The Glasgow Financial Alliance for Net Zero has published a consultation paper on nature in net-zero transition plans, which supplements the guidance provided in its November 2022 financial institution net-zero transition plans report. The proposed guidance covers opportunities to reduce nature emissions or increase nature sinks (natural climate mitigation), as well as opportunities to support emissions reductions and sequestration through nature-related activities (natural climate enablers). GFANZ explains that collectively, these nature-related levers expand the toolkit for financial institutions to achieve their net-zero commitments and may identify more potential net-zero financing opportunities. GFANZ notes that general impacts on nature from climate change are beyond the scope of the proposed guidance but are discussed in the consultation paper as an area for ongoing consideration, which may lead to integrated transition planning in the future. The deadline for comments is January 27, 2025. GFANZ expects to publish the final supplemental guidance in Q1 2025.

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The European Securities and Markets Authority has published a consultation on amendments to the research provisions in the revised Markets in Financial Instruments Directive following changes introduced by the Listing Act. The Listing Act introduces changes that enable joint payments for execution services and research for all issuers, irrespective of the market capitalization of the issuers covered by the research. The consultation paper includes proposals to amend Article 13 of MiFID II to align it with the new payment option offered. The proposals aim to ensure that the annual assessment of research quality is based on robust criteria and that the remuneration methodology for joint payments for execution services and research does not prevent firms from complying with best execution requirements. The deadline for comments is January 28, 2025. ESMA aims to provide its technical advice to the Commission in Q2 2025.

The European Securities and Markets Authority has published a consultation on amendments to the research provisions in MiFID II following changes introduced by the Listing Act. The Listing Act introduces changes that enable joint payments for execution services and research for all issuers, irrespective of the market capitalisation of the issuers covered by the research.

The consultation paper includes proposals to amend Article 13 of MiFID II to align it with the new payment option offered. The proposals aim to ensure that the annual assessment of research quality is based on robust criteria and that the remuneration methodology for joint payments for execution services and research does not prevent firms from complying with best execution requirements.

The deadline for comments is 28 January 2025. ESMA aims to provide its technical advice to the Commission in Q2 2025.

The European Securities and Markets Authority has published a consultation paper on draft technical advice under the EU Prospectus Regulation and a call for evidence on prospectus liability. The consultation recommendations aim to facilitate European capital market activity by streamlining and reducing regulatory burden. It also puts forward proposals for non-equity securities that are advertised with ESG features and proposals to update the data reporting requirements to consider the changes introduced by the Listing Act. The Listing Act calls for an analysis of the liability of the information given in a prospectus and an assessment of whether further harmonization is warranted in this regard. It also calls for proposals of amendments to the liability provisions to be presented if relevant. As such the call for evidence on prospectus liability aims to gather input to provide technical advice on whether further harmonization should be considered. The deadline for comments on both publications is December 31, 2024. ESMA aims to publish its final technical advice to the EC in two separate final reports based on feedback received in Q2 2025.

The Financial Action Task Force has published a consultation paper on revisions to its anti-money laundering and counterterrorism financing standards relating to financial inclusion. The consultation is part of FATF's program of work to address the unintended consequences of AML/CFT measures.

The revisions focus on recommendation 1 (assessing ML/TF risks and applying a risk-based approach) and its Interpretive Note, with corresponding changes to recommendations 10 (customer due-diligence) and 15 (new technologies) and related Glossary definitions. The proposed revisions aim to better promote financial inclusion through increased focus on proportionality and simplified measures in the risk-based approach, and to give countries, supervisors, and financial institutions greater confidence and assurance when implementing simplified measures.

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The U.K. Financial Services and Markets Act 2023 (Commencement No. 8) Regulations 2024 have been made. The Regulations revoke certain pieces of EU law retained in the U.K. post-Brexit as well as bringing into force amendments made by the Financial Services and Markets Act 2023 to other such assimilated law. The regulations also bring into force amendments to FSMA 2000 made by FSMA 2023 giving HM Treasury the power to make regulations about unauthorized co-ownership alternative investment funds.

Revocations include: (i) removing LIBOR as a critical benchmark for the purpose of the U.K. Benchmark Regulations effective October 29, 2024; and (ii) revoking assimilated law versions of Commission Implementing Regulations (EU) 2018/33 and 2018/34 on October 29, 2024, which contain Implementing Technical Standards on the standardized presentation format of the statement of fees and the fee information document and their common symbol. These ITS supplement parts of the Payment Accounts Regulations 2015 that were revoked on January 1, 2024.

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The Taskforce on Nature-related Financial Disclosures has published a discussion paper setting out draft guidance on nature transition planning for corporates and financial institutions developing and disclosing a transition plan in line with the TNFD recommended disclosures. The TNFD explains that delivering the transition implied by the Kunming-Montreal Global Biodiversity Framework (GBF) requires significant changes to business practices across all sectors. The guidance covers all aspects of nature apart from climate change and greenhouse gas emissions as drivers of nature loss, and natural carbon stocks. The TNFD explains that transition planning for these topics is covered in guidance from organizations such as GFANZ.

