Key Regulatory Topics: Weekly Update 10 – 16 July 2020
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Our weekly update on key regulatory topics affecting the financial services sector.
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Brexit
Please see our Financial Crime section for an update on the draft Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020.
Please see our Markets and Markets Infrastructure section for the EC’s update to its Brexit readiness notices for insurance, markets in financial instruments and post-trade financial services.
Please see our Payment Services and Payment Systems section for an update on the European Payments Council’s (EPC) preparations for the end of the transition period in respect of SEPA.
Please see our Prudential Regulation section for updates on HMT’s: (i) statement on applicability of Covid-19 related amendments to the CRR; and (ii) consultation on updating the UK’s Prudential Regime before the end of the transition period.
Capital Markets
Please see our Covid-19 section for an update on the EC’s timing for its work on the Capital Markets Union (CMU).
ESMA final Guidelines on disclosure requirements under the Prospectus Regulation
On 15 July, ESMA published its final Guidelines on disclosure requirements under the Prospectus Regulation. These provide guidance to financial market participants regarding the disclosure of financial and non-financial information in the prospectus. ESMA states that the aim of the Guidelines is to ensure that market participants have a uniform understanding of the relevant disclosure required in the various annexes included in the Commission Delegated Regulation (EU) 2019/980. Also, the Guidelines aim to support competent authorities in properly assessing the completeness, comprehensibility and consistency of information in prospectuses. The final Guidelines will become effective two months after their publication on ESMA’s website in all of the official EU languages.
Conduct
FCA to launch enhanced Financial Services Register
On 13 July, the FCA updated its webpage (published 9 July) which announces that it will be replacing its existing Financial Services Register with an enhanced Financial Services Register on 27 July, in response to user feedback. The FCA confirms that it will add a directory of certified and assessed persons to the Register later this year, and that the existing Financial Services Register will cease to be available from 24 July.
PRA consults on updates to SM&CR forms
On 13 July, the PRA published a consultation paper which sets out its proposals to make minor amendments to the PRA Rulebook, the Notifications Form and the SM&CR Form L. The PRA proposes to amend the Notification Form to reflect the FCA’s new address following their move to new premises and the new FCA logo. The PRA also proposes to make minor consequential amendments to the Notification Form – these being: (i) deleting an incorrect reference to the PRA as a limited company; (ii) updating references to the PRA Rulebook; and (iii) updating the General Data Protection Regulation (GDPR) notification. The PRA is proposing to update SM&CR Form L to reinstate question 3.05, which requests firms making a notification to provide details of any disciplinary action taken. The deadline for comments is 13 October.
Consumer/retail
Please see our Covid-19 section for an update on the EC’s best practices to help mitigate impact of Covid-19 in relation to relief measures offered to consumers and businesses.
Please see our Payment Services and Payment Systems section for an update on the FCA’s consultation on branch and ATM closures or conversions.
Draft Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020
On 15 July, HMT published a draft version of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, alongside a draft Explanatory Memorandum. The instrument establishes a debt respite scheme for people in problem debt, giving those eligible who receive professional debt advice, access to a 60-day period in which interest, fees and charges are frozen and enforcement action is paused.
FCA confirms further support for users of motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products – Covid-19
On 15 July, the FCA finalised its revised guidance which provides continued support for users of motor finance, BNPL, RTO, pawnbrowking and HCSTC products in view of the challenges brought about by Covid-19. The updated temporary guidance comes into force on 17 July. The FCA has also published the Covid-19 Motor Finance and High Cost Credit Instrument 2020 which makes amendments to rules in CONC to reflect the updated temporary guidance, together with the related feedback statement.
FCA Temporary Guidance – Motor Finance agreements
FCA Temporary Guidance – RTO, BNPL and pawnbroking agreements
FCA Temporary Guidance – HCSTC agreements
FCA Covid-19 Motor Finance and High Cost Credit Instrument 2020
Covid-19
Pleases see the other sections for product specific updates relating to Covid-19.
