The International Organization of Securities Commissions has published a report on retail OTC leveraged products, alongside a statement warning retail investors of the risks of investing in illegal or fraudulent binary options. This step at international level follows the temporary prohibition of the marketing, distribution or sale of binary options and the restrictions on the marketing, distribution or sale of CFDs to retail clients introduced in the EU earlier this year, which the U.K. Financial Conduct Authority fully supported.

The report covers rolling spot forex contracts, CFDs and binary options offered and sold on a domestic and cross-border basis by intermediaries to retail investors. The report includes three toolkits providing guidance to IOSCO member jurisdictions on methods for mitigating the harm to retail investors investing in these products.

Read more. 

The International Organization of Securities Commissions has published a final report setting out Guidance to its members to address the significant potential conflicts of interest arising from the role of intermediaries during key stages of an equity raising. IOSCO consulted on a draft version of the guidance between February and April 2018.

IOSCO has identified a number of key risks. In the early, pre-offering, phase of an equity raising, conflicts of interest can arise if analysts employed by firms managing the securities offering are at risk of being under pressure to present a positive view of the issuer. During the investor education and price-formation phase, there is a risk that these "connected" analysts may produce conflicted research and conflicts can also be present during the allocation of securities. IOSCO considers that there can be both conflicts of interest and risks of misconduct where staff employed within firms that are managing an equity raising enter into personal transactions related to the capital raising. These issues can damage investor confidence and the effectiveness of the capital markets as route for issuers to raise finance.

Read more.

The U.S.-U.K. Financial Regulatory Working Group has issued a statement following its inaugural meeting held on September 12, 2018 in London. Participants discussed the outlook for financial regulatory reforms and future priorities, including possible areas for deeper regulatory cooperation to facilitate further financial services activity between U.S. and U.K. markets. Participants also discussed Brexit-related issues, including: (i)  U.S.-U.K. financial regulatory issues resulting from the U.K.’s exit from the EU;  and (ii) the implications of Brexit for financial stability and cross-border financial regulation, including contractual continuity and potential cliff-edge risks.

The Working Group was established in April 2018 to serve as a forum for staff from the U.S. Department of the Treasury and HM Treasury and financial regulatory authorities to exchange views on the regulatory relationship between the U.S. and the U.K. Its objectives are to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.

The next meeting of the Working Group will be held in the first half of 2019 in Washington, D.C.

View the statement. 

The U.K. Financial Conduct Authority has launched a consultation on its approach to implementing Regulatory Technical Standards and related Guidelines developed by the European Banking Authority to supplement provisions of the revised Payment Services Directive. The FCA's consultation focuses in particular on the RTS for strong customer authentication and common and secure open standards of communication. These RTS impose obligations on payment service providers to increase the security of customers' payments made by card and other means and also set out requirements on account servicing payment service providers (ASPSPs) relating to the third party providers of Account Information Services (AIS) and Payment Initiation Services (PIS) that were brought within the regulatory regime by PSD2.

The consultation includes proposals on new fraud reporting requirements reflecting PSD2 fraud reporting guidelines published by the EBA in July 2018. The FCA is also consulting on proposed changes to its Payment Services and E-Money Approach Document to reflect other legislative changes and clarify its expectations.
The EBA consulted between June and August 2018 on proposed Guidelines on aspects of the RTS. The FCA's proposed implementation approach is premised on the assumption that the final Guidelines will be largely as consulted on and the FCA will adjust its approach if necessary when the finalized Guidelines are published.

Read more.

The Bank of England has announced that its Money Markets Committee has launched a public register to display the statements of commitment from market participants that have agreed to abide by the UK Money Markets Code and would like their statements to be included on the register. The public register is accessible via a dedicated BoE webpage.

The Code is a voluntary industry code launched in April 2017, written by market participants. It sets out best practice expected from participants in the deposit, repo and securities lending markets and incorporates revised relevant sections of the Non-Investment Products Code, and also a revision and update of the Gilt Repo Code and Securities Borrowing and Lending Code.

View the public register. 

View the Money Markets Code. 