Key focus areas of the discussion paper are: (i) a definition of a nature transition plan; (ii) an overview of related initiatives; (iii) guidance on what a nature transition plan should include; (iv) guidance on how a plan should be presented and disclosed; and (v) areas of further work needed to support development and assessment of nature transition plans. TNFD aims for the discussion paper to inform the development of TNFD guidance on the content and disclosure of nature transition plans, stimulate further work and collaboration to support nature transition plans including on transition pathways and transition finance categories and encourage organizations to pilot test the TNFD draft guidance. The deadline for comments is February 1, 2025 and the Taskforce plans to publish final TNFD guidance on nature transition plans in 2025.

The U.K. Financial Conduct Authority has published its financial promotions quarterly data for Q3 2024. The FCA summarizes the data collected between July 1 and September 30, 2024 and the action it took against firms breaching financial promotion rules, and referrals and investigations into unregulated activity. The FCA also shows where it is working to improve standards across the market so that consumers are provided with clear and fair financial promotions which are not misleading.

Key messages include:

• the FCA's interventions in Q3 resulted in 10,593 promotions being amended or withdrawn by authorized firms, including one firm who withdrew 6,792 promotions, many of which were historical promotions withdrawn as a precaution;
• the FCA issued 552 alerts on unauthorized firms and individuals, 12% of which were clone scams;
• the cryptoasset financial promotions regime came into force on October 8, 2023 and has now been live for a year. Over the last year the FCA has issued 1,702 consumer alerts about illegal crypto promotions, which has resulted in the take down of over 900 scam crypto websites and the removal of 56 apps from U.K. apps stores. The FCA are continuing to work with social media companies to remove and block illegal content on their platforms; and
• the FCA is actively engaging with firms who appear to be providing and advertising unauthorized debt advice and debt solutions to consumers via online promotions. The FCA continues to observe trends of aggressive sponsored promotions placed by unauthorized firms, particularly through TikTok and paid-for Google advertisements.

For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets.

Commission Delegated Regulation (EU) 2024/2759 supplementing the European Long-Term Investment Funds Regulation with regard to certain regulatory technical standards was published in the Official Journal of the European Union. It covers RTS on circumstances in which the use of financial derivative instruments for hedging purposes is considered as solely serving the purpose of hedging the risks inherent to the investments of the ELTIF, the requirements for an ELTIF's redemption policy and liquidity management tools, the circumstances for the matching of transfer requests of units or shares of the ELTIF, certain criteria for the disposal of ELTIF assets, and certain elements of the costs disclosure. The Delegated Regulation entered into force on October 26, 2024, the day after its publication in the Official Journal.

The Financial Action Task Force has published the outcomes from its plenary meeting, which took place between October 23 and 25, 2024. Outcomes include:

• the approval of the last two assessment reports in the FATF's fourth cycle of assessments. FATF will now focus on its new round which will deliver more focused, risk-based mutual evaluations;
• the release for public consultation of proposed revisions to the standards related to FATF's ongoing focus on financial inclusion (see update above). FATF also approved new guidance on national risk assessments to support countries to understand the illicit finance risks they face;
• discussing standards changes related to cross-border payment systems and progressing work to identify the latest terrorist financing and proliferation financing risks. FATF also commenced a project to review its processes to ensure that countries do not misuse the FATF requirements to restrict the activities of non-profit organizations;
• reporting on the value of the horizontal review of designated non-financial businesses and professional compliance related to corruption to support necessary reforms. FATF decided to continue discussing follow-up on this issue at its next meeting; and
• taking stock of actions taken to improve gender diversity in the FATF, discussing further proposals to strengthen this work. FATF plans to launch a second mentoring program to strengthen inclusivity and diversity within the FATF and Global Network, building on the WFGN initiative under the Singapore Presidency.

The next FATF plenary will be held in February 2025.

The U.K. Financial Conduct Authority has published a series of portfolio letters it has sent to: (i) lifetime mortgage providers, which includes firms that provide lifetime mortgages, home reversion and later life lending products; (ii) non-bank mortgage lenders and mortgage third-party administrators; (iii) retail banks; and (iv) building societies, in each case setting out its key concerns and priorities in respect of each such portfolio in 2025.

The letters explain that the FCA plans to engage with relevant firms on their cultures and controls, focusing on the following consistent priority areas: (a) the Consumer Duty and for non-bank mortgage lenders, mortgage third-party administrators, retail banks and building societies, the treatment of customers in financial difficulty; (b) financial resilience (for non-dual regulated firms); (c) operational resilience; (d) financial crime and fraud; and (e) sustainable finance. For retail banks and building societies, the FCA identifies access as an additional priority; as firms transform their channels, products and services, it is vital that consumers are not unreasonably or unlawfully excluded from payment accounts and banking services.