FSB report on the financial stability implications of Covid-19 and policy measures taken
On 15 July, the FSB published a report to the G20 Finance Ministers and Governors on the financial stability implications of Covid-19 and policy measures taken. The FSB states that it continues to support international cooperation and coordination on the Covid-19 response underpinned by the FSB principles, specifically by: (i) assessing vulnerabilities in the global financial system, to support assessments of the appropriateness of financial policy responses and potential adjustments; (ii) regularly sharing information on policy responses and supporting domestic assessments of the use of policy measures taken; and (iii) coordinating the response to policy issues, including measures that standard-setting bodies (SSBs) may take to provide, or give guidance on, flexibility available to authorities and firms within existing international financial standards. The FSB will provide a further update on member authorities’ and SSBs’ Covid-19 responses, its financial stability risk assessment and its work on the effectiveness of policy responses by November, ahead of the G20 Summit.
EC best practices for relief measures in the context of Covid-19
On 14 July, the EC published a document to facilitate the convergence and implementation of relief measures offered to consumers and businesses in the context of the Covid-19 crisis. The best practices are aimed at insurers as well as for bank and non-bank lending to consumers and businesses. The best practices cover several issues, including: (i) payment moratoria for consumer and business loans, and for insurance contributions; (ii) enabling safer cashless payments while ensuring cash payments remain available for those who need them; (iii) ensuring loans aimed at mitigating the impact of coronavirus are provided swiftly, and that the fees and interest rates incurred are fair; and (iv) ensuring legitimate insurance claims are processed and paid out as quickly as possible.
PRA updates statement on implementation of the EBA Guidelines to address gaps in reporting data and public information in the context of Covid-19
On 10 July, the PRA has updated its statement on the implementation of the EBA Guidelines on Covid-19 reporting and disclosure (dated 2 June 2020). The update states that the PRA has now considered how to apply the disclosure elements of the EBA Guidelines. The PRA expects that UK banks and building societies which: (i) are, or are controlled by, global or other systemically important institutions designated by the PRA in the most recent list; and (ii) have retail deposits equal to or greater than £50 billion on an individual or consolidated basis, should make disclosures similar to those prescribed by the EBA Guidelines, but incorporating a number of modifications that the PRA will set out. The PRA expects such firms to make these disclosures for the highest level of consolidation in the UK. The PRA is finalising the design of the disclosure templates.
EC timing for its work on the Capital Markets Union (CMU)
The EC has published Executive Vice-President Dombrovskis’ remarks at the ECOFIN press conference. In his remarks, Mr Dombrovskis states that the Covid-19 pandemic has injected urgency into the CMU because the strength of economic recovery will depend on well-functioning capital markets and access to market financing. A fully-fledged CMU will also be vital for mobilising much-needed long-term investments in new technologies and infrastructure, to tackle climate change and to deliver Europe's Green Deal and Digital Agenda. In its CMU action plan which it intends to present in September, the EC will look at topics such as SME access to finance, market infrastructure, and measures to get savers in Europe to invest more through capital markets. The EC will also present later this month a package of targeted amendments, or “quick fixes”, to capital markets rules to facilitate economic recovery.
Financial crime
Please see our Investigations Insight Blog for an update on the SEC being forced to change its enforcement approach. In a conversation with A&O partner and former SEC Enforcement Official Bill White, Billy Jacobson explores the Supreme Court’s decision in SEC v. Liu decided in late June, and two other recent Supreme Court decisions which are already having an impact on the SEC’s ability to bring cases going forward.
Please see our Publication on the UK imposing its first “Magnitsky” sanctions on entities and individuals alleged to have been involved in human rights abuses pursuant to the Global Human Rights Sanctions Regulations 2020 (the Regulation). We set out the background to the Regulation and discuss its impact on UK companies and financial institutions.
