18 Aug 2017
Key Regulatory Topics: Weekly Update - 11 August 2017 – 17 August 2017
ECB interview on Brexit preparations
On 16 August, the ECB published the transcript of an interview, given by Sabine Lautenschlager, ECB Executive Board Member and Supervisory Board Vice-Chair, on the preparatory work of banks and supervision in the light of the UK leaving the EU. Amongst other things key points of the interview included: (i) as no one knows how Brexit will play out, all affected banks should prepare themselves for a hard Brexit. Banks are not as far advanced as the ECB would like them to be. Of the banks that have indicated an interest in relocating operations to the euro area, a number of the larger banks have made progress in their planning. However, the ECB has not yet seen many final decisions on how these and other banks want to organise their business. For a number of reasons, banks seem to be very cautious about taking decisions, but they must do so soon. The ECB has a narrow timeframe in which to assess plans and applications; (ii) the ECB is open to discussing with each bank their concrete proposals, and even pre-discussing license applications, as well as giving feedback on the proposals. Any application needs to take into account how substantive the business being transferred is, the risk profile, and complexity. Where possible, the ECB will provide banks with more information through the FAQs on its website; and (iii) the ECB will counter attempts to create "empty shells" in the euro area at the licensing phase. It will work closely with national supervisors and thoroughly assess banks' applications with them.
Treasury Committee inquiry on UK's future economic relationship with EU closed in May 2017 due to general election
On 11 August, the HoC Treasury Committee updated its webpage on the inquiry into the UK's future economic relationship with the EU. The committee advises that the inquiry closed on 3 May, when Parliament was dissolved for the general election. The inquiry cannot be re-opened, but the committee may choose to hold another inquiry on this subject in the future. If it does so, it may refer to the evidence gathered in previous parliaments. The evidence received is available on the webpage.
CAPITAL MARKETS AND MARKET INFRASTRUCTURE
FCA publishes consultation on market infrastructure providers' 2017/18 fee rates
On 17 August, the FCA published a consultation paper (CP17/31) on the setting of its 2017/18 fee rates for market infrastructure providers. CP17/31 completes the FCA's annual consultation in the case of recognised investment exchanges and benchmark administrators (part of the B fee-block). It also sets the 2017/18 periodic fee rate for data reporting service providers (fee-block G25), which is effective from 3 January 2018 when the Data Reporting Services Regulations 2017 come fully into effect. CP17/31 closes on 16 October. The FCA intends to publish its feedback on any comments, together with the final rules, in its December 2017 Handbook notice.
Please see the 'other' section for an update on the FOS ombudsman news issue 141.
FCA update on supervisory activity regarding firms dealing with PPI complaints
On 16 August, the FCA published a new webpage on its supervisory approach to PPI. The FCA advises that it will soon launch a campaign to inform people about the 29 August 2019 deadline for PPI complaints. The campaign is being funded by 18 banks and other providers that, together, receive more that 90% of PPI complaints. The FCA asked these firms to make a range of improvements to the way people can complain to them about PPI, ahead of the campaign launch. The improvements should make it quicker and easier for people to check if they have had PPI, and to complain about it. After launching the campaign, the FCA will collect information from firms on customer satisfaction rates, and how their PPI complaints processes are working. Over the next few months, the FCA will be looking to ensure that any increase in complaint numbers does not affect the quality of service that consumers receive. It plans to closely review the operational activities at larger firms to ensure they are dealing with all PPI complaints fairly and promptly, and that they will be able to continue doing so. The FCA will continue to monitor and challenge all firms to ensure they maintain the expected standards, and are delivering on their commitments to make it easy for people to complain about PPI. This includes reviewing and acting on feedback from consumers, consumer groups and the FOS. The FCA also expects firms to bring any issues that may harm consumers to its attention. If the FCA receives information that causes concern, it will act quickly to ensure any emerging issues are dealt with promptly. It intends to provide further updates about its supervisory activity in this area, to produce an interim report after one year, and a final report after the August 2019 deadline.
Treasury Committee inquiry on retail banking market review closed in May 2017 due to general election
On 11 August, the HoC Treasury Committee updated its webpage on the inquiry on the retail banking market review. The committee advises that the inquiry closed on 3 May, when Parliament was dissolved for the general election. The inquiry cannot be re-opened, but the committee may choose to hold another inquiry on this subject in the future. If it does so, it may refer to the evidence gathered in previous parliaments. The evidence received by the committee is available on the webpage.