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The U.K. Financial Conduct Authority has published the findings from its non-financial misconduct survey. The survey, sent to 1,028 wholesale banks, brokers and insurance firms in February, aimed to examine how firms detect and handle non-financial misconduct incidents. It found that the number of allegations reported increased between 2021 and 2023. The FCA's findings include:

• the distribution of non-financial misconduct types varied by sector, although bullying and harassment (26%) and discrimination (23%) were the most reported types of non-financial misconduct across all sectors. There were also 41% of non-financial misconduct incidents reported in the "other" category;
• firms identified 50% of incidents through reactive routes such as grievances or similar formal processes, as well as other reporting routes such as whistleblowing;
• disciplinary or "other" actions were taken in 43% of cases; and
• the total number of confidentiality and settlement agreements signed by complainants fell over the three years surveyed, according to the data from the wholesale banks sector. However, the data from other sectors showed no clear trend.

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The European Banking Authority launched a consultation on draft Regulatory Technical Standards on the treatment of structural foreign exchange positions under Article 104c of the EU Capital Requirements Regulation and on reporting on structural foreign exchange positions. The draft RTS largely retain the provisions of the EBA's 2020 guidelines. The key changes are: (i) the introduction of a clear quantitative threshold for a currency to be considered eligible for the structural FX treatment; (ii) the option for banks to consider only credit risk own funds requirements when determining the position neutralising the sensitivity to the capital ratios, as long as the credit risk own funds requirements are the ones driving the variability of the ratio against FX changes; (iii) clarifications around how institutions should remove the risk position from the own funds requirements for foreign exchange risk; and (iv) provisions relating to institutions' policies on currencies that are particularly illiquid in the market. The changes are not expected to lead to a material capital impact. The consultation also sets out a proposed policy framework for the treatment of structural FX positions. The deadline for comments is February 7, 2025.

The European Commission has adopted a Commission Delegated Regulation supplementing the EU Digital Operational Resilience Act with regard to Regulatory Technical Standards on harmonization of conditions enabling the conduct of the oversight activities. The draft RTS cover: (i) the information to be provided by an ICT third-party service provider in the application for a voluntary request to be designated as critical; (ii) the information to be submitted by the ICT third–party service providers that is necessary for the Lead Overseer to carry out its duties; and (iii) the details of the competent authorities' assessment of the measures taken by critical third party providers based on the recommendations of the Lead Overseer. Separate RTS will be adopted focusing on the criteria for determining the composition of the joint examination team, their designation, tasks, and working arrangements. The Delegated Regulation shall enter into force 20 days after publication in the OJ. DORA will apply as of January 17, 2025.

The U.K. Financial Conduct Authority has published a speech by Graeme Reynolds, director of competition on addressing vulnerability in the wealth management sector. Mr Reynolds discusses the good and bad practices that have been observed through its supervisory work. He sets out the FCA's key expectations for firms with regards to vulnerable customers, which include: (i) to have processes in place to recognize those who may need more help or who are engaging with services which may not meet their needs; (ii) to consider why people are using products and services, what the client's goals are, and how the "client journey" that firms provide supports the realisation of those goals; (iii) to issue clear, easily understood communications and promotions to enable people to make informed decisions, tailoring them where necessary; (iv) to develop well trained, empathetic client service taking account of the fact that vulnerabilities and circumstances may change and that the firm might need to adapt in response; (v) to think pragmatically and proportionately about what a 'good' client outcome is for those using a service; (vi) to use data to test whether clients are, in fact, in the target market, and receiving the service intended; and (vii) to digest FCA publications on how the Consumer Duty and vulnerability guidance is being implemented elsewhere, considering what lessons are relevant.

The Financial Stability Board has published a report on depositor behaviour and interest rate and liquidity risks in the financial system. The report draws on lessons from the March 2023 banking turmoil which saw the collapse of several banks, triggered by the confluence of interest rate increases and solvency and liquidity risks. The report identifies life insurers, non-bank real estate investors and banks as most vulnerable to solvency and liquidity risks. These entity types typically have a high proportion of interest rate-sensitive assets and liabilities and are affected by higher rates through various solvency and liquidity risk channels. It also observes that social media may have influenced some of the March 2023 bank runs, along with technological advancements that make it easier and quicker to transfer deposits.

The report finds that the speed of the recent runs means that banks and authorities may need to: (i) be able to react much more quickly to deposit outflows than in the past; (ii) find ways to address the liquidity and solvency vulnerabilities that gave rise to such extreme outflows; and (iii) consider whether monitoring of social media could be helpful as an early warning tool to flag potential stress at a bank or wider turmoil that might affect banks. Consideration could also be given to gathering and publishing data on bank deposits and unrealized losses on bank securities portfolios.

The European Commission has adopted the following legislation supplementing the EU Digital Operational Resilience Act: (i) Commission Delegated Regulation containing Regulatory Technical Standards specifying the content and time limits for the initial notification of, and intermediate and final report on, major ICT-related incidents, and the content of the voluntary notification for significant cyber threats; and (ii) Commission Implementing Regulation laying down Implementing Technical Standards with regard to the standard forms, templates, and procedures for financial entities to report a major ICT-related incident and to notify a significant cyber threat. The Council of the European Union and the European Parliament will now scrutinize the Delegated Regulation. If neither object, it will be published in the Official Journal of the European Union. The Implementing Regulation will be published in the Official Journal without further scrutiny. Both Regulations will enter into force 20 days after publication in the Official Journal of the European Union. DORA will apply as of January 17, 2025.