HMT publishes the draft Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020
On 15 July, HMT published a draft version of the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 (the Regulations), alongside a draft Explanatory Memorandum. The Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to implement amendments made by the Fifth Money Laundering Directive to the Fourth Money Laundering Directive. The main changes are made in order to transpose provisions introduced concerning the UK’s register of express trusts, in particular expanding the scope of the register, and requiring that information on the register is made available in certain circumstances to those with a legitimate interest. Parts 1 to 3 of the Regulations come into force 21 days after the day on which they are laid (except as specified). Regulation 7(2)(a) comes into force on 6 April 2021. Regulation 5 and regulation 7(4) come into force on 10 March 2022. Part 4 of the Regulations (EU exit amendments) comes into force on IP completion day.
HMT summarises responses to technical consultation on Fifth Money Laundering Directive (MLD5) and Trust Registration Service (TRS)
On 15 July, HMT published a summary of responses to its technical consultation on MLD5 and the TRS. HMT recognises that, in some areas, there is good justification for expanding the categories of trusts that are not required to register on the basis that they are regulated elsewhere or that for other reasons the inherent risk of the trust being used for money laundering and/or terrorist financing is low. Furthermore, HMT acknowledges that trustees, professionals and other stakeholders will need clarity on the registration requirements of the trusts they are responsible for and HMT will provide detailed guidance to assist in the registration process.
EP announces new measures to stop money laundering and terrorist financing
On 10 July, the EP published a resolution which welcomes the EC’s Action Plan on how to fight effectively against money laundering (ML) and terrorist financing (TF) and highlighted the most pressing changes needed to achieve an efficient EU framework. To promote better implementation and cooperation, MEPs: (i) deplored the incorrect and patchy implementation of the Anti-money laundering/Combatting Terrorism Financing (AML/CTF) rules in member states; and (ii) call for a zero-tolerance approach and infringement procedures against member states who lag behind in transposing the rules into national law. To enhance effective use of data, MEPs: (a) call for the EC to address the persisting lack of quality data to identify ultimate beneficial owners by setting up interconnected and high-quality registers in the EU with high standards of data protection; (b) call for a widening of the scope of supervised entities to include new and disruptive market sectors such as crypto-assets; and (c) reiterate that non-cooperative jurisdictions and high-risk third countries must be immediately blacklisted.
Fintech
FCA and City of London Corporation pilot ‘digital sandbox’ to help innovative companies drive recovery from Covid-19
On 16 July, the FCA announced that it will collaborate with City of London Corporation on the pilot of a ‘digital sandbox’ to support innovative firms tackling challenges caused by Covid-19, by providing them with access to high-quality data sets to allow for the testing and validation of technology solutions. The FCA states that in the pilot stage, the digital sandbox will support large financial institutions and start-ups looking to play a key role in the recovery from Covid-19 through supplying relevant data sets and expertise in the areas of detecting and preventing fraud and scams, supporting vulnerable customers, and improving access to finance for SMEs financially affected by the pandemic.
Markets and Markets infrastructure
ESMA publishes first review reports on the MiFIR transparency regime
On 16 July, ESMA published first review reports on the MiFIR transparency regime. The first Report reviews the regime for equity instruments and contains proposals for targeted amendments regarding the transparency obligations for trading venues, specifically the double volume cap mechanism. It also includes recommendations on other key transparency provisions, in particular the trading obligation for shares and the transparency provisions applicable to systematic internalisers (SIs) in equity instruments. The second Report reviews the pre-trade transparency obligations applicable to SIs in non-equity instruments. ESMA has also published a timeline of upcoming MiFID II review reports.
