contrary to the Consumer Protection from Unfair Trading Regulations 2008, as well as damages under the Financial Services and Markets Act 2000 and relief under the Consumer Credit Act 1974.

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The Working Group on Sterling Risk-Free Reference Rates has published a summary of the responses it received to its March 2019 discussion paper on conventions for referencing SONIA in new financial contracts.

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The U.K. Financial Conduct Authority has published the findings of its review into the implementation of the Senior Managers and Certification Regime for the banking sector. The SM&CR came into force for banking firms in March 2016 with the aim of making individuals in the banking sector more accountable for their conduct. The FCA conducted the review to determine how the SM&CR has been implemented in the three years since its introduction. The review is intended to aid understanding of the impact of the regime and the FCA does not intend to make any policy changes on the basis of its findings. The FCA's review focuses on the implementation of the existing banking SM&CR, but an expanded SM&CR regime will come into force for all FCA solo-regulated firms from December 9, 2019. Firms falling within scope of the expanded regime should, where appropriate, also take the findings of the FCA's review into account in their implementation of the SM&CR.

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The U.K. Treasury Committee has published a report on the Financial Conduct Authority's perimeter of regulation. The Report is part of the Committee's ongoing inquiry, The Work of the Financial Conduct Authority, which is considering: (i) the timeliness in which the FCA is able to take action; (ii) the transparency of the FCA's work and decisions; and (iii) the scope of the FCA's regulatory perimeter. This Report considers the last of these issues and makes several recommendations to the Treasury on the remit and powers of the FCA to enhance understanding of consumers of the regulatory perimeter, reduce harm to consumers and mitigate against regulatory arbitrage.

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The European Commission has published a Communication on equivalence in the area of financial services, including an annex that briefly sets out the equivalence decisions adopted by the Commission since January 2018. The Communication describes the Commission's current equivalence policy priorities, recent legislative improvements and the main assessment and the decision-making processes. It also sets out recent and ongoing work on equivalence assessments and monitoring.

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The U.K. Financial Conduct Authority has published its final rules extending the Senior Managers and Certification Regime to all FCA solo-regulated firms. The final rules take into account responses to the FCA's consultation paper issued in January 2019, which proposed changes to optimize the expanded regime. 

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The European Central Bank has announced the publication time for the new Euro short-term rate (or €STR) that will come into effect from October 2, 2019. €STR will represent the wholesale euro unsecured overnight borrowing costs of banks located in the euro area. The ECB has also published the final version of its Guideline in the Official Journal of the European Union. The Guideline is addressed to all Eurosystem central banks and will govern the rate and establish the responsibilities of the ECB and national central banks in determining and administering the rate.

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Launching the first phase of the Future Regulatory Framework Review, HM Treasury has issued a call for evidence on regulatory coordination in the financial services sector. The Financial Services Future Regulatory Framework Review was announced in March 2019 by the Chancellor in his Spring Statement. The Review will assess whether the U.K. financial services regulatory framework is fit for purpose, including being able to support the sector to grow in the future. Four key challenges for the sector are identified: operating outside of the EU, new relationships following Brexit, technological change and other global challenges, such as climate change. The Review will entail a comprehensive evaluation of the regulatory framework in a phased process. The first phase covers coordination by the U.K. regulators. Later phases will cover other areas, to be announced once the arrangements for the U.K.'s exit from the EU are clearer.

The call for evidence focuses on how the government and regulators work together to ensure the best outcomes for the financial services sector, consumers of financial services and the U.K. Feedback is requested on what stakeholders consider works well and the areas for potential improvement. Where possible, responses should provide examples. Responses to the call for evidence should be submitted by October 18, 2019.

View the call for evidence.

The U.K. Financial Conduct Authority has published its Annual Report and Accounts for the year ended March 31, 2019. The report considers topics including: (i) key highlights from 2018/2019; (ii) the U.K.'s withdrawal from the EU and the FCA's proposed approach to regulation in the wake of Brexit; (iii) the FCA's cross-sector and sector priorities; and (iv) perimeter issues. The report follows the publication of the FCA's first Annual Perimeter Report in June 2019, which provides a review of the FCA's regulatory perimeter.

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The Global Financial Innovation Network, the group of financial regulators established in 2018 to support international financial innovation, has published a report on the progress made during its first year. The group is made up of 35 global regulators from 21 jurisdictions that work together to share knowledge and market experiences and enable innovative firms to interact with a network of regulators.

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Huw van Steenis, the Bank of England financier appointed by the BoE in 2018 to review the future of the U.K. financial system, has published his "Future of Finance" report, setting out a vision for the medium-term future of the U.K. financial system and the BoE's role in supporting that. The report was based on consultations with entrepreneurs, financiers, tech firms, global investors, consumer groups, charities, policymakers and business leaders across the U.K. and overseas. In response, the BoE has published a document which sets out the actions it intends to take to deal with the challenges and opportunities identified in the report.

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The U.K. FICC Markets Standards Board has published a Transparency Draft of its new Statement of Good Practice on Conflicts of Interest. The Statement aims to provide guidance for participants in the fixed income, currencies and commodities markets on ways to identify and manage risks arising from conflicts of interest in the FICC markets. The guidance is particularly targeted at firms operating in Europe and the conflicts that may arise from the sale and trading of publicly listed or over-the-counter securities or financial instruments. 

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The U.K. Financial Conduct Authority has published its first annual perimeter report, which (i) describes the boundaries of the FCA's regulatory oversight, (ii) considers challenges to the regulatory perimeter and (iii) sets out its aims for the future. The motivations behind the report include recent high profile controversies involving firms on the periphery of the FCA's regulatory perimeter (including London Capital & Finance which issued non-transferable bonds to consumers), innovations in technology that test the boundaries of the perimeter and the post-Brexit future of U.K. financial regulation.

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The European Banking Authority has launched a consultation on draft Guidelines on loan origination and monitoring. The consultation stems from the European Council's Action Plan on tackling non-performing loans in Europe. The purpose of the guidelines is to improve the processes by which institutions grant loans and monitor them thereafter, with the overarching goal of improving the financial stability of the EU financial system.

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