The U.K. Financial Conduct Authority has published its review of consumer credit firms and other non-bank lenders as the latest chapter in its ongoing supervisory focus on financial resilience. While the review specifically considered financial resilience, it is interesting to note that, where shortcomings were identified, they stem from common systemic issues that can impact a firm’s whole business model, in particular failure to effectively:

• Identify all of the risks to the business;
• Set risk appetite and establish appropriate systems and controls; and
• Undertake adequate stress testing and establish a proper wind down plan.

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The draft U.K. Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024 have been published, together with an explanatory memorandum. The Order makes changes to the U.K. Emissions Trading Scheme, including the following: (i) to include carbon dioxide venting from installations in the 'upstream' oil and gas sector as a regulated activity under the U.K. ETS and to introduce a new activity group for the verification of carbon dioxide venting emissions; (ii) to introduce two new penalties – firstly, where installations and aircraft operators fail to surrender allowances by the relevant deadline, a U.K. ETS regulator will be able to issue a "deficit notice". Should the operator not comply with the deficit notice, they will be liable to a penalty equivalent to the carbon price for each allowance they are in deficit for, multiplied by a factor of 1.5. Operators who continue not to pay this may be liable for a daily penalty. Secondly, a new penalty of £5000 will be introduced for certain operators failing to provide information in breach of article 27A of the Greenhouse Gas Emissions Trading Scheme Order 2020; and (iii) reducing the U.K. ETS cap on how many allowances can be created over the trading period and in each year (subject to certain exceptions) to bring it in line with the U.K.'s net zero commitments. The number of allowances auctioned from 2024 onwards has already been reduced in line with this new cap through amendments made to Auctioning Regulations in late 2023. The government considers that this reduction of around 30% in the cap for the trading period supports a smooth transition for the scheme's participants whilst sending a strong signal to decarbonize.

The Financial Stability Board has published a letter sent to G20 finance ministers and central bank governors providing an update on various workstreams, including on cyber and operational resilience. The FSB notes that cyber and operational resilience risks continue to pose a threat to financial stability and is therefore delivering, for public consultation, a common Format for Incident Reporting Exchange (FIRE). FIRE is designed to enhance convergence in incident reporting, address operational challenges arising from reporting to multiple authorities and foster better communication amongst authorities. After public consultation, the FSB expects to publish the final version of FIRE by Q2 2025. The FSB's other publications include: (i) G20 status reports on crypto-asset policy implementation; (ii) a report on the financial stability implications of tokenisation; (iii) G20 roadmap progress reports on cross-border payments; and (iv) a report on lessons learned from the March 2023 banking turmoil.

The Critical Benchmarks Regulations 2024 have been published, together with an explanatory memorandum. The Regulations come into force on November 13, 2024. The instrument specifies two benchmarks, the WMR Closing Spot Rates and the ICE Swap Rate, as 'critical' under Article 20 of the U.K. BMR. A benchmark is recognized as a 'critical benchmark' where it meets certain qualitative or quantitative criteria, such as where the value of the contracts referencing the benchmark is at least €500bn, where it has no or very few market-led substitutes if it were to cease being produced, or where it is not reasonably practicable for one or more users to switch to an available market-led substitute. As a result of this specification, the administrators of these benchmarks will become subject to more stringent regulatory requirements and the FCA will have greater powers to intervene to address any potential market disruption.

The FCA has announced that it is interviewing 20 'finfluencers' under caution who may be touting financial services products illegally. 'Finfluencers' are social media personalities who use their platform to promote financial products and share insights and advice with their followers. Their target audience is often comprised of young people, who are increasingly being drawn into investment scams which may have been promoted on social media. The FCA states that it has also issued 38 alerts against social media accounts operated by finfluencers which may contain unlawful promotions.

The U.K Prudential Regulation Authority began consulting on proposals to amend the prudential framework for large exposures. The proposals include changes to implement the remaining Basel large exposures standards, by: (i) removing the possibility for firms to use internal model methods to calculate exposure values to securities financing transactions; and (ii) introducing a mandatory substitution approach to calculate the effect of the use of credit risk mitigation techniques.

Other changes the PRA is consulting on include: (a) removing the option for firms to exceed LE limits for trading book exposures to third parties; (b) allowing firms to exceed LE limits for trading book exposures to intragroup entities, and simplifying the calculation of the additional capital requirements; (c) allowing firms to apply for higher LE limits to exposures to intragroup entities, and amend the conditions firms need to meet to mitigate the higher concentration risk; (d) removing the exemption from LE limits to firms' exposures to the U.K. deposit guarantee scheme; (e) removing the option for firms to use immovable property as CRM; and (f) removing the stricter requirements on exposures to certain French counterparties.

The deadline for comments is January 17, 2025. The implementation date for the changes would, except for the proposal on SFTs, take effect shortly after publication of the final policy statement. The proposal to remove the possibility for firms to use initial margin methods to calculate exposure values to SFTs would take effect on January 1, 2026. The PRA proposes to offer firms that currently have a modification by consent under rules 2.1 and 2.2 of the Large Exposures Part of the PRA Rulebook a modification by consent to maintain the current position until March 2026.

