Key Regulatory Topics: Weekly update 12 – 18 June 2020
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Our weekly update on key regulatory topics affecting the financial services sector.
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Capital Markets
EC consult on Draft Delegated Regulation supplementing the Prospectus Regulation as regards the minimum information content of the document to be published for a prospectus exemption
On 16 June, the EC published a consultation on its Draft Delegated Regulation supplementing the Prospectus Regulation. Certain companies can be exempted from the obligation to publish a full prospectus for investors when making public offerings of securities as part of a takeover, merger or division. The objective of the Delegated Regulation is to lay down the minimum information content of the documents to be published to benefit from this exemption. The deadline for comments is 14 July.
Consumer/Retail
Please see our Covid-19 section for an update on the FCA’s speech “a financial system to support the recovery”.
EBA extends deadline for the application of its Guidelines on payment moratoria to 30 September
On 18 May, acknowledging the crucial role played by banks in providing financing to European businesses and citizens during the ongoing Covid-19 pandemic, the EBA extended the application date of its Guidelines on legislative and non-legislative moratoria to 30 September. With EU economies not yet fully opened, this extension shows the importance of a continued support to the measures taken by banks to extend loans in response to the extraordinary nature of the current situation. The EBA is highly aware of the trade-off faced in making the extension, as persistent liquidity shortages under the current circumstances may develop into solvency issues that need to be properly assessed by banks on a case-by-case basis. In addition, the EBA highlights that the implementation timeline envisaged in the EBA’s IRB roadmap to repair internal models used to calculate own funds requirements for credit risk under the Internal Ratings Based (IRB) approach remains overall unchanged. The EBA, nonetheless, also recognises that there may be institution-specific circumstances requiring more flexibility. Consequently, the EBA notes that supervisors may want to use their supervisory discretion in line with Article 146 of the Capital Requirements Regulation (CRR).
FCA encourages firms to improve equity release advice – key findings on later life lending
On 17 June, the FCA published its key findings on its exploratory work on later life lending, where it considered the borrowing opportunities available to consumers aged 55 and over, focusing on lifetime mortgages. Its review found that firms must do more to ensure that they are always giving appropriate advice to equity release consumers. The FCA saw cases where lifetime mortgages were working well, unlocking equity for consumers who would not have been able to afford traditional mortgages or other sources of borrowing. Also, its review found equity release to be working well for many consumers. However, the FCA also saw cases where it was not clear that the advice was in the best interests of the consumer. The FCA found 3 significant areas of concern about the suitability of advice provided, which it considers increases the risk of harm to consumers in this market: (i) insufficient personalisation of advice; (ii) insufficient challenging of customer assumptions; and (iii) lack of evidence to support the suitability of advice. In light of Covid-19, which continues to have a significant financial impact on many consumers, it is more important than ever that advice on equity release is appropriate taking into account consumers’ individual circumstances.
FCA updates guidance for firms on mortgages – Covid-19
On 16 June, the FCA updated its guidance for firms on mortgages in respect of Covid-19. Amongst other things, the FCA updated the section on customers who have not yet had a payment deferral, providing clarity on firms providing personalised information to customers. The FCA states that firms who were unable to provide personalised information under the version of the guidance that came into force on 4 June, but provided information and assistance in a manner which is consistent with the update, will not be treated as having acted inconsistently with the guidance. The updated guidance states, amongst other things, that: (i) a firm should give customers adequate information to understand the implications of any support offered, to enable them to make an informed decision – this should, where possible, include personalised information on the impact on their monthly payments and/or the term of their mortgage and this may be a reasonable estimate; (ii) for a partial payment deferral this may be given by a combination of personalised information on the impact of a full payment deferral with an explanation that the impact of a partial payment deferral would be proportionately less; (iii) where a firm is not able to provide personalised information it should provide customers with the clearest information and assistance possible to help them understand the impact of their decision on their monthly payment and mortgage term and enable them to make an informed decision; (iv) in considering how best to provide this information and assistance, a firm may wish to consider a combination of options which have been detailed in the guidance; and (v) where a firm is able to provide personalised information through some but not all communication channels, it should make this clear to customers so that they can choose to use channels where personalised information is available.
