BANKING

Integrated financial services trade association to be named UK Finance

The Consumer Credit Trade Association (CCTA) has announced that the new trade association for the UK financial services sector will be named UK Finance. The new trade association will integrate the Asset Based Finance Association (ABFA), the British Bankers' Association (BBA), the Council of Mortgage Lenders (CML), Financial Fraud Action UK, Payments UK and the UK Cards Association (UKCA).

Bob Wigley will take up his role as the chair of UK Finance on 1 March 2017 and he will oversee the appointment of the new chief executive and the integration of the existing trade associations.

UK Finance is set to launch in summer 2017. CCTA, 27 March 2017

BoE announces key elements of UK banking stress test 2017

Bank of England (BoE) has published a paper setting out the key elements of the 2017 stress test for the UK banking system. The BoE's stress-testing framework is designed to examine the potential impact of hypothetical adverse scenarios on the health of the banking system and individual institutions within it.

As previously announced, the 2017 stress test includes two stress scenarios, the annual cyclical scenario and, for the first time, an additional exploratory scenario. The BoE has also published guidance for participating banks and building societies, together with a spreadsheet identifying variable paths for the 2017 stress test and a spreadsheet on the traded risk scenario. The BoE will publish the results of the stress tests in the fourth quarter of 2017. BoE, 27 March 2017

PRA stress test model management principles

PRA published a letter on stress test model management that it has sent to the heads of stress testing at the banks participating in the 2017 concurrent stress test. The annex to the letter contains principles relating to stress test management. The purpose of the principles is to set out the Bank of England's (BoE) current thinking concerning expectations on stress test model management and to support banks' assessments of their own stress test model management frameworks. The BoE expects the board of directors and senior management of banks to provide challenges to stress test model outputs and to understand the capabilities of stress test models, model limitations and the impact of model uncertainty on banks' stress test results. PRA, 27 March 2017

Pensions Regulator publishes innovation and regulation plan

The Pension Regulator has published its innovation and regulation plan, which sets out how it is working to support innovation and disruptive business models, and how it is using innovation to deliver its work more effectively. Its response was formulated in conjunction with the Department for Work and Pensions. Pensions Regulator, 27 March 2017

ECB ready for any Brexit outcome, says ECB vice chair

The chair and vice-chair of the supervisory board of the ECB, Danièle Nouy and Sabine Lautenschläger, have delivered opening addresses at the ECB Annual Report on supervisory activities for 2016 setting out views on banks’ stability, profitability and fragmentation issues. ECB, 27 March 2017 Tackling financial exclusion: A country that works for everyone?

The House of Lords Select Committee on Financial Exclusion has published a report on financial exclusion that calls on the government, the FCA and the banking industry to do more to tackle financial exclusion, together with a volume of written and oral evidence and an easy read report.

House of Lords, 27 March 2017

ECB speech on FinTechs and the future of banking

European Central Bank (ECB) published a speech given by Sabine Lautenschläger, Vice-Chair of the ECB's Supervisory Board, on FinTech companies (FinTechs) and the future of banking. ECB, 27 March 2017 BBA supportive of EBA's proposals on supervision of significant branches

British Bankers’ Association (BBA) has responded to the European Banking Authority’s consultation on supervision of significant branches, saying the proposals provide a co-ordinated way to manage supervision of significant branches, better separation of responsibilities between different supervisors, an improvement in how resolution is approached for significant branches, and a rationalisation of reporting and the overall regulatory burden faced by firms operating across borders through branches. BBA, 24 March 2017

FPC statement from 22 March 2017 policy meeting

Bank of England (BoE) published a statement from the Financial Policy Committee (FPC) relating to the meeting held on 22 March 2017. At the meeting, the FPC discussed issues concerning the stability of the UK financial system relating to, among other things, financial risks arising from Brexit, compliance with international prudential standards, consumer lending and progress on "too big to fail" initiatives. BoE, 22 March 2017

INVESTMENTS AND FUNDS

 

ESMA on haircuts in EU securities financing transactions

ESMA has issued a research piece which provides a stock-take of the multi-trillion euro-large market for securities financing transactions (SFTs) in the EU, and firms' use of collateral haircuts. ESMA's research looks at the level and calculation methodologies of haircuts used in the EU by SFT market participants. ESMA, 27 March 2017

Investment Association consults on new code for charges and transaction costs disclosure

Investment Association (IA) published a consultation paper on a new code for enhanced disclosure of charges and transaction costs. The code's goal is to develop a consistent and comprehensive framework that will allow fund and asset managers to deliver underlying charges and transaction cost information using standard definitions, regardless of the distribution channel and the way in which this information will eventually be presented to clients. The deadline for responses to the consultation is 19 May 2017. The IA plans to publish a feedback statement and a final set of proposals in the third quarter of 2017. IA, 27 March 2017

European Commission responds to concerns made by ECON about MiFID II systematic internalisers operating broker crossing networks

ECON has published two letters made between the negotiating team for the MiFID II package of measures and Vice-President Valdis Dombrovskis in respect of concerns surrounding the potential establishment of networks of systematic internalisers (SIs) and of other liquidity providers that might circumvent certain MiFID II obligations, in particular the trading of shares.

  • In a letter dated 24 February 2017 the Negotiating Team and ESMA shared the same concern that certain investment firms may be setting up interconnected SIs to cross third party buying and selling interest via matched principal trading, or other types of back-to-back transactions.
  • In response via a letter dated 16 March 2017, Mr Dombrovskis set out the conclusions of a preliminary investigation into the issue and outlines concerns made by market operators.

The Commission has proposed to engage in a dialogue with ESMA and competent national regulators to determine the jurisdictions that the alleged broker crossing networks could potentially be established in and will further engage with the relevant authorities on how to address the establishment of such networks within the MiFID II rules. ECON, March 2017