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Key Regulatory Topics: Weekly Update 16 – 22 December 2021

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In a week that that has led to one of the longest weekly updates ever, it is fair to say that 2021 has ended with a “bang” in terms of publications. We wish you all a restful and healthy festive break.


Please see the Markets and Markets Infrastructure section for ESMA’s statement and report on the conclusions from its assessment of systemically important CCPs established in the UK and of the risks they may pose to the financial stability of the EU.

Please see the Payment Services and Payment Systems section for a reminder from the EPC with regards to the measures that SEPA payment scheme participants should have implemented as of 1 January 2021, due to the end of Brexit transition period.


Please see the Markets and Markets Infrastructure section for the FCA’s announcement that it will extend its temporary measures on the requirement for firms to issue 10% depreciation notifications to investors for a further 12 months until 31 December 2022.

PRA inventory of senior manager responsibilities under SM&CR

On 16 December, the PRA published an inventory of senior manager responsibilities. The inventory responds to the feedback in the ‘Evaluation of the SM&CR’ report that it would be useful to have an inventory of references to senior manager responsibilities made in PRA publications that are not directly related to individual accountability. The inventory summarises a number of instances where the PRA has called on firms through supervisory statements or other documents to assign responsibility for managing particular risk issues to one or more Senior Management Function holders (or other senior personnel). The PRA states that the inventory will be updated periodically, but it does not replace or amend any PRA publication, nor does it remove the need to review relevant PRA publications. Stakeholders should continue to refer to the original publications or the PRA Rulebook, and should not regard the inventory as an exhaustive list.

Strengthening accountability webpage


EBA guidelines on delineation and reporting of available financial means of deposit guarantee schemes

On 17 December, the EBA finalised its guidelines on the delineation and reporting of available financial means (AFM) of deposit guarantee schemes (DGSs). The purpose of the guidelines is to ensure that only funds that credit institutions originally contributed to a DGS fund, or that stem indirectly from such contributions, such as recoveries, will count towards reaching the target level of said DGS fund. Conversely, funds that stem directly or indirectly from borrowed resources should not count towards the target level. These clarifications aim at preventing a situation whereby a DGS could meet the target level by taking out a loan, instead of raising contributions from the industry. The guidelines follow up on the recommendations from the EBA Opinion on DGS funding and uses of DGS funds published on 23 January 2020, ahead of any future review of the DGSD. The final guidelines clarify that AFM are comprised of two subsets: (i) qualified AFM (QAFM) – funds stemming directly or indirectly from contributions of DGS member institutions; and (ii) other AFM – funds, which are not QAFM, including borrowed funds that stem from liabilities such as loans, and hence do not count towards reaching the target level of the DGS fund. The guidelines will extend the reporting requirements from DGSs to the EBA to reflect the clarified concept of AFM, qualified AFM (QAFM) and other AFM. They also introduce new reporting requirements of DGSs to the EBA, most notably the reporting of outstanding liabilities of DGSs and high-level information on alternative funding arrangements that are in place. Compared to the draft guidelines published on the final guidelines, the EBA: (a) replaced the approach on the allocation of recoveries to QAFM and other AFM with an approach that permits two alternatives; (b) simplified the treatment of investment income with regards to QAFM; (c) clarified the treatment of loans between DGSs; and (d) included loans between DGSs in the reporting requirements and excluded unclaimed repayments. The guidelines apply from 30 March 2022.

Press release


Financial crime

JMLSG revises guidance on monitoring customer activity and consults on syndicated lending revisions

On 20 December, the JMLSG published revisions to the monitoring customer activity section of its AML/CFT guidance for the financial services sector. It has also published a clarification to Part II Sector 16 of the guidance, which concerns correspondent banking relationships. The new text has been submitted to HMT for approval. The JMLSG has also began consulting on proposed revisions to its syndicated lending guidance. It proposes to insert a new paragraph on customer due diligence by lenders. The deadline for comments is 17 January 2022.

Press release

Monitoring customer activity

Correspondent banking relationships

Syndicated lending proposal

EBA final draft RTS on central AML/CFT database

On 20 December, the EBA published final draft regulatory technical standards (RTS) on a central AML/CFT database, as mandated under Article 9 of the EBA Regulation. The central AML/CFT database will contain information on material AML/CFT weaknesses in financial sector operators that competent authorities have identified. It will also contain information on the measures competent authorities have taken in response to those material weaknesses. The draft RTS specify when weaknesses are material, the type of information competent authorities have to report, how information will be collected and how the EBA will analyse and disseminate the information contained in the database. They also set out the rules necessary to ensure confidentiality, the protection of personal data and the effectiveness of the database. The EBA will use this database to inform its view of ML/TF risks affecting the EU’s financial sector. It will also share information from this database with competent authorities as appropriate, support them at all stages of the supervisory process and, in particular, if specific risks or trends emerge. The EBA will submit the draft RTS to the EC for approval. Once approved, the RTS will be directly applicable in all Member States. The EBA plans for the database to start receiving data in Q1 2022.

Press release

Final report

EBA revised guidelines on risk-based approach to AML/CFT supervision

On 16 December, the EBA revised its guidelines on the characteristics of a risk‐based approach to AML/CFT supervision, and the steps to take when conducting supervision on a risk‐sensitive basis. The amendments address the key challenges for supervisors when implementing the risk-based approach and take into consideration changes in the EU legal framework and new international guidance by the FATF and BCBS on this topic. In summary, the revised guidelines: (i) emphasise the need for a comprehensive risk assessment at a sectoral and sub-sectoral level to support competent authorities’ identification of those risk areas that require more intense supervisory attention; (ii) explain different supervisory tools available to