Financial Regulation Weekly Bulletin

5 MARCH 2015
ISSUE 801
Financial Regulation
Weekly Bulletin
Major UK and European regulatory developments of interest to banks, insurers and reinsurers,
asset managers and other market participants
QUICK LINKS:
Selected Headlines
General
Banking and Finance
Insurance
Asset Management
Securities and Markets
Financial Crime
Enforcement
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Selected Headlines
GENERAL
Non-bank non-insurer G-SIFIs - FSB and IOSCO publish second joint
consultation on proposed identification assessment methodologies
PRA consultation paper CP8/15: Engagement between external auditors and
supervisors and commencing the PRA’s disciplinary powers over external
auditors and actuaries
BANKING AND FINANCE
CRR - European Commission adopts Delegated Regulation amending Delegated
Regulation on RTS on calculating own funds requirements for market risk
CRD IV - EBA consults on sound remuneration policies
CRR - EBA publishes discussion paper on the future of the internal ratings based
approach
Senior Managers and Certification Regime - HM Treasury (i) announces
commencement date of 7 March 2016; (ii) makes two SIs; and (iii) publishes
outcome of consultation on extending the regime to UK branches of foreign
banks
Market intelligence programme - Bank of England announces reforms
CRD IV/CRR - PRA publishes letter on PRA expectations concerning
remuneration
INSURANCE
Solvency II - EIOPA publishes relevant risk free interest rate term structures
EIOPA Solvency II consultation on ITS and guidelines - Insurance Europe
publishes statement
Solvency II - PRA data collection exercise
FCA Policy Statement PS15/4: Retirement reforms and the guidance
guarantee: retirement risk warnings
FCA Policy Statement PS15/5: Final rules for charges in workplace personal
pension schemes and feedback on CP14/24
FCA Discussion Paper DP15/2: Transaction Costs Disclosure: Improving
Transparency in Workplace Pensions
FCA Consultation Paper CP15/7: Proposed changes to our pension transfer
rules
1.1
2.1
6.2
7.3
7.4
10.1
12.1
13.2
15.1
16.1
17.1
18.1
18.2
18.3
18.4
FINANCIAL REGULATION
5 mARCH 2015
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Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
ASSET MANAGEMENT
Money Market Funds Regulation - ECON votes and proposes vote of the
European Parliament
Securities and Markets
CSD Regulation - EBA launches consultation on draft regulatory technical
standards on prudential requirements
United Kingdom v European Central Bank
Market intelligence programme - Bank of England announces reforms
FCA Thematic Review TR15/2: Structured Products: Thematic Review of
Product Development and Governance
FINANCIAL CRIME
AML/CFT - FATF (i) updates lists of jurisdictions with deficiencies and provides
progress report on others and (ii) publishes report on ISIL
Liquidity auctions - SFO and Bank of England announce investigation
ENFORCEMENT
Insider dealing - Former Group Treasurer and Head of Tax at major retailer
pleads guilty and is sentenced to 12 months imprisonment
Providing misleading information - FCA fines and restricts bank and fines two
approved persons
Insurance
Enforcement
21.1
24.1
26.1
27.1
28.1
30.1
33.1
34.1
34.2
General
1.
Financial Stability Board and the International Organization of Securities Commissions
1.1
Non-bank non-insurer G-SIFIs - FSB and IOSCO publish second joint consultation on proposed
identification assessment methodologies - 4 March 2015 - Following the publication of their first
consultation paper in January 2014, the Financial Stability Board (FSB) and the International Organization
of Securities Commissions (IOSCO) have published their second consultation on proposed assessment
methodologies for identifying non-bank non-insurer Global Systemically Important Financial Institutions
(NBNI G-SIFIs). The proposed methodology allows for a greater role for supervisory judgment in the
assessment compared to the methodologies applied to identify the global systemically important banks
and insurers. It also includes sector-specific methodologies for finance companies, market intermediaries
(securities broker-dealers), investment funds (including hedge funds) and asset managers. The paper does
not propose any specific entities for designation, nor any policy measures that would apply to NBNI G-SIFIs.
The consultation period closes on 29 May 2015.
The consultation paper is here.
The January 2014 consultation paper is here.
The press release is here.
02
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Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
5 mARCH 2015
Insurance
Enforcement
2.
Prudential Regulation Authority
2.1
PRA consultation paper CP8/15: Engagement between external auditors and supervisors and
commencing the PRA’s disciplinary powers over external auditors and actuaries - February 2015 - The
PRA has issued a consultation paper (CP8/15) proposing a rule to require the external auditors of the largest
UK-headquartered deposit-taking institutions that are not subsidiaries of non-UK firms to provide written
reports to it in relation to the audits for financial reporting periods ending on or after 1 November 2016
(with a possible dry run in 2015). In addition, the PRA is consulting on how it will use its new disciplinary
powers, contained in section 345A(4) of FSMA 2000, over actuaries and external auditors. The PRA states
that disciplinary action could be taken against the “person” who is formally appointed to undertake the audit
or actuarial work, and that this may be an individual or a firm, depending on the terms of appointment.
In addition, Chapter 2 of the CP contains a general discussion of recent improvements in the quality of
auditor‑supervisor dialogue, and a summary of a report to the PRA Board on the subject, as mentioned to
the Parliamentary Commission on Banking Standards.
As well as proposed rules, the CP includes a draft Supervisory Statement on ‘Written reports by external
auditors’, and Chapter 3 of the CP contains some examples of questions that might be included in a report
by auditors. The CP also contains a Draft Statement of Policy on ‘Penalties’ (February 2015) and a draft
amendment to the PRA’s Statement of Policy on ‘Decision‑making’.
