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Key Regulatory Topics: Weekly Update 10-16 June 2022

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The BCBS this week issued 18 high-level principles for the effective management and supervision of climate-related financial risks.  Meanwhile, in the EU, the EC adopted a Delegated Regulation specifying the information to be provided by an undertaking in an application for authorisation in accordance with Article 8a CRD IV.  In the UK, the BoE published its first resolvability assessment, the FCA’s publications remind firms to ensure the fair treatment of customers and the PRA announced that it will remove the increased PRA Pillar 2A buffer adjustments with effect from end-December 2022.

Consumer/Retail

FCA on ensuring the fair treatment of customers in vulnerable circumstances

On 16 June, the FCA provided an update on the positive steps firms have taken to embed its guidance on the fair treatment of vulnerable customers (FG21/1). However, in recent engagement with retail banks, the FCA has also found inconsistent practice and it outlines its key expectations, including that firms: (i) produce, and regularly review, management information on the outcomes they are delivering for customers in vulnerable circumstances. The information should be able to identify which products and processes are working well for customers in vulnerable circumstances, and which might be causing detriment and need changing to improve outcomes; (ii) consider the needs of customers in vulnerable circumstances when developing products and services, and across the entire customer journey. This includes when making changes to existing products or developing new ones; (iii) consider whether they have clear lines of accountability for senior leaders and how they can demonstrate how vulnerability features in the considerations of senior and executive committees and in information provided to boards. Where firms fail to meet their obligations to treat customers fairly, the FCA will take further action.

Update

UK to reform Consumer Credit Act

On 16 June, HMT announced plans to reform the Consumer Credit Act (CCA). The announcement states that much of the CCA will be transferred from statute to sit under the FCA and that ambiguous technical terms will be simplified.  The idea is to cut costs for businesses and simplify rules for consumers.  The reforms will build on the recommendations of the FCA’s retained provisions report and the Woolard Review, which both made recommendations for a reformed regime. A consultation is expected to be published by the end of this year outlining the government’s proposals. The announcement stresses that reforming the Consumer Credit Act is complex and will require substantive work to deliver the reforms. As such, HMT expects the reform to take place over an extended timeframe to ensure it is fit for purpose.

Press release

FCA Dear CEO letter to lenders on cost of living crisis

On 16 June, the FCA wrote to the CEOs of lenders reminding them of the standards that they should meet as consumers across the country are affected by the rising cost of living. Failings identified by the FCA in most firms include that they have not consistently: (i) explored customers’ individual circumstances, so they can provide appropriate tailored support and ensure that arrangements to pay back debt are sustainable; and (ii) helped customers in financial difficulty access money guidance or free debt advice. The FCA continues to monitor outcomes and carefully scrutinise firms and will use its supervisory and enforcement powers to take further action as necessary. The FCA will publish the detailed findings from its work on borrowers in financial difficulty later this year and plans to consult on the future of the tailored support guidance, which may include changes to the Handbook.

Press release

Dear CEO letter

FCA consults on updated guidance on branch and ATM closures

On 14 June, the FCA published a consultation on updates to its guidance (FG20/3) for firms on branch and ATM closures or conversions. Some firms have fallen short of the FCA’s expectations in FG20/3 and therefore the FCA proposes updating and extending the guidance in order to ensure its expectations are clear and to provide further examples of good practice. This includes: (i) extending the guidance so that it applies where firms partially close a branch in the same way as it does to full closures; (ii) to ensure that as well as considering the impact of moving from dedicated branches to other non-branch venues, firms consider and manage the impacts on customers if the services provided at such venues are later changed or withdrawn; (iii) that the required commercial evaluation includes any usage trends and overall transaction volumes across a suitably representative time period and is shared with the FCA; and (iv) to extend the communications section of the guidance to ensure other stakeholders, like relevant consumer groups (such as charities representing local carers and the elderly) and local councils are also proactively contacted. The deadline for comments is 26 July. The FCA aims to finalise the guidance later in the year.