The Eurosystem revised its cyber resilience strategy to further address evolving cyber threats. The revised strategy updates the original 2017 Strategy taking account of the evolving threat landscape and leveraging industry best practices, lessons learnt from the original strategy and the practical application of the Cyber Guidance issued by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.

Revisions to the strategy include: (i) the incorporation of new non-FMI entities that are overseen under the Eurosystem oversight framework for electronic payment instruments, schemes and arrangements – the PISA framework. These entities are encouraged to use tools developed by the Eurosystem to periodically assess and continuously enhance their cyber resilience; (ii) measures to address threats linked to geopolitical tensions or technological innovation such as artificial intelligence and quantum computing; and (iii) amendments to take into account recent EU regulation, namely the EU Digital Operational Resilience Act, which applies to certain FMIs covered by the strategy including central securities depositories and central counterparties. The strategy also includes a new overarching component for monitoring implementation, which is designed to promote harmonisation.

The European Securities and Markets Authority has launched a survey on legal entity identifiers to gather evidence on how the optionality in the use of legal identifiers would impact market participants were it to be introduced in future reporting regimes or in the review of existing reporting regimes. ESMA had proposed to mandate the LEI in technical standards under the EU Digital Operational Resilience Act and Markets in Cryptoassets Regulation, in line with G20/Financial Stability Board and European Systemic Risk Board recommendations, which advocate for the use of the LEI to identify all parties involved in financial transactions. However, in response to concerns raised by the European Commission on the mandatory use of LEIs by non-financial entities, the proposals now set the LEI as the default identifier for legal persons, but also allow for the use of alternative identifiers where an entity does not have an LEI. The Commission has advocated for allowing for the use of the European Union Identifier in the context of DORA, which does not contain the same level of information as the LEI.

ESMA's survey is intended to raise awareness about these recent developments and to collect feedback on the potential impacts of adding alternatives to the LEI. The deadline for responses is November 12, 2024.

The Bank of England has began consulting on proposals for its supervisory fees for financial market infrastructure firms for 2024/25. The proposals cover: (i) the fee rates to meet the BoE's 2024/25 funding requirement for its FMI supervisory activity and the policy activity that supports this; (ii) the BoE's proposed hourly rates for special project fees for 2024/25; and (iii) the fees for the 2023/24 fee year including rebate and recovery rates. The BoE explains that the most significant factor driving fee increases this year are its new FSMA 2023 rule-making powers and responsibilities, which have resulted in increased policy work including the creation of the CCP rulebook. The BoE proposes to spread related one-off costs across the next three years. The deadline for comments is December 18, 2024. The proposed implementation date for the proposals is Q4 of the 2024/25 fee year (December 2024 to February 2025), when invoices will be issued for the 2024/25 fee year.

HM Treasury has begun consulting on draft legislation regulating Buy Now Pay Later. HM Treasury is proposing to bring forward secondary legislation that would bring BNPL into Financial Conduct Authority regulation as soon as possible. The consultation sets out HM Treasury's intended policy approach to regulation along with the draft legislation. HM Treasury explains that the proposed legislation aims to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise. 

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The U.K. Transition Finance Market Review published its report for scaling transition finance. The report sets out the TFMR's recommendations on how to scale a high-integrity transition finance market that can support both U.K. and global net zero ambitions. 

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HM Treasury has published a statement (dated September) by the G7 Cyber Expert Group on planning for the opportunities and risks of quantum computing. The Cyber Expert Group encourages jurisdictions to monitor developments in quantum computing, to promote collaboration among relevant public and private stakeholders, and to begin planning for the potential risks posed by quantum computing on some current encryption methods. The Cyber Expert Group explains that the development of an operational quantum computer (or hybrid computer) is increasingly possible within a decade, although its capability to undermine existing cryptography, at least initially, remains uncertain. However, as it may take significant time and economic effort for financial entities to coordinate activities to mitigate vulnerabilities in anticipation of a postquantum environment, entities should prepare for the emerging risks as soon as possible. The Cyber Expert Group recommends financial entities consider: (i) developing a better understanding of quantum computing, the risks involved and strategies for mitigating those risks; (ii) assessing quantum computing risks in their areas of responsibility; and (iii) developing a plan for mitigating quantum computing risks.

The Financial Conduct Authority has published a speech by Jessica Rusu, FCA Chief Data, Information and Intelligence Officer, on ten years of FCA innovation. In the speech, Ms Rusu announced the launch of the AI Lab, which will help the FCA in its mission to facilitate firms overcome challenges in building and implementing AI solutions, as well as supporting the U.K. Government's work on safe and responsible AI development. Ms Rusu explains that the AI Lab will play a critical role by providing AI-related insights, discussions, and case studies, assisting the FCA to deepen its understanding of potential AI risks and opportunities.

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The Financial Ombudsman Service has published updated versions of its guidance for businesses on: (i) handling complaints concerning Authorized Push Payment fraud and other scams involving authorized payments or withdrawals; and (ii) handling complaints concerning fraud and scams. The FOS's updated guidance reflects the new rules introduced, with effect from October 7, 2024, on Faster Payments and CHAPS APP fraud reimbursement.