The European Central Bank has opened a consultation on a draft Part 2 to its Guide to Assessments of Licence Applications by banks. The ECB published the Guide to Assessment of Licence Applications in March 2018, which applies to all license applications to become a credit institution within the meaning of the Capital Requirements Regulation.  The ECB developed the Guide, which is not legally binding, to promote awareness and enhance the transparency of the assessment criteria and processes for establishing a credit institution within the Single Supervisory Mechanism.

The consultation on the draft Part 2 of the Guide focuses on assessment criteria for capital requirements and business plans, including initial capital, own funds, location, operations and structural organization, banking group and outsourcing.

The consultation closes on October 25, 2018.

View the consultation paper. 

View the consultation webpage. 

View details of the Guide to Assessments of Licence Applications.

The Financial Conduct Authority has published a direction on how EEA market operators can apply for recognition as an overseas investment exchange in preparation for Brexit. EEA market operators operating a regulated market, a multilateral trading facility or an organised trading facility currently use passports granted under the revised Markets in Financial Instruments Directive to give their U.K.-based members access to their markets. Once the U.K. has left the EU, those passports will no longer be valid and the U.K. Government does not intend to establish a temporary permissions regime in the event of a "no deal" outcome to the EU-U.K. Brexit negotiations or without an agreed implementation period. EEA market operators that engage in regulated activities when providing their U.K. members with access to their markets will need to apply for ROIE status, unless they can rely on the U.K.'s overseas persons exclusion. The FCA's direction sets out the FCA's expectations for EEA market operators.

View the FCA's statement.

View the FCA's Direction. 

The U.S. Commodity Futures Trading Commission and the Monetary Authority of Singapore today signed a cooperation arrangement on FinTech innovation, which is to be supported by the agencies' respective FinTech initiatives, LabCFTC and the MAS Financial Technology & Innovation Group. The arrangement will facilitate inter-agency cooperation on FinTech innovation and referrals for innovators that wish to enter the other regulator's market. In addition, it will provide an information sharing framework between the agencies focused on FinTech market trends and developments, innovations and best practices within their respective jurisdictions. The arrangement also calls for joint events, proofs of concept, trials and innovation competitions where permitted, along with periodic meetings to discuss FinTech issues of common interest.

CFTC Chairman J. Christopher Giancarlo in a statement said that he believes this collaboration with the MAS will "enhance global awareness of the critical role of regulators in 21st century digital markets," while Ravi Menon, Managing Director of the MAS, said that he hopes the arrangement will "create more opportunities for firms in both jurisdictions, especially in developing innovative business models for the derivatives market."

The arrangement follows a similar agreement reached by the CFTC and the U.K. Financial Conduct Authority this past February, and reflects the global nature of FinTech markets and the importance of cross-border collaboration between regulators.

View the cooperation agreement.

View the CFTC/FCA agreement.

The U.S. Federal Deposit Insurance Corporation published a notice of proposed rulemaking and request for comments regarding a limited exception for a capped amount of reciprocal deposits from treatment as brokered deposits.

Read more.

The European Central Bank has announced its recommendation of the Euro short-term rate - €STR - as a euro risk-free rate by a private sector working group. The group also recommends that €STR replaces the Euro overnight index average, EONIA, because EONIA no longer complies with the EU Benchmark Regulation and will be restricted from January 1, 2020. The recommendations of the working group are not legally binding.

Read more.

A Commission Delegated Regulation on settlement discipline has been published in the Official Journal of the European Union. The Delegated Regulation sets out Regulatory Technical Standards on settlement discipline as required under the Central Securities Depository Regulation. The RTS cover measures for preventing settlement fails through automated matching, a hold and release mechanism and partial settlement. The RTS also provide measures for monitoring and addressing settlement fails, such as a mechanism for cash penalties and a buy-in process. The RTS will apply directly across the EU from September 13, 2020.

View the RTS.