Consultation

Fees/ Levies

FOS discussion paper on future funding model

On 14 June, the FOS launched a discussion paper on potential changes to its future funding model. The FOS explains that the diversity of its cases and the proportion that are less scalable, has increased and that it therefore needs a funding model that is more resilient to cope with unpredictable volumes of complaints. For the 2023/24 budget, the FOS’ proposals include: (i) that the compulsory jurisdiction (CJ) levy should recover its fixed overheads such as IT, property and other support functions, rather than cover a particular proportion of its income. The initial analysis suggests that the CJ levy for 2023/24 could increase above the current £106 million. However, the FOS expects that this will reduce over time; (ii) to charge a fixed fee for all voluntary jurisdiction participants, which the FOS anticipates will be no more expensive than the current arrangement. This aims to reduce the administrative cost that stems from calculating the generally small amounts of levy for each business individually; and (iii) to move to a differentiated case fees model, rather than the current single flat case fee. The case fees could be differentiated according to the stage at which the complaint is closed, or the type of complaint. Beyond 2023/24, the FOS proposals include: (a) charging professional representatives a fee to bring complaints; (b) providing discounts for cases resolved in batches; and (c) introducing supplementary fees for uncooperative firms. The deadline for comments is 5 August. The FOS will take feedback into account in consulting on its budget for 2023/24.

Press release

Discussion paper

Financial Crime and Sanctions

Please see our Investigations Insight blog for new posts on: (1) the UK Law Commission’s long awaited ‘options paper’ on corporate criminal liability reform; (2) the toughening of the UK sanctions enforcement regime, due to the Economic Crime (Transparency and Enforcement) Act 2022 which came into force on 15 June; and (3) the common weaknesses in market abuse surveillance arrangements at small and medium sized firms that were identified by the FCA in issue 69 of its Market Watch publication.

Draft Money Laundering and Terrorist Financing (Amendment) (No.2) Regulations 2022

On 15 June, the Draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 were published together with an explanatory memorandum. Amongst other changes to the MLRs, the instrument: (i) extends customer due diligence requirements to trust and company service providers; (ii) extends the “travel rule” to expand the information sharing requirements for wire/bank transfers to transfers involving cryptoassets; (iii) defines proliferation financing and strengthens the mitigation of proliferation financing risk; (iv) extends the scope of the discrepancy reporting regime so that it is an ongoing requirement and limits the requirement to report only material discrepancies; (v) removes the requirement to implement a centralised automated mechanism to identify persons holding or controlling bank accounts or safe deposit boxes through a bank account portal; (vi) requires proposed acquirers of cryptoasset firms to notify the FCA ahead of such acquisitions and provide the FCA with powers to undertake a ‘fit and proper’ assessment of the acquirer. This includes powers to object to any such acquisition before it takes place; and (vii) removes account information service providers from scope of the MLRs as they are considered to present a low ML/TF risk.

Draft Regulations

Explanatory memorandum

EBA guidelines on role and responsibilities of AML/CFT compliance officer

On 14 June, the EBA published guidelines specifying the role and responsibilities of an AML/CFT compliance officer and of the management body of credit or financial institutions. These guidelines specify that credit or financial institutions should appoint one member of their management body who will ultimately be responsible for the implementation of the AML/CFT obligations, and clarify the tasks and functions of that person. They also describe the roles and responsibilities of the AML/CFT compliance officer, when this person is appointed by the management body pursuant to the proportionality criteria. When the credit or financial institution is part of a group, the guidelines prescribe that a group AML/CFT compliance officer should be appointed and clarify this person’s tasks and responsibilities. The guidelines aim to create a common understanding, by competent authorities and credit or financial institutions, of credit or financial institutions’ AML/CFT governance arrangements. They complement but do not replace relevant EBA guidelines on wider governance arrangements and suitability checks. The guidelines will be translated and published on the EBA website. The deadline for competent authorities to report whether they intend to comply with the guidelines is six months after the publication of the translations. The guidelines will apply from 1 December.