ESMA Review Report – Equity Instruments
ESMA Review Report – Non-Equity Instruments
FCA updates EMIR breach notification form
On 14 July, the FCA published an updated version of its EMIR breach notification form to make minor changes but also to incorporate the changes to the reporting requirements pursuant to Article 9(1a) to (1e) of EMIR REFIT. The FCA states that the following should be noted by firms when completing the form: (i) for firms who have provided date(s)/timeframe(s) by which they intend to complete remediation of the reported issues, back report the impacted transactions, and/or carry out improvements in their systems and controls, the FCA requests an update is sent to it by stated date(s)/timeframe(s); (ii) for firms who are taking a multi-stage approach to remediation and have provided any date(s)/timeframe(s) by which the individual stages are expected to be completed, the FCA requests that periodic updates are sent to it by the stated date(s)/timeframe(s); and (iii) for firms who have been unable to fully answer any of the questions in the form, but have stated a date(s)/timeframe(s) by which a complete answer will be available, the FCA requests that further information is sent to it by the stated date(s)/timeframe(s). The FCA confirms that firms should complete and submit this updated form going forward.
EC adopts Delegated Regulations supplementing EMIR on fees, tiering, and comparable compliance for third-country central counterparties (CCP)
On 14 July, the EC announced the adoption of three Delegated Regulations supplementing EMIR concerning CCPs established in third countries (TC-CCPs) by updating its webpage on implementing and delegated acts relating to EMIR. The Delegated Regulations supplement respectively: (i) Regulation (EU) No 648/2012 with regard to fees charged by the European Securities and Markets Authority to central counterparties established in third countries; (ii) Regulation (EU) No 648/2012 with regard to the criteria that ESMA should take into account to determine whether a central counterparty established in a third-country is systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its Member States; and (iii) Regulation (EU) No 648/2012 with regard to the minimum elements to be assessed by ESMA when assessing third-country CCPs' requests for comparable compliance and the modalities and conditions of that assessment.
EC updates Brexit readiness notices for insurance, markets in financial instruments and post-trade financial services
On 13 July, the EC updated its webpage on getting ready for the end of the Brexit transition period to announce the publication of updated notices for readiness. The published notices are to stakeholders on the withdrawal of the UK and EU rules in the fields of: (i) insurance/reinsurance; and (ii) markets in financial instruments. On 14 July, the EC also published a notice to stakeholders in the field of post-trade financial services, which covers: (a) derivatives; (b) trade repositories and reporting; (c) central securities depositories; and (d) securities settlement systems.
BoE’s speech on entering LIBOR endgame
On 13 July, the BoE published a speech on entering the LIBOR endgame. The speech details the: (i) continued importance of the transition away from LIBOR; (ii) necessity for change given that the BoE states that LIBOR is not a robust and transparent basis for determining funding costs for firms and households; (iii) the alternative to LIBOR; (iv) adapting to the impact of Covid-19; (v) the state of play in sterling so far – progress that has been made in regard to the transition; and (vi) legacy business and what has come to be referred to as the ‘endgame’.
ESMA’s third EU-wide CCP stress test finds system resilient to shocks
On 13 July, ESMA published a report on the results of its third EU-wide CCP stress test exercise which confirms the overall resilience of EU CCPs to common shocks and credit, liquidity and concentration risks. This states, among other things, that the exercise was completed while the EU experienced a major and unprecedented crisis with the Covid-19 outbreak. ESMA, in coordination with the NCAs, closely monitored the impact on EU CCPs, which remained resilient through the crisis, despite the increased market volatility and operational risk.
ESMA reports on sanctions and measures imposed under MiFID II during 2019
On 13 July, ESMA published a report which provides an overview of the applicable legal framework and the sanctions and measures imposed by NCAs under the MiFID II framework during 2019. The report notes that NCAs imposed a total of 371 sanctions and measures in 2019 of an aggregated value of about €1.8 million. Due to differences in the identification of sanctions and measures for the purpose of the reporting to ESMA and the length of the enforcement processes, the data does not provide at this time the basis for detailed statistics, clear trends or tendencies in the imposition of sanctions and measures. The information in the report will contribute to ESMA’s work aimed at fostering supervisory convergence in the application of MiFID II.