The U.S. Board of Governors of the Federal Reserve System announced a final rule amending the liability provisions of Subpart C of Regulation CC to address instances where there is a dispute between banks as to whether a check has been altered or is a forgery, and the original check is not available for inspection.  The final rule creates a rebuttable presumption of alteration (as that term is used in the UCC) with respect to disputes that arise between banks regarding substitute or electronic checks.  The presumption is rebuttable either by proving by a preponderance of the evidence that the substitute or electronic check is forged (i.e., derives from an original check that was issued with an unauthorized signature of the drawer) or does not contain an alteration.  The presumption of alteration does not apply if a copy of the original check is available for inspection by all parties or where one bank sent the original check to the other bank, even if the check was subsequently truncated and destroyed.  The final rule will take effect on January 1, 2019.

View full text of the final rule.

The European Commission has published a Communication setting out a broad strategy for strengthening the EU's framework for anti-money laundering supervision. The Communication is accompanied by a fact sheet setting out Questions and Answers on the strategy.

The Commission notes that, despite the recent strengthening of the EU's framework, through the Fourth Money Laundering Directive (4MLD) and the forthcoming Fifth Money Laundering Directive (5MLD), there are concerns that gaps remain in the EU's supervisory framework. The Commission highlights that there is no clear articulation between the prudential and anti-money laundering rules for financial institutions. It identifies shortcomings in the reaction time of national supervisors and in the level of cooperation and information sharing both between prudential and anti-money laundering supervisors and on a cross-border basis between EU supervisors and other supervisors based both within and outside the EU. While the Commission recognizes that 5MLD will remove certain obstacles to cooperation between anti-money laundering and prudential supervisors, it also notes that further steps are necessary to ensure effective supervisory cooperation, especially where financial institutions operate across borders.

Read more.

HM Treasury has published a consultation on the U.K. Government's proposed approach to implementing the EU Bank Creditor Hierarchy Directive (also known as the Insolvency Hierarchy Directive) into U.K. domestic law. Member states are required to transpose the BCHD into national law by December 29, 2018 and must apply the laws from the date of transposition.

The BCHD is part of a package of reforms aimed at further strengthening the resilience of EU banks. It lays down harmonized rules for the insolvency ranking of unsecured debt instruments for the purposes of the EU recovery and resolution framework. The BCHD introduces statutory subordination across the EU, by amending the Bank Recovery and Resolution Directive so as to require Member States to create a new class of non-preferred senior debt in their creditor hierarchy. Instruments meeting the relevant criteria to fall within the new class will be eligible to meet subordination requirements under the provisions of the Total Loss Absorbing Capacity (TLAC) term sheet and its EU equivalent, the requirement for Minimum Requirement for Own Funds and Eligible Liabilities (MREL). HM Treasury explains in the consultation paper that the statutory subordination introduced by the BCHD will not prevent the U.K.'s preferred approach, which is to require structural subordination (i.e. subordination within the terms of capital instruments).

Read more.

The U.K. Prudential Regulation Authority has launched a consultation on changes to the PRA's reporting requirements to reflect proposed changes set out by the European Banking Authority in EBA consultations launched in August 2018. The EBA proposes a number of revisions to the existing Implementing Technical Standards on the supervisory reporting requirements under the Capital Requirements Regulation. These include proposed revisions to the financial reporting (FINREP) annexes of the ITS, which add new reporting requirements for non-performing and forborne exposures, amend the reporting of profit or loss items (in particular on expenses) and amend the reporting on leases following International Financial Reporting Standard 16. Proposed revisions to the common reporting (COREP) annexes relate to the Liquidity Coverage Requirement for credit institutions.

Read more.

HM Treasury has published a press release announcing that Bank of England Governor Mark Carney will remain in his position for an extended term until January 31, 2020. The extension of Dr. Carney's term will ensure continuity at the BoE until Brexit is completed. A new governor would be appointed during Autumn 2019 after the terms for the U.K.'s withdrawal and the framework for the future U.K.-EU partnership have been agreed.

Sir Jon Cunliffe, BoE Deputy Governor with responsibility for financial stability, has also been re-appointed for a term from November 1, 2018 to October 2023.

View the HM Treasury press release.

View the correspondence between Dr. Carney and the Chancellor of the Exchequer. 

The U.S. Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency and Bureau of Consumer Financial Protection issued an interagency statement explaining the role and legal status of supervisory guidance.

Read more.