Implementing Regulation on standardised presentation format for IPID under IDD published in OJ
On 12 August, Commission Implementing Regulation (EU) 2017/1469 laying down a standardised presentation format for the insurance product information document (IPID or PID) under the IDD was published in the OJ. The Implementing Regulation has been developed under Article 20(9) of the IDD. It will enter into force 20 days after publication (that is, on 1 September). The Commission adopted the Implementing Regulation on 11 August. The IDD aims to create a level playing field between insurance distributors across the EU, and also to ensure that customers get the same standards of choice and service when buying insurance regardless of the member state in which insurance is bought. Member states are required to transpose the IDD into their domestic law by 23 February 2018.
Treasury Committee inquiry on EU insurance regulation under Solvency II Directive closed in May 2017 due to general election
the regime for insurance regulation under the Solvency II Directive. The committee advises that the inquiry closed on 3 May, when Parliament was dissolved for the general election. The inquiry cannot be re-opened, but the committee may choose to hold another inquiry on this subject in the future. If it does so, it may refer to the evidence gathered in previous parliaments. The evidence received is available on the webpage, including evidence from the PRA and FCA.
MiFIR - EC adopts Delegated Regulation supplementing MiFIR on the treatment of package orders
On 14 August, the EC published the draft text of a Delegated Regulation supplementing the MiFIR with regard to the treatment of package orders. The next step will be for the Council of the EU and the EP to consider the Delegated Regulation. If neither of them objects, it will enter into force 20 days after its publication in the OJ. It will apply from 3 January 2018.
PSR consults on Regulatory Fees 2018/19
On 17 August, the PSR published a consultation paper (CP17/30) on its regulatory fees for 2018/19. In CP17/30, the PSR is considering whether and how to review its approach to allocating and collecting regulatory fees for the PSR. In particular, it is consulting on the following: (i) collection of PSR fees from fee payers; (ii) allocation of PSR fees to fee payers; and (iii) other issues. CP17/30 closes on 28 September. The PSR will consult on any potential rule changes in its second consultation in November and intends to publish its decision in March 2018. At the same time, the PSR will consult on the final fee rates for 2018/19, with the final rules published in July 2018. Depending on the outcome of the consultation, the PSR may need to make other necessary changes to deliver its final approach to PSR regulatory fees. They include, but are not limited to, its approach to returning any underspend, the collection of on-account fees, minimum thresholds and publication of operator transaction volumes. It will provide more information in its November consultation. The proposed amendments to the FCA's Fees manual (FEES) are set out in the draft Fees (Payment Systems Regulator) Instrument (No 5) 2017, which is in Annex 2 to CP17/30. It has a provisional coming into force date of 23 November.
Treasury Committee inquiry on access to basic retail financial services closed in May 2017 due to general election
On 11 August, the HoC Treasury Committee updated its webpage on the inquiry on access to basic retail financial services. This inquiry closed on 3 May, when Parliament dissolved for the general election. The inquiry cannot be re-opened, but the Committee may choose to hold another inquiry on this subject in the future and may refer to the evidence gathered in previous parliaments if it does so. The evidence received is available on the webpage.
Treasury Committee inquiry on the work of the PSR closed in May 2017 due to general election
On 11 August, the HoC Treasury Committee updated its webpage on the work of the PSR. This inquiry closed on 3 May, when Parliament dissolved for the general election. The inquiry cannot be re-opened, but the Committee may choose to hold another inquiry on this subject in the future and may refer to the evidence gathered in previous parliaments if it does so. The evidence received is available on the webpage.
CRR - Implementing Regulation on ITS on supervisory reporting to reflect IFRS 9 changes to FINREP published in OJ
On 17 August, the EC Implementing Regulation amending the Implementing Regulation on supervisory reporting of institutions (Regulation 680/2014) under the CRR was published in the OJ. The Implementing Regulation contains the text of ITS relating to supervisory reporting of institutions as regards instructions, templates and definitions. The amendments relate to the provisions in Regulation 680/2014 concerning FINREP and are intended to align these provisions with IFRS 9. The Regulation will enter into force on the twentieth day following its publication in the OJ (that is, 6 September). It applies from 1 January 2018.
CRR- EBA updates list of public sector entities for the calculation of capital requirements
On 14 August, the EBA published an updated list of PSEs that may be treated as regional governments, local authorities or central governments for the calculation of capital requirements, in accordance with the EU CRR. The list includes the PSEs that are treated as regional governments, local authorities or central governments under the SA due to their reduced risk level. As a result of this treatment, exposures to the PSEs included in the list will qualify for the same risk weight as their respective regional government, local authority or central government. The list includes changes to the list of PSEs in France and Croatia.