Press release

Guidelines

Law commission proposals for reform on corporate criminal liability

On 10 June, the Law Commission published 10 reform options for the Government for improving the law to ensure that corporations are effectively held to account for committing serious crimes. The project has had a particular focus on economic crime, such as fraud, tax evasion, bribery or money laundering. The options for reform include: (i) allow conduct to be attributed to a corporation if a member of its senior management engaged in, consented to, or connived in the offence. This could be drafted so that chief executive officers and chief financial officers are always considered part of an organisation’s senior management; (ii) introduce an offence of failure to prevent fraud by an employee or agent. This would apply when the company has not put appropriate measures in place to prevent their own employees or agents committing a fraud offence for the benefit of the company; (iii) introduce an offence of failure to prevent human rights abuses; (iv) introduce an offence of failure to prevent ill-treatment or neglect; (v) introduce an offence of failure to prevent computer misuse; (vi) make publicity orders available (requiring the corporate offender to publish details of its conviction) in all cases where a corporation is convicted of an offence; (vii) introduce a regime of administratively imposed monetary penalties; (viii) introduce civil actions in the High Court, based on Serious Crime Prevention Orders, with a power to impose monetary penalties; and (ix) introduce a reporting requirement requiring large corporations to report on anti-fraud procedures. It is now for the Government to review and consider the options paper.

Press release

Paper

Summary

Impact assessment

Fintech

Please see the Financial Crime and Sanctions section for the Draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which, amongst other amendments to the MLRs, extend the “travel rule” to expand the information sharing requirements for wire/bank transfers to transfers involving cryptoassets.

Markets and Market Infrastructure

Please see the Prudential Regulation section for the draft Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022, which amongst other amendments, make transitional provisions in respect of risk retention requirements for certain securitisations following the implementation of the IFPR.

ESMA statement on implementation of the clearing obligation for pension scheme arrangements

On 16 June, ESMA published a statement on the implementation of the clearing obligation (CO) for pension scheme arrangements (PSAs). ESMA explains that, in line with its recommendations, the EC has adopted a draft Delegated Act, supplementing EMIR, which exempts PSAs from the CO until 18 June 2023. ESMA notes that the approval process for the Delegated Act may take some time and the current temporary exemption runs out on 18 June. Therefore from 19 June and until the approval process of the Delegated Act is complete, ESMA expects competent authorities not to prioritise their supervisory actions in relation to the CO for PSAs and to apply their risk-based supervisory powers in their day-to-day supervision of applicable legislation in this area in a proportionate manner.

Statement

ESAs propose to adapt EMIR implementation timelines for intragroup contracts with third-country group entities

On 10 June, the ESAs published two draft RTS amending the Delegated Regulations on bilateral margin requirements and on the clearing obligation. The proposed amendments relate to the temporary regime for intragroup OTC derivative contracts where one counterparty is established in a third country and the other counterparty is established in the EU. The ESAs are of the view that a review of the EMIR framework for intragroup exemptions for contracts with third countries, and its interaction with CRR, would be desirable. Taking into account the possible negative consequences if the deferred dates of application were not extended beyond the current expiry date of 30 June as well as the scheduled upcoming reviews of EMIR, which offer the possibility to address these challenges, the ESAs are proposing to extend the temporary regime by three years. As the approval process for the draft RTS may take some time, from 1 July and until the end of the approval process, the ESAs expect competent authorities not to prioritise their supervisory actions with respect to the related requirements applicable to intragroup transactions and to generally apply their risk-based supervisory powers in their day-to-day supervision of applicable legislation in this area in a proportionate manner.

