Key Regulatory Topics: Weekly Update 16 – 22 April 2021
16 April 2021
In this week’s update, the UK Chancellor outlines proposals to support UK FinTech and financial services (including through the creation of a joint Central Bank Digital Currency taskforce) and the European Commission continued to advance its sustainability agenda through the adoption of a package of measures on the EU taxonomy, corporate sustainability reporting, sustainability preferences and fiduciary duties.
Please see the Sustainable Finance section for a letter from the FMLC to HMT, where it discusses UK/EU divergence on sustainable finance standards.
Government response to UK listings review recommendations
On 19 April, the HoC published Rishi Sunak, Chancellor of the Exchequer’s response to the UK listing’s review setting out how the Government intends to take forward each of the 14 recommendations made. Mr Sunak: (i) agrees to present an annual ‘State of the City’ report to Parliament from 2022; (ii) will carefully consider the recommendation that HMT consider an additional ‘growth’ or ‘competitiveness’ objective for the FCA, as part of the ongoing Future Regulatory Framework Review, and in preparing its second consultation later this year; (iii) welcomes the recommendations to reform the UK prospectus regime and will consult on this later this year; (iv) agrees that expertise needs to be brought together to consider the highly technical issue of improving the efficiency of further capital raising by listed companies. Mr Sunak states that his officials will be considering what form this will take over the coming weeks; and (v) states that the recommendation concerning how technology can be used to improve retail investor involvement in corporate actions and their undertaking of an appropriate stewardship role will be taken forward by the Department for Business, Energy and Industrial Strategy as part of its wider consideration of the findings from the Law Commission’s recent scoping study on intermediated securities. The 7 other recommendations are directed towards the FCA, to which it responded on 3 March.
Please see the Markets and Markets Infrastructure section for the HoL’s proposed amendments to the Financial Services Bill 2019-21, which include amendments concerning the protection of vulnerable customers and implementing a duty of care.
Please also see the Other Developments section for the FCA’s speech on financial innovation.
Competition and Markets Authority (CMA) annual concurrency report 2021
On 22 April, the CMA published its seventh annual concurrency report. It reviews how the concurrency arrangements between the CMA and the sectoral regulators have worked over the year from 1 April 2020 to 31 March, and assesses progress since the last annual report. The concurrency regime is designed to allow the CMA and regulators to cooperate with each other when they investigate anti-competitive activities, such as price fixing, and on other work, such as market studies and investigations. The report finds that, overall, there has been continued progress in competition enforcement. The CMA highlights, among other things, that: (i) 3 new investigations were launched by the CMA, the FCA and the Office of Rail and Road to investigate competition concerns in online payments, financial services and rail services, respectively; (ii) 2 fines following the CMA-led investigations into the private healthcare and financial services sectors, totalling over £19 million; (iii) 3 ongoing investigations launched by Ofgem, Ofcom and PSR, resulting in those regulators provisionally finding breaches in competition law; and (iv) the CMA’s and other regulators’ responses to issues caused by the Covid-19 pandemic and advice to government on legislative approaches to address them, including: (a) advising government on exclusion orders to enable a coordinated response to the Covid-19 pandemic; and (b) publishing guidance on cooperation for UK businesses who find it necessary to liaise with competitors (for example, to ensure continued supply or to assist with national and local efforts to tackle the pandemic.
EC consultation on roadmap on retail investment strategy
On 21 April, the EC began consulting on a roadmap on a retail investment strategy for the EU, as part of its capital markets union action plan. The retail investment strategy aims to provide a coherent approach to empower consumers to take financial decisions and benefit from the internal market and to address the challenge of low capital market participation rates in the EU. The strategy aims to assess the entire retail investor journey and will put the investor at the heart of EU policies in the spirit of “an economy that works for the people”. The initiative aims to tackle issues including: (i) investor protection rules are currently set out in a number of sector specific legislative instruments, including MiFID, PRIIPs, UCITS, and the IDD. The rules and disclosures can differ from one instrument to another, which may make it more difficult for consumers to make investment decisions that correspond to their needs; (ii) due to payments of inducements, advice provided by intermediaries may sometimes be biased towards products with higher rewards for the intermediaries; (iii) ineffective suitability assessments; (iv) the impact of digital innovation on the retail investment market, such as social media and online brokerages; (v) the general level of consumer understanding and familiarity with retail investment products; (vi) the possible need for further differentiation between different investor categories; (vii) the high complexity of some retail investment products; and (viii) improving access to effective individual redress. The deadline for comments is 18 May. The EC has also commissioned a study on disclosures to consumers, inducements and advice, and the suitability and appropriateness assessment tests. It will publish the results in autumn 2021 and will represent an important input for the retail investment study.
EC speech on making finance work for citizens
On 20 April, the EC published a speech by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, in which she considers how to make financial services work for citizens. Highlights include: (i) the EC will work with the OECD to develop a joint financial competence framework in order to develop a common understanding of what financial literacy means. The framework could be used by national governments or at regional or indeed local level, or by civil society organisations, to develop financial education strategies, tools and campaigns; (ii) the EC alongside the ECB is monitoring the latest developments in relation to access to cash and changes since the onset of the Covid-19 crisis. If necessary, it may decide to take action to protect the availability of cash towards the end of the year; (iii) the EC is concerned and is stepping up its enforcement in relation to the lack of compliance with the SEPA rule that gives consumers and business the right to make euro payments from their account to another bank account regardless of whether these two accounts are located in the same Member State; (iv) the EC, together with ESMA, is looking at whether any further measures or changes to rules may be needed to make the European system safe and secure for retail investors, noting the effect of the digitalisation on the ease of access to trading platforms; (v) in early 2022, the EC will publish its retail investment strategy, which will be an opportunity to place retail investors at the heart of its policies and assess the entirety of the retail investor journey. As a first step, the EC will shortly launch a public consultation to gather views on how the current rules work and what might need to change; (vi) on sustainable finance, the EC is developing an EU taxonomy, a proposal for an EU Green Bond Standard, and in 2021 will adopt an EU Ecolabel for retail investors; and (vii) the EC is assessing how to progress towards further supervisory convergence – a common set of rules that are consistently applied by all national regulators.
