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The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • EU Consultation on CCP Procyclicality of Margin Requirements
    01/27/2022

    The European Securities and Markets Authority has opened a consultation in which it proposes to amend the requirements on EU CCPs relating to an additional charge related to the procyclicality of margin. Responses to the consultation should be submitted by March 31, 2022. The European Market Infrastructure Regulation requires CCPs to impose, call and collect margins to limit their credit exposures from clearing members. A CCP must also regularly monitor and, if necessary, revise the level of its margins to reflect current market conditions considering any potentially procyclical effects of those revisions. Procyclicality of margin is the term used to describe the fact that margin requirements for the same portfolio are higher in times of market stress and lower in calm conditions. Regulatory Technical Standards under EMIR set out requirements for CCPs to use at least one of three options to limit procyclicality to the extent that the financial soundness of the CCP is not negatively affected. Generally, the EU imposes higher (more costly) margin charges than most other jurisdictions, including the U.S. and other major financial centres, which have essentially no extra procyclicality charge for CCPs.

    Read more.
    Topics : COVID-19Derivatives
  • Bank of England Drops Warning Against Profit Distributions for Financial Market Infrastructures
    11/11/2021

    The Bank of England has written to the CEOs of all regulated U.K. financial market infrastructures notifying them that they are no longer expected to discuss prospective shareholder distributions with the BoE.

    Read more.
  • International Bodies Consult on Margin Practices
    10/26/2021

    An international consultation has been launched on the review of margining practices in the centrally and non-centrally cleared markets. The consultation is being run jointly by the Basel Committee for Banking Standards, the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions. In March 2020, around the start of the COVID pandemic, large increases in margin occurred in the centrally and non-centrally cleared markets, furthering the so-called "dash for cash".

    The consultation is considering a range of potential changes to the international framework, such as:
    • increasing transparency in the centrally cleared market;
    • enhancing liquidity preparedness of market participants as well as liquidity disclosures;
    • identifying data gaps in regulatory reporting;
    • streamlining variation margin processes in centrally and non-centrally cleared markets;
    • further work on evaluating the responsiveness of centrally cleared initial margin models to market stresses with a focus on impacts and implications for CCP resources and the wider financial system; and
    • evaluating the responsiveness of non-centrally cleared initial margin models to market stresses.
    Topics : COVID-19Derivatives
  • International Bodies Launch Survey on Margin Calls
    05/05/2021

    The Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructure and the International Organization of Securities Commissions has published a survey on margin calls as part of an investigation into liquidity shortfalls during the early stages of the COVID-19 pandemic. The combined effect of government measures to contain the pandemic in March 2020, together with market uncertainty, job losses and travel restrictions triggered a pullback in economic activity and stress on market liquidity. The non-bank financial intermediation sector was found to be particularly vulnerable to the liquidity shock.

    Read more.
  • UK Conduct Regulator Sets Out Supervision Strategy of Retail Banks
    02/05/2021

    The U.K. Financial Conduct Authority has published a letter addressed to the CEOs of retail banks setting out the FCA's approach to retail bank supervision in light of the COVID-19 pandemic.

    In the letter, the FCA identifies the key risks of harm that retail banks' activities may pose over the next two years, sets out its expectations of the actions retail banks need to take to mitigate the risks and discusses the work that the FCA will undertake to ensure firms are meeting the expectations. The risks are grouped into the following four priority supervisory areas:
     
    1. ensuring fair treatment of borrowers, including those in financial difficulties;
    2. ensuring good governance and oversight of customer treatment and outcomes during business change over the next two years;
    3. ensuring operational resilience over the next two years and beyond; and
    4. minimizing fraud and other financial crime.

    View the FCA's letter.
  • EU Delays Securities Settlement Discipline Regime to February 2022
    01/27/2021

    EU Regulatory Technical Standards postponing the implementation deadline of the settlement discipline regime under the Central Securities Depositories Regulation have been published in the Official Journal of the European Union. The RTS delay the application date of the settlement discipline rules from February 1, 2021 to February 1, 2022, by amending the existing RTS (Commission Delegated Regulation (EU) 2018/1229). The settlement regime was originally due to apply from September 13, 2020. However, that date was changed to February 1, 2021, amid calls from industry associations and other stakeholders to delay the application date so that systems, procedures and measures could be put in place. The latest delay arises from the impact of the COVID-19 pandemic on the financial services industry. 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.