The U.S. Office of Comptroller of the Currency published a notice of proposed rulemaking regarding permitting federal savings associations with total consolidated assets of $20 billion or less as of December 31, 2017 (“covered savings associations”), to elect to operate with the same rights and privileges as a national bank.  The proposed rule seeks to implement Section 206 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amends the Home Owners’ Loan Act, and is intended to provide business flexibility for certain federal savings associations to adapt to change without a corresponding requirement to change charters.   Under the proposed rule, a covered savings association has same rights and privileges as a national bank that has its main office situated in the same location as the home office of the covered savings association, and is subject to the same duties, restrictions, penalties, liabilities, conditions and limitations that would apply to such a national bank.  The covered savings institution, however, will retain its federal savings association charter, and will be treated as a federal savings association for governance and other purposes, including consolidation, merger, dissolution, conversion, conservatorship and receivership.  Treatment as a covered savings association would generally continue even after the institution’s total consolidated assets exceed $20 billion.  Comments to proposed rule are due no later than November 19, 2018.

View full text of the proposal.

The U.S. Federal Deposit Insurance Corporation published a proposal (FIL-46-2018) seeking comment with respect to the retirement of certain Financial Institution Letters.  FILs are letters that typically announce various types of regulations, policies, publications, and other matters of interest to those in the banking community.  The retired FILs would be archived and moved to inactive status, but would still be available for reference.  The FDIC issued the proposal pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996, which requires the FDIC (and other agencies) to conduct a review of their rules at least every 10 years to identify outdated or unnecessary regulations.  In connection with this mandate, the FDIC has identified 374 FILs issued between 1995 and 2017 regarding risk management supervision that have become outdated or redundant.  The FDIC is also currently reviewing FILs regarding other subject matters, and is exploring opportunities to update or streamline its remaining FILs generally.  Comments to the proposal are due by October 10, 2018.

View full text of the FDIC proposal, including a list of the letters to be retired.

HM Treasury has published draft statutory instruments on the regulation of payments and e-money and on access to the Single Euro Payments Area in preparation for the U.K.'s withdrawal from the EU - the draft Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 and the Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018. The draft Regulations are relevant to all Payment Service Providers and registered Account Information Service Providers. The draft Regulations will amend the Payment Services Regulations 2017, Electronic Money Regulations 2011 and the SEPA Regulation to:

• Create a temporary permissions regime for EEA payment firms

In line with the proposed temporary permissions regime for EEA firms regulated under the Financial Services and Markets Act 2000 (covered by the draft EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018), HM Treasury is proposing a TPR for payments. EEA firms operating under the TPR for payments will need to establish a U.K. subsidiary at the end of the proposed three-year TPR period. This provision should give firms the time to fully operationalize their new U.K. subsidiary.

Read more.

The U.K. Financial Conduct Authority has issued a press release announcing the appointment of Sheldon Mills as its new director of competition. Mr. Mills is currently senior director, mergers and state aid at the Competition and Markets Authority. Mr. Mills will take up his role in November 2018.

View the FCA press release.

The Joint Committee of the European Supervisory Authorities has published a joint report on automation in financial advice. The Report follows the ESA's 2015 joint discussion paper and follow-up report in 2016. The Report provides a summary of recent sectoral work by the ESAs in this area and the main findings of a survey with national regulators on the evolution of automation in financial advice in the securities, banking and insurance sectors. The ESAs observed that automated services are more often offered through partnerships between established financial intermediaries and FinTech firms than by FinTech firms alone. The ESAs also found that automation in financial advice has grown slowly and that the number of firms and customers involved is still limited. As a result, the ESAs do not consider that any of the previously identified risks have materialized and therefore that further action is unnecessary at this stage. The ESAs will conduct a new monitoring exercise if and when market developments and risks merit the work.

View the report.

The European Securities and Markets Authority has published an Opinion on the European Commission's proposed amendments to the final draft Implementing and Regulatory Technical Standards on reporting under the Securities Financing Transactions Regulation. Various parts of the SFTR came into effect on January 12, 2016. However, the new reporting obligation for SFTs is not yet in force. Securities financing transactions involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy backs. The SFTR requires, amongst other things, all securities financing transactions to be reported to EU recognized trade repositories, including details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies.