HMT consults on regulation of non-transferable debt securities
On 19 April, HMT began consulting on proposals to bring the issuance of non-transferable debt securities (NTDS) within the scope of financial services regulation. NTDS, commonly referred to as ‘minibonds’, are unlisted bonds typically issued by companies to retail investors in order to raise finance. Generally only the marketing of such products is regulated under the financial promotions regime. HMT propose two options for regulatory reform: (i) make the direct-to-market issuance of certain NTDS where the proceeds of the issue are used to on-invest or on-lend a regulated activity. HMT proposes to provide a specific exemption to Article 18 of the RAO, which currently provides an exclusion from the regulated activity ‘dealing in investments as principal for firms who issue their own debt securities’, so it does not apply to the issue of non-transferable debt securities if the issuer uses the funds raised to on-lend or invest in other third-party projects. HMT considers this a less burdensome method than amending UK MiFID; and (ii) extend the scope of the Prospectus Regulation to cover all NTDS, so that public offers of NTDS would require an FCA approved prospectus. Under this option the activity of issuing remains unregulated, however it applies to all NTDS. HMT also considers a third option: to not introduce any additional regulation and instead rely on changes that have been, or are planned to be made to the UK’s financial promotions regime, such as the FCA’s ban on the mass-marketing of speculative illiquid securities. However HMT considers that this measure only addresses the marketing of these products and means there is very little, if any, regulatory oversight in the design, governance and functioning of these products. HMT notes that these options are not mutually exclusive and could be applied together, however considers that the first best addresses the issues identified with the current regulatory framework. The deadline for comments is 12 July.
EC mini-sweep on consumer credit
On 16 April, the EC updated its sweeps webpage to provide information on a mini-sweep of consumer credit websites (a "sweep" is a set of checks carried out on websites simultaneously to identify breaches of EU consumer law in a particular sector). Consumer protection authorities from 13 Member States and 2 EEA countries took part. The primary objective was to check on various technical devices (PC, tablets, smartphones), whether traders comply with EU consumer rules on standard information in online advertising of consumer credit, if the overall presentation of the consumer credit offers cannot mislead consumers, and if the offers do not aggressively exploit consumer vulnerabilities. Key findings include: (i) 36% of the 118 websites that were swept were flagged for potential irregularities with EU consumer law; (ii) 30% of consumer credit advertising, which indicates an interest rate or any figures relating to the cost of credit, did not include all the standard information by means of a representative example in a clear, concise and prominent way as required by the Consumer Credit Directive; (iii) the suspected infringement rate was 8% higher for websites checked by smartphones; (iv) on 34% of checked creditor websites it was unclear how the creditworthiness assessment is performed, including the personal data used for that purpose and the possible use of machine learning; and (v) 47% of advertisements/websites for short-term high cost products were flagged. In the vast majority of these cases, this was because the standard information required for advertising was not presented by means of a representative example in a clear, concise and prominent way.
Please see the other sections for product-specific updates relating to Covid-19.
FCA consultation on regulated fees and levies for 2021/22
On 20 April, the FCA began consulting on its regulated fees and levies rates for 2021/22. The FCA sets out its proposals, among others, for: (i) its overall Annual Funding Requirement (AFR) – £616.5m for 2021/22, which represents an increase of 4.5% over 2020/21; (ii) application fees for funeral plan firms when they seek authorisation from the FCA and the structure of periodic fees; (iii) the FOS general levy – £96m, which represents a 14% increase; (iii) the levy for the Department of Work and Pensions for MaPs – £149.2m; (iv) the devolved authorities debt advice levy - £14.0324m; and (v) HMT’s illegal money lending levy – £6.5m. The deadline for comments is 25 May. The FCA intends to publish feedback and the final fees and levy rates in a policy statement in July, subject to FCA Board approval in June.
JMLSG consults on revisions to trade finance section of its guidance
On 20 April, the Joint Money Laundering Steering Group (JMLSG) began consulting on proposed revisions to Sector 15 (trade finance) in Part II of its AML/CTF guidance for the financial services sector. The deadline for comments is 18 June.
Office for Financial Sanctions Implementation (OFSI) blog on introduction to licensing
On 19 April, the Office for Financial Sanctions Implementation (OFSI) published a new blog on an introduction to licensing. This follows the new UK autonomous sanctions framework in place since January. The blog provides an overview of the licensing process, explaining the new changes, the OFSI process and some tips on how to complete a licence application. An OFSI license grants permission to carry out an activity that would otherwise be a breach of financial sanctions prohibitions. When a person or organisation is subject to an asset freeze, any funds or economic resources belonging to them, must be frozen. One must not deal with these assets, or make them available to, or for the benefit of, a designated person unless there is an exception in the legislation one can rely on, or one has a valid licence.
UK Chancellor proposals to support UK FinTech and financial services
On 19 April, the Chancellor of the Exchequer, Rishi Sunak announced a number of proposals to support UK FinTech: (i) a new FCA ‘scale box’ to support FinTech firms in scaling up. The FCA will also launch the second phase of its Digital Sandbox to enable firms to test concepts that tackle sustainability and climate change-related challenges; (ii) Mr Sunak backed the creation of a Centre for Finance, Innovation and Technology, which would work closely with the regional hubs to identify and address sector challenges in support of FinTech growth across the UK; (iii) a joint HMT and BoE CBDC Taskforce and related engagement forums (covered in our update below); (iv) a new sandbox for firms exploring how to use technologies like distributed ledger to improve financial market infrastructure; (v) the BoE has launched a new ‘omnibus’ account to enable payment system operators to settle in central bank money. This will allow them to offer innovative payment services, while having the security of central bank money settlement. The BoE has provided more information on its policy for omnibus accounts in a separate press release; (vi) this Summer, the UK will consult on changes to its prospectus regime, which among other things will explore how to make it easier for companies to provide forward-looking financial information, which would particularly benefit technology and life sciences companies with high-growth potential, and their investors. A group will also be convened to look at improving the efficiency of rights issues and what role technology could play in streamlining the process; and (vii) a detailed response to the Kalifa Review on UK FinTech, which made recommendations for the creation and implementation of a new UK FinTech policy and regulatory strategy. The Department for International Trade also announced the creation of: (a) a FinTech Export Academy that will give businesses free advice on issues such as legal, tax, regulatory, accounting and market entry, and (b) a FinTech Champions scheme to promote expansion and provide further assistance.