Statement

EC adopts RTS and ITS on registration, reporting requirements and data access of TRs under EMIR

On 10 June, the EC adopted: (i) an Implementing Regulation amending ITS in Implementing Regulation (EU) 1248/2012 as regards the format for applications for registration as trade repositories (TRs) and for applications for extension of registration as TRs; (ii) a Delegated Regulation with regard to RTS specifying the procedures for the reconciliation of data between TRs and the procedures to be applied by the TR to verify the compliance by the reporting counterparty or submitting entity with the reporting requirements and to verify the completeness and correctness of the data reported; (iii) a Delegated Regulation amending the RTS laid down in Delegated Regulation (EU) 150/2013 as regards the details of the applications for registration as a TR and for applications for extension of registration as a TR; (iv) an Implementing Regulation laying down ITS with regard to the standards, formats, frequency and methods and arrangements for reporting; (v) a Delegated Regulation laying down RTS specifying the minimum details of the data to be reported to TRs and the type of reports to be used; and (vi) a Delegated Regulation amending the RTS laid down in Delegated Regulation (EU) 151/2013 by further specifying the procedure for accessing details of derivatives as well as the technical and operational arrangements for their access. The Regulations will next be scrutinised by the EP and Council and shall enter into force on the twentieth day following that of their publication in the OJ.

Implementing Regulation (i)

Delegated Regulation (ii)

Delegated Regulation (iii)

Implementing Regulation (iv)

Delegated Regulation (v)

Delegated Regulation (vi)

Payment Services and Payment Systems 

Please see the Financial Crime and Sanctions section for the Draft Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which, amongst other amendments to the MLRs, remove account information service providers from scope.

EPC consults on SEPA Payment Account Access Scheme rulebook

On 13 June, the EPC began consulting on the draft rulebook of its new SEPA Payment Account Access (SPAA) Scheme. The SPAA scheme covers the set of rules, practices and standards that will allow the exchange of payment accounts related data and facilitates the initiation of payment transactions in the context of ‘value-added’ (‘premium’) services provided by asset holders (i.e. account-servicing payment service providers to asset brokers (e.g. third party providers)). The SPAA scheme covers messaging functionalities. It is not about a payment means or a payment instrument, but it offers a way to transport information in relation to payment accounts and transactions. The EPC is also consulting on a related document concerning a possible additional ‘premium’ functionality that would allow asset brokers to request a payment with transaction fees not borne by the payer. The deadline for comments on both documents is 12 September.

Press release

Draft Rulebook

Consultations webpage

Prudential Regulation

Please see the Other Developments section for the FCA’s quarterly consultation issue no. 36, which includes proposals in relation to IPRU-INV 5.8.2R and updates to the FCA’s IFPR reporting forms and accompanying guidance.

RTS on revised market risk requirements under the CRR

On 14 June, the EC adopted two Delegated Acts supplementing the CRR with regard to RTS specifying: (i) the criteria for assessing the modellability of risk factors under the internal model approach and specifying the frequency of that assessment under Article 325be(3); and (ii) technical details of back-testing and profit and loss attribution requirements under Articles 325bf and 325bg, specifically: (a) the technical elements to be included in the actual and hypothetical changes in the value of the portfolio of an institution for the purposes of the back-testing; (b) the criteria necessary to ensure that the theoretical changes in the value of a trading desk's portfolio are sufficiently close to the hypothetical changes in the value of a trading desk's portfolio for the purposes of the Profit and Loss attribution requirements; (c) the consequences for an institution where those changes are not sufficiently close; (d) the frequency at which the Profit and Loss attribution test is to be performed by an institution, the technical elements to be included in the theoretical and hypothetical changes in the value of a trading desk's portfolio for the purposes of the Profit and Loss attribution requirement; and (e) the manner in which institutions that use the internal model are to aggregate the total own funds requirement for market risk for all their trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk, taking into account the consequences of the Profit and Loss attribution requirement. The Regulations will be scrutinised by the EP and Council and shall enter into force on the twentieth day following their publication in the OJ.

Draft Delegated Act (i)

Draft Delegated Act (ii)

Draft Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022

On 14 June, a draft version of the Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022, together with an explanatory memorandum were published. The Regulations: (i) include further consequential amendments following the introduction of the IFPR and Basel 3 standards. In particular, this instrument repeals the Banking Act 2009 (Exclusion of Investment Firms of a Specified Description) Order 2014 as it is redundant following the removal of FCA-regulated investment firms from the UK resolution regime; (ii) make transitional provision in respect of risk retention requirements for certain securitisations following the implementation of the IFPR. These requirements relate to the retention of a material net economic interest in a securitisation by the originator, sponsor, or original lender to better align their interests with those of investors; (iii) make amendments to ensure that short-term liabilities owed to both PRA-regulated and FCA-regulated investment firms with permission to underwrite or deal on own account will continue to be exempt from bail-in; and (iv) address further deficiencies arising from the withdrawal of the UK from the EU. It is anticipated that the Regulations will come into force on 17 August.