The consultation period closes on 27 May 2015.
CP8/15 is here.
The holding page is here.
The press release is here.
3.
Financial Conduct Authority
3.1
Unfair contract terms library - FCA removes documents from website for update - 2 March 2015 - The
FCA has updated its ‘Unfair contract terms library’ by removing a number of documents (listed) from its
website while it considers how they should be updated in light of: (i) the Consumer Rights Bill; (ii) related
Competition and Markets Authority draft guidance; and (iii) case law (also listed) from the Court of Justice of
the European Union on the Unfair Terms in Consumer Contracts Directive (93/13/ECC).
The webpage is here.
4.
National Audit Office
4.1
Financial services bodies - NAO publishes overview report - 27 February 2015 - The National Audit Office
(NAO) has published a report summarising the activities and performance of five financial services bodies
involved in regulation, redress and advice: the FCA, the PRA, the Financial Services Compensation Scheme
(FSCS), the Financial Ombudsman Service (FOS) and the Money Advice Service. Part One focuses on each
body’s activity over the past year; Part Two examines how the organisations interact and cooperate; Part
Three concentrates on the NAO’s analysis of activity over the last year and challenges facing the individual
bodies; Part Four contains case studies concerning the impact that the financial crisis had on the FSCS and
the effect that the rise of payment protection insurance mis-selling cases had on the FOS.
03
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Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
5 mARCH 2015
Insurance
Enforcement
The report ‘Financial services: regulation, redress and advice overview 2014’ is here.
The holding webpage is here.
Banking and Finance
5.
Basel Committee on Banking Supervision
5.1
Basel III monitoring results - Basel Committee issues latest report - March 2015 - The Basel Committee
on Banking Supervision has issued a report on the results of its latest Basel III monitoring exercise. It is based
on data as of 30 June 2014, and shows that all large internationally active banks now meet the final Basel
III risk-based capital minimum requirements. The result of a similar exercise run by the European Banking
Authority is reported below.
The report is here.
The holding page is here.
The press release is here.
6.
European Commission
6.1
CRR - speech by Commissioner Hill - 3 March 2015 - Jonathan Hill, European Commissioner for Financial
Stability, Financial Services and Capital Markets Union, has given a speech entitled ‘A strong and stable
banking system at the heart of Europe’s recovery’ in which he announces his intention to consult on the
impact of the Capital Requirements Regulation (575/2013/EU) (CRR) on lending to corporates and on longterm finance with a particular focus on small to medium sized enterprises (SMEs). Commissioner Hill intends
to use the feedback from the consultation to reach conclusions on the impact of increased capital charges
on lending to businesses and to determine whether changes to the CRR are required. He also suggests that
in deciding by the end of 2016 whether it is appropriate to introduce a binding leverage ratio or ratios in the
EU, it may be appropriate to differentiate between different business models.
The speech is here.
6.2
CRR - European Commission adopts Delegated Regulation amending Delegated Regulation on RTS
on calculating own funds requirements for market risk - 4 March 2015 - The European Commission
has adopted a Commission Delegated Regulation of 4 March 2015 amending Regulation (529/2014/EU)
supplementing the Capital Requirements Regulation (575/2013/EU) as regards regulatory technical standards
(RTS) for assessing the materiality of extensions and changes of internal approaches when calculating own
funds requirements for market risk.
The Delegated Regulation will come into force 20 days after it is published in the Official Journal of the
European Union.
The text is here.
The Annex is here.
04
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Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
5 mARCH 2015
Insurance
Enforcement
7.
European Banking Authority
7.1
CRD IV - CRR / Basel III monitoring exercise - EBA publishes report - 3 March 2015 - The EBA has
published its seventh report of the Basel III monitoring exercise on the European banking system. It
monitors the impact of a fully-implemented Capital Requirements Directive (2013/36/EU) (CRD IV) and
Capital Requirements Regulation (575/2013/EU) (CRR) on capital and risk weighted assets, as well as the
impact of full implementation of the Basel III framework on liquidity ratios and leverage ratio using data as
of 30 June 2014. The exercise was run in parallel with that conducted by the Basel Committee on Banking
Supervision, which is reported above.
The report is here.
The press release is here.
7.2
EU-wide stress tests - EBA decides not carry out in 2015 - 2 March 2015 - The EBA has decided not to
carry out an EU-wide stress test in 2015 but to start preparing for the next exercise in 2016. In lieu of a
stress test in 2015, the EBA intends to run a transparency exercise similar to the one conducted in 2013.
A letter from Andrea Enria, Chairman of the EBA, to the EU institutions, is here.
The press release is here.
7.3
CRD IV - EBA consults on sound remuneration policies - 4 March 2015 - The EBA has published a
consultation paper on draft Guidelines on sound remuneration policies. These have been developed under
Articles 74 and 75 of the Capital Requirements Directive (2013/36/EU) (CRD IV) and Article 450 of the
Capital Requirements Regulation (EU/575/2013). They complement the EBA Opinion on allowances issued in
October 2014.
The EBA states that, on the application of proportionality to the remuneration principles, these draft
Guidelines follow a legal reading of the CRD IV, supported by the European Commission, that the
requirements on deferral and payment in instruments have to be applied to all institutions, and do not
permit waivers of the deferral of variable remuneration, the pay out in instruments and the application of
malus and clawback. It is intending to suggest to the European Commission legislative amendments for
certain institutions that do not extensively rely on variable remuneration and, possibly also for identified
staff that receive only a low amount of variable remuneration, and seeks feedback on this.
The EBA is holding a public hearing on 4 May 2015.
The consultation period closes on 4 June 2015.