ESMA’s final report – Guidelines on securitisation repository data completeness and consistency thresholds
On 10 July, ESMA published a final report comprising Guidelines on securitisation repository data completeness and consistency thresholds. The Guidelines aim to ensure consistent application of the requirement to be “sufficiently representative” under Article 4(2)(d) of the draft Securitisation Repository Operational Standards Delegated Regulation. This report provides an overview of the feedback received from stakeholders during the consultation (issued on 17 January) as well as the ESMA response to that feedback, together with the final version of the Guidelines. Among other things, ESMA has provided further clarity on: (i) ESMAs view on the scope of application of the Guidelines; and (ii) the guiding principles used for future revisions of the thresholds. The Guidelines in Annex I will be translated into all official languages of the EU and published on ESMA’s website. ESMA will consider these Guidelines for the purpose of its supervision as of 1 January 2021.
Payment services and Payment systems
FCA highlights difficulties of cheque use between firms during Covid-19
On 16 July, the FCA published its July regulation round-up, including a section on electronic alternatives to cheques for firm-to-firm payments. The FCA states that the continued payments between firms through the use of cheques has been reported to cause some difficulties during the Covid-19 disruption. The FCA states that firms may want to be aware of this and consider transferring funds using secure electronic alternatives to cheques, where possible, which reduces the need for staff to be handling cheques onsite. The FCA does not expect firms to require all customers to stop using cheques.
FCA consultation on branch and ATM closures or conversions
On 16 July, the FCA published a consultation on proposed guidance for regulated firms that operate (or have agents that operate) branches, or ATMs (cash machine or cashpoint). The guidance sets out its expectation that firms should carefully consider the impact of a planned closure or conversion on their customers’ everyday banking and cash access needs, and other relevant branch services. Where firms do close or convert any of these sites, the FCA states sets out its expectations around alternative access arrangements. The FCA expects firms to keep it informed of plans for closures or conversions throughout the process, to enable it to monitor whether customers are being treated fairly. The deadline for comments is 30 July.
Joint Authorities Cash Strategy (JACS) Group – safeguarding the UK’s cash infrastructure
On 15 July, HMT published a document by the JACS Group on safeguarding the UK’s cash infrastructure. The document provides an update on developments regarding the UK’s cash infrastructure and the work of JACS Group members, including: (i) how current regulatory oversight maps onto the end-to-end cash
infrastructure; (ii) key trends in the use of cash and in cash withdrawals and deposits; (iii) the state of, and key pressures on, the overall end-to-end cash infrastructure across the UK; and (iv) major industry initiatives that JACS Group members are tracking and engaging with, and what actions members themselves are undertaking.
European Payments Council (EPC) preparations for the end of the transition period in respect of SEPA
On 14 July, the EPC published a press release confirming preparations for the end of the transition period in respect of SEPA. As of 1 January 2021, the UK will maintain participation in the SEPA geographic scope. This means that the SEPA Credit Transfer (SCT)/SEPA Direct Debit (SDD) rules applicable to transactions from/to non-EEA jurisdictions are also applicable to SCT/SDD transactions with the UK. The EPC therefore requests all payment service providers to implement without delay measures to ensure a continued smooth processing of cross-border SEPA payments involving a UK-based SEPA payment scheme participant after 31 December 2020. The EPC confirms that additional transaction details are needed for SEPA transactions to be executed or settled as of 1 January 2021 involving a UK-based SEPA payment scheme participant. The EPC warns that the lack of these additional transaction details may lead to rejected transactions or potential other issues from the scheme participant receiving the payment message. Therefore, the EPC strongly recommends each SEPA payment scheme participant to identify as soon as possible its customers with incoming and outgoing cross-border SEPA transactions involving both a UK and an EEA payment account, and to inform all customers concerned about the need to provide this extra SEPA transaction data as from 1 January 2021.