Joint BoE and HMT Central Bank Digital Currency Taskforce and Forums
On 19 April, the BoE and HMT announced the joint creation of a Central Bank Digital Currency (CBDC) Taskforce to coordinate the exploration of a potential UK CBDC. The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore CBDC, in line with their statutory objectives and to promote close coordination between them. The Taskforce will: (i) coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC; (ii) guide evaluation of the design features a CBDC must display to achieve the BoE/HMT’s goals; (iii) support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC; and (iv) monitor international CBDC developments. The BoE also announced the creation of: (a) a CBDC Engagement Forum to engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The forum will consider issues including: ‘use cases’ for CBDC, functional needs of CBDC users, roles of public and private sectors in a CBDC system, financial & digital inclusion considerations, and data and privacy implications; (b) a CBDC Technology Forum to engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The forum will have an important role in helping the BoE to understand the technological challenges of designing, implementing and operating a CBDC. Members will be invited by the Bank and drawn from a range of financial institutions, academia, fintechs, infrastructure providers and technology firms; and (c) a CBDC Unit to lead the internal exploration around CBDC. It will also lead the BoE’s external engagement on CBDC, including with other UK and international authorities. The Deputy Governor for Financial Stability, Jon Cunliffe, will oversee the work of the CBDC Unit.
Please see the Sustainable Finance section for the BoE’s updates to the UK Money Markets Code.
Working Group on Sterling Risk-Free Reference Rates (RFRWG) letter on safe harbour provisions to support the wind-down of critical benchmarks
On 22 April, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a letter that it sent to HMT relating to the possible safe harbour provisions in the Financial Services (FS) Bill 2019-21 supporting the wind-down of critical benchmarks. The RFRWG welcomed the recent consultation published by HMT to seek feedback on whether there is a case for also incorporating a legal “safe harbour” provision, to reduce the risk of contractual uncertainty and disputes that may arise from the transition of tough legacy contracts. The RFRWG now understands that the safe harbour protections envisioned in the consultation are unlikely to be included in the FS Bill and that this does not represent a substantive decision on the merits of introducing such protections. The RFRWG is nonetheless eager to receive a formal update from the Government on the feedback received to HMT’s consultation, and how it intends to proceed. The RFRWG is aware that a number of industry bodies have now published their responses to the consultation, in which they broadly support the proposed approach. As transition enters its final months, the RFRWG would appreciate an update on whether the Government intends to introduce safe harbour protections and, if so, an indication of the proposed timing and possible legislative vehicles which may be used in order to provide reassurance that these protections can be put into place ahead of the end 2021 deadline.
HoL proposed amendments to Financial Services Bill 2019-21
On 21 April, a list of amendments made to the Financial Services Bill 2019-21, together with explanatory notes were published, reflecting amendments made at the report stage of the Bill in the House of Lords. The amendments include to: (i) amend FSMA to require the FCA to: (a) have regard to the general principle that firms should not profit from exploiting a consumer’s vulnerability, behavioural biases, or constrained choices when considering the appropriate degree of protection which it should secure for consumers in accordance with its consumer protection objective; and (b) make rules introducing a duty of care by 6 April 2022; (ii) give HMT the ability to bring interest-free Buy-Now-Pay-Later products into the scope of FCA regulation in a proportionate way. HMT will be able to exclude provisions of the Consumer Credit Act 1974 from applying to activities that currently fall within the relevant exemptions in the RAO; (iii) remove a provision in Article 28 of MAR which restricts the FCA from holding personal data collected for the purposes of MAR for more than five years. This would mean that MAR personal data must be held in general compliance with GDPR personal data retention standards, which requires personal data to be held only as long as is necessary; (iv) require the FCA to make rules imposing a cap on the Standard Variable Rates charged to borrowers with inactive lenders or unregulated entities who cannot switch providers because of their financial circumstances. It would also require the FCA to make rules that would enable mortgage prisoners with certain characteristics to access new fixed-term interest rate deals; (v) to include the provision of cash in the list of activities that do not constitute a payment service under the PSRs, where there is no corresponding purchase of goods and services; and (vi) require the FCA and PRA to have regard to the carbon target for Net Zero emissions as set out in section 1 of the Climate Change Act 2008.
EC adopts Delegated Regulation correcting MiFID II Delegated Regulation
On 21 April, the EC adopted a Delegated Regulation (Amending Delegated Regulation) correcting Delegated Regulation (EU) 2017/565, which supplements MiFID II as regards organisational requirements and operating conditions for investment firms and defined terms. To be fully compliant with MiFID II, the Amending Delegated Regulation corrects: (i) Article 1 paragraph 1 to clarify that it requires the application of Article 64(4), Article 65 and Chapter VIII of that Regulation instead of Article 59(4), Article 60 and Chapter IV; and (ii) errors that appeared in several cross-references in the Annex I, more precisely under 'Client assessment', 'Order handling', 'Client order and transactions', 'Reporting to clients', 'Communication with clients' and 'Organisational requirements'. The Council of the EU and the EP will now consider the draft Amending Delegated Regulation. If neither the Council nor the EP object, it will be published in OJ and will enter into force on the twentieth day following that of its publication.
FMSB LIBOR transition case studies for navigating conduct risks in back book transition
On 20 April, the Fixed Income, Currencies and Commodities Markets Standards Board (FMSB) published a spotlight review on LIBOR transition “navigating conduct risks in back book transition”. The FMSB examine certain risks to market fairness and effectiveness that might arise when transitioning existing LIBOR-based contracts with maturities extending beyond end-2021 to alternative risk-free rates. For older legacy contracts the FMSB note that there are four broad transition or fallback options depending on the product and contract in question: (i) to proactively transition LIBOR-based contracts to alternative benchmark rates in advance of LIBOR cessation; (ii) to proactively amend legacy fallback language; (iii) to rely on legacy fallback terms; and (iv) to rely on a legislative solution for tough legacy contracts. The FMSB believes that there are a number of benefits to proactive transition: enabling market participants to take a degree of control over the impact of the transition on their contracts, and reducing operational risk associated with waiting for LIBOR cessation. However, this method carries its own complexities, which firms will need to manage: (a) a risk of value transfer, with the quantum and direction of this value transfer depending on the timing of transition and subsequent benchmark rate movements; (b) mis-matches in fallbacks for underlying cash and associated hedging instruments; and (c) where firms are required to exercise some discretion this may give rise to differential client treatment. These complexities, and corresponding key considerations and good practice observations, are examined in 4 case studies in the paper.