The FCA has published a Statement on how it applies the proportionality principle and is strongly
encouraging firms to consider the draft guidelines and the likely impacts on their businesses, and to respond
to the consultation.
The consultation paper is here.
The holding page is here.
The EBA webpage on Guidelines on sound remuneration policies is here.
05
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Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
5 mARCH 2015
Insurance
Enforcement
The EBA Opinion on allowances is here.
The press release is here.
The Statement by the FCA is here.
7.4
CRR - EBA publishes discussion paper on the future of the internal ratings based approach - 4 March
2015 - The EBA has launched a discussion paper on the future of the internal ratings based approach under
the Capital Requirements Regulation (575/2014/EU) (CRR).
A public hearing is to take place on 8 April 2015.
The consultation period closes on 5 May 2015.
The Discussion Paper is here.
The holding page is here.
The new webpage on the Discussion paper is here.
The press release is here.
7.5
CRD IV - EBA publishes final draft RTS and ITS on benchmarking and technical advice - 2 March
2015 - The EBA has published Final Draft Regulatory Technical Standards (RTS) on benchmarking portfolio
assessment standards and assessment sharing procedures and Final Draft Implementing Technical Standards
(ITS) on benchmarking portfolios, templates, definitions and IT solutions under Article 78 of the Capital
Requirements Directive (2013/36/EU) (CRD IV). The EBA has also published technical advice for the purposes
of the report required under Article 78 of the CRD IV. The work is part of the EBA’s efforts to address
possible inconsistencies in the calculation of risk weighted assets across the EU Single Market.
The Final RTS and ITS (with Annexes) can be found here.
The technical advice is here.
The press release is here.
7.6
CRR - EBA publishes responses to consultation on ITS regarding leverage ratio - 5 March 2015 - The EBA
has published the responses to its consultation on draft implementing technical standards (ITS) amending
ITS on supervisory reporting on leverage ratio (December 2014).
The responses can be found here.
7.7
Supervisory reporting - EBA publishes revised XBRL taxonomy - 2 March 2015 - The EBA has published
a new XBRL taxonomy (version 2.3) to be used by competent authorities for the remittance of data under
the EBA Implementing Technical Standards (ITS) on supervisory reporting. The new taxonomy will apply for
reports with reference dates as of 30 June 2015 onwards, including the first reports on additional liquidity
monitoring metrics and supervisory benchmarking.
The EBA press release, which contains links to the documents published, is here.
06
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Asset Management
7.8
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
5 mARCH 2015
Insurance
Enforcement
RRD and CRR - EBA updates single rulebook Q&As - 27 February 2015 - The EBA has updated its single
rulebook Q&As.
The updated Q&As on the single rulebook are here.
7.9
Lending-based crowdfunding - EBA publishes Opinion - 26 February 2015 - The EBA has published an
Opinion recommending that EU legislators clarify the application of existing EU law to lending-based
crowdfunding. The EBA has identified the Payment Services Directive (2007/64/EC) as the Directive that is
most feasibly applicable to lending-based crowdfunding, although it does not cover lending-related aspects.
The EBA suggests potential ways to address the gaps.
The Opinion is here.
The press release is here.
8.
European Central Bank
8.1
Eurosystem oversight report - ECB publishes 2014 report - February 2015 - The European Central Bank
(ECB) has published the ‘Eurosystem oversight report 2014’. The report focuses on the oversight of financial
market infrastructures, including payment systems, securities and derivatives clearing and settlement
systems, and trade repositories.
The report is here.
9.
House of Commons Treasury Committee
9.1
Parliamentary Commission on Banking Standards - House of Commons Treasury Committee publishes
Government’s response - 2 March 2015 - The House of Commons Treasury Committee has published the
Government’s response to the November 2014 statement by the former members of the Parliamentary
Commission on Banking Standards (PCBS), which accompanied the Treasury Committee report on
implementation of the PCBS’s recommendations. The response is in the form of a letter by Andrea
Leadsom, Economic Secretary to HM Treasury.
The letter includes comments on:
•
ring-fencing, resolution and proprietary trading;
•
new regulatory regimes for individuals;
•
remuneration;
•
competition; and
•
better regulation.
The letter is here.
07
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Selected Headlines
Asset Management
10.
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
5 mARCH 2015
Insurance
Enforcement
HM Treasury and Financial Conduct Authority
10.1 Senior Managers and Certification Regime - HM Treasury (i) announces commencement date of
7 March 2016; (ii) makes two SIs; and (iii) publishes outcome of consultation on extending the regime
to UK branches of foreign banks - 3 & 4 March 2015 - The Economic Secretary to the Treasury, Andrea
Leadsom, has announced that the commencement date of the new Senior Managers and Certification
Regime will be 7 March 2016. Firms will have to notify regulators of the names of approved persons
becoming senior managers by 8 February 2016. The new criminal offence relating to decisions causing a
financial institution to fail will also come into effect on 7 March 2016, for decisions made following that
date.
The Treasury has made ‘The Financial Services (Banking Reform) Act 2013 (Commencement No.9) Order
2015’ to bring into force the relevant provisions of the Financial Services (Banking Reform) Act 2013.
The Treasury has also made the Financial Services (Banking Reform) Act 2013 (Transitional and Savings
Provisions) Order 2015, which comes into force on 26 March 2015, and makes transitional provisions and
savings in connection with the coming into force of Part 4 of the Financial Services (Banking Reform) Act
2015.
The FCA has made a Statement. It intends to publish a roadmap to commencement “later this month”, which
will include its timetable for publishing final rules.