Read more.

The European Commission has published a Communication (dated August 10, 2018) on proposed amendments by the European Securities and Markets Authority to a Regulatory Technical Standard, known as "RTS1," supplementing the Markets in Financial Instruments Regulation.

Under MiFIR, Systematic Internalisers must make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent of 10% of the standard market size for the quoted instrument; (ii) include both a bid and offer price; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity." ESMA submitted final draft amendments to RTS 1 in March 2018, which provided that, where a financial instrument is subject to the "minimum tick size" regime, the quotes of an SI can only adequately reflect prevailing market conditions when those quotes reflect the minimum price increments ("tick sizes") quoted by EU trading venues trading the instrument.

Read more.

The Prudential Regulation Authority has issued an update on the application of its supervisory statement, "Resolution Planning." The supervisory statement sets out the PRA's expectations on the resolution planning information that firms must submit to comply with their obligations under the EU Bank Recovery and Resolution Directive. The update confirms the approach that will be taken by the PRA and the Bank of England as the U.K.'s national resolution authority.

Read more.

The U.S. Board of Governors of the Federal Reserve System and U.S. Federal Deposit Insurance Corporation announced that the agencies have extended the submission deadline for the resolution plans (commonly referred to as “living wills”) for one designated non-bank and four foreign banking organizations. The announcement extends the submission deadline for the non-bank financial company from December 31, 2018 to December 31, 2019, and extends the submission deadline for the four foreign banking organizations from July 1, 2019 to July 1, 2020. The agencies noted that the extended deadline will allow for feedback to be provided to the institutions with respect to their prior resolution plan submissions, and will also provide time for the institutions to prepare their next resolution plan submissions.  The FDIC also announced that it will be extending the resolution plan submission deadline for all insured depository institutions to no sooner than July 1, 2020.

View full text of the FDIC and Federal Reserve press release.

Following a consultation in March 2018, the Basel Committee on Banking Supervision has published a finalized technical amendment to the consolidated Pillar 3 disclosure technical standard that was issued in March 2017. The amendment imposes additional Pillar 3 disclosure requirements for those jurisdictions implementing an Expected Credit Loss, or ECL, accounting model as well as for those adopting transitional arrangements for the regulatory treatment of accounting provisions. These additional disclosures require banks to disclose, where applicable: (i) the "fully loaded" impact of ECL transitional arrangements used in Total Loss Absorbing Capacity resources and ratios; (ii) the allocation between general and specific provisions for standardized approach exposures; and (iii) the rationale for their categorization of ECL accounting provisions in general and specific categories for standardized approach exposures.

The technical amendment will also apply to jurisdictions adopting transitional arrangements for the regulatory treatment of accounting provisions. The interim approach to, and transitional arrangements for, the regulatory treatment of accounting provisions were published separately by the Basel Committee in March 2017.

The amendments covered by the revised Technical Standard will take effect from January 1, 2019.

View the Technical Amendment. 

View the consultation paper.

View the interim approach and transitional arrangements published March 2017.

The U.S. Office of the Comptroller of the Currency issued guidance to OCC-supervised institutions with respect to the role of informal or implied expressions of support from foreign governments in determining credit risk ratings.

Read more.

The U.S. Office of the Comptroller of the Currency issued an advanced notice of proposed rulemaking with respect to the modernization of the Community Reinvestment Act.

Read more.

The U.S. Board of Governors of the Federal Reserve System issued an interim final rule increasing the asset threshold for the applicability of the Federal Reserve Board’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (Regulation Y, Appendix C) from $1 billion to $3 billion in total consolidated assets.

Read more.

The European Banking Authority has published a consultation paper setting out proposed amendments to existing Implementing Technical Standards on supervisory reporting, to align the reporting of securitizations with the new EU securitization framework. The new securitization framework took effect in January 2018 and comprises: (i) the Securitization Regulation (also known as the STS Regulation), which lays down common due diligence for institutional investors, risk retention and transparency measures and establishes a category of simple, transparent and standardized securitization in the EU; and (ii) a Regulation making targeted amendments to the Capital Requirements Regulation to provide for the capital treatment of STS securitizations and certain SME synthetic securitizations, including measures to reduce reliance on external credit ratings.