BoE’s Annual Report on Real-Time Gross Settlement (RTGS) system and CHAPS
On 14 July, the BoE published its Annual Report on the RTGS system and CHAPS, including its strategy for 2020/21. For 2020/21, the BoE’s focus is on ‘augmentation’, with further maturity of its risk management arrangements, enhancing the CHAPS rulebook and seeking to maximise the financial stability benefits of CHAPS being part of the central bank. In 2020/21, the BoE intends, among other things, to focus on: (i) service delivery including operating, and enhancing the resilience of, RTGS and CHAPS; (ii) risk management including acting as an end-to-end risk manager for the CHAPS system; and (iii) further enhancing collaboration across the teams that support the delivery of the RTGS and CHAPS services, and improving ways of working – including how this may change in light of Covid-19. As part of its strategy, the BoE will: (a) enhance its approach to operational resilience – for example, it will consider what further arrangements may need to be put into place to ensure compliance with the proposals set out in its December 2019 consultation on improving the operational resilience of FMIs to protect the wider financial sector and UK economy; (b) continue to develop its medium term strategy for RTGS and CHAPS; and (c) continue to engage domestically and internationally with its counterparts operating other RTGS and high-value payment systems on topics including ISO 20022 and cross-border payments; (d) continue to contribute to its wider review of access to the BoE’s payments infrastructure and balance sheet; and (e) finalise and publish the specification and technical market guidance for enhanced ISO 20022 messages by September.
The Committee on Payments and Market Infrastructures (CPMI) Stage 2 Report for the G20 on enhancing cross-border payments
On 13 July, the CPMI published its Stage 2 Report as part of the G20’s three-stage process to develop a global roadmap for enhancing cross-border payments. The report identifies a set of building blocks where further joint public and private sector work could enhance cross-border payments: (i) focus area A – commit to a joint public and private sector vision to enhance cross-border payments; (ii) focus area B – coordinate on regulatory, supervisory and oversight frameworks; (iii) focus area C – improve existing payment infrastructures and arrangements to support the requirements of the cross-border payments market; (iv) focus area D – increase data quality and straight through processing by enhancing data and market practices; and (v) focus area E – explore the potential role of new payment infrastructures and arrangements. Analysis undertaken by the Task Force has identified important interdependencies between building blocks that will be assessed further to inform the Stage 3 roadmap and beyond. Furthermore, it is emphasised that extensive engagement with all relevant private and public sector stakeholders will be needed to make progress in enhancing cross-border payments. It is also stated that a comprehensive set of delivery milestones involving both the public and the private sector, together with monitoring, is essential to ensure success. The CPMI has also published a technical background report, providing supplementary analysis. Additionally, the FSB has published a letter (dated 10 July) sent to the G20 Finance Ministers and Central Bank Governors welcoming the report, as well as confirming its plan to publish the final report in October.
CPMI Technical Background Report
Prudential Regulation
Please see our Covid-19 section for an update on the PRA’s updated statement on implementation of the EBA Guidelines on Covid-19 reporting and disclosure.
HMT’s statement on applicability of Covid-19 related amendments to the CRR
On 16 July, HMT published a statement clarifying the Covid-19 amendments to the CRR and CRRII that apply before the end of the transition period and which will form part of the body of EU law to be retained in the UK. The Treasury will use powers under the European Union (Withdrawal) Act 2018 (as amended by the European Union (Withdrawal Agreement) Act 2020 to address any deficiencies arising from the relevant provisions of the CRR, ensuring these elements of retained EU law operate effectively in the UK at the end of the transition period.