    View the amending Delegated Regulation.
    Topics : COVID-19Securities
  • European Securities and Markets Authority Renews Notification Requirement for Net Short Positions at or Exceeding 0.1%
    12/17/2020

    The European Securities and Markets Authority has renewed its decision requiring holders of net short positions in shares traded on an EU-regulated market to notify national regulators if the position reaches or exceeds 0.1% of issued share capital. ESMA originally introduced the requirement on March 16, 2020 for a period of three months and has extended it twice since then. This latest extension will apply the requirements from December 19, 2020 until March 19, 2021. The temporary transparency obligations are a response to perceived threats to market integrity arising from the COVID-19 pandemic. They apply to any natural or legal person, irrespective of their country of residence, but do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making activities, or stabilization activities.

    The European Free Trade Association's Surveillance Authority published a decision on the same day renewing its decision imposing the same transparency obligations for shares admitted to trading on an EEA regulated market. The renewed requirements also apply from December 19, 2020 until March 19, 2021.

    View ESMA's decision.

    View the EFTA decision.
    Topics : COVID-19Securities
  • UK Conduct Regulator Extends Certification and Conduct Rules Implementation Deadlines
    10/28/2020

    Following its consultation earlier this year, the U.K. Financial Conduct Authority has published its final policy statement and rules to extend certain implementation deadlines for the Certification Regime and Conduct Rules. To assist firms impacted by the COVID-19 pandemic, the U.K. has made legislation—The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) (Amendment) Regulations 2020— extending the deadline for completion of firms' first assessments of the fitness and propriety of their Certified Persons from December 9, 2020, to March 31, 2021. This applies only to solo-regulated firms (other than benchmark administrators).

    In addition to extending that date, the FCA has also extended the following deadlines from December 9, 2020, to March 31, 2021:
    • the date the Conduct Rules come into force for staff that are not Senior Managers, Certification Staff or board directors;
    • the date by which relevant employees must receive training on the Conduct Rules; and
    • the deadline for submission of information about Directory Persons to the FS Register.

    The FCA has reiterated that firms that are able to certify staff and submit information for the FS Register before March 31, 2021, should do so.

    View the FCA's policy statement and amended rules.
  • Bank of England Financial Policy Committee Publishes Policy Summary
    10/08/2020

    The Bank of England's Financial Policy Committee has published its latest Policy Summary and the minutes of its meeting held on September 30, 2020. The FPC notes a range of near-term risks that could impact the U.K. economy, including the evolution of the COVID-19 pandemic, post-Brexit trading arrangements between the U.K. and EU and various other geopolitical risks. 

    Read more.
  • European Commission Sets out Capital Markets Union Action Plan
    09/24/2020

    The European Commission has published a Communication to EU bodies on its Capital Markets Union Action Plan. The CMU is an EU initiative which aims to enhance and further integrate the capital markets of EU Member States. An action plan to develop the initiative was first adopted in 2015 and has been commented upon and updated since then. The Commission's Communication sets out the latest Action Plan, and is accompanied by a Q&A. It follows the recommendations of the High-Level Forum on the CMU, which proposed 17 key recommendations for the CMU, and the Commission's Roadmap on the CMU which set out details of the Commission's proposed Action Plan for comments by interested parties.

    Read more.
    Topics : COVID-19Securities
  • European Commission Sets Out EU Digital Finance Strategy
    09/24/2020

    The European Commission has published a Communication on its EU digital finance strategy for the coming years. The global economy has been transformed by digital innovation, and this includes financial services. The Commission's strategic objective is to embrace digital finance for the benefit of consumers and businesses while ensuring digital transformation is soundly regulated. To achieve this objective, the Commission sets out four priorities for the digital transformation of the EU financial sector over the next four years and the actions it will take to achieve them.

    Read more.
    Topics : COVID-19FinTech
  • European Banking Authority Phases Out COVID-19 Guidelines on Loan Repayments Moratoria
    09/21/2020

    The European Banking Authority has confirmed that it will phase out its Guidelines on legislative and non-legislative payment moratoria in accordance with its September 30, 2020 deadline. The EBA originally published the Guidelines in April 2020, stipulating that, for a period of three months, banks should not class payment moratoria that were based on national law or private-sector initiatives as forbearance or distressed restructuring practices, in light of the COVID-19 pandemic. The Guidelines were extended for a further three months on June 30, 2020 but the EBA now intends to comply with the September 30, 2020 phase out deadline in light of the success of the temporary moratoria and the need to return to the usual rescheduling of loans on a case-by-case approach.  The treatment described in the Guidelines will continue to apply to payment holidays granted prior to September 30, 2020.