The Economic Secretary also announced that the Government has decided to proceed with its proposal to
extend the regime to UK branches of foreign banks from the same date. HM Treasury will make an order—
subject to the affirmative procedure—under section 71A of the Financial Services and Markets Act 2000 to
implement the measure. Thereafter, the same timetable will apply. HM Treasury has published its response
to its consultation, ‘Regulating individual conduct in banking: UK branches of foreign banks,’ (November
2014). It includes discussion of when the new regime would apply to an individual based outside the UK. The
PRA and the FCA are to consult on the necessary rules shortly.
The Statement by Andrea Leadsom is here.
The Commencement Order is here.
The Financial Services (Banking Reform) Act 2013 (Transitional and Savings Provisions) Order 2015 is here.
The explanatory memorandum to the Financial Services (Banking Reform) Act 2013 (Transitional and
Savings Provisions) Order 2015 is here.
The HM Treasury press release is here.
The FCA Statement is here.
The HM Treasury response to the consultation is here.
The consultation webpage is here.
11.
Department for Business, Innovation & Skills
11.1 Small Business, Enterprise and Employment Bill - BIS publishes response to consultation on its
proposal to nullify bans on invoice assignment clauses - March 2015 - The Department for Business,
08
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5 mARCH 2015
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Innovation & Skills (BIS) has published a summary of responses to its consultation on the proposal to nullify
bans on invoice assignment clauses. The summary does not set out the Government’s response to responses
received. BIS intends to publish amended Regulations and an accompanying document outlining changes to
the Regulations based on the responses to the consultation, after the election.
None of the responses objected to the proposed approach to financial services (exempting financial services
from nullification of the ban, based on the definition of financial services listed under section 40 of the
Terrorist Asset Freezing etc. Act 2010) but two issues were raised on invoice financing.
The summary of responses is here.
The consultation webpage is here.
12.
Bank of England
12.1 Post-crisis bank capital framework - speech by David Rule, Executive Director of Prudential Policy at
the Bank of England - 2 March 2015 - The Bank of England has published a speech by David Rule, Executive
Director of Prudential Policy at the Bank, on the post-crisis bank capital framework. His speech discusses
four particular areas where questions remain:
•
the overall calibration of total loss absorbing capacity (TLAC);
•
the appropriate level of capital buffers, including how and by how much they increase as banks are
more systemically important;
•
the location of capital buffers, requirements and loss absorbing capacity within international banking
groups; and
•
how to measure a bank’s risk exposures in order to set TLAC and buffers.
Amongst other concluding remarks, Mr Rule discusses the characteristics of a sustainable securitisation
market.
The speech is here.
13.
Prudential Regulation Authority
13.1 CRD IV - PRA discloses 2014 list of UK headquartered G-SIIs - 27 February 2015 - The PRA has disclosed
its 2014 list of firms identified as UK headquartered Global Systemically Important Institutions (G-SIIs) and
their respective sub-categories. The PRA has also published a table disclosing the applicable scores and G-SII
buffers.
The list can be found here.
13.2 CRD IV/CRR - PRA publishes letter on PRA expectations concerning remuneration - 8 December 2014
- The PRA has published a letter (dated 8 December 2014) from its Deputy Governor, Andrew Bailey, to
PRA authorised firms’ Remuneration Committee Chairs, addressing particular areas of uncertainty that
have arisen in relation to remuneration and the Capital Requirements Directive (2013/36/EU) (CRD IV), the
Capital Requirements Regulation (575/2013/EU) (CRR) and the PRA Remuneration Code.
09
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5 mARCH 2015
Insurance
Enforcement
The letter, which is subject to final EBA Guidelines, includes comments on:
•
identification of material risk takers;
•
guaranteed variable remuneration;
•
determining the fixed component of total remuneration for the ratio; and
•
clawback obligations.
The PRA intends to issue a Supervisory Statement in due course.
The letter is here.
14.
New Legislation
14.1 A revised draft Mortgage Credit Directive Order 2015 has been published. It supersedes the draft laid
before Parliament and published on 26 January 2015, which was reported in this Bulletin on 29 January 2015.
The draft Order will, when made, implement in part the Mortgage Credit Directive (2014/17/EU).
The draft Order is here.
The draft explanatory memorandum is here.
14.2 Payment Systems Regulator - various statutory instruments made - March 2015 - Various statutory
instruments regarding the role and powers of the Payment Systems Regulator (PSR) have been made.
The statutory instruments are as follows:
•
The Payment Services (Amendment) Regulations 2015 (SI 2015/422) were made on 4 March
2015 and will come into force on 1 April 2015. The Regulations transfer the functions of supervising
and enforcing compliance with the requirements of the Payment Services Regulations 2009 relating
to access to payment systems, from the Competition and Markets Authority to the PSR, and make
related amendments;
•
The Payment to Treasury of Penalties (Enforcement Costs of the Payment Systems Regulator)
Order 2015 (SI 2015/487) was made on 4 March 2015 and will come into force on 1 April 2015, and
supplements the definition of ‘enforcement costs’; and
•
The Banking Act 2009 (Inter-bank payment systems) (Disclosure and publication of specified
information) (Amendment) Regulations 2015 (SI 2015/488) were made on 4 March 2014 and will
come into force on 1 April 2015. The Regulations enable the Bank of England to share information it
has obtained by virtue of section 204(1) of the Banking Act 2009 with the PSR.
Separately, the PSR has published minutes of a Board meeting held on 21 January 2015, which provides some
information about the preparations for its assumption of its regulatory functions.
SI 2015/422 is here.
The explanatory memorandum is here.
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SI 2015/487 is here.
The explanatory memorandum is here.
SI 2015/488 is here.
The explanatory memorandum is here.
The PSR Board Minutes are here.