HMT’s consultation on updating the UK’s prudential regime before the end of the transition period
On 16 July, HMT published a consultation on updating the UK’s prudential regime before the end of the transition period. HMT states that much of CRDV builds on CRDIV, and that HMT’s implementation of CRDIV delegated significant responsibility to the Prudential Regulation Authority (PRA). Therefore, HMT only intends to legislate via secondary legislation to update the UK’s implementation of CRDIV (to reflect the amendments to CRDIV that have been made by CRDV). This includes providing the PRA with new or updated powers, to implement CRDV and to ensure that the PRA can update its rulebook as needed. This consultation only seeks comment on those areas requiring legislation, which include: (i) the intention to exempt investment institutions prudentially regulated by the FCA from the scope of CRDV, given the planned introduction of the Investment Firms Prudential Regime by summer 2021; (ii) various updates to the capital buffers that the PRA can require of institutions, to allow the Financial Policy Committee (FPC) and the PRA to maintain their current level of macro-prudential flexibility; (iii) extending the PRA’s powers for consolidated supervision to holding companies and creating a new approval regime for Financial Holding Companies and Mixed Financial Holding Companies as well as granting the PRA an express power to remove members of the management body of institutions and holding companies; and (iv) amendments to the list of entities exempted from CRDV. The deadline for comments is 19 August.
Sustainable Finance
ESAs respond to EC’s consultation on renewed sustainable finance strategy
On 16 July, the ESAs published their responses to the EC’s consultation on a renewed sustainable finance strategy. In their joint letter (dated 15 July), the ESAs welcome the strategy and state that they believe that enhancing the easy access to sustainability data would constitute an essential contribution to putting sustainability at the forefront in the financial sector, as well as to support investment. The ESAs state that they strongly believe in the potential of digital tools – specifically, the establishment of a publicly accessible, single EU data platform covering both financial and ESG information would grant all market participants equal and timely access to publicly reported information. Moreover, the ESAs state that to ensure a more forward-looking perspective, robust corporate governance arrangements that support a sound risk management and risk culture at all levels as well as an effective strategy setting and oversight by management bodies are key. Furthermore, the ESAs attach importance to the promotion of transparency and oversight on ESG-related aspects and to the role of, for example, ESG ratings and ESG benchmarks.
Other developments
PRA Q&As on branch return templates
On 16 July, the PRA published Q&As on its international bank branch return template and associated reporting instructions. The PRA consulted on a proposal to change the format and content of the branch return in CP 8/19 and published the final template and associated reporting instructions in PS 17/19. The PRA has received a number of additional questions from firms regarding the template and reporting instructions and has thus published answers to these questions (Q&As), to clarify the reporting instructions and rules.
EEA Joint Committee Decisions amending EEA Agreement published in OJ
On 16 July, three Decisions of the EEA Joint Committee that amend Annex IX (Financial Services) to the EEA Agreement were published in the OJ. The Decisions incorporate: (i) Implementing Regulations relating to the Solvency II Directive (Decision 17/2019); (ii) a Delegated Regulation and an Implementing Regulation relating to the BRRD (Decision 19/2019); and (iii) Delegated Regulations and Implementing Regulations relating to the CSDR (Decision 20/2019).
Office of the Complaints Commissioner annual report for 2019/20 and FCA response
On 16 July, the Office of the Complaints Commissioner published its annual report for 2019/20 which reviews how the financial services regulators consider complaints. The Commissioner states that the FCA has not yet established a complaints function with the resilience required to deal with the kinds of problems that an organisation of its size and responsibilities requires. The Complaints Commissioner states that serious consideration should be given to: (i) improving the Complaints Scheme to make it more readily understandable to complainants, and clarifying the policy on compensation under the Scheme; (ii) giving the Complaints Commissioner (or another independent person) a wider role in periodic quality assurance of the operation of the regulators’ complaints functions; and (iii) regular publication of the steps taken by the FCA to review the operation of its functions and to address concerns, including those arising from the Complaints Scheme. The Commissioner states that without these measures, there is a danger that the Complaints Scheme will continue not to meet its objectives. In its response to the report, the FCA responds to the themes identified in the report, these being: (a) delays and quality problems in the FCA’s Complaints Team; (b) accuracy of Registers; (c) supervision of firms; and (d) delays in regulatory processes, lack of candour about extent of failings, and the impact upon financial services firms.