Trade associations letter on EEA UCITS and collateral under UK EMIR
On 19 April, ISDA, the Alternative Investment Management Association, the Investment Company Institute, the Institutional Money Market Funds Association and the Securities Industry and Financial Markets Association Asset Management Group published a joint letter (dated 15 April) that has been sent to the BoE, HMT, and the FCA about EEA UCITS and collateral. The trade associations urge the PRA to permit use of EEA UCITS for initial margin (IM) purposes in the UK Uncleared Margin Requirements Binding Technical Standards (BTS) once the current ‘standstill’ comes to an end on 31 March 2022. The trade associations believe that once the restriction for financial counterparties to the use of UK UCITS as IM is in effect, there will be negative consequences for the counterparties concerned and for the attractiveness of the UK as a jurisdiction in which to do uncleared derivatives business. They urge the PRA to consider expanding the eligibility criteria in the BTS to include EEA UCITS, as part of its ongoing consultation.
Working Group on Transition from LIBOR in Sterling Structured Products
On 19 April, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a paper that supports the transition of legacy structured products where GBP LIBOR is in use and considers how a sterling structured products market could be designed using compounded in arrears SONIA. Market participants are encouraged to take all necessary steps to complete their operational transition plans for structured products in order to reduce the financial stability risks arising from the widespread reliance on GBP LIBOR and to support an orderly transition ahead of end 2021. To assist with this, the RFRWG suggests that participants consider issuing new structured products based on compounded in arrears SONIA. The RFRWG encourages market participants to amend their legacy GBP LIBOR referencing structured products now where it is feasible to do so. Consent solicitation or other forms of liability management could be a means to accelerate active transition away from GBP LIBOR, where it is viable to do so. To help drive momentum, the RFRWG also encourages market participants to consider publicly disclosing, where appropriate, transactions referencing compounded in arrears SONIA (together with any disclosable information around the transition mechanisms).
Payment Systems and Payment Services
Please see the Markets and Markets Infrastructure section for the HoL’s proposed amendments to the Financial Services Bill 2019-21, which include amending the PSRs to include the provision of cash in the list of activities that do not constitute a payment service.
Please also see the FinTech section for the BoE’s update on the launch of its new ‘omnibus’ account to enable payment system operators to settle in central bank money.
PSR consultation on changes to guidance on the EU Interchange Fee Regulation
On 22 April, the PSR began consulting on amending its guidance on its approach as a competent authority for the EU Interchange Fee Regulation (IFR) to take account of Brexit and other changes to the regulatory framework. The proposed amendments reflect the principal differences between the EU IFR and the UK IFR, which include: (i) the different scope of the UK IFR – the UK IFR caps UK transactions (i.e. where the point of sale, acquirer and card issuer are all based in the UK) and therefore the PSR proposes to replace references to the EEA with references to the UK; and (ii) replacement of references to the EU regulatory technical standards (adopted under Article 7 of the EU IFR – which introduced specific requirements relating to the independence of payment card schemes and processing entities), with references to the onshored RTS. Other proposed changes reflected in the amendments include: (a) removal of the chapter on the exemption offered to three-party schemes (when they behave like a four-party scheme) if their annual market share of transaction values does not exceed 3%, as this exemption expired on 9 December 2018; (b) removal of references to weighted average interchange fees, as the option to allow for these expired on 9 December 2020; and (c) amending references to the rules on surcharging in the UK, to reflect changes made by PSD2 and the process of onshoring the relevant legislation. The PSR proposes to rename the Guidance to “Guidance on the PSR’s approach to monitoring and enforcing compliance with the Interchange Fee Regulation” to reflect these changes and its new responsibilities. The deadline for comments is 21 May. The PSR plans to publish the final version of the updated guidance later in 2021.
LSB updates contingent reimbursement model code for APP scams
On 20 April, the Lending Standards Board (LSB) updated its contingent reimbursement model code for authorised push payment (APP) scams. The updates include the introduction of governance and oversight requirements. The new provisions will support embedding and ongoing oversight of the Code’s requirements as well as ensuring that Code related policies and processes are formalised and customer facing staff have greater awareness of the Code. These provisions will be effective from 14 June. Amendments have also been made to the wording of the Code in respect of the no-blame funding pot. References to the no-blame fund now makes it clear that firms are able to self-fund no-blame scam cases. These amendments are effective immediately.
PRA statement on remuneration benchmarking and remuneration high earners reporting templates
On 22 April, the PRA published a statement on its remuneration reporting templates for benchmarking and high earners, advising that the PRA is aware of an issue related to the templates. As part of the EBA’s Taxonomy 2.10, the remuneration module became reportable for the first time in XBRL format, effective from 31 December 2020. The PRA became aware of issues with the EBA’s XBRL Remuneration reporting templates, for which the EBA released a patch on 18 March to address this issue. The PRA and FCA have worked together to assess the amount of change required in the GABRIEL / RegData systems, and the impact that implementing the proposed patch would have on firms. The PRA and FCA have decided not to implement it at this time in order to minimise the burden placed on firms. Instead, it has been decided that the best course of action is to revert back to the XML-based REP004 and REP005 reporting templates for submission of 2020 data via GABRIEL / RegData. Firms migrated onto the RegData platform should submit their remuneration data via RegData. Firms will be notified as soon as the reporting schedules on GABRIEL / RegData have been amended to reflect this reversion. It is recognised that, for firms with a 31 December year-end, they will be unable to meet the submission deadlines specified in rules 17.4 and 18.3 of the Remuneration Part of the PRA Rulebook. As a result, the PRA expects such firms to submit REP004 and REP005 reporting templates for 2020 data by 1 June. The PRA expects that firms with a non-31 December year-end should be able to comply with the submission date. However, if firms foresee a problem with meeting their usual submission date due to the issues outlined above, the PRA advises that firms contact their usual supervisor.