14.3 The Deposit Guarantee Scheme Regulations 2015 (SI 2015/486) were made on 4 March 2015 and come
into force on 26 March 2015 and 3 July 2015. The instrument implements in part the Deposit Guarantee
Schemes Directive (2014/49/EU) of 16 April 2014.
The Regulations are here.
The explanatory memorandum is here.
The transposition note is here.
Insurance
15.
European Insurance and Occupational Pensions Authority
15.1 Solvency II - EIOPA publishes relevant risk free interest rate term structures - 28 February 2015 - EIOPA
has published technical documentation (dated 23 February 2015) outlining the relevant risk free interest rate
term structures for Solvency II (2009/138/EC). Additional folders of technical information have also been
published.
These publications will enable consistent calculation of technical provisions used to assess the solvency and
financial position of insurance and reinsurance firms across the European Union, and generally help ensure
uniform implementation of Solvency II.
Further updates are anticipated in March 2015 and it is ultimately intended that term structures will be
updated on a monthly basis. A new webpage has been created and a Q&A summary is also available.
The technical documentation is here.
The new webpage, with access to the techinical information folders, is here.
The Q&As are here.
The press release is here.
15.2 Solvency II - EIOPA publishes call for advice on the identification and calibration of infrastructure
investment risk categories - February 2015 - The European Insurance and Occupational Pensions Authority
(EIOPA) has published a call for advice from the European Commission on technical advice on the calibration
of infrastructure investment risk categories in the Commission Delegated Regulation (2015/35/EU)
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supplementing the Solvency II Directive (2009/138/EC) (Solvency II). The Commission requests this advice
by 30 June 2015. EIOPA’s website indicates it intends to consult in April 2015.
The call for advice is here.
The EIOPA webpage on investment in infrastructure projects is here.
16.
Insurance Europe
16.1 EIOPA Solvency II consultation on ITS and guidelines - Insurance Europe publishes statement - 5 March
2015 - Insurance Europe has published a statement on the timetable for implementation of Solvency II
following the consultation on the second set of EIOPA Solvency II Directive (2009/138/EC) implementing
technical standards (ITS) and guidelines.
The statement is here.
17.
Prudential Regulation Authority
17.1 Solvency II - PRA data collection exercise - 27 February 2015 - The PRA has published a summary of two
data requests made to all insurers subject to Solvency II (2009/138/EC) as part of its 2015 data collection
exercises. The response date for general insurers is 1 May 2015. The response date for life insurers is 1 July
2015. A corresponding announcement has been added to the Solvency II updates webpage.
The summary is here.
The updated webpage is here.
17.2 Climate change - speech by Paul Fisher, Deputy Head of the PRA and Executive Director, Insurance
Supervision - 3 March 2015 - Paul Fisher, Deputy Head of the PRA and Executive Director for Insurance
Supervision, has given a speech in which he discusses matters including climate change. Mr Fisher remarks
that the Bank of England has been conducting analysis to better understand the risk and intends to publish a
report later this year.
The speech is here.
18.
Financial Conduct Authority
18.1 FCA Policy Statement PS15/4: Retirement reforms and the guidance guarantee: retirement risk
warnings - February 2015 - In a ‘Dear CEO’ letter dated 26 January 2015, the FCA announced an intention
to make rules in addition to the final rules set out in its policy statement (PS14/17) on retirement reforms
and guidance guarantees (November 2014), following the reforms announced by the 2014 Budget. The FCA
has now issued a policy statement (PS15/4) introducing new rules that will require firms to give personalised
risk warnings to consumers accessing their defined contribution pension savings, based on the consumer’s
answers to certain questions. The information is intended to support the guidance by the Government’s
Pension Wise service.
The new rules will come into force on 6 April 2015.
The FCA has made these rules without consultation under section 138L of FSMA 2000. However, it intends
to undertake a review in summer 2015, and will consult then on whether any changes are necessary.
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The Pensions Regulator is to publish complementary guidance for trustees following the laying of
amendments to the disclosure regulations before Parliament.
Separately, the Pension Schemes Act 2015 received Royal Assent on 4 March 2015. Amongst other things,
the Act provides greater protection for individuals wishing to take advantage of the new pension freedoms
after 6 April 2015.
PS15/4 is here.
The holding page is here.
The cost benefit analysis is here.
The press release is here.
The January 2015 ‘Dear CEO Letter’ is here.
The Pension Schemes Act 2015 is here.
The press release relating to the Pensions Schemes Act 2015 is here.
18.2 FCA Policy Statement PS15/5: Final rules for charges in workplace personal pension schemes and
feedback on CP14/24 - March 2015 - The FCA has published its policy statement (PS15/5) containing
final rules to implement a charge cap for default funds used for automatic enrolment. Firms will also be
prevented from using certain charging practices in workplace personal pension schemes.
PS15/5 includes the following measures:
•
a cap on the charges within default funds equivalent to 0.75% per year for funds under management
from 6 April 2015;
•
a ban on firms from paying or receiving consultancy charges from 6 April 2015;
•
a ban preventing firms from paying commission or other charges for advice that are not initiated by
scheme members from 6 April 2016; and
•
a ban preventing firms from using differential charges based on whether the member is currently
contributing or not from 6 April 2016.
The FCA has also issued a call for evidence – FCA Discussion Paper DP15/2: Transaction Costs Disclosure:
Improving Transparency in Workplace Pensions – reported in the item immediately below.
PS15/5 is here.
CP14/24 can be found here.
The holding page is here.
The press release is here.