CRD IV- EBA publishes indicators from 35 G-SIIs: August 2017
On 11 August, the EBA published indicators from 35 G-SIIs in the EU, as provided for in the ITS and guidelines on disclosure rules applicable to institutions whose leverage ratio exposure measure exceeds EUR 200 billion. In an accompanying press release, the EBA explains that to promote a level playing field in the EU regarding the requirements, and to increase transparency on the internal financial market, the current level of disclosure goes beyond the minimum standards required by the BCBS. This is both in terms of granularity of the disclosed information and applicable scope of institutions. Consequently, some of the group-specific templates published on the webpage belong to institutions that did not contribute directly to the BCBS's exercise for G-SIBs. Identification as a G-SII, which leads to a higher capital requirement, is the responsibility of NCAs and will be updated by 15 December. It follows global denominators disclosure and G-SIB exercise results, which the BCBS and FSB expect to be published in November of each year. The higher capital requirement will then apply about one year after the publication by NCAs in each member state of banks' scoring results, so as to allow institutions enough time to adjust to the new buffer requirement.
RECOVERY AND RESOLUTION
BoE publishes consultation on policy on valuation capabilities to support resolvability
On 17 August, the BoE published a consultation paper, which sets out the BoE's proposed policy for the capabilities firms should have in place to ensure that an inability to produce timely and robust resolution valuations does not impede resolvability. The proposed policy applies to UK-based firms whose preferred resolution strategy involves the use of stabilisation powers, and to material UK subsidiaries of overseas-based banking groups. It sets out the BoE's principles-based expectations for firms' valuation capabilities. Firms are expected to develop, enhance, and maintain their capabilities to meet the required standard. Where they do not, the BoE would consider using its resolvability power of direction to ensure that the necessary improvements were made. The consultation paper includes the following sections: (i) section 2 explains the role of valuations in resolution and the potential for valuation capabilities to constitute a barrier to resolvability; (ii) section 3 outlines the proposed policy approach relating to the BoE's thinking around how requirements for valuation capabilities would be applied; (iii) section 4 sets out the BoE's views on the scope of firms and valuations to which the proposed policy would apply. The BoE intends to survey those firms that are expected to be within scope to give it a better understanding of firms' current capabilities and the costs of complying with the proposed policy. The survey is in Appendix 2 to the consultation paper; and (iv) section 5 and 6 set out the BoE's proposed objectives and principles for resolution valuation capabilities, and summarises the rationale behind these. The consultation closes on 17 November. The BoE intends to develop a statement of policy on resolution valuation capabilities based on the proposed policy set out in the consultation paper. It is envisaged that, once a statement of policy has been published, firms would be given around 18 months to implement the changes necessary to comply with the policy. The BoE has also published an accompanying webpage on resolution planning.
Treasury Committee inquiry on capital closed in May 2017 due to general election
On 11 August, the HoC Treasury Committee updated its webpage on the inquiry into capital. The inquiry examined recovery and resolution and assessed whether the rules and institutions created to ensure that banks could be recapitalised, if necessary, without recourse to taxpayer funding, are or will work properly. The committee advises that the inquiry closed on 3 May, when Parliament was dissolved for the general election. The inquiry cannot be re-opened, but the committee may choose to hold another inquiry on this subject in the future. If it does so, it may refer to the evidence gathered in previous parliaments. The evidence received is available on the webpage.
FOS publishes ombudsman news issue 141
On 15 August, the FOS published issue 141 of ombudsman news. Items of interest include: (i) case studies relating to complaints involving problems with credit; (ii) an update on PPI complaints focusing on the FOS' actions in the run up to 29 August when the FCA's new rules and guidance for PPI complaints come into effect (this includes the start of the two year timeframe for complaining about mis-sold PPI). Amongst other things, the FOS is talking to businesses to ensure that they are clear about the information the FOS will need from them, as well as the FOS gearing up to ensure that it is ready to deal with the anticipated increase in the number of complaints. The FOS will use an autumn issue of ombudsman news to share some of its early sight into what it has seen since the new FCA rules came into effect; (iii) complaints statistics for the first quarter of the 2017/2018 financial year. These show that PPI complaints remain the most complained about products (42,401 new complaints), followed by current accounts (5,229 new complaints). The FOS upheld 35% of complaints resolved in that period; and (iv) a Q&A clarifying the role the FOS will play with regards to the future regulation of claims management. The FOS will take over the role of the Legal Ombudsman in looking into complaints from people unhappy with the service they have received from claims management companies.
This ePublication is for general guidance only and does not constitute definitive advice.
© Allen & Overy 2017