    View the EBA's statement on the phase-out of its Guidelines.

    View details of the EBA's Guidelines.
  • International Organization of Securities Commissions Publishes Guidance on Conflicts of Interest in Debt Capital Raising
    09/21/2020

    The International Organization of Securities Commissions has published guidance on how to address potential conflicts of interest and associated conduct risks for intermediaries involved in the issuance of debt securities. Intermediaries may perform a variety of roles on a debt capital raising transaction and may also have a proprietary interest in the transaction itself.  In 2017, the IOSCO Board decided to examine conflicts of interest and other conduct risks in the capital raising process. IOSCO published guidance for the equity capital raising process in September 2018.

    Read more.
    Topics : COVID-19Securities
  • European Central Bank Decision Excluding Eurozone Central Bank Exposures from Total Exposure Measures
    09/21/2020

    The European Central Bank has published a Decision in the Official Journal of the European Union temporarily excluding certain central bank exposures from significant Eurozone banks' leverage ratio calculations for the purposes of the EU Capital Requirements Regulation. The Decision will enter into force on September 26, 2020 and the exclusion will apply until June 27, 2021.

    Read more.
  • European Securities and Markets Authority Renews Notification Requirement for Net Short Positions at or Exceeding 0.1%
    09/18/2020

    The European Securities and Markets Authority has renewed its decision requiring holders of net short positions in shares traded on an EU-regulated market to notify national regulators if the position reaches or exceeds 0.1% of issued share capital. ESMA originally introduced the requirement on March 16, 2020 for a period of three months, extending it for a further three months on June 17, 2020. ESMA's latest decision means the measure will now apply from September 18, 2020 until December 18, 2020.

    Read more.
    Topics : COVID-19Securities
  • Financial Stability Board Further Delays Implementation Deadlines for Minimum Haircut Standards for Uncleared SFTs
    09/07/2020

    The Financial Stability Board has announced delays to the implementation of minimum haircut standards for non-centrally cleared securities financing transactions. SFTs 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. In 2015, the FSB published its regulatory framework and recommendations for haircuts on uncleared SFTs, which included timelines for the implementation of the recommendations by FSB member jurisdictions. The deadline for implementation was extended in July 2019 by the FSB because of the delay to implementation of the Basel III framework, including the minimum haircut standards on bank-to-non-bank SFTs, which was postponed to January 2022. In March 2020, a further delay to the implementation of the Basel framework to 2023 was announced, with the objective of relieving the operational burden on banks impacted by the coronavirus pandemic. The FSB has decided to delay its framework again because it is expected to be implemented by many jurisdictions through the Basel III framework.

    Read more.
  • Certification Deadline Extended for UK-Solo-Regulated Firms
    09/01/2020

    A U.K. statutory instrument—The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) (Amendment) Regulations 2020—has been published. This extends from December 9, 2020, to March 31, 2021, for solo-regulated firms (other than benchmark administrators) the deadline for completion of firms' first assessments of the fitness and propriety of their Certified Persons. HM Treasury agreed to the extension to assist firms impacted by the coronavirus pandemic.

    The Financial Conduct Authority recently consulted on extending certain other implementation deadlines for the Certification Regime and Conduct Rules and intends to publish its Policy Statement in October 2020.

    View The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) (Amendment) Regulations 2020.

    View details of the FCA's consultation.
  • EU Draft Technical Standards Published for Further Delaying Securities Settlement Discipline Rules to 2022
    08/28/2020

    The European Securities and Markets Authority has published a final report and final draft Regulatory Technical Standards to further postpone the securities settlement discipline rules under the Central Securities Depositories Regulation to February 2022. ESMA announced on July 28, 2020 that it was preparing the draft RTS in response to a request from the European Commission to consider whether a further delay was needed due to the impact of COVID-19. The EU has already postponed the application date of the settlement discipline rules from September 13, 2020 to February 1, 2021 due to industry feedback that more time was needed to put in place the operational requirements for implementation of the rules. The draft RTS published today by ESMA would further delay the application date by a year from February 1, 2021 to February 1, 2022.