Covid-19
Please see the other sections for product specific updates relating to Covid-19.
FCA speech – a financial system to support the recovery
On 16 June, the FCA published a speech by Charles Randell (Chair of the FCA and PSR) to a virtual roundtable of bank chairs, entitled “a financial system to support the recovery”. Charles Randell states that over 800,000 businesses have taken on debt under government backed schemes – thus, there is a need to apply a shared understanding of how to treat borrowers in difficulty. He emphasises that there needs to be an appropriate dispute resolution system, and the FCA is working with the Financial Ombudsman Service (FOS) and the Business Banking Resolution Service to ensure that there is capacity to deal with the volumes that it may see. In respect of concerns of risky investments for retail customers, a framework to stop social media platforms and search engines from promoting unsuitable investments, including scams, is needed. Furthermore, advertising harmful products online is one of the huge challenges that the digitisation of financial services brings. The challenging environment for banks’ net interest income over the coming years, if a low policy rate continues to prevail, can only increase the risks of financial exclusion – rather than finding a sustainable model for charging for those services as an industry, individual banks may continue to withdraw services they regard as unprofitable but which are lifelines for some of their customers. The speech also addresses the concern regarding the number of people with very little financial resilience, as a result of high debt, low savings or both – existing public policy tools may not be adequate to deal with a large number of people who cannot pay their bills even after receiving appropriate advice and forbearance. Additionally, it is emphasised that: (i) there is a need for a robust framework for dealing with small business loans which turn out to be unaffordable; (ii) UK financial markets and businesses are well placed to help the country and the world recapitalise; and (iii) the FCA has worked with pace and pragmatism in the crisis and will make these ways of working its new normal as it transforms for the future. Charles Randell states that the following changes should be implemented: (a) the FCA should focus more on consumer outcomes and it should require firms to do the same; (b) being as clear as possible about desired outcomes – the pandemic has shown that the FCA is at its best when it has a clear task and a clear deadline; (c) ensuring rules and supervisory approaches do more to correct the huge information asymmetry that exists between many financial firms and their customers; and (d) redesigning the system to ensure that the polluting firms in the financial sector pay, rather than those who have behaved well.
Financial Crime
Please see our Investigations Insight Blog for an update on enforcement risks associated with valuation of illiquid securities and investments. In April, our blog noted that increased government enforcement activity around issues of perceived or actual mismarking or over valuation of illiquid securities should be expected in light of recent market turmoil. We have now started to see examples of this type of enforcement.
Please see our Other Developments section for an update on the EBA changing its Q&A tool.
EBA calls for input to understand impact of de-risking on non-financial institutions and customers
On 15 June, the EBA published a call for input to understand the scale and drivers of ‘de-risking‘ at EU level and its impact on customers. ‘De-risking’ refers to financial institutions deciding not to service a particular customer or category of customers, in order to manage customers’ profiles associated with higher money laundering and terrorist financing (ML/TF) risks. This call, which forms part of the EBA’s work to lead, coordinate and monitor the EU financial sector’s AML/CFT efforts, aims to understand why financial institutions choose to de-risk instead of managing the risks. The EBA seeks to hear from all groups affected by de-risking, thus the call for input is of interest to stakeholders across the financial sector and their users. Responses to the call for input will inform the EBA 2021 Opinion on ML/TF risks and potentially other policy outputs. The call for input runs until 11 September.
FCA updates stance on how to report suspected market abuse
On 12 June, the FCA updated its webpage on how to report suspected market abuse as a firm or trading venue. The FCA has included a new section on how to submit a market observation, as firms and trading venues may want to notify the FCA of activity that they have observed in the market which is not required as a suspicious transaction or order report (STOR) – to do so, they must complete a market observation form. The FCA has also published a new webpage on how to report suspected market abuse as an individual, providing relevant contacts and information needed to assess individuals’ concerns.