Implementing Regulation on ITS on public disclosures by institutions under CRR published in OJ
On 21 April, Commission Implementing Regulation (EU) 2021/637, which lays down implementing technical standards (ITS) on public disclosure requirements for institutions under the CRR, was published in the OJ. The Implementing Regulation repeals Implementing Regulation (EU) No 1423/2013, Delegated Regulation (EU) 2015/1555, Implementing Regulation (EU) 2016/200 and Delegated Regulation (EU) 2017/2295. The Implementing Regulation introduces a consistent and complete Pillar 3 disclosure framework, providing uniform disclosure formats, templates and tables. This will aid consistency and comparability of the information disclosed by institutions. The Implementing Regulation enters into force on 11 May (20 days after its publication in the OJ). It will apply from 28 June.
Second FCA consultation on IFPR
On 19 April, the FCA began its second consultation on the Investment Firms Prudential Regime (IFPR). The FCA’s proposals include: (i) in relation to own funds requirements, and supplementing its proposals in the first consultation, to introduce a fixed overheads requirement (FOR). The FCA also sets out the remaining activity-based capital requirements or “K-factors”, and own funds requirements and firm categorisation for FCA investment firms when they provide clearing services as clearing members and indirect clearing firms; (ii) a basic liquid assets requirement – this would be based on holding an amount of core liquid assets equivalent to at least one third of the amount of a firm’s FOR; (iii) requiring clearly documented remuneration policy and compliance with basic remuneration rules in respect of all staff. Non-“small and non-interconnected investment firms” must comply with further requirements, which include identifying material risk takers and setting an appropriate ratio between variable and fixed remuneration; (iv) to assess adequate financial resources through the introduction of an internal capital and risk assessment (ICARA) process. Through this, firms will be expected to meet an Overall Financial Adequacy Rule. The ICARA consolidates the FCA’s requirement for business model analysis, stress-testing, recovery planning and actions, and wind-down planning. The FCA also sets out new guidance on intervention points, the actions it expects of firms in certain situations and what firms can expect from the FCA; and (v) to reduce the amount of information that FCA investment firms need to report to the FCA about their remuneration arrangements. The FCA also considers the application of the IFPR to collective portfolio management investment firms, international firms and tied agents, as well as the implications for its existing prudential sourcebooks. The deadline for comments is 28 May. Following this consultation, the FCA will issue a third consultation in Q3 2021.
PRA on regulatory treatment of retail residential mortgage loans under Mortgage Guarantee Scheme
On 19 April, the PRA updated its statement on the regulatory treatment of retail residential mortgage loans under the Mortgage Guarantee Scheme (MGS), to provide information on capital, notification, disclosure, and reporting requirements. The PRA’s approach to capital would be applicable to mortgage insurance schemes with similar contractual features to MGS, but the approach to reporting, notification, and disclosure only applies to MGS and not to other securitisation programmes. The PRA sets out, among other things: (i) the approach for firms using the standardised approach for underlying mortgage loans under Articles 245 and 261 of the UK CRR; (ii) the approach for firms using the internal ratings based approach for underlying mortgage loans under Articles 245 and 259 of the UK CRR; (iii) how the 5% vertical slice works; (iv) maturity mismatch and the requirements contained in Article 252 of the UK CRR; (v) how to apply for a modification by consent in relation to significant risk transfer notifications and when private securitisation notifications must be made; and (vi) the requirement to obtain a legal opinion on the effectiveness and enforceability of credit protection afforded by a guarantee such as MGS can be satisfied on the basis of a legal opinion obtained jointly by firms.
PRA update on rule waivers and CRR permissions
On 19 April, the PRA updated its information pages on (amongst other things): (i) CRR permissions and (ii) waivers and modifications of rules. The PRA states that the consolidated list of Waivers and CRR Permissions granted to PRA-authorised firms is no longer being provided. Firms that wish to discuss their requirements for the report can contact the PRA. Alternatively, firms should use the FCA Register which is the primary source of PRA Waivers and EU Permissions data and is available for external parties. Firms are not required to provide details of a precedent direction or written notice when applying for a waiver or modification of PRA rules or a CRR Permission.
ECB targeted review of internal models
On 19 April, the ECB reported on the results of its targeted review of internal models (TRIM). TRIM was a multi-year project launched by the ECB at the beginning of 2016 in close cooperation with national competent authorities (NCAs). TRIM aimed to assess whether the Pillar I internal models used by significant institutions (SIs) within the SSM are appropriate in light of the applicable regulatory requirements and whether their results are reliable and comparable. Overall, TRIM confirmed that the internal models of SIs can continue to be used for the calculation of own funds requirements. However, for a certain number of models, limitations were needed to ensure a level of own funds that was appropriate to cover the underlying risk. This was notably the case for a number of loss given default and credit conversion factor models related to low-default portfolios, for which supervisory backstops were imposed as a result of TRIM. The ECB identified over 5,800 findings and issued binding supervisory measures for banks to take corrective action within given deadlines. Through those measures, TRIM resulted in a 12% increase, or about €275 billion, of risk-weighted assets for the investigated models. The ECB concludes that SIs will need to continue to invest in high-quality models. This includes defining internal model strategies for the development and maintenance of internal models. In particular, the independent internal validation function needs to be further strengthened in line with the TRIM requirements.
Recovery and Resolution
EC adopts RTS on contractual terms on recognition of resolution stay powers under BRRD
On 22 April, the EC adopted a Delegated Regulation on regulatory technical standards (RTS) determining the content of the contractual terms on recognition of resolution stay powers under BRRD. The Delegated Act specifies the content of the term required in Article 71a(1) of BRRD, taking into account institutions' and entities' different business models. Article 71a(1) of BRRD (which was inserted by BRRD II), requires institutions and entities to include terms that recognise the stay powers of resolution authorities in their financial contracts that they enter into and which are governed by third-country law. The Council of the EU and the EP will now scrutinise the draft Delegated Regulation and if neither object, the Delegated Regulation will enter into force 20 days after its publication in the OJ.