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18.3 FCA Discussion Paper DP15/2: Transaction Costs Disclosure: Improving Transparency in Workplace
Pensions - 2 March 2015 - The FCA has published a discussion paper (DP15/2) containing a joint call
for evidence with the Department for Work and Pensions on improving the reporting and disclosure of
information about transaction costs in occupational and workplace personal pension schemes.
Responses to the call for evidence are due on 4 May 2015.
The FCA plans to consult on proposed rules in Autumn 2015.
The FCA has also published an independent report commissioned by Novarca International Ltd.
The call for evidence is here.
The holding page is here.
The independent report is here.
The press release is here.
18.4 FCA Consultation Paper CP15/7: Proposed changes to our pension transfer rules - March 2015 - The FCA
has published a consultation paper (CP15/7) on proposed changes to its pension transfer rules to support
the government’s new flexible pensions regime as set out in the Pension Schemes Act 2015. The changes
are necessary following a proposed amendment to the Financial Services and Markets Act 2000 (Regulated
Activities) (Amendment) (No. 2) Order 2015, that will make advising on the conversion or transfer of
safeguarded pension benefits into flexible benefits a regulated activity. The FCA is also proposing that all
pension transfers advice be provided or checked by a pension transfer specialist, regardless of when the
transferred benefits are being accessed.
The consultation period closes on 15 April 2015.
The FCA intends to publish a policy statement in June 2015.
CP15/7 is here.
The holding page is here.
The press release is here.
19.
New Legislation
19.1 The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (Pensions Guidance
Exclusions) Order 2015 (SI 2015/489) was made on 4 March 2015 and comes into force on 26 March 2015.
The Order makes provision in connection with the implementation of the pensions guidance service, Pension
Wise, to ensure that persons providing the service are not carrying out a regulated activity.
The Order is here.
The explanatory memorandum is here.
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Competition and Markets Authority
20.1 Private motor insurance - CMA market investigation - CMA launches consultation on modified draft
order - 27 February 2015 - The Competition and Markets Authority (CMA) has published a modified
version of its draft order resulting from its investigation into private motor insurance. Following responses
to the initial draft order consultation in January 2015, the CMA is now consulting on whether to extend
the deadline for implementing procedures to provide better consumer information on no-claims bonus
protection from September 2015 to August 2016.
The consultation is due to close on 9 March 2015, with the final order expected to be published later in the
month.
The modified draft order is here.
The notice of intention to make an order is here.
The press release is here.
Asset Management
21.
European Parliament
21.1 Money Market Funds Regulation - ECON votes and proposes vote of the European Parliament 26 February 2015 - The Economic and Monetary Affairs Committee (ECON) of the European Parliament has
voted on a draft report on the proposed Money Market Funds Regulation. The text adopted by ECON is to
be put to vote by the full House to consolidate the European Parliament’s position before negotiations with
the Member States. The European Parliament has updated its procedure file on the proposed Money Market
Funds Regulation to change the indicative plenary sitting date to 28 April 2015.
The press release is here.
The procedure file for the proposed Money Market Funds Regulation is here.
21.2 European Long-Term Investment Funds Regulation - ECON publishes supplementary report 16 February 2015 - ECON has published a supplementary report on the proposed European Long-Term
Investment Funds Regulation.
The supplementary report is here.
The procedure file for the proposed Regulation is here.
See also the Banking and Finance section above for an item on the EBA consultation on sound remuneration
policies.
See also the Insurance section above for an item on various pension related items.
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22.
Joint Committee of the European Supervisory Authorities
22.1 CRA Regulation - Joint Committee of ESAs extend deadline for responses to Discussion Paper on the
use of credit ratings by financial intermediaries - 2 March 2015 - In December 2014, we reported in this
Bulletin that the Joint Committee of European Supervisory Authorities (ESAs) had published a Discussion
Paper on the use of credit ratings by financial intermediaries under Article 5(a) of the Credit Rating Agencies
Regulation (1060/2009/EC). The Committee has now extended the deadline for responses to 13 March
2015.
The holding page for the Discussion Paper is here.
23.
European Securities and Markets Authority
23.1 ESMA guidelines and technical standards - ESMA publishes webpage - 2 March 2015 - The European
Securities and Markets Authority (ESMA) has published a new webpage containing links to all its guidelines
and technical standards.
The following tables have been published:
•
Guidelines under consultation;
•
Final guidelines;
•
Technical standards under public consultation;
•
Technical standards submitted to the European Commission; and
•
Technical standards in force.
ESMA intends to update the tables regularly.
The new webpage, with links to overview documents, is here.
24.
European Banking Authority
24.1 CSD Regulation - EBA launches consultation on draft regulatory technical standards on prudential
requirements - 27 February 2015 - The European Banking Authority (EBA) has published a consultation paper
on its draft regulatory technical standards on prudential requirements for central securities depositories
(CSDs) under the CSD Regulation (EU/909/2014).
There will be a public hearing on 23 March 2015.
The consultation is due to close on 27 April 2015.
The consultation paper is here.
The webpage for Regulatory Technical Standards on prudential requirements for CSDs is here.
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The press release is here.
25.
Bank of England
25.1 EMIR - Bank publishes new webpage on CCP qualifying holding notifications - 2 March 2015 - The Bank
of England has published a new webpage containing information for persons proposing to buy or sell a
qualifying holding in a UK central counterparty (CCP). There are change of control notification and consent
requirements under Article 31 of European Markets Infrastructure Regulation (EMIR) (648/2012/EU).
The webpage is here.
26.
Recent Cases
26.1 United Kingdom v European Central Bank, Case T-496/11, 4 March 2015
ECB had no competence to impose a requirement that central counterparty clearing systems be located in the
Eurosystem
In response to an action by the United Kingdom, the General Court of the European Union (Fourth
Chamber) has partially annulled the Eurosystem Oversight Policy Framework published by the European
Central Bank (ECB), in so far as it sets a requirement for CCPs involved in the clearing of securities to be
located within the Eurozone.