Draft Regulations

Explanatory memorandum

PRA statement on removing the PRA Pillar 2A buffer adjustment

On 13 June, the PRA announced that it will remove the increased PRA Pillar 2A buffer adjustments with effect from end-December 2022. The temporary adjustments were introduced for firms that received a P2A reduction in response to the uncertainty caused by the Covid-19 pandemic, which in the PRA’s view has now receded. Supervisors will be in contact with firms either through their Supervisory Review and Evaluation Process where that is planned in 2022, or separately to communicate firms’ updated PRA buffers. Where the adjustment is immaterial, the change may be aligned with the next SREP to simplify the communications.

Statement

RTS on information to be provided by investment firms for authorisation as credit institutions

On 10 June, the EC adopted a Delegated Regulation supplementing CRD IV with regard to RTS specifying the information to be provided by an undertaking in the application for authorisation in accordance with Article 8a CRD IV. Under Article 8a, investment firms that meet the threshold conditions set out in Article 4(1) of the CRR, which are therefore considered to be systemically important, should apply for authorisation as credit institutions. The draft RTS consist of a subset of the information to be provided to competent authorities for authorisation of a credit institution as they take into account the limited activities provided by the applicants. These draft RTS provide the necessary flexibility to the competent authorities in requiring such information and, in well-defined cases, allow competent authorities to waive some information considering, in particular, any prior licences the applicant might possess. The Delegated Regulation will be scrutinised by the EP and Council and shall enter into force on the twentieth day following that of its publication in the OJ.

Draft Delegated Regulation

Recovery and Resolution

Please see the Prudential Regulation section for the draft Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022, which, amongst other amendments, repeal the Banking Act 2009 (Exclusion of Investment Firms of a Specified Description) Order 2014 and make amendments to ensure that short-term liabilities owed to both PRA-regulated and FCA-regulated investment firms with permission to underwrite or deal on own account will continue to be exempt from bail-in. 

Eurogroup invite EC to consider legislation to reform the CMDI framework

On 16 June, the Eurogroup (an informal body where the ministers of the euro area member states discuss matters relating to their shared responsibilities related to the euro) issued a statement on the future of the Banking Union.  The Eurogroup consider that, as an immediate step, work on the Banking Union should focus on strengthening the common framework for bank crisis management and national deposit guarantee schemes (CDMI framework), underpinned by the following broad elements: (i) a clarified and harmonised public interest assessment; (ii) broadened application of resolution tools in crisis management at European and national level, including for smaller and medium-sized banks, where the funding needed for effective use of resolution tools is available, notably through MREL and industry-funded safety nets; (iii) further harmonisation of the use of national deposit guarantee funds in crisis management, while ensuring appropriate flexibility for facilitating market exit of failing banks in a manner that preserves the value of the bank’s assets. A harmonised least-cost test, administered by national authorities, to govern the use of DGS funds outside payout to covered depositors, to ensure consistent, credible and predictable outcomes; and (iv) harmonisation of targeted features of national bank insolvency laws to ensure consistency with the principles of the European CMDI framework. The Eurogroup invites the European Commission to consider bringing forward legislative proposals for a reformed CMDI framework. They invite the co-legislators to complete any legislative work during this institutional cycle until early-2024.

Eurogroup statement

SRB operational guidance on implementation of bail-in tool

On 15 June, the SRB published updated versions of its operational guidance to banks on the implementation of the bail-in tool. These include updated guidance on bail-in playbooks, bail-in data set instructions and an explanatory note on the latter. The updates add more detail to the expectations related to intra-group loss transfer and recapitalisation mechanisms between the resolution entity and its subsidiaries, as well as the required management information systems (MIS) capabilities. A dedicated section on the testing of bail-in playbooks and MIS capabilities by banks and includes targeted amendments based on the SRB’s experience in this area since August 2020 has also been added.  The changes made are summarised in the annexes to the documents.