SRB response to EC review of the crisis management and deposit insurance framework
On 21 April, the SRB published its response to the EC’s review of its crisis management and deposit insurance (CMDI) framework. The SRB’s considerations include: (i) that a much deeper analysis would be needed to assess quantitatively to what extent the CMDI framework has met its objectives. Generally though, SRB considers that the CMDI has met or partially met its objectives. It notes that more work is needed in minimising recourse to public financing and taxpayers’ money, ensuring a level playing field, and providing legal certainty and predictability (significant complexity remains); (ii) that the resolution objectives are fit and appropriate for the CMDI framework, noting two further objectives, which can be seen as supporting or ancillary: resolvability, and preventing the destruction of value; (iii) eventually, raising alternative measures to the European Deposit Insurance Scheme (EDIS) to EU level would be preferable to introducing measures in national systems and would better achieve CMDI framework objectives such as predictability, value maximisation, ensuring a level playing field across Member States, and managing cross-border bank failure; (iv) overall, deposit guarantee scheme (DGS) flexibility should be preserved to strengthen the CMDI framework. Such flexibility could help to allow the resolution authority to act minimising the impact of the failure on financial stability, and maximising franchise value. Clarity should be provided on how the different measures, such as preventive and alternative measures for the use of DGS, and precautionary recapitalisation, interact with the resolution framework. There should be a clear delineation between the criteria and conditions for use of preventive and precautionary tools versus the tools that are meant to support the transfer of some assets and liabilities of a bank and to facilitate its exit; (v) the resolution framework has a comprehensive set of tools at its disposal, what is required is an enhancement of these tools; and (vi) it seems unnecessary and unhelpful to change SRB governance arrangements if the review of the CMDI framework enhances (rather than overhauls) the resolution toolkit. Overhauling the governance seems to pose more risks than advantages at this stage, particularly if any intermediate step is geared towards EDIS. In this regard, and in line with the original EC proposal, the SRB should be the entity managing a future EDIS.
Implementing Regulation on ITS on resolution authorities’ reporting on MREL published in OJ
On 16 April, Commission Implementing Regulation (EU) 2021/622 laying down implementing technical standards (ITS) on uniform reporting templates, instructions and methodologies for reporting on the minimum requirement for own funds and eligible liabilities (MREL) under BRRD was published in the OJ. The Implementing Regulation replaces the existing ITS in order to reflect the amendments to BRRD by BRRD II, relating in particular to MREL subordination levels and the MREL applied to entities that are not themselves resolution entities. The Implementing Regulation enters into force on 6 May (twenty days after its publication in the OJ).
Please see the Markets and Markets Infrastructure section for the HoL’s proposed amendments to the Financial Services Bill 2019-21, which include requiring the FCA and PRA to have regard to the carbon target for Net Zero emissions in the Climate Change Act 2008.
Please see the Other Developments section for the FCA’s announcement that it has appointed Sacha Sadan as Director of Environment Social and Governance.
Commons Treasury Committee report on net zero and the future of green finance
On 22 April, the Commons Treasury Committee published its Thirteenth Report of Session 2019-21 on net zero and the future of green finance. The Committee, following an inquiry into decarbonisation and green finance that was launched in June 2019, makes a series of recommendations for how the Government can meet its commitment to achieve net-zero by 2050, including: (i) financial products should be clearly labelled to allow consumers to assess their relative climate impacts and to make choices accordingly. HMT and the FCA should consult on making such green labels mandatory, including how they could encourage innovation and be widely understood by retail consumers; (ii) the FCA should set out how it will tackle remaining regulatory barriers that discourage innovative green financial products from coming to market; (iii) the Government should set out the principles upon which the UK will fund its transition to net-zero, and its own cost assessments of achieving net-zero by 2050; and (iv) with the first issuance of a UK green sovereign bond expected in summer 2021, the UK is lagging behind other countries – therefore, the government should set out its tolerance, when issuing such bonds, for them to be more expensive than other forms of government debt.
Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021
On 21 April, the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021 were published together with an explanatory memorandum. The Regulations govern the auctioning of UK emissions allowances and the provision of a secondary market under the UK Emissions Trading Scheme, which commenced on 1 January. The Regulations came into force on 22 April.
Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021
On 21 April, the Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021 were published, together with an explanatory memorandum. The Regulations are being made as part of the legislative effort to establish a UK Emissions Trading Scheme (ETS) and accompanying emission allowance market. The Regulations update existing UK provisions to reflect that the UK is no longer part of the EU ETS but has now established the UK ETS. The Regulations are specifically concerned with amendments to financial services law that govern access to a UK ETS auction platform, what is required of an auction platform, and the auctioning and trading of emission allowances as financial instruments. The Regulations establish an oversight role for the FCA in relation to the auctioning of emission allowances. They set the rules for access to the ETS auction platform and allow the FCA to monitor and regulate the trading of UK emissions allowances. Further, the Regulations ensure the appropriate regulatory treatment of UK emission allowances. The Regulations came into force on 22 April.
FMLC letter on International Platform on Sustainable Finance and UK/EU divergence on sustainable finance standards
On 21 April, the FMLC published a letter sent to HMT on the International Platform on Sustainable Finance (IPSF), which the UK joined in February. The FMLC understands that the IPSF is a forum for public authorities in charge of developing sustainable finance policies/initiatives to help investors contribute to climate and environmental objectives and it congratulates HMT on its membership of this forum and supports the coordination efforts made globally to scale up sustainable finance and promote integrated markets internationally. The FMLC, however, also draws attention to the risk of uncertainty due to divergence which may arise between sustainable finance standards adopted in the EU and UK after Brexit - particularly in relation to the Sustainable Finance Disclosure Regulation (SFDR), the Non-Financial Reporting Directive and the Taxonomy Regulation. The FMLC notes that none of the operative disclosure obligations were applicable before the end of the Brexit transition period and therefore have not become retained EU law. The Financial Services (Implementation of Legislation) Bill would have provided a power for the UK to implement and make changes to these EU measures but the Bill was not, ultimately, enacted and the Government has not subsequently clarified its approach. The FMLC notes that the complex situation that firms are having to manage has been exacerbated by the delayed EU regulatory technical standards specifying the content, methodologies and presentation of sustainability-related disclosures under the SFDR. The FMLC urges HMT to provide clarity on the approach it intends to take towards the SFDR and other pieces of legislation post Brexit. The FMLC suggests using either an approach which takes into account EU standards (but potentially enhancing detailed disclosure requirements at Level 2, where appropriate) or an outcomes-based approach which is consistent with the direction of travel in the EU and beyond, to avoid regulatory conflict.