Read more.

The European Banking Authority has launched a consultation on proposed revisions to the existing Implementing Technical Standards for the financial reporting, or FINREP, framework under the Capital Requirements Regulation.

The proposed revisions relate to the reporting requirements for non-performing and forborne exposures. The EBA proposes revisions to existing templates to provide for additional breakdowns on performing and non-performing exposures, forborne exposures and collateral obtained. The proposals include some new templates for additional reporting by institutions with elevated levels of non-performing exposures that are not "small and non-complex." The new templates are designed to provide further insights into an institution's portfolios of performing and non-performing loans and/or or forborne loans and advances and on collateral obtained. The EBA also proposes revisions to the reporting on profit or loss items in FINREP and to account for the introduction of International Financial Reporting Standard 16 Leases, which is due to replace IAS 17 as the standard for the accounting of leases from January 1, 2019.

Read more.

The European Banking Authority has launched a consultation on proposed revisions to the Implementing Technical Standards that relate to supervisory reporting, under the common reporting, or COREP, framework, in line with the Liquidity Coverage Requirement, or LCR, under the Capital Requirements Regulation.

The proposed revisions to the ITS are intended to reflect amendments made to an existing Delegated Regulation supplementing the Capital Requirements Regulation. These amendments were made by an Amending Regulation adopted by the European Commission in July 2018. The changes introduced by the Amending Regulation require the EBA to make related changes to the ITS on LCR reporting to capture the necessary elements for its calculation and monitoring. The revisions to the ITS relate mainly to the calculation of inflows and outflows in securities financing transactions and collateral swaps or the unwind waivers envisaged for some SFTs and collateral swaps with central banks. Further minor amendments are also proposed.

Read more.

The European Securities and Markets Authority has announced its intention to adopt a Decision to extend the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA has previously adopted intervention measures for binary options, with the current Decision set to expire on October 1, 2018.

ESMA has power under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices. This may be done when, among other conditions, the exercise of ESMA's power addresses a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire. In reviewing the current Decision, ESMA has agreed to exclude from the scope of product intervention certain types of binary option that are less likely to lead to a significant investor protection concern.

Read more.

The U.S. Board of Governors of the Federal Reserve System, U.S. Office of the Comptroller of the Currency and U.S. Federal Deposit Insurance Corporation jointly issued an interim final rule and request for comment to expand the number of insured depository institutions and U.S. branches and agencies of foreign banks eligible for an 18-month on-site examination cycle.

Read more.

The Commodity Futures Trading Commission has proposed exempting certain bank holding companies, savings and loan holding companies and community development financial institutions from swap clearing requirements. The proposed exemptions, issued in response to comments made through the CFTC's Project KISS initiative, codify prior no-action relief provided under CFTC Staff Letters 16-01 and 16-02.

Read more. 

HM Treasury has published a technical notice entitled "Banking, insurance and other financial services if there's no Brexit deal," to provide guidance about the impact of the U.K. leaving the EU without a ratified withdrawal agreement in place. The guidance is relevant to financial services firms, funds and financial market infrastructures and to their customers. The technical notice is one of the first 25 of a series of U.K. government technical notices setting out information that will enable businesses and citizens to make informed plans and preparations in the event of the U.K. exiting the EU on March 29, 2019 without a deal. These technical notices include a notice on the government's overarching approach to preparing for a "no deal" scenario.

Read more.

The European Central Bank has published an Opinion on the legislative proposals adopted by the European Commission in December 2017 for a new framework for the prudential regulation of investment firms. The framework proposed by the European Commission comprises a proposal for a regulation on the prudential requirements of investment firms (including amendments to the Capital Requirements Regulation, the Markets in Financial Instruments Regulation and the European Banking Authority Regulation) along with a proposal for a directive on the prudential supervision of investment firms, which includes amendments to the CRD IV Directive and the revised Markets in Financial Instruments Directive. The ECB was asked by the European Parliament and the Council of the European Union to provide its opinion on the proposed framework in January 2018.

