FCA consults on revised guidance on guarantor loans. The UK Financial Conduct Authority requested comments on proposed guidance regarding the FCA’s interpretation of requirements under the Consumer Credit Act 1974 regarding the enforcement of security in the context of guarantor loans to serve a default notice before enforcing a guarantee or indemnity following breach of a regulated agreement. Comments are due on or before November 25, 2016. (10/25/2016) FCA press release.
PRA issues final supervisory statement on monitoring model drift and the reporting of standard formula SCR information. The Prudential Regulation Authority published a supervisory statement that explains its expectations of firms with an approved internal model and its approach to monitoring model drift and the reporting of standard formula Solvency Capital Requirement information. The statement provides clarifications on the standard formula calculation, the re-basing of “model drift” ratios on approval of major changes, and the possible disclosure of results. (10/25/2016) PRA press release.
PRA seeks comments on proposed changes to reporting format for NST submissions by Solvency II firms. The PRA published a consultation paper relevant to UK Solvency II firms that proposes changes to the National Specific Template file type and reporting format, including requirements and transitional arrangements to facilitate the use of standard XBRL format, and presents several reporting clarifications and technical corrections relating to the accompanying NST LOG files. Comments are due on or before December 6, 2016. To enable firms to submit in XBRL or XBRL-enabled Excel format, the PRA also published a Modification by Consent to enable firms with a financial year ending on or after June 30, 2016, but before December 19, 2016, to have time to implement the proposed changes to the reporting format. (10/25/2016) PRA press release.
EBA offers recommendations to simplify and harmonize large exposures regime. The European Banking Authority published a report that responds to the European Commission’s call for advice on the review of the large exposures framework laid down in the Capital Requirements Regulation. Among other things, the report recommends modifying the current large exposures capital base by including only Tier 1 capital instead of allowing also a proportion of Tier 2 capital and removing three of the five exemptions currently used by institutions to enhance alignment of the framework with the Basel Committee on Banking Supervision’s standards on large exposures. (10/24/2016) EBA press release.
EBA consultation on technical standards on MREL reporting by Resolution Authorities. The EBA requested comments on draft Implementing Technical Standards that propose the procedures and templates for Resolution Authorities to use when informing the EBA of the minimum requirements for own funds and eligible liabilities that have been set for each institution under their jurisdiction. Comments are due on or before November 21, 2016. (10/24/2016) EBA press release.
ESMA releases translations of MAR guidelines. The European Securities and Markets Authority announced the translation of its Market Abuse Regulation Guidelines on persons receiving market soundings and on delay in the disclosure of inside information into the 22 official languages of the European Union, which is required to trigger their national applications. (10/20/2016) ESMA press release.
EBA advises EC to apply full CRDIV/CRR only to investment firms identified as GSIIs and OSIIs. In a response to the European Commission’s call for technical advice on the application of the Capital Requirements Directive and Capital Requirements Regulation prudential regime to investment firms, the EBA recommended that only those investment firms that are currently identified as Global Systemically Important Institutions and Other Systemically Important Institutions should remain subject to the full CRD/CRR regime. (10/20/2016) EBA press release.
EBA will hold public hearing on European covered bond framework proposals.The EBA announced that it will hold a public hearing on November 18, 2016, regarding its draft proposals on the European covered bond framework. The EBA said that it expects to deliver its final report on the functioning of the frameworks for covered bonds according to the EBA’s best practice principles by the end of the year. (10/20/2016) EBA press release.
FCA completes thematic review of packaged bank accounts. The FCA released the findings of its thematic review of packaged bank accounts, which examined the implementation of new rules designed to help customers understand the suitability of these products for them. The FCA’s review found that the new rules raised standards in the market, but firms needed to improve their practices around eligibility checks for certain kinds of insurance products and in their handling of complaints. (10/20/2016) FCA press release.
Regulation round-up. The FCA published the October 2016 edition of its Regulation round-up. (10/20/2016)
PRA statement on the concept of “durable link.” The PRA issued a statement on the concept of “durable link,” which is used to determine whether a firm’s holding of less than 20% in another undertaking is to be treated as a “participation” for the purposes of the CRR. The PRA explained that its interpretation of durable link takes into consideration the definition of “significant influence” under the accounting framework as well as factors regarding the financial, governance and management intent of the firm’s management. (10/20/2016) PRA statement.
FCA publishes guidance consultation on mortgage payment shortfall remediation framework. The FCA requested comments on proposed guidance on the treatment of customers with mortgage payment shortfalls. The proposed guidance responds to concerns about the automatic inclusion of arrears balances in these customers’ monthly mortgage payments and recommends a remediation framework to provide a proportionate, fair and timely remediation option that firms can use. Comments are due on or before January 18. 2017. (10/19/2016) FCA press release.