    View the final report and final draft RTS.

    View details of the amending RTS delaying the rules to February 2021.
    Topics : COVID-19Securities
  • UK Prudential Regulator Announces Termination of Temporary Approach to VAR Back-Testing Exceptions
    08/27/2020

    The U.K. Prudential Regulation Authority has published a statement confirming that, following its review of the temporary approach that allows firms to offset increases in VAR back-testing exceptions through a reduction in risks-not-in-VAR capital requirements, it has decided to terminate the temporary approach from September 30, 2020. The PRA has made this decision because of the changes introduced to the EU Capital Requirements Regulation (known as the CRR Quick Fix package), which has applied directly across the EU since June 27, 2020.

    From October 1, 2020, firms should no longer apply any commensurate reduction in risks-not-in-VAR capital requirements. Firms should apply to the PRA to exclude back-testing options that do not result from deficiencies in their internal model occurring between January 1, 2020 and December 31, 2021.

    View the PRA's statement.

    View details of CRR Quick Fix.
  • Confirmation Announced of Revisions to EU Guidelines on Stress Testing of Money Market Funds
    08/27/2020

    The European Securities and Markets Authority has published a statement confirming that the 2019 Guidelines on stress test scenarios under the Money Market Funds Regulation will be updated by the end of 2020 to reflect COVID-19 market developments. The MMF Regulation has applied directly across the EU since July 21, 2018. MMFs are fund vehicles that invest in highly liquid short-term debt instruments, such as government bonds, and are often regarded as a short-term cash management function alternative to bank deposits. The MMF Regulation requires MMFs and MMF managers to measure the impact of the common reference stress test scenarios, as specified by ESMA in its guidelines, and to report the outcomes to their national regulators. ESMA is required to assess annually whether the Guidelines should be updated to reflect market developments. ESMA states that it intends to update the Guidelines published in July 2019 to reflect the impact of COVID-19 on the market, in particular, the liquidity challenges faced by MMFs. The 2019 Guidelines will continue to apply until the revised Guidelines apply—ESMA intends to publish the updated Guidelines in Q4 2020, following which they will be translated into EU national languages. The updated Guidelines will apply two months after the translations are published.

    View ESMA's statement.
    Topics : COVID-19Funds
  • UK Prudential Regulator Issues Updated Statement on IFRS 9 and Capital Requirements
    08/26/2020

    The U.K. Prudential Regulation Authority has published a further statement on IFRS 9 and capital requirements in the context of COVID-19. In line with the Financial Conduct Authority's guidance in relation to mortgage payments, firms should consider tailored forbearance arrangements where, at the end of the COVID-19 payment deferral period, a borrower is unable to resume payments in full immediately, with all deferred sums either paid in full or capitalized. The PRA states that the tailored forbearance arrangements may be as good an indicator of significant increases in credit risk, credit impairments or defaults as forbearance before the pandemic. Any loans subject to tailored forbearance should not be automatically treated as having experienced SICR or become credit impaired or in default, and firms will need to exercise judgment where the position is not clear.

    The PRA also states that some of the guidance in its statement on March 26, and June 4, 2020 continues to be relevant, depending on the circumstances.

    View the PRA's statement.

    View details of the PRA's June statement.

    View details of the PRA's March statement.
  • EU Considering Further Delaying Securities Settlement Discipline Rules to 2022
    08/24/2020

    The European Securities and Markets Authority has announced that it is preparing new Regulatory Technical Standards to further postpone the securities settlement discipline rules under the Central Securities Depositories Regulation. The move follows a request from the European Commission for ESMA to consider whether a further delay is needed in light of the impact of COVID-19. The Commission has adopted the draft RTS prepared by ESMA that will delay the application date of the settlement discipline rules from September 13, 2020 to February 1, 2021. Those RTS are now subject to scrutiny by the European Parliament and Council of the European Union and will only come into force once published in the Official Journal of the European Union. ESMA's announcement relates to a proposal for an additional delay until February 2022.

    Read more.
    Topics : COVID-19Securities
  • European Banking Authority Revises 2020 Work Program in Response to COVID-19
    08/14/2020

    The European Banking Authority has published an updated work program as part of its response to the coronavirus pandemic. According to the EBA, it has only launched consultations that are critical, has kept interactions with industry to a minimum and has progressed work on technical standards according to the expected implementation timeline and degree of finalization.