The ECB and the Bank of England have both issued press releases taking note of the decision.
The judgment is here.
The General Court press release is here.
The ECB press release is here.
The Bank of England press release is here.
27.
Bank of England
27.1 Market intelligence programme - Bank of England announces reforms - 26 February 2015 - On
13 November 2014, we reported in this Bulletin that the Oversight Committee of the Bank of England had
published an independent report by Lord Grabiner QC on whether, between 2005 and 2013, any Bank
official was aware of, or involved in, misconduct in the foreign exchange market. The Bank of England has
now published its response to Lord Grabiner’s recommendations on documentation, education and market
intelligence (MI). Alongside it, the Bank is publishing a wide-ranging set of changes to its MI function.
The Bank states that MI is the ongoing process of discussion with financial market participants to identify
insights relevant to policymaking. It has published the result of a review. The review identified 11 specific
areas for action, with an implementation plan contained in Annex 2. As well as the review, the Bank has
published an MI Charter (one of the recommended actions) which seeks to answer the following questions:
•
What is Market Intelligence and why does the Bank collect it?
•
From whom does the Bank gather Market Intelligence?
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How does the Bank gather Market Intelligence?
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What happens to information gathered for Market Intelligence?
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The Bank is also introducing a more pro-active approach to compliance, including the benchmarking of the
Bank’s policies, and an enhanced training programme for all staff conducting market intelligence.
The Bank’s response to Lord Grabiner’s recommendations is here.
‘A Review of Market Intelligence at the Bank of England’ is here.
The MI Charter is here.
A related speech by Bank Deputy Governor for Markets and Banking, Minouche Shafik, is here.
The ‘Market Intelligence’ webpage is here.
The press release is here.
28.
Financial Conduct Authority
28.1 FCA Thematic Review TR15/2: Structured Products: Thematic Review of Product Development and
Governance - 5 March 2015 - The FCA has published a thematic review report (TR15/2) on structured
products. It is stated to be relevant to all firms involved in any stage of the design, manufacture, packaging
and distribution of structured products. It incorporates findings from an Occasional Paper on survey
evidence that investors overvalue structured deposits and behavioural and qualitative research with
consumers.
The key points from the review include:
•
retail consumers generally struggle to understand the relative merits of structured products and the
factors driving potential returns;
•
firms’ senior management must do more to put customers at the forefront of their approach to
product governance and identify a clear target market;
•
structured products should have a reasonable prospect of delivering economic value to customers in
the target market;
•
firms need to provide customers with clear and balanced information on each product and any risks;
•
manufacturers need to strengthen the monitoring of their products; and
•
firms need to do more to ensure fair treatment of customers throughout the lifecycle of a structured
product.
The FCA has asked some of the firms involved in the review to undertake more work. The FCA states that all
firms involved in the structured product market should consider the report.
TR15/2 is here.
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A qualitative research document is here.
Occasional Paper No. 9 is here.
The webpage is here.
The press release is here.
29.
Financial Markets Law Committee
29.1 Benchmarks Regulation - FMLC publishes letter written to European Commission - 3 March 2015 - The
Financial Markets Law Committee (FMLC) has published a letter to the European Commission highlighting
potential legal uncertainties that would arise from proposed amendments to the equivalence regime in the
proposed Benchmarks Regulation, concerning recognition of an administrator located in a third country. The
letter refers to amendments in a compromise proposal (dated 6 February 2015) and a draft report by the
European Parliament’s Committee on Economic and Monetary Affairs (ECON) (dated 11 December 2014).
The letter is here.
The text of the Compromise Proposal can be found here.
The draft report is here.
The procedure file for the proposed Benchmark Regulation is here.
See also the Enforcement section below for the latest sentence for insider dealing.
Financial Crime
30.
Financial Action Task Force
30.1 AML/CFT - FATF (i) updates lists of jurisdictions with deficiencies and provides progress report on
others and (ii) publishes report on ISIL - 25 to 27 February 2015 - Following its plenary meeting in Paris, the
Financial Action Task Force (FATF) has produced and published the following documents:
•
‘Public statement on jurisdictions with strategic anti-money laundering and combating the financing
of terrorism (AML/CFT) deficiencies’;
•
‘Improving Global AML/CFT Compliance: on-going process’, which provides an update on the FATF’s
on-going work to improve global AML/CFT compliance in various jurisdictions; and
•
‘Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL)’, which analyses how
the terrorist organisation generates and uses its funding and considers new and existing measures to
disrupt its funding.
The public statement is here.
The document on improving global AML/CFT compliance is here.
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The report ‘Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL)’ is here.
The holding page for the report is here.
The press release for the report is here.
The full Outcomes of the plenary meeting are here.
31.
Cabinet Office
31.1 Bribery and corruption enforcement - Cabinet Office publishes Terms of Reference for second Phase
of Review - February 2015 - The Cabinet Office has published Terms of Reference for the second phase of
its Review into bribery and corruption enforcement. The aim of the Review is to improve the coordination
and effectiveness of the UK’s enforcement response to bribery, corruption and related fraud, through a full
consideration of the powers, capabilities and organisations involved. The FCA is one of the organisations
supporting the review.
The terms of reference are here.
32.
New legislation
32.1 Serious Crime Act 2015 - 3 March 2015 - The Home Office has announced that the Serious Crime Bill has
received Royal Assent, becoming the Serious Crime Act 2015. Section 37, which comes into force on a day to
be appointed, adds a new section 338(4A) into the Proceeds of Crime Act 2002, as follows:
“Where an authorised disclosure is made in good faith, no civil liability arises in respect of the disclosure on
the part of the person by or on whose behalf it is made.”