FCA Webpage – Firms and Trading Venues
Markets and Markets Infrastructure
FCA consult on making mini-bond marketing ban permanent
On 18 June, the FCA published a consultation on its proposals to make its temporary rules on marketing certain high-risk investments permanent as well as to extend them to certain similar securities. The FCA’s temporary product intervention (TPI) for speculative illiquid securities (SISs) came into effect on 1 January and lasts for 12 months. The FCA now propose to make the TPI permanent, with a small number of changes. These are generally based on feedback it has received since publishing the TPI including bringing listed bonds with similar features to speculative illiquid securities and which are not regularly traded within the scope of the ban. In order to strengthen its broader financial promotions regime for high-risk investments (HRIs), the FCA believe that any further changes should be based on the fullest possible evidence of harm and, linked to its Consumer Investments business priority which it launched in its 2020/21 Business Plan. The FCA is keen to engage more widely on this issue and expect to publish a discussion paper inviting further views. The FCA state that making the TPI permanent is the first part of its thinking relating to HRIs. The consultation closes on 1 October.
ECB working group on euro risk‐free rates recommendations for voluntary compensation for legacy swaption contracts affected by the discounting transition to the €STR
On 16 June, the ECB announced recommendations from the working group on euro risk‐free rates for voluntary compensation for legacy swaption contracts affected by the discounting transition to the €STR. Market participants are advised to contact swaption counterparties to discuss and decide on voluntary compensation. There is no single preferred option for implementing voluntary compensation, but several potential modalities have been identified. The feasible options for the timing and methodology of voluntary compensation are a: (i) single-date cash compensation; (ii) single‐date notional/strike adjustment; or (iii) cash compensation at the expiry date of the swaps. The working group acknowledges that some market participants may not see these three options as the best, and takes note that other bilateral arrangements may also be possible.
Payments services and payment systems
Please see our Covid-19 section for an update on the FCA’s speech “a financial system to support the recovery”.
Payment Systems Regulator (PSR) updates the powers and procedure guidance (PPG)
On 16 June, the PSR published revisions to its PPG, which was originally published in 2015. The revisions reflect developments in the PSR’s processes and practices, as well as its increased remit. The revised guidance also aims to be more informative, for example, to help regulated parties understand how the regulator chooses which of its powers to exercise and when. In addition, the revised guidance provides more detail about how the PSR decides whether to make a formal direction, as well as about how and when it conducts an enforcement investigation. The PSR has also updated its guidance on its approach to the Interchange Fee Regulation (IFR), revising the relevant chapter to bring it in line with the updated PPG. At the same time, the PSR published the stakeholder submissions that it received on its consultation for these revisions.
FCA’s and PSR’s joint approach to access to cash
On 16 June, the FCA and PSR published their joint approach to access to cash. In terms of addressing access to cash issues during Covid-19, the FCA and PSR detail the actions that they have taken to address the impact on consumers of lost access: (i) delivered a better understanding of cash access; (ii) used this information to support coordinated action; (iii) overseen effective communication with people and businesses; (iv) focused on the needs of the vulnerable; and (v) worked closely with consumer organisations. They will both continue to work closely with the industry, and use data to build on their work to date to maintain access to cash. Furthermore, the FCA and PSR remain committed to helping ensure that consumers and businesses who need to access and deposit cash can continue to do so. In the longer term, legislation announced in the 2020 Budget should enhance their ability to protect access to cash for those who need it in a way that works for them. Before this is implemented, the FCA and PSR will work with the industry to explore how it can provide an appropriate and sustainable model of accessing cash - for example, through wider use of shared services and initiatives involving local communities. Firms may need to take decisions on their provision of cash machines and bank branches, including through banks’ membership of the LINK scheme – the FCA’s focus will be on engaging with them on the steps they are taking to consider the impact of these decisions on consumers who need to withdraw cash, and businesses who need to deposit cash. The PSR will continue to work with LINK, the operator of the UK’s cash machine network, to ensure that it does all that it can to protect widespread access to cash through the geographic ‘footprint’ of free-to-use cash machines.