    View the EBA’s updated 2020 work program.
    Topic : COVID-19
  • UK Conduct Regulator Urges Firms to Return Client Money if Reinvestment in Short Term is Unlikely
    08/12/2020

    The U.K. Financial Conduct Authority has published a Dear CEO letter sent to U.K.-regulated firms providing non-discretionary investment services. The FCA letter makes clear that, where firms’ clients have increased the level of client money held with a firm, the firm should return client money that is unlikely to be reinvested in the short term. Many firms have reported an increase in client money levels as clients respond to the COVID-19 situation. The FCA states that senior management at firms should consider whether it would be in the best interest of their clients to return money that isn’t likely to be reinvested in the short term.

    View the Dear CEO letter.

    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
  • European Banking Authority Provides Clarity on Application of CRR Quick Fix Package
    08/11/2020

    The European Banking Authority has published guidance on the impact on supervisory reporting and disclosure of the EU's CRR Quick Fix adjustments, which were made in response to COVID-19. The CRR Quick Fix introduced changes to a broad range of requirements on firms under the Capital Requirements Regulation. It has applied directly across the EU since June 27, 2020. The EBA's guidance consists of:
     
    1. Guidelines on supervisory reporting and disclosure requirements in compliance with the CRR "quick fix" in response to the COVID‐19 pandemic (EBA/GL/2020/11). These Guidelines aim to clarify how firms should report the Implementing Technical Standards on supervisory reporting versions 2.9 and 2.10, and on the existing ITS on disclosure of leverage ratio.

    Read more.
  • Basel Committee on Banking Supervision Proposes Principles for Operational Risk
    08/06/2020

    The Basel Committee on Banking Supervision has opened a consultation on proposed principles for operational resilience and updated Principles for the Sound Management of Operational Risk (PSMOR). The consultation closes on November 6, 2020.

    Read more.
  • UK Prudential Regulator Proceeds with Extension of Coverage under Financial Services Compensation Scheme
    08/04/2020

    The U.K. Prudential Regulation Authority has published a Policy Statement and final rules on the temporary high balances coverage extension under the Financial Services Compensation Scheme. The PRA has decided to implement the proposal, made in July this year and in response to the coronavirus pandemic, to extend coverage under the FSCS for temporary high balances, from six months to 12 months from the date of the deposit or the first date the balance becomes legally transferrable to the depositor. The change will be effected by changes to the PRA's depositor protection rules and the Statement of Policy on the Deposit Guarantee Scheme. The change will take effect from August 6, 2020. The coverage will revert to six months from February 1, 2021.

    View the Policy Statement, updated rules and Statement of Policy.
  • European Central Bank Publishes Results of Bank COVID-19 Vulnerability Analysis
    07/28/2020

    The European Central Bank Banking Division has published the results of the COVID-19 vulnerability analysis it conducted on Eurozone banks directly prudentially supervised under the Single Supervisory Mechanism. The analysis was designed to establish how 86 Eurozone banks would be impacted by the COVID-19 pandemic and any vulnerabilities that may arise over a three-year horizon.

    Read more.
  • UK Prudential Regulation Authority Announcement on Bank Dividend Payments and Share Buybacks Beyond 2020
    07/28/2020

    The U.K. Prudential Regulation Authority has published an announcement on its approach to dividend payments and share buybacks by large U.K. banks subject to its prudential supervision, in light of COVID-19. The PRA states that it intends to assess firms' plans for distributions beyond 2020 in Q4 2020, taking into account banks' current and projected capital positions and the level of uncertainty around the economy, market conditions and capital trajectories at that time.

    Read more.
  • European Central Bank Publishes Recommendation on Bank Dividend Distributions During COVID-19
    07/27/2020

    The European Central Bank has published an updated Recommendation on dividend distributions by significant institutions that are directly prudentially supervised by the ECB. The Recommendation states that, until January 1, 2021, no dividends should be paid out for the financial years 2019 and 2020, nor should share buy-backs aimed at remunerating shareholders take place. Banks that consider themselves legally required to pay out dividends should explain their underlying reasons to their joint supervisory team. Banks that plan to pay dividends to a non-Eurozone parent institution, parent financial holding company or parent mixed financial holding company should also discuss their intentions with their joint supervisory team.