In the Opinion the ECB states that it generally supports the objectives of the proposed framework, which are to create a prudential framework better suited to the risks and business models of different types of investment firms and to subject systemically important investment firms to the same prudential rules as credit institutions.

Read more.

The U.S. Board of Governors of the Federal Reserve System, U.S. Office of the Comptroller of the Currency and U.S. Federal Deposit Insurance Corporation jointly issued an interim final rule and request for comment to treat “liquid and readily-marketable,” investment grade municipal obligations as level 2B high-quality liquid assets (HQLAs) for purposes of the liquidity coverage ratio rule.

Read more.

The European Securities and Markets Authority has published a final report and technical standards on the disclosure and reporting requirements under the EU Securitization Regulation (or STS Regulation). The Securitization Regulation requires originators and sponsors to notify ESMA of any securitization that meets the "Simple, Transparent and Standardized" criteria. ESMA will maintain a list of all such securitizations on its website. Securitization special purpose entities, originators and sponsors of a securitization will be required to make certain information available via a securitization repository to holders of a securitization position, to the national regulators and, upon request, to potential investors. The Securitization Regulation will apply directly across the EU from January 1, 2019 to securities issued under securitizations on or after January 1, 2019. Securitizations issued before that date may be referred to as STS securitizations provided that they meet certain conditions.

Read more.

HM Treasury has released another draft statutory instrument in preparation for Brexit, the Capital Requirements (Amendment) (EU Exit) Regulations 2018 - the draft Capital Requirements Regulations. The EU regulatory capital requirements framework for banks, building societies and investment firms comprises the Capital Requirements Regulation, the Capital Requirements Directive and secondary legislation in the form of technical standards. The CRD is implemented into U.K. law through various sector-specific legislation, for example, the Regulated Covered Bonds Regulations 2008, the Capital Requirements Regulations 2013, the Capital Requirements (Country-by-Country Reporting) Regulations 2013, and the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 as well as through PRA and FCA rules. The CRR and the technical standards are directly applicable across the EU.

This draft Capital Requirements Regulations will amend the CRR to ensure that it continues to operate effectively in the U.K. when the U.K. leaves the EU. The domestic legislation implementing CRD is also amended to ensure that it continues to function as intended. The Prudential Regulation Authority and the Financial Conduct Authority will be responsible for amendments to the technical standards and for updating their rulebooks. They are expected to consult in Autumn 2018 on these aspects.

Read more.

The Commodity Futures Trading Commission has unanimously approved final amendments to clarify and simplify its regulations governing the duties and annual reporting requirements for chief compliance officers at futures commission merchants, swap dealers and major swap participants. The amendments, first proposed in May 2017, are designed to clarify certain requirements (including as to the annual CCO report) as well as harmonize the CFTC's requirements with similar Securities and Exchange Commission rules that will be applicable to security-based swap dealers.

Read more.

The U.S. Federal Deposit Insurance Corporation issued modification to its Statement of Policy with respect to Section 19 of the Federal Deposit Insurance Act, which (among other things) prohibits persons with convictions for certain criminal offenses, or those who have entered into pretrial diversion or similar programs with respect to the same, from participating in the affairs of a FDIC-insured financial institution without prior approval of the FDIC.

Read more.

The U.S. Board of Governors of the Federal Reserve System Announced that David Wilcox, the director of the Federal Reserve Board’s Division of Research and Statistics, would retire at the end of the year.  Mr. Wilcox has served as the director of the division for 7 years, and in his 30 years of service has also held positions on the staff of the President's Council of Economic Advisers, as assistant secretary for economic policy at the Treasury Department and as deputy director of the Division of Research and Statistics.

View full text of the Federal Reserve Press.

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have published a consultation paper on governance arrangements for OTC derivatives data elements other than the Unique Transaction Identifier and the Unique Product Identifier. Critical data elements are an important aspect of reporting derivatives transactions to a trade repository. The consultation paper proposes the key criteria for the CDE maintenance and governance, the different areas of CDE governance and governance functions and allocation of the governance functions to different bodies.