UNEP FI guidelines for climate target setting for banks
On 21 April, the UN Environment Programme Finance Initiative (UNEP FI) published guidelines for climate target setting for banks, which outline key principles to underpin the setting of credible, robust, impactful and ambitious targets in line with achieving the objectives of the Paris Agreement. The guidelines are grouped under four headings: (i) banks shall set and publicly disclose long-term and intermediate targets to support meeting the temperature goals of the Paris Agreement; (ii) banks shall establish an emissions baseline and annually measure and report the emissions profile of their lending portfolios and investment activities; (iii) banks shall use widely accepted science-based decarbonisation scenarios to set both long-term and intermediate targets that are aligned with the temperature goals of the Paris Agreement; and (iv) banks shall regularly review targets to ensure consistency with current climate science. The guidelines will be reviewed at least every three years, and are to be applied on a comply-or-explain basis.
EC sustainable finance package
On 21 April, the EC adopted a package of measures on the EU taxonomy, corporate sustainability reporting, sustainability preferences and fiduciary duties. The package is comprised of: (i) the EU Taxonomy Climate Delegated Act, which provides the first set of technical screening criteria of the EU taxonomy and a common language around sustainable activities. The criteria cover the economic activities of roughly 40% of EU-domiciled listed companies, in sectors including energy, forestry, manufacturing, transport and building, which are responsible for almost 80% of direct greenhouse gas emissions in Europe. The EC explains the changes it has made to the Delegated Act following consultation in its communication on the sustainable finance package. The Delegated Act will be formally adopted at the end of May once translations are available in all EU languages and will apply from 1 January 2022. A complementary Delegated Act will be adopted later in 2021 on agriculture and certain energy sectors such as nuclear power and natural gas not yet included in the Delegated Act agreed today; (ii) a proposal for a Corporate Sustainability Reporting Directive (covered below); and (iii) six amending Delegated Acts on investment and insurance advice, fiduciary duties, and product oversight and governance. The legislation incorporates sustainability considerations into frameworks for the UCITS Directive, AIFMD, MiFID II, Solvency II, and the Insurance Distribution Directive.
EC Proposal for Corporate Sustainability Reporting Directive – sustainable finance package
On 21 April, the EC adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) as part of its sustainable finance package. This proposal builds on and revises the sustainability reporting requirements set out in the Non-Financial Reporting Directive (NFRD), in order to make sustainability reporting requirements more consistent with the broader sustainable finance legal framework, including the SFDR and the Taxonomy Regulation, and to tie in with the objectives of the European Green Deal. Compared to the NFRD sustainability reporting requirements, the principal elements of this proposal are: (i) to extend the scope of the reporting requirements to additional companies, including all large companies and listed companies (except listed micro-companies). In recognition of the economic difficulties they face in light of the Covid-19 pandemic, SME requirements would apply only three years after they apply to other companies; (ii) to require assurance of sustainability information; (iii) to specify in more detail the information that companies should report, and require them to report in line with mandatory EU sustainability reporting standards. The European Financial Reporting Advisory Group (EFRAG) would be responsible for developing these standards; and (iv) to ensure that all information is published as part of companies’ management reports, and that companies digitally tag information such that it is machine readable and feeds into the EU single access point. The proposal would amend four existing pieces of legislation: the Accounting Directive, the Audit Directive, the Audit Regulation, and the Transparency Directive. The EC will now engage in discussions with the EP and Council. In parallel, the EFRAG will start work on a first set of draft sustainability reporting standards, which it aims to have ready by mid-2022.
BoE launches initiative on diversity and updates UK Money Markets Code
On 21 April, the BoE published a speech by Andrea Rosen, Head of BoE Markets Intelligence and Analysis Division, as it launched its "meeting varied people" initiative. The BoE hopes the initiative will enable it to hear from a more diverse range of people who work in financial markets. It will use this insight to inform the decisions it makes on, for example, setting interest rates and designing its market operations. Mr Rosen explains that gathering the widest possible range of well-informed views from diverse market contacts ensures that the BoE get the best information possible to fulfil its mission: testing its views against those in the market, across regions and asset classes, exploring the different possible explanations for trends, and understanding the expectations and impact around each of the BoE’s policy decisions. As part of the initiative, Mr Rosen explains that the BoE is: (i) re-launching the BoE’s Market Intelligence Charter, which sets out the BoE’s aims and ambitions of talking to a diverse range of contacts and affirms its commitment to open engagement, with an emphasis on challenge and diversity of thought; and (ii) publishing the UK Money Markets Committee’s three-yearly update to its Code, which sets out best practice in the unsecured, repo and securities lending markets in the UK. There have been significant changes in relation to: the benefits of diversity and inclusion, guidance on working from home, the importance of ESG, how the code applies to electronic trading practices, and the importance of high standards in trade settlement discipline. The FCA have recognised the updated code as an industry standard. The BoE has also published a speech given by Andrew Bailey, BoE Governor, in which he talks about diversity and the BoE’s new initiative. Mr Bailey explains that diversity is a priority for the BoE as, among others reasons: (a) as a public institution, the BoE need to represent the diversity of the country; (b) it helps the BoE achieve its objectives. Improved cognitive diversity helps make for better decision making; and (c) it improves the BoE’s understanding of what is driving markets, what people expect from future policy and the potential impacts of different decisions.
FCA letter to HMT on progress of the FCA’s transformation programme
On 20 April, the FCA published a letter (dated 16 April) from Charles Randell, FCA Chair, to John Glen, Economic Secretary to HMT, providing an update on the progress the FCA has made with its transformation programme which covers: (i) strengthening the FCA structure – the FCA has made substantial changes to its operating structure, with new appointments and positions such as the Chief Data, Information and Intelligence Officer, and by bringing the Policy, Supervision and Competition functions under two new Executive Directors to improve coordination; (ii) operational improvements – the FCA summarises the improvements, which include additional and updated training for staff, and campaigns for consumers to highlight potential harm; (iii) implementation of review recommendations – the FCA aims to complete the majority of actions by the end of 2021 and has established a new team to provide continuous independent and comprehensive assurance on this delivery; (iv) transformation – the FCA highlights its investment in technology to support better use of data and a fresh approach to tackling firms and individuals who do not meet the required standards. It will report on its progress this Summer; and (v) recommendations for the Government – the Government committed to work with the FCA to consider whether paid-for advertising on online platforms should be brought into the scope of the financial promotions regime, and with the Department for Digital, Culture, Media & Sport to ensure that fraudulent online advertising is addressed as a priority harm through its online advertising programme. As a result of Brexit an exemption to the financial promotions regime available to online platforms has fallen away, therefore the FCA is looking at the operations of the major online platforms to determine whether they now fall within its rules and, if so, whether they are compliant. Mr Randell notes that the FCA has been consistently of the view that financial harms should be included in the Online Safety Bill to ensure that social media firms take responsibility for the promotions on their websites. Mr Randell notes that the FCA’s Chief Executive, Nikhil Rathi, will write to the Treasury Committee with a further update ahead of the next accountability hearing, which has been scheduled for 12 May.