    Read more.
  • European Commission Publishes Capital Markets Recovery Package in Response to COVID-19 Pandemic
    07/24/2020

    The European Commission has published a series of proposed legislative amendments to reduce the burden on financial institutions during the coronavirus pandemic in relation to their obligations under the EU Securitization Regulation, the Markets in Financial Instruments Directive and the Prospectus Regulation. The package is referred to as the Capital Markets Recovery Package and is designed to make it easier for companies to raise capital and increase banks' capacity to finance the recovery.

    Read more.
  • EU Forbearance for Issuer’s Account for COVID-19-Related Lease Modifications
    07/21/2020

    The European Securities and Markets Authority has published a statement on coordination of supervisory action on issuers’ accounting for lease modifications in light of the coronavirus pandemic. Issuers have encountered challenges in accounting for the large number of lease modifications granted in many jurisdictions. The International Accounting Standards Board issued an amendment to IFRS 16 in May 2020 which provided practical relief for lessees.

    Read more.
    Topic : COVID-19
  • UK Conduct Regulator Consults on Extending Certification and Conduct Rules Implementation Deadlines
    07/17/2020

    Following the announcement of the extension for solo-regulated firms of the deadline for completion of firms' first assessments of the fitness and propriety of their Certified Persons from December 9, 2020, to March 31, 2021, the U.K. Financial Conduct Authority has opened a consultation on extending certain other implementation deadlines for the Certification Regime and Conduct Rules. The extension of the deadline for firms' first fitness and propriety assessments was agreed to by HM Treasury in light of the continuing impact of the coronavirus pandemic.

    Read more.
  • HM Treasury Provides Guidance on Application of EU CRR Quick Fix Package During Brexit Transitional Period
    07/16/2020

    HM Treasury has published a statement on the application of the EU CRR Quick Fix package during the Brexit transitional period. The EU CRR Quick Fix package consists of a Regulation amending the Capital Requirements Regulation (and also amending the Regulation amending the CRR, known as CRR2) and it was published in the Official Journal of the European Union on June 26, 2020. The Regulation forms part of the EU's response to the coronavirus pandemic.

    Read more.
  • UK Prudential Regulator Proposals to Extend Coverage under the Financial Services Compensation Scheme
    07/09/2020

    The U.K. Prudential Regulation Authority has opened a consultation on proposals for extending coverage of the Financial Services Compensation Scheme for temporary high balances. Responses to the consultation may be submitted until July 23, 2020. The PRA is proposing to extend coverage under the FSCS for temporary high balances, from six months to 12 months from the date of the deposit or the first date the balance becomes legally transferrable to the depositor. The coverage would revert to six months from February 1, 2021. The proposal is made because of the impact of COVID-19 on consumers.

    View the consultation paper.
  • European Commission Consults on Proposed Revisions to EU Cybersecurity Rules
    07/07/2020

    The European Commission has launched a consultation on proposed revisions to the EU Directive on the security of network and information systems across the Union (commonly known as the NIS Directive), which is designed to protect the security of EU network and information systems. The NIS Directive sets out, among other things, the parameters of national network and information security strategies to be implemented by Member States for providers of "essential services", which include credit institutions (as defined under the EU Capital Requirements Regulation) and financial market infrastructures.

    Read more.
  • European Banking Authority Report on Implementation of EU Prudential Framework During COVID-19
    07/07/2020

    The European Banking Authority has published a report on the implementation of certain prudential policies introduced by the EBA to deal with the effects of the COVID-19 pandemic. The report focuses on two areas in particular: implementation issues around the EBA's Guidelines on legislative and non-legislative moratoria on loan repayments and the criteria that institutions should follow for the identification and treatment of operational risk events and losses.

    Read more.
  • Financial Action Task Force Publishes 12-Month Review on Revised FATF Standards for Virtual Assets
    07/07/2020

    The FATF has published the results of its 12-month review into the revised FATF standards published in June 2019, designed to help tackle money laundering and terrorist financing risks connected with virtual assets and virtual asset service providers. The FATF's revised standards introduced a new Interpretive Note to Recommendation 15 on New Technologies, which clarified how countries should apply the FATF standards to virtual assets and VASPs, as well as updated guidance on a risk-based approach for virtual assets and VASPs. When the revisions were published, the FATF undertook to conduct a 12-month review of the changes.