Responses to the consultation should be submitted by September 27, 2018 using the dedicated response form, available through the links below.

View the press release.

View the consultation paper.

The Financial Stability Board has launched a thematic peer review on implementation of the Legal Entity Identifier and is inviting feedback on implementation of the LEI at the same time. The objective of the LEI system is for unique identifiers to be held by all legal entities participating in financial markets across the globe. It is envisaged that the LEI system will lead to better data aggregation, enhance systemic risk monitoring and reduce costs to market participants.

Using the peer review, the FSB will: (i) consider the approaches and strategies used by FSB members to implement the LEI, including its adoption for regulatory requirements; (ii) assess whether current levels and rates of LEI adoption are sufficient to support the ongoing and anticipated needs of FSB member authorities; (iii) identify the challenges in further advancing the implementation and use of the LEI; and (iv) if appropriate, make recommendations for addressing any challenges.

Read more.

HM Treasury has published draft Deposit Guarantee Scheme and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018. The draft regulations are expected to be laid before Parliament in autumn 2018 and to come into force mostly on the day the U.K. withdraws from the EU. These draft regulations are part of HM Treasury's measures to onshore EU legislation under the provisions of the European Union (Withdrawal) Act 2018. The key changes proposed are:

• transferring the power to review, adjust and set the coverage level from EU bodies to the Prudential Regulation Authority, with approval from HMT; and
• removing the cooperation arrangement under which the U.K. Financial Services Compensation Scheme administers compensation payments to depositors at U.K. branches of EEA banks on behalf of EEA deposit guarantee schemes. A transitional provision will allow the FSCS to continue after Brexit to accept instructions and funds from EEA DGS should an EEA firm operating in the U.K. fail immediately before Exit Day.

View the draft Regulations.

View the explanatory guidance.

Two Commission Implementing Regulations supplementing the Benchmark Regulation have been published in the Official Journal of the European Union. The Benchmark Regulation, which took effect across the EU in January 2018, sets out the authorization and registration requirements for benchmark administrators, including third-country entities, and the requirements for governance and control of administrators. It provides for different categories of benchmarks depending on the risks involved, imposes additional requirements on benchmarks considered to be "critical" and gives powers to national regulators to mandate, under certain conditions, contributions to or the administration of critical benchmarks.

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Draft U.K. secondary legislation has been published to onshore the EU Short Selling Regulation on the day the U.K. exits the EU. The draft Short Selling (Amendment) (EU Exit) Regulations 2018 (or U.K. SSRs) are expected to be laid before Parliament in Autumn 2018 and to come into force mostly on the day the U.K. withdraws from the EU. The draft U.K. SSRs are made under the provisions of the European Union (Withdrawal) Act 2018 to address failures of retained EU law relating to short selling to operate effectively and other deficiencies arising from Brexit.

The explanatory guide to the U.K. SSRs states that changes for firms with shares admitted to trading on a U.K. venue should be minimal. The procedure for notifying U.K. instruments to the Financial Conduct Authority will be kept and instruments admitted to trading on U.K. venues will continue to have the same restrictions applied to them.

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The European Securities and Markets Authority has published a further statement on the transitional exemption from the clearing obligation for pension scheme arrangements under the European Market Infrastructure Regulation and delegated regulations. Transitional provisions provide for PSAs to be exempt from the clearing obligation until August 16, 2018. There is no provision in EMIR that would allow for a further extension of this exemption period. It is proposed that this exemption will be further extended under the proposal to amend EMIR, known as EMIR Refit. ESMA issued a statement on July 3, 2018 stating that national regulators are expected not to prioritize "their supervisory actions towards entities that are expected to be exempted again in a relatively short period of time and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate manner."

This new statement clarifies that ESMA does not expect national regulators to focus on any non-compliance by PSAs with the related trading obligation under the Markets in Financial Instruments Regulation. Financial counterparties that are exempt from the clearing obligation under EMIR are also exempt from the trading obligation under MiFIR. It is likely that the clearing obligation exemption will expire before it is extended under EMIR Refit and therefore the trading obligation exemption would also lapse.

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