Press release

Guidance

Explanatory note

Instructions

First BoE resolvability assessment of major UK banks

On 10 June, the BoE set out the findings from the first assessment of the resolvability of the eight major UK banks, as part of the Resolvability Assessment Framework. The findings show that today the major UK banks could enter resolution safely: remaining open and continuing to provide vital banking services to the economy, with shareholders and investors, not taxpayers, first in line to bear the costs. There are further improvements to make however, which the BoE sets out both thematically and specifically in relation to each of the banks. The BoE expects banks to: (i) continue to embed resolvability in their governance processes to ensure that their capabilities for a resolution are kept live and their boards and senior management are confident that their banks can, at a minimum, continue to meet the resolvability outcomes; (ii) consider further testing of their resolvability capabilities conducted under time and resource constraints. Banks should also consider the roles of their risk and internal audit functions and business subject matter experts in conducting testing. The BoE will repeat its assessment in 2024, and every two years thereafter, to assess the progress made in addressing these findings and enhancing their preparations for resolution.

Findings

Regulatory Reform Post Brexit

Please see the Prudential Regulation section for the draft Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022, which amongst other amendments, address further deficiencies in onshored legislation arising from the withdrawal of the UK from the EU.

Treasury Committee report on future of financial services regulation

On 16 June, the HoC Treasury Committee published a report on the future of financial services regulation. The report’s recommendations and conclusions include that: (i) Brexit should not in itself be the cause of instant or dramatic changes to financial services regulation in the UK. While there are opportunities to tailor inherited EU regulations, HMT must not pressure the regulators to weaken or water down regulatory standards. The Treasury and regulators should publish a forward-looking schedule of approximately when they expect each EU financial regulatory file to move across to the regulatory rulebooks, including timelines for consultation, and when they expect the overall project to conclude; (ii) there should be a secondary objective for the FCA and the PRA to promote long-term economic growth and HMT should continue to reject any calls for a growth and/or competitiveness objective to become a primary objective. This secondary objective should reflect the ways in which financial services facilitate economic growth by providing capital, credit and insurance to firms outside of the financial services sector; (iii) while regulators should not be carrying out social policy, the FCA should have regard for financial inclusion in its rule-making; (iv) the PRA should consider what more can be done to level the playing field between smaller banks and insurers, and larger firms which model their own capital requirements; and (v) the FCA should investigate whether there are opportunities for larger firms to be more experimental with innovative products, for example by setting aside additional capital to compensate consumers if new products turn out not to benefit consumers as anticipated. HMT is expected to respond within two months.

Press release

Report

Summary

European Scrutiny Committee Post-Brexit regulatory divergence inquiry

On 14 June, the European Scrutiny Committee launched an inquiry on the benefits and challenges to business and the UK economy of diverging from copied EU regulations when the UK left the EU, and where the Government should rewrite or repeal these laws. The enquiry also looks to examine the complexities of making changes to regulations in areas that had been controlled at EU-level in the context of overlapping commitments enshrined in the Withdrawal Agreement, new trade deals and the devolution settlements. Financial services and data are two areas that will receive special attention as part of the inquiry. The Committee have set out nine divergence-related questions on which it requests responses before 22 July.

Press release

Inquiry

Sustainable Finance

BCBS principles for the effective management and supervision of climate-related financial risks

On 15 June, the BCBS issued 18 high-level principles for the effective management and supervision of climate-related financial risks. The principles cover corporate governance, internal controls, risk assessment, management and reporting. They seek to achieve a balance in improving practices and providing a common baseline for internationally active banks and supervisors, while retaining sufficient flexibility given the degree of heterogeneity and evolving practices in this area. The BCBS seeks to promote a principles-based approach to improving risk management and supervisory practices related to climate-related financial risks. The BCBS expects implementation of the principles as soon as possible and will monitor progress across member jurisdictions to promote a common understanding of supervisory expectations and support the development and harmonisation of strong practices across jurisdictions.