The European Securities and Markets Authority has published an updated version of its manual on post-trade transparency and an updated version of its opinion on the assessment of pre-trade transparency waivers for equity and non-equity instruments under the Markets in Financial Instruments package. ESMA is providing further practical guidance on the provisions following the statement from last March on the transition for the application of the MiFID II/MiFIR Review, to reflect the changes introduced. ESMA explains that the amendments are published with the objective of contributing to the smooth transition and consistent application of MiFIR, and complements the clarifications on the applicable MiFIR Review and Technical Standards provisions provided in the Interactive Single Rulebook earlier this year. ESMA also stated that it has updated its Q&As on transparency and market structure issues.

The European Commission, the European Central Bank and the European Securities and Markets Authority have published a joint statement on the next steps to support the preparations towards a transition to T+1. Under the EU Central Securities Depositories Regulation, ESMA is required to assess the appropriateness of shortening the settlement cycle in the EU and to propose a detailed roadmap towards a shorter settlement. ESMA plans to deliver its report to the Council of the European Union and the European Parliament in the coming months.

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HM Treasury has published a joint statement issued with the Swiss State Secretariat for International Finance on the first U.K.-Switzerland financial dialogue. The statement summarizes what was discussed at the meeting and the key outcomes. The discussions emphasized close, ongoing U.K. and Swiss cooperation in financial services and focused on several key themes, including the economic outlook and financial stability, the Berne Financial Services Agreement, sustainable finance, AI and technological innovation, capital markets. On the Berne Financial Services Agreement, finance ministries updated on the progress of their respective domestic implementation procedures, with the U.K. and Switzerland noting that the ambition is to complete implementation as soon as possible, by the end of 2025 at the latest, and enter the Agreement into force shortly thereafter. U.K. and Swiss supervisors also noted that negotiations of a supervisory cooperation memorandum of understanding supporting the Berne Financial Services Agreement are progressing with a view to reach their concluding stages soon. U.K. and Swiss representatives agreed to reconvene in the second half of 2025, emphasizing the importance of continued open dialogue on shared priorities.

HM Treasury has published a draft new chapter for the Special Resolution Regime Code of Practice that reflects reforms introduced by the Bank Resolution (Recapitalisation) Bill. This draft chapter sets out how the recapitalization mechanism will be used, including the firms that are in scope, how the Bank of England will determine the funds required from the Financial Services Compensation Scheme and assess the relative costs of using the mechanism compared to insolvency, and the Bank of England's accountability. It also clarifies certain aspects of the policy, following the U.K. Government's engagement with industry and Parliament. HM Treasury explains that the draft chapter may change, including as a result of any amendments made to the Bill during the parliamentary process and consultation with the Banking Liaison Panel. The Government intends to issue a finalized version of the Code in full when the Bill comes into force.

The U.K. Prudential Regulation Authority has published a consultation paper on the restatement of the remaining provisions of the U.K. Capital Requirements Regulation. The consultation paper sets out the PRA's proposals to restate the relevant provisions in the assimilated CRR in the PRA Rulebook and other policy material such as supervisory statements or statements of policy. The PRA also proposes to update the credit ratings mapping tables in some assimilated Technical Standards and to restate them in the PRA Rulebook. The proposals in the consultation consist primarily of the restatement of assimilated law into PRA rules and policy materials without modifications. There are a few instances where the consultation proposes to modify certain areas as part of their restatement. The PRA notes that more substantive proposals relate to proposed changes to the securitization requirements. The deadline for comments is January 15, 2025.

The Bank of England has published a consultation paper on amendments to its statement of policy on setting the minimum requirement for own funds and eligible liabilities. The proposals are designed to ensure that the U.K.'s MREL framework: (i) is simplified and consolidated where possible, to make it easier to navigate and implement; (ii) keeps up to date with, and is responsive to, wider developments in financial regulation and markets; (iii) remains aligned with international standards; and (iv) adapts over time to reflect lessons learnt from its implementation.

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The Committee on Payments and Market Infrastructures has published two reports to the G20 that offer key insights and recommendations on the interlinking and interoperability of payment systems to enhance cross-border payments. The first report, Linking fast payment systems across borders: governance and oversight, aims to support owners and operators of faster payment services when they are developing the governance and risk management of their faster payment services interlinking arrangement as well as overseers when they are defining their oversight approach. The report discusses the main decisions to be taken by operators in developing the governance approach for faster payment services interlinking arrangements. The report also sets out recommendations that overseers should consider when developing an oversight approach for the respective component faster payment services or a separate entity.

The second report, Promoting the harmonisation of application programming interfaces to enhance cross-border payments: recommendations and toolkit, presents the recommendations of the API Panel of Experts on the prioritization of harmonization. The report makes ten recommendations, divided into four categories: (i) recommendations that aim at facilitating the global API harmonization processes; (ii) recommendations that focus on API design principles and the use of existing international data standards; (iii) recommendations to enhance the developer experience; and (iv) recommendations to promote pre-validation APIs and implementation. Each recommendation is accompanied by a list of potential actions that stakeholders may consider as practical and concrete implementation measures. The recommendations are further supported by a toolkit to assist various stakeholders in assessing their current related practices.