FCA to publish Business Plan for 2021/22 in July
On 20 April, the FCA announced that it will be publishing its Business Plan for 2021/22 in July, rather than April. The FCA states that it’s Business Plan will be published alongside its 2020/21 Annual Report and Accounts and will include an update on plans for transforming the FCA.
FCA speech on financial innovation
On 20 April, the FCA published a speech by Nikhil Rathi, FCA Chief Executive, on the need to level the playing field in financial innovation in the service of consumers and the market. Highlights include: (i) Mr Rathi considers that success in financial innovation has been enabled by regulatory open-mindedness, and that the FCA’s support for innovation has been matched by action to protect consumers and markets. As a result, there are products now on the market offering new ways to pay, insure and access advice; (ii) as part of continuing to support innovation the FCA will be taking forward the Kalifa Review’s recommendation for a Scalebox, including the creation of a regulatory “nursery”. This will create a period of enhanced oversight as those newly authorised firms develop and grow used to their regulatory status. The regulatory nursery will keep the FCA in close contact with firms immediately post-authorisation so that it can provide support and, where necessary, intervene earlier to steer firms in the right direction. The FCA will also shortly begin allowing year-round applications for the sandbox (as opposed to its past approach of allowing applications by cohort). The FCA also intends, in partnership with the Corporation of the City of London, to refine the digital sandbox, focusing specifically on sustainability; (iii) Mr Rathi reiterates his call for the Government to take action to provide better financial protection for consumers online, stating that ultimately, online search and social media firms need to take greater responsibility for their role in connecting consumers with these investment offers. He states that the FCA sees no reason why search engines or social media should be treated differently to a newspaper; and (iv) the FCA, in order to ensure that its internal processes allow for quick action, is currently reviewing how its Regulatory Decisions Committee (RDC) functions. The RDC is the final decision maker on contested enforcement, supervisory and authorisation interventions.
FOS appoints Nausicaa Delfas as Interim Chief Executive and Chief Ombudsman
On 19 April, the FOS announced it has appointed Nausicaa Delfas as its Interim Chief Executive and Chief Ombudsman. Ms Delfas joins the organisation from the FCA, where she is currently the Executive Director of International and Interim Chief Operating Officer. She will officially take up the role on 17 May and will be in post while the FOS’ board carries out an open recruitment process for a permanent Chief Executive and Chief Ombudsman.
FCA sustainability and technology hires
On 19 April, the FCA announced that it has appointed Sacha Sadan as Director of Environment Social and Governance. In the newly created role, Mr Sadan will develop and advocate for the FCA’s approach to sustainable finance domestically and internationally. He will lead the development of policy that will help ensure the long-term safety and soundness of firms, the proper functioning of markets and the protection of consumers. As part of its transformation programme to build a data-led regulator able to make fast and effective decisions, the FCA has also appointed Ian Alderton as Chief Information Officer and Ian Phoenix as Director, Intelligence and Digital. As CIO, Mr Alderton is driving a technological change programme designed to help the FCA regulate the 60,000 financial services firms under its remit. Mr Phoenix, will lead the enhancement of the FCA’s intelligence and surveillance capabilities, as well as lead digital work to disrupt harmful online activity.
AG Bobek considers EBA guidelines on product oversight and governance arrangements for retail banking products invalid
Advocate General (AG) Michal Bobek has given an opinion (dated 15 April) in which he considered whether the EBA acted within its powers when it adopted guidelines on product oversight and governance arrangements for retail banking products. The guidelines set out requirements for manufacturers and distributors when designing and bringing to market products offered and sold to consumers relating to certain provisions of CRD IV, PSD 1, 2EMD and the Mortgage Credit Directive (MCD). The Fédération bancaire française (French Banking Federation - FBF) claimed that the EBA’s guidelines are invalid due to the EBA’s lack of competence to issue such guidelines. As regards the directives which are specifically cited by the contested guidelines in relation to the latter’s scope of application, the AG noted that there is a clear mismatch between the subject matter of those acts and that of the guidelines. While the guidelines have set out specific ‘rules’ that concern product governance, the subject matter of the relevant provisions of the legislation all relate to corporate governance. He therefore found that the EBA could not lawfully adopt guidelines on the governance of banking products. The fact that the guidelines aim at protecting consumers does not alter that conclusion.
BCBS work programme and strategic priorities for 2021-22
On 16 April, BCBS published its work programme and strategic priorities for 2021-22. The work programme focuses on three key themes: (i) Covid-19 resilience and recovery: as the pandemic and economic crisis continue to unfold, BCBS’ work related to Covid-19 will continue to form a core part of its work programme. This includes the ongoing monitoring and assessment of risks and vulnerabilities to the global banking system. Where deemed relevant, BCBS stands ready to deploy additional policy and/or supervisory measures to mitigate these risks. BCBS is conducting an evaluation of the initial “lessons learned” from the Covid-19 crisis with regards to the Basel III standards, and intends to finalise an interim report in Summer 2021, to be followed by subsequent updates; (ii) horizon scanning and mitigation of medium-term risks and trends: BCBS will pursue a forward-looking approach to identifying, assessing and mitigating medium-term risks and structural trends to the banking system. This includes work related to the ongoing digitalisation and disintermediation of finance, climate-related financial risks, and the impact on banks' business models resulting from a "low-for-long" interest rate environment; and (iii) strengthening supervisory coordination and practices: BCBS will pursue a range of initiatives aimed at strengthening supervisory coordination and practices, with a focus on the role of artificial intelligence / machine learning in banking and supervision, data and technology governance by banks, operational resilience, and the role of proportionality in bank regulation and supervision. BCBS has also marked a clear end to the Basel III policy agenda. Going forward, BCBS’ Basel III-related work will focus on: (a) monitoring the full, timely and consistent implementation of these standards by its members; and (b) completing an evidence-based evaluation of the effectiveness of these reforms.