Press release

Principles

GFANZ consultation and guidance on net-zero transition plans

On 15 June, the Glasgow Financial Alliance for Net Zero (GFANZ), launched a consultation on its draft net-zero transition plan (NZTP) framework for the financial sector. This common framework will enable a financial institution to demonstrate, and stakeholders to judge, the credibility of its plan to accelerate and scale clean energy and transition-related finance to levels consistent with limiting global warming to 1.5 degrees. The deadline for comments is 27 July. In addition, GFANZ has published a set of connected tools, frameworks, and resources to enable the extensive collaboration between financial institutions, real-economy companies, the public sector, and civil society to support a global whole-economy transition to net-zero, including: (i) guidance on use of sectoral pathways for financial institutions; (ii) concept note on portfolio alignment measurement; (iii) introductory note on expectations for real-economy transition plans; and (iv) report on the managed phaseout of high-emitting assets.

Press release

Consultation

Publications

MEPs object to EC’s proposal to include gas and nuclear activities in EU taxonomy

On 14 June, the EP’s ECON and the Environment, Public Health and Food Safety Committee adopted an objection to the EC’s proposed Delegated Regulation to include specific nuclear and gas energy activities in the list of environmentally sustainable economic activities set out in the Taxonomy Regulation. The MEPs considered that the proposed technical screening criteria do not respect the criteria for environmentally sustainable economic activities as set out in Article 3. The resolution also requests that any new or amended delegated acts should be subject to a public consultation and impact assessments, as they could have significant economic, environmental and social impacts. The resolution is scheduled for a vote during the EP’s plenary session of 4-7 July. The EP and the Council have until 11 July to decide whether to veto the EC’s proposal. If an absolute majority of MEPs objects, the EC will have to withdraw or amend it.

Press release

Draft motion

Other Developments

Last week we covered HMT’s plans to regulate service providers deemed critical to the UK finance sector.  Read our summary of what this might mean for service providers here.

UK-Japan Financial Regulatory Forum 2022

On 10 June, HMT published a joint statement from the UK and Japan on the inaugural Financial Regulatory Forum, which was held on 9 June. HMT and the Financial Services Agency of Japan (FSA) signed an exchange of letters which formally established the Forum and set out how the parties would use it to progress on their shared priorities for financial services. Amongst other actions, both parties: (i) reaffirmed the importance of deference and noted that they will continue to cooperate to seek out mutually beneficial opportunities to defer to each other’s regulatory and supervisory regimes; (ii) agreed on the importance of openness, competition and high standards for preserving global markets, avoiding market fragmentation and supporting greater opportunities for cross-border trade in financial services; (iii) exchanged views on global trends in asset management, including the global norm of cross-border portfolio management, and acknowledged the importance of continuing dialogue on these topics; (iv) agreed to establish an innovation working group, which would provide a space for sharing expertise on payments, cryptoassets and financial innovation and would be tasked with exploring how the UK and Japan could share their experience and expertise; (v) agreed to establish a dedicated sustainable finance working group; and (vi) reiterated the importance of robust AML practices and discussed the work they have been doing to address the evolving challenges in this space.

Joint statement

FCA Quarterly Consultation No. 36

On 10 June, the FCA published quarterly consultation paper, issue No. 36. The FCA is consulting on: (i) a minor amendment to DEPP to reflect changes to the FCA’s decision-making processes implemented on 26 November 2021; (ii) updating annuitant mortality tables in COBS to provide better annuity income information to consumers; (iii) changes to the table in IPRU-INV 5.8.2R to clarify the items to be deducted as illiquid assets; and (iv) updates to the FCA’s IFPR reporting forms and accompanying guidance. The deadline for comments for these proposals is 18 July. The FCA is also consulting on amendments to the Compensation rules relating to the FSCS in relation to funeral plans and to the Funeral Plan: Conduct of Business sourcebook. The deadline for comments for this section is 27 June.

Quarterly Consultation Paper