A draft version of the Collective Investment Schemes (Temporary Recognition) and Central Counterparties (Transitional Provision) (Amendment) Regulations 2024 has been published, alongside a draft explanatory memorandum. The Regulations amend the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 to remove the requirement that a CCP must continue to be recognized in the EU to remain in the temporary recognition regime for overseas CCPs.

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The draft Building Societies Act 1986 (Modifications) Order 2024 has been published, together with an explanatory memorandum. The Order amends Parts 7 and 8 of the Building Societies Act 1986 to assimilate the law relating to building societies and to companies concerning directors' retirement and balance sheet signature following modification of the statutory provisions in force in relation to companies. The draft Order will amend: (i) sections 60 and 61 of the Building Societies Act to remove all references to the normal retirement age or the compulsory retirement age for directors, as stated in the 1986 Act. This will update the 1986 Act in line with the Companies Act 2006, where there are no longer corresponding restrictions for company directors; and (ii) section 80(1) of the 1986 Act so that the current requirement for the balance sheet of a building society to be signed by two directors and the CEO is changed to allow one director to sign the balance sheet on behalf of the board. This amendment aims to modernize the 1986 Act, aligning the provisions with section 414(1) of the Companies Act 2006. This would reduce a small but unnecessary burden for building societies, providing building societies with the equivalent accounts sign-off procedures as to companies. The draft Order will come into force 21 days after the day on which it is made.

The Building Societies Act 1986 (Amendment of Small Business Turnover Limit) Order 2024 has been published, together with an explanatory memorandum. The Order amends section 7(10) and (11) of the Building Societies Act 1986 to increase the turnover limit in a relevant financial year for the definition of a small business in section 7(10) of the Act from £1 million to £6.5 million. It also makes a corresponding amendment to the reference to the equivalent limit in any other currency in subsection (11)(c). Under section 7(1) and (2) of the Building Societies Act, subject to some exclusions, building societies are required to raise at least 50 per cent of their funding from members' deposits; the rest can be raised from other sources, known as wholesale funding. Deposits by small businesses with a society, or any subsidiary undertaking of the society, are excluded from the wholesale funding limit by section 7(3)(aa). By amending the definition of a small business in section 7(10) of the Building Societies Act, the Order will exclude a larger range of deposits with building societies by small businesses from the funding limit, thereby providing building societies with greater flexibility in their funding sources. This amendment will also help building societies compete more effectively with ring-fenced retail banks for deposits from small businesses. The proposed new small business turnover limit of £6.5 million is already used to classify the smaller businesses whose deposits must be held within the ringfence. The Order comes into force on November 4, 2024.

The House of Commons has published a written statement by Tulip Siddiq, Economic Secretary to HM Treasury, on the status of reforms to the bank ring-fencing regime. Ms Siddiq states that the U.K. Government will implement a package of reforms as soon as parliamentary time allows. The reforms will aim to improve competition and competitiveness in the U.K. banking sector and support economic growth, while maintaining financial stability.

The reforms include:

• The introduction of a secondary threshold to exempt retail-focussed banking groups from the regime—where investment banking activity accounts for less than ten per cent of Tier 1 capital.
• New flexibilities to allow ring-fenced banks to operate globally, subject to the Prudential Regulation Authority's rules.
• Measures to encourage more investment by ring-fenced banks in U.K. SMEs.
• Measures to reduce the compliance burdens associated with the regime.
• An increase in the primary deposit threshold for ring-fenced banks, from £25bn to £35bn.

The Basel Committee on Banking Standards has published a progress report on the 2023 banking turmoil and liquidity risk. The report, requested by the G20 Brazilian Presidency, provides an update on the Basel Committee's analytical work on liquidity risk dynamics observed during the turmoil, building on the Committee's stocktake report published in October 2023. The report includes updated empirical analysis on a range of liquidity-related issues highlighted by the turmoil, including distressed banks' outflow rates, the materiality of different liquidity risk factors, and the role and use of supervisory monitoring tools. Drawing on the findings of this progress report, the Basel Committee plans to pursue a series of follow-up initiatives related to the turmoil, including: (i) prioritizing work to strengthen supervisory effectiveness and identify issues that could merit additional guidance at a global level; and (ii) pursuing additional follow-up analytical work based on empirical evidence to assess whether specific features of the Basel Framework, such as liquidity risk and interest rate risk in the banking book, performed as intended during the turmoil and assess the need to explore policy options over the medium term.

The U.K. Technology Working Group, supported by the Investment Association, published a report on the current and future usage of artificial intelligence in investment management. The U.K. Financial Conduct Authority and HM Treasury are observers on the Group and supportive of the agenda. The report outlines common use cases of AI, examines enablers and barriers for longer-term AI adoption, and makes recommendations for future AI integration in the investment management industry. Key recommendations include:

• establishing regulatory clarity and consistency to enable developers and users of AI to plan and invest with confidence. This would include closer coordination between regulators and the further development of AI standards;
• building a U.K. fintech ecosystem with strong international connections that investment management firms can leverage to gain access to innovative solutions, specialized knowledge, and valuable insights;
• joint public and private sector action on AI-enabled fraud, to combat malicious actors and fight cybercrime and misinformation; and
• managing systemic risk through collective understanding and identifying best practices in risk management. The changing profile of systemic risk in the financial sector should not be a reason to hold back from innovating.