The announcement is here.
The Serious Crime Act 2015 is here.
33.
Serious Fraud Office and Bank of England
33.1 Liquidity auctions - SFO and Bank of England announce investigation - 4 and 5 March 2015 - The Serious
Fraud Office (SFO) has confirmed that it is investigating material referred to it by the Bank of England
concerning liquidity auctions during the financial crisis in 2007 and 2008 and that the material is a result of
an independent inquiry that the Bank of England commissioned into this matter. The SFO accepted this case
for investigation in December 2014.
The Bank of England has published a Statement confirming that it commissioned Lord Grabiner QC
to conduct an independent inquiry into liquidity auctions during the financial crisis and, following the
conclusion of the initial inquiry, referred the matter to the SFO.
The SFO press release is here.
The Bank of England Statement is here.
See also the Enforcement section below for the latest sentence for insider dealing.
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34.
Financial Conduct Authority
34.1 Insider dealing - Former Group Treasurer and Head of Tax at major retailer pleads guilty and is
sentenced to 12 months imprisonment - 3 March 2015 - The FCA has announced that Paul Coyle, former
Group Treasurer and Head of Tax at Wm Morrison Supermarkets plc, has pleaded guilty to two offences of
insider dealing under section 52(1) of the Criminal Justice Act 1993. He has been sentenced to 12 months
imprisonment. He was also ordered to pay £15,000 towards prosecution costs and a Confiscation Order of
£203,234.
The press release is here.
34.2 Providing misleading information - FCA fines and restricts bank and fines two approved persons 5 March 2015 - The FCA has fined Bank of Beirut (UK) Ltd £2.1 million for what the FCA describes as a breach
of Principle 11 (dealing with regulators in an open and cooperative way) by repeatedly providing the FCA with
misleading information that it was addressing concerns raised by the FCA in a remediation plan concerning
its financial crime systems and controls. The FCA also imposed a restriction on the bank under section
206A of FSMA 2000, restricting the bank from acquiring new customers from high-risk jurisdictions for 126
days. The firm qualified for an early settlement discount of 30% without which the fine would have been
£3,000,000 and the bank would have been restricted for 180 days. The FCA has also fined two approved
persons.
The FCA has also fined Anthony Rendell Boyd Wills, the former compliance officer and Michael John Allin,
the internal auditor, £19,600 and £9,900 respectively for breach of Principle 4 of the FCA’s Statement of
Principles for Approved Persons (an approved person must deal with the FCA, the PRA and other regulators
in an open and cooperative way and must disclose appropriately any information of which the FCA or the
PRA would reasonably expect notice). Mr Wills and Mr Allin were responsible for addressing a number of the
the remedial actions and communicating with the FCA. The FCA states that they should have resisted any
senior management influence to be less than open and cooperative with the FCA. Both individuals qualified
for an early settlement discount of 30% without which the fines would have been £28,000 and £14,100
respectively.
The Final Notice for the bank is here.
The Final Notice for Anthony Rendell Boyd Wills is here.
The Final Notice for Michael John Allin is here.
The press release is here.
See also the General section above for an item on PRA consultation paper CP8/15: Engagement between external
auditors and supervisors and commencing the PRA’s disciplinary powers over external auditors and actuaries.
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This Bulletin is prepared by the Financial Regulation Group of Slaughter and May in London. The Group comprises
a team of lawyers with expertise and experience across all sectors in which financial institutions operate.
We advise on regulatory issues affecting firms across the financial services sector, including banks, investment firms,
insurers and reinsurers, brokers, asset managers and funds, non-bank lenders, payment service providers, e-money
issuers, exchanges and clearing systems. In addition, our leading financial regulatory investigations practice is
regularly instructed by financial institutions requiring specialist knowledge of financial services regulation together
with experience in high profile and complex investigations and contentious regulatory matters.
Most of the projects that we advise on have an extensive international or cross-border element. We work in
seamless integrated teams with leading independent law firms which offer many of the most highly regarded
financial institutions lawyers in Europe, the US and Asia, as well as strong and constructive relationships with local
regulators.
Our Financial Regulation Group also produces occasional briefing papers and other client publications. The five
most recent issues of this Bulletin and our most recent briefing papers and client publications, appear on the
Slaughter and May website here.
The Group’s recent work includes advising:
•
a number of banking groups in relation to the new banking structural reforms, including the new ring-fencing
regime;
•
•
•
•
Standard Life plc on its acquisition of Ignis Asset Management Limited from Phoenix Group Holdings plc;
•
Deutsche Bank in relation to several simultaneous investigations in multiple jurisdictions relating to LIBOR
and a global financial services institution in relation to a number of regulatory investigations into foreign
exchange trading at several banks;
•
Banco Santander on a pan-European and global asset management joint venture with leading global private
equity firms Warburg Pincus and General Atlantic;
•
a number of multi-national clients in relation to the UK, EU, and US economic and trade sanctions regimes.
the UK Government on the establishment of the British Business Bank;
Pollen Street Capital Limited’s sale of Moneycorp to international private equity group, Bridgepoint;
international and specialist insurer and reinsurer, Catlin Group Limited, on the acquisition of it by global
insurer and reinsurer, XL Group plc;
If you would like to find out more about our Financial Regulation Group or require advice on a financial regulation
matter, please contact one of the following or your usual Slaughter and May contact:
Jan Putnis
Ben Kingsley Michael Sholem
[email protected]
[email protected]
[email protected]
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