    Read more.
  • UK Conduct Regulator Statement on Open Access Regime for Exchange-Traded Derivatives
    07/06/2020

    The U.K. Financial Conduct Authority has published an updated statement on the open access regime for trading and clearing exchange-traded derivatives. The Markets in Financial Instruments Regulation provided a temporary opt-out from the open access requirements for trading venues and clearing houses in relation to ETDs. The opt-out was due to expire on July 3, 2020. However, in light of COVID-19, the EU has announced it is postponing the implementation of the open access regime for ETDs until July 3, 2021. The FCA's statement acknowledges the EU's postponement of the regime and states that the amended open access regime will form part of retained EU law that will be transposed by the U.K. post-Brexit and will continue to apply in the U.K. after the end of the transition period.

    Read more.
  • EU Notice on Postponement of Open Access Provisions for Exchange-Traded Derivatives
    07/03/2020

    A notice of information has been published in the Official Journal of the European Union, postponing the entry into application of open access provisions for exchange-traded derivatives under the Markets in Financial Instruments Regulation until July 3, 2021.

    MiFIR requires a trading venue to provide open and non-discriminatory access to a CCP so that a CCP can clear trades in transferable securities, money market instruments and ETDs concluded on a trading venue of their choice. There is a reciprocal requirement on CCPs to provide open and non-discriminatory access to a trading venue that wishes to clear financial instruments through a particular CCP. These provisions have been in force for over-the-counter products (i.e. those not traded on a regulated market) for some time. The European Securities and Markets Authority published a statement in June 2020 setting out the circumstances in which trading venues and CCPs may refuse requests for access, acknowledging the strain placed on trading venues and CCPs by COVID-19, which may impact their ability to deal with such requests.

    Read more.
  • Financial Stability Board Statement on COVID-19 Impact on Benchmark Reform
    07/01/2020

    The Financial Stability Board has published a statement on the impact of COVID-19 on global benchmark reforms. Although the FSB acknowledges some aspects of benchmark reform will be delayed due to the effects of COVID-19, many areas can go on as planned and the FSB considers that firms should continue to make wider use of risk-free rates to reduce reliance on IBORs. Firms should also ensure their transition programs facilitate a transition away from LIBOR before the end of 2021. The FSB will publish a report on the remaining challenges for benchmark transition later in July.

    View the FSB's statement on the impact of COVID-19 on LIBOR benchmark reform.
  • UK Conduct Regulator Announces Expectations for Approved Persons Regime for Benchmark Administrators During COVID-19
    06/30/2020

    The U.K. Financial Conduct Authority has announced its expectations for benchmark administrators and firms using Appointed Representatives that are subject to the Approved Persons Regime during COVID-19. The APR has been superseded by the Senior Managers and Certification Regime for most solo- and dual-regulated firms. However, as benchmark administrators were a new category of authorized firm, they were granted a one-year extension from the roll-out of the SM&CR and so remain subject to the APR until December 7, 2020, when the SM&CR for benchmark administrators that do not undertake other regulated activities will be implemented.

    Read more.
  • UK Prudential Regulator Statement on EU CRR ‘Quick Fix’ Package
    06/30/2020

    The U.K. Prudential Regulation Authority has published a statement on the EU Capital Requirements Regulation ‘Quick Fix’ package, confirming that it applies directly to all PRA-regulated firms. The CRR Quick Fix package has applied across the EU since June 27, 2020. The CRR Quick Fix package is part of the EU’s response to the coronavirus pandemic.

    In its statement, the PRA confirms that U.K.-regulated banks already applying the CRR transitional arrangements for IFRS 9 must implement the revised calculations as a result of the Quick Fix package, which extended by two years the transitional measures for the implementation of IFRS 9. In addition, a bank contemplating ceasing to apply the IFRS 9 transitional measures must first obtain PRA approval to do so. The PRA is encouraging those banks to submit their requests by July 31, 2020, which requests must include a written explanation of the basis on which senior management has satisfied itself with the continuing adequacy of the bank’s financial resources.