The draft Consumer Composite Investments (Designated Activities) Regulations 2024 have been published, together with an explanatory memorandum. The Regulations establish a proposed new legislative framework for the regulation of Consumer Composite Investments, formerly Packaged Retail and Insurance-based Investment Products. They replace the following assimilated law relating to PRIIPs: (i) the PRIIPs Regulation; (ii) the PRIIPs Regulations 2017; (iii) Commission Delegated Regulation (EU) 2017/653; and (iv) Commission Delegated Regulation (EU) 2016/1904. The Regulations take into account feedback that HM Treasury received on the original version of the draft statutory instrument, which was published for technical comments in November 2023.

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The U.K. Climate Financial Risk Forum (CFRF) has published three guides to help the financial sector develop its approach to climate-related financial risks and opportunities. The CFRF is a financial services industry forum established jointly by the U.K. Financial Conduct Authority and Prudential Regulation Authority and is comprised of senior representatives from across the financial services industry. The three guides are: (i) Nature-related Risk: Handbook for Financial Institutions - this provides an introduction for financial institutions to help frame nature as a risk, and discusses emerging practices in incorporating nature into financial risk management; (ii) Short-Term Scenarios - this discusses the use cases of short-term scenarios for banks/asset managers/insurers to provide more guidance to firms; and (iii) Mobilising Adaptation Finance to Build Resilience - this provides guidance for the industry to assess the physical risks they face and to facilitate increased levels of investment into climate adaptation to respond to those risks as an opportunity.

The Directorate-General for Financial Stability, Financial Services, and Capital Markets Union has launched a targeted consultation on the effectiveness of the EU securitization framework. Feedback gathered in preparation of the European Commission's report on the functioning of the Securitisation Regulation, and subsequent stakeholder engagement, indicates that issuance and investment barriers remain high in the securitization market, hindering the EU economy from fully reaping the benefits that securitization can offer. Originators and investors argue that issuance and investment barriers are partly driven by the conservativeness of specific aspects of the regulatory framework, such as transparency and due diligence requirements, as well as the capital and liquidity treatment of securitizations. The consultation seeks feedback on a range of issues impacting the EU securitization market, including: (i) the effectiveness of the securitization framework; (ii) the scope of application of the Securitisation Regulation; (iii) due diligence requirements; (iv) transparency requirements and the definition of public securitization; (v) supervision; (vi) the simple, transparent, and standardized standard; (vii) the securitization platform; and (viii) the prudential and liquidity treatment of securitization for banks. The deadline for comments is December 4, 2024.

The Council of the European Union has adopted the Listing Act legislative package, marking the final step in the decision-making process. The package consists of: (i) a regulation amending the Prospectus Regulation, Market Abuse Regulation, and Markets in Financial Instruments Regulation; (ii) a directive amending the revised Markets in Financial Instruments Directive and repealing the Listing Directive; and (iii) a directive on multiple vote shares. The regulation and directive amending MiFID and repealing the Listing Directive seek to streamline the rules applicable to companies going through a listing process or companies already listed on EU public markets. The aim is to simplify the process for companies, particularly SMEs, by alleviating administrative burdens and costs, while preserving a sufficient degree of transparency, investor protection, and market integrity. The multiple-vote shares directive creates a minimum harmonization at EU level that removes obstacles for the access of SMEs with multiple-vote structures to SME growth markets and any other multilateral trading facility open to trading of SME shares. The directive protects the rights of shareholders with fewer votes per share by introducing safeguards on how key decisions are taken at general meetings and also helps investors to take decisions by mandating transparency measures for companies with multiple-vote share structures.

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The U.K. Financial Conduct Authority has published a Dear CEO Letter setting out its supervisory strategy for financial advisers and investment intermediaries. The FCA's priorities over the next two years are reducing and preventing serious harm to consumers who rely on financial advice, monitoring and testing higher industry standards under the Consumer Duty, and enabling more consumers to pursue their financial objectives through the Advice Guidance Boundary Review.

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The draft Securitisation (Amendment) (No. 2) Regulations 2024 have been published, together with an explanatory memorandum. At present, U.K. investors in U.K.- or EU-origin Simple, Transparent, and Standardized securitizations can benefit from preferential prudential treatment due to a temporary arrangement. The time by which EU STS securitizations can enter the temporary arrangement will expire on December 31, 2024. This instrument extends the time by which such EU-origin STS securitizations can enter the temporary arrangement to June 30, 2026. The U.K. government is aiming to provide continuity and certainty to investors, until a non-time-limited assessment is undertaken. The explanatory memorandum explains that the three EEA-EFTA states will implement the EU Securitisation Regulation in their respective national legislation indicatively during 2025. It is preferable for the U.K. to undertake a single equivalence assessment at such a time when the EU and the three EEA-EFTA states have implemented the EU Securitisation Regulation uniformly, to reach a single assessment outcome for the EEA.