FCA finalizes findings of investment and corporate banking market study. The FCA released the final report of its investment and corporate banking market study, which recommends several measures to improve competition in the market. Among other things, the FCA’s report suggests the development of industry guidelines on the presentation of league tables, the elimination of incentives for loss-making trades to generate higher positions on league tables, and the implementation of a supervisory program for initial public offering allocations. (10/18/2016) FCA press release.
FCA seeks comments on proposed ban on use of restrictive contractual clauses by banks. In connection with the final report on its market study of the investment and corporate banking market, the FCA published a consultation paper that proposes to ban the use of contractual clauses by banks that restrict competition by requiring customers to award or offer future services to the bank. Comments are due on or before December 16, 2016. (10/18/2016) FCA consultation paper 16-31.
ECB publishes results of October 2016 euro area bank lending survey. The European Central Bank released the results of its euro area bank lending survey for the third quarter of 2016. Among other things, the survey found that loan demand continued to increase, credit standards on loans to enterprises remained unchanged, and credit supply conditions improved for households. (10/18/2016) ECB press release.
PRA publishes feedback received on consultation paper on Pillar 2 liquidity.The PRA published a statement that summarizes the feedback it received on a draft statement of policy for its approach to three aspects of Pillar 2 liquidity: intraday risk, debt buyback and non-margined derivatives. (10/18/2016) PRA statement.
FCA completes thematic review of annuity sales practices. The FCA released the findings of its thematic review of non-advised annuity sales practices, which examined whether firms provided customers with adequate information about enhanced annuities. The FCA found no evidence of a systemic failure to provide customers with sufficient information but noted that it did have concerns about practices at some firms when significant communications took place by telephone. (10/14/2016) FCA press release.
ECB reports results of September 2016 SESFOD credit terms survey. The ECB published the results of its September 2016 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets. The ECB found that credit terms offered to counterparties in both the provision of finance that is collateralized by euro-denominated securities and over-the-counter derivatives markets became somewhat less favorable, while liquidity and functioning of markets remained stable. (10/14/2016) ECB press release.
ESMA releases Guidelines on remuneration practices under UCITS and AIFMD.ESMA published two sets of Guidelines on sound remuneration practices under the Undertakings for the Collective Investment in Transferable Securities Directive and the Alternative Investment Fund Managers Directive. The UCITS Guidelines clarify requirements for management companies when establishing and applying a remuneration policy for key staff. The AIFMD Guidelines amend the current guidelines on sound remuneration practices to clarify the application of the remuneration rules in a group context. The Guidelines will apply from January 1, 2017. (10/14/2016) ESMA press release.
ESMA and IFRS Foundation update cooperation agreement. ESMA and the International Financial Reporting Standards Foundation published an updated set of protocols that outlines how the two organizations will cooperate with each other and work together to facilitate the development and implementation of IFRS Standards. (10/13/2016) ESMA press release.
ESMA updates Q&A on UCITS. ESMA revised its questions and answers document on the application of the UCITS Directive to include new information on regulated markets in Member States under the Directive; translation requirements in relation to the remuneration disclosure; reinvestment of cash collateral; and the commencement of periodical reporting pursuant to Article 13 of the Securities Financing Transactions Regulation. (10/12/2016) ESMA press release.
EBA issues reminder of deadlines for data submission for the 2017 benchmarking exercise of internal approaches. The EBA reminded competent authorities of the key dates for the submission of data for the 2017 benchmarking exercise of internal approaches. The 2017 exercise will apply to EU institutions using internal approaches to calculate capital requirements and will cover market risk and credit risk for the so-called low default portfolios, including large corporate, sovereign and financial institutions. (10/12/2016) EBA press release.
EBA publishes 2017 annual work program. The EBA announced its annual work program for 2017, which describes its specific activities and tasks for the year. The EBA’s priorities for 2017 include liquidity and leverage ratio; credit risk and credit risk modelling; recovery planning and early intervention; promoting convergence; and improving the framework for the protection of consumers and the monitoring of financial innovation. (10/12/2016) EBA press release.
ESMA announces priorities for 2017 work program. ESMA published its annual work program, which identifies its priorities and areas of focus for 2017. ESMA identified several key areas of focus, including converging supervisory practices on the implementation of MiFIDII/MiFIR; focusing on data quality; continued work on the Benchmarks Regulation and other initiatives under the Capital Markets Union; and directly supervising credit rating agencies and trade repositories, with a particular focus on their ancillary activities. (10/11/2016) ESMA press release.