    Read more.
  • Extension of Fitness and Propriety Assessments for UK FCA-Regulated Firms
    06/30/2020

    The U.K. Financial Conduct Authority has announced the extension for solo-regulated firms of the deadline for completion of firms’ first assessments of the fitness and propriety of their Certified Persons. In light of the impact of the coronavirus pandemic on financial institutions, HM Treasury agreed to extend the deadline from December 9, 2020, to March 31, 2021, although the legislation to formalize the extension is yet to be finalized. The FCA states that firms that are able to carry out their assessments before the March 2021 deadline, should do so.

    Read more.
  • UK Prudential Regulator Updates Statement on Regulatory Reporting
    06/26/2020

    The U.K. Prudential Regulator has announced that, given the time firms have had to adjust to working during COVID-19 and the need for prudential regulators to access data in a timely manner, the PRA expects that, in general, firms will submit regulatory reports on time going forward. Firms experiencing difficulty with this should contact their supervisor. This amends the statement made by the PRA on April 2, 2020, when it stated that it would accept delayed submission of certain regulatory returns with deadlines on or before May 31, 2020. The PRA's previous statement, which confirmed its flexibility on receiving firms' Pillar 3 disclosures, still stands, although the PRA notes that it does not expect publication timelines for Pillar 3 disclosures to be affected by COVID-19 in most cases.

    View the PRA's statement on regulatory reporting during COVID-19.

    View the PRA's April statement on regulatory reporting.
  • EU Banking ‘Quick Fix’ Regulation Published
    06/26/2020

    A new EU Regulation amending the Capital Requirements Regulation (and also amending the Regulation amending the CRR, known as CRR2), has been published in the Official Journal of the European Union. It is known as the CRR Quick Fix package and applies from June 27, 2020. The Regulation forms part of the EU’s response to the coronavirus pandemic. 

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  • EU Amends Technical Standards on Prudent Valuation in Response to COVID-19
    06/25/2020
    An EU Regulation amending the Regulatory Technical Standards on prudent valuation has been published in the Official Journal of the European Union. The amending Regulation amends Delegated Regulation (EU) No 101/2016 (which supplements the EU Capital Requirements Regulation) by increasing the aggregation factor applicable to the core approach from 50% to 66% until December 31, 2020, with the aim of it applying for the June 30, 2020, COREP reporting. The amending Regulation applies from June 26, 2020.

    View the amending Regulation.
  • European Banking Authority Extends Payments Moratoria Guidelines
    06/18/2020

    The European Banking Authority has extended the applicability of its Guidelines on legislative and non-legislative loan repayments in light of the ongoing effects of COVID-19. The Guidelines were originally published in April 2020 and stated that, where payment moratoria were based on national law or a private-sector initiative broadly applied by credit institutions in response to COVID-19, they would not be classified as forbearance or distressed restructuring measures. The Guidelines as originally published applied to moratoria applied before June, 30 2020. That deadline has now been extended to moratoria applied before September 30, 2020.
     
    View the EBA's updated statement on its Guidelines on payments moratoria.
     
    View details of the EBA's original statement on its Guidelines on payments moratoria.
  • European Banking Authority Publishes Peer Review of Deposit Guarantee Scheme Stress Test Results
    06/17/2020

    The European Banking Authority has published the results of its peer review of EU deposit guarantee schemes. The EU Deposit Guarantee Scheme Directive establishes requirements for EU DGSs, including that Member States conduct stress tests of their DGSs. Member States were required to report on their stress tests by July 3, 2019, and the EBA has based its peer review report on the results of the tests. The report is intended to assess the resilience of EU DGSs and identify good practices and areas for improvement.

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  • UK Payment Systems and Conduct Regulators Publish Joint Statement on Access to Cash
    06/16/2020

    The U.K. Payment Systems Regulator and U.K. Financial Conduct Authority have published a joint statement on their approach to maintaining access to cash for those that need it in light of bank branch and cash machine closures due to COVID-19. The regulators have adopted a series of actions, including mapping which regions have seen branch and cash machine closures, working with banks, building societies, the Post Office and Link to ensure access to these facilities is re-established as soon as possible and focusing on the needs of vulnerable consumers who require ongoing access to cash. In the longer-term, the regulators will work to ensure reasonable access to cash is maintained, including through use of shared services and local community initiatives, and anticipate additional powers to preserve access to cash from upcoming legislation announced in the U.K. Government’s 2020 budget.
     
    View the PSR's statement on access to cash.
     
    View the FCA's statement on access to cash.
     
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.
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