BoE speech on payments after the Covid-19 crisis – emerging issues and challenges
On 15 June, the BoE published a speech by Executive Director (Financial Market Infrastructure Directorate) Christina Segal-Knowles on payments after the Covid-19 crisis, specifically emerging issues and challenges. The speech details, amongst other things, that: (i) even before the current crisis, people were changing the way that they pay (in particular, movement towards digital payments); and (ii) some types of international payments, importantly including remittances, remain expensive and cumbersome. Ms Segal-Knowles emphasises that the Covid-19 crisis has accentuated these trends and brought new challenges. Ms Segal-Knowles states that innovation could potentially address the longstanding challenges in international payments by making them less costly and cumbersome – though, clear and transparent regulatory expectations are critical to ensure innovation is not held back. This poses several challenges for regulators and Ms Segal-Knowles focuses on the two that are most important for financial stability: (a) needing payments to be secure and reliable (with discussion of stablecoins replacing current systemic payments chains as a way to pay); and (b) where stablecoins are used in place of money, they need to offer the same protections as money. Ms Segal-Knowles states that with the right regulation, stablecoins may be safe for use in systemic payments chains. Ms Segal-Knowles concludes that changes to payments and the challenges seen over the past several months pose two important and interrelated questions for central banks and regulators: (1) how to ensure that there are legislative and supervisory frameworks in place to support the development of safe private sector innovation that could respond to these challenges – there is a need to ensure that new ways to pay and new forms of electronic money offer equivalent protections to existing ones; and (2) determining the appropriate role for central banks in provision of money used in transactions.
Prudential Regulation
EBA final technical standards under the CRD, to: (i) enhance quality and consistency of information for passport notifications; and (ii) identify staff with a material impact on the institution’s risk profile
On 18 June, the EBA published final revised technical standards under Articles 35, 36 and 39 of the CRD to enhance quality and consistency of information for passport notifications. The amending technical standards increase the quality and consistency of information to be provided by a credit institution notifying its home competent authorities when it intends to open a branch or provide services in another Member State, as well as of the communication between home and host authorities. In particular, the most material revisions that have been made by the EBA are: (i) requesting the credit institution to indicate as accurately as possible, the intended start date of each activity for which the notification is submitted, rather than just of the core business activities – such change applies to both the branch and the services passport notification; (ii) with regard to the establishment of branches, additional granularity has been included in relation to the financial plan – assumptions underpinning forecasts are now expressly requested to be included in the notification; and (iii) in respect of branch planned termination, a new requirement has been added to the communication to be made by the credit institution – it imposes the submission of a statement by the credit institution indicating the measures that have been or that are being undertaken to ensure that it will no longer hold deposits or repayable funds from the public through the branch after the termination. The EBA has also published revised Regulatory Technical Standards (RTS) under the CRD to identify all categories of staff whose professional activities have a material impact on the institution’s risk profile (“risk takers”). Following feedback received during the consultation phase, the EBA has made the following changes to its draft RTS: (a) qualitative criteria have been revisited to enhance the application of proportionality; (b) the definition of managerial responsibility has been revised taking into account that institutions of different sizes have different layers of hierarchical levels; (c) clarification on how the criteria should be applied on a consolidated, sub-consolidated and individual basis; and (d) some flexibility in calculating the amount of remuneration for the application of the quantitative requirements has been introduced. In terms of quantitative criteria, the 0.3% of staff with the highest remuneration criterion has been amended to be applied only by institutions that have more than 1 000 staff in order to reduce the burden for small institutions. The final draft RTS retains the qualitative criterion that identify the staff with high levels of remuneration above EUR 750 000.
EBA Final Guidelines – Information for Passport Notifications
EBA Final Guidelines – Identifying Staff Impact on Institution’s Risk Profile
EBA peer review of the stress tests and the resilience of deposit guarantee schemes (DGS)
On 17 June, the EBA published a report on its first peer review of DGS stress tests and the resilience of DGS. The purpose of the peer review was to assess the resilience of DGS based on the results of the DGS stress tests, and to identify good practices and areas for improvement. In its report, the EBA assessed the results of 135 DGS stress tests performed by 32 DGS from 27 EU Member States. The priority tests covered: (i) operational and funding capabilities; (ii) credit institutions’ single customer view (SCV) files containing depositor information to prepare for a DGS payout; and (iii) cross-border cooperation in case of cross-border branches. The EBA concluded that such tests have become an established tool to prepare for DGS interventions. In addition, the EBA is of the view that using the grading system outlined in the Guidelines on stress tests of DGS, the overall resilience of DGS across the EU is ‘fair’, which is the second best result, after ‘optimal’ – the identified shortcomings are isolated or can easily be addressed by the DGS at the point of failure, and are unlikely to affect the ability of DGS to perform their tasks in line with the Deposit Guarantee Schemes Directive (DGSD). The peer review includes provisions stemming from the outbreak of the Covid-19 pandemic – specifically, the EBA outlines lessons learnt from a real-life payout case in one EU Member State.
European Economic and Social Committee (EESC) opinion on the proposal for a Regulation amending CRR and CRR II – Covid-19
On 16 June, the Council of the EU’s EESC published its opinion on the proposal for a Regulation amending CRR and CRR II as regards adjustments in response to the Covid-19 pandemic. The EESC agrees with the decision to postpone the implementation of the consolidated Basel III framework; however, the EESC stresses that this postponement must not simply confirm the existing rules, and so the proposal to review the directives and regulations is appropriate. The EESC also suggests that prior to implementation, the changes which will inevitably be imposed on economic and financial institutions at this difficult time must be carefully evaluated, a crucial step for any adjustment in the European regulatory system. Further impact assessments might be necessary. The EESC agrees with the EC proposal on adjusting the transitional arrangements that allow credit institutions to alleviate the impact from expected credit-loss (ECL) provisioning and corrections under IFRS 9 on their own funds; though, it considers that the proposal is merely a first step towards meeting the objective of mitigating the impact of the recession but that it is neither effective nor adequate for maintaining the level playing field between European intermediaries. Thus, the EESC considers that the following measures should be added to the proposal: (i) extending the "new" dynamic component as gauged on 1 January 2020 to loans which became non-performing from 1 January 2020 (or any successive date deemed appropriate and in line with the date on which the pandemic began); (ii) not substituting the scale factor with a single weighting of 100%, used for retail client financing; and (iii) extending the phase-in period to the static component as measured on 1 January 2018, with the introduction of the new IFRS 9 accounting principle. With regard to the regulatory framework on non-performing loans, the EESC state that the Covid-19 pandemic will inevitably influence the NPL market in a number of ways and calls for a temporary amendment to Regulation 2019/630 as regards minimum coverage of losses on non-performing exposures. The EESC considers that the "prudential filter", provided for in the Basel II framework, needs to be introduced on a temporary basis to remove unrealised assets and losses from balance sheets. The EESC also stresses that it is imperative that the level I framework should be amended to remove the current links between volatility and banks' capital absorption (which multiplies VaR).
EBA letter on the submission of technical standards under the risk reduction measures package
On 15 June, the EBA published a letter from José Manuel Campa (EBA Chair) to John Berrigan (Director General for Financial Stability, Financial Services and Capital Markets Union at the EC). The letter states that the EBA plans to submit technical standards due to be delivered by December 2019 and June 2020 within the new deadlines set out in the tables within the letter (in respect of CRR II, CRD V, BRRD II and EMIR), most of which have been set out accordingly in the EBA roadmap on the risk reduction measures package. The EBA confirms that there is no deviation (except for three listed within the tables) beyond that set out in the EBA’s roadmap, despite the exceptional circumstances of Covid-19.
Sustainable Finance
BoE report on climate-related financial disclosure
On 18 June, the BoE published its report on climate-related financial disclosure for this year, setting out its approach to managing the risks from climate change across its entire operations, and the steps taken to improve the BoE’s understanding of these risks. The Bank’s climate strategy is structured around three themes: (i) risk –ensuring firms and investors can measure and manage the financial risks from climate change; (ii) reporting – improving the quantity and quality of climate-related disclosures by implementing a common framework built on the Task Force on Climate-related Financial Disclosures (TCFD); and (iii) return – helping better equip firms and investors to identify the frictions and the opportunities in the transition to a carbon-neutral economy. The BoE state that there has been substantial progress towards embedding climate change in all aspects of the BoE’s policy and operational work. The BoE will continue to engage domestically and internationally to develop its TCFD disclosure further. Also, its approach will evolve further, reflecting the dynamic nature of the risks. As an example, Governor Andrew Bailey set out in March that over the coming years, the BoE will consider how to incorporate climate factors into decisions on the mix of financial assets that it holds, whilst still ensuring the policy aims of the relevant portfolios.
EP adopts Taxonomy Regulation
On 18 June, the EP announced that it has adopted the Taxonomy Regulation, which includes new rules to determine whether an economic activity is environmentally sustainable. The Regulation lays down environmental objectives and allows economic activity to be labelled as environmentally sustainable if it contributes to at least one of the objectives without significantly harming any of the others. The objectives are: (i) climate change mitigation and adaptation; (ii) sustainable use and protection of water and marine resources; (iii) transition to a circular economy, including waste prevention and increasing the uptake of secondary raw materials; (iv) pollution prevention and control; and (v) protection and restoration of biodiversity and ecosystems. The EP state that the Regulation should help to achieve the goal of a climate-neutral EU by 2050. The Regulation also includes a clear mandate for the EC to start defining environmentally harmful activities.
ECB Banking Supervision’s approach to climate risks
On 17 June, the ECB published a speech by Andrea Enria (Chair of the ECB’s Supervisory Board) at the European Central Bank Climate and Environmental Risks Webinar, addressing the ECB Banking Supervision’s approach to climate risks. The speech highlights that although methodologies for estimating the magnitude of climate-related risks for banks are still being developed, available estimates suggest that the impact of climate-related risks is likely to be significant. Furthermore, Andrea Enria emphasises that the nature of climate-related risks requires forward-looking supervision – climate change provides an opportunity to broaden horizons and combine short-term, business-as-usual risk management tools with mechanisms that allow to better understand and manage risks driven by more structural, long-term changes in economies. Also, the speech outlines that the adequate pricing of climate-related risks will contribute to a smoother transition to a low-carbon economy. Andrea Enria draws attention to the ECB’s draft guide (published on 20 May) which describes how the ECB Banking Supervision expects banks to consider, manage and disclose climate-related and environmental risks in the light of current regulatory requirements. The Banking Supervision intends to provide transparency about the ECB’s understanding of safe and prudent management of these risks within the current prudential framework, increase the industry’s awareness of these risks as well as improve risk management practices. It is also closely coordinating its approach with other supervisors and with regulators, specifically developing the guide with national competent authorities (NCAs). Once the guide is finalised, the ECB expects banks to assess whether their current practices are safe and prudent in the light of its supervisory expectations and to start adapting their practices where necessary.
EC requests feedback on its EU Green Bond Standard (EU GBS) initiative
On 12 June, the EC published a consultation alongside an impact assessment, requesting feedback on its initiative for establishing an EU GBS. In its consultation, the EC states that the Covid-19 pandemic shows the importance of integrating social issues and objectives into the broader functioning of the economy. The EC also states that the EU GBS aims to address barriers identified in the current market by: (i) reducing uncertainty about what constitutes green investment by linking it to the EU taxonomy; (ii) standardising costly and complex verification and reporting processes; and (iii) establishing an official standard to which potential incentives could be linked. In its consultation, the EC asks questions in respect of: (a) the potential need for an official / formalised EU GBS; (b) the proposed content of the standard; (c) the use of proceeds and the link to the EU Taxonomy; (d) grandfathering and new investments; (e) incentives, in particular whether specific financial or alternative incentives are necessary; (f) issues for public sector issuers; and (g) improving the cost of financing for green projects or assets. The impact assessment covers, amongst other things: (1) problems the initiative aims to tackle; (2) basis for EU intervention (legal basis and subsidiarity check); (3) objectives and policy options; and (4) preliminary assessment of expected impacts – such as likely economic impacts. If a legislative approach is taken to enact the initiative, an implementation plan will be established. The deadline for feedback on the impact assessment is 10 July. The deadline for comments on the consultation is 2 October.
Other developments
BoE annual report and accounts
On 18 June, the BoE published its annual report and accounts for this year. The BoE’s Governor, Andrew Bailey, states, amongst other things, the initiatives which the BoE are taking forward into the 2020s, including: (i) upgrading the Bank’s Real-Time Gross Settlement (RTGS) system; (ii) continuing to make its largest banks more easily resolvable; (iii) carrying through its commitment to reform benchmark rates; (iv) continuing to develop a framework to monitor operational risks both for individual firms and the system; (v) continuing its data strategy of making the best use of its data, as well as reviewing how the BoE can best work with banks, insurers, and financial market infrastructures to collect and host these data efficiently in the long run; and (vi) preparing for its central role, alongside the PRA, in the UK’s future regulatory framework once EU regulation ceases to apply. In its review of 2019/2020, the BoE gives detail on, amongst other things: (a) its response to Covid-19; (b) monetary and financial policy; (c) its 2019/2020 strategic goals; (d) prudential regulation; (e) payments; (f) operational resilience; (g) climate change; (h) polymer notes; and (i) value for money. The BoE has set out its strategic goals for 2020/21: (1) UK-EU relationship; (2) central services transformation; (3) climate change; (4) fair and effective markets; (5) FinTech; (6) operational resilience; (6) resolvability; and (7) Real-Time Gross Settlement (RTGS). The report also outlines the BoE’s financial review for 2019/2020.
EBA changes its Q&A tool
On 17 June, the EBA announced that it has expanded the scope of its Q&A process and tool to enable the submission of questions on the Anti-Money-Laundering Directive (AMLD) and Consumer Protection legislation under the EBA’s scope. Going forward, submitted questions, subject to meeting the prescribed criteria, will be published on the EBA website while their answers are being prepared. The EBA has also made some changes to expand and update its online Interactive Single Rulebook (ISRB). The changes reflect the new Article 16(b) of the EBA founding Regulation on Q&A. The EBA has also published its June update of its document on additional background and guidance for asking questions. The update to the ISRB states that as of 12 June, the ISRB has been expanded to include the AMLD and Wire Transfer Regulation (WTR). Additionally, it has been updated to include the: (i) CRR as amended by CRR II; (ii) CRD IV as amended by CRD V; and (iii) BRRD as amended by BRRD II.
EBA Additional Background and Guidance
ESMA annual report and revised 2020 Work Programme
On 16 June, ESMA published its annual report, setting out key actions taken in the previous year. ESMA’s recent work has been focused on its response to the Covid-19 crisis. The annual report covers: (i) ESMA’s mission, objectives and activities; and (ii) achievements against its objectives. In order to reflect these challenging times for the financial markets, ESMA has also published a revised version of its 2020 Work Programme. To respond adequately to the repercussions of Covid-19 on the financial markets, a full assessment of ESMA's activities for 2020 was undertaken. Each activity in the original 2020 work programme was evaluated and assessed against criteria of relevance for the market and urgency, as well as impact on stakeholders and on that basis classified into high, medium or low priority. The results of the assessment are provided in the revised work programme, which includes the changes in relation to new items added as high priority and elements that are delayed or removed from the work programme. Annex I sets out delays to ESMA’s planned consultations. ESMA has maintained some flexibility in its work programme to respond to potential new initiatives, such as those relating to the Capital Markets Union.
FCA Complaints Scheme – approach to remedies
On 16 June, the FCA published a statement on its Complaints Scheme, specifically its approach to remedies. The statement explains the FCA’s current approach to deciding what it does when it agrees that a complaint made about the FCA under the Complaints Scheme (the Scheme) is well founded. The FCA details the remedies that it may apply: (i) apologies; (ii) actions to address the complaint; (iii) recommendations; or (iv) compensatory payments on an ex gratia basis. The FCA aim to apply a consistent and fair approach to ensure remedies are appropriate and proportionate, based on the individual features of the complaint and what went wrong. In deciding what remedy is appropriate, the FCA states that it considers the factors set out in paragraph 7.14 of the Scheme. Furthermore, the statement confirms that if a complaint is about a loss caused by a regulated firm or individual and not about the FCA, this is not a matter for the Scheme – such a matter will need to be referred to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme as appropriate. In the near future, the FCA intends to consult on its approach to remedies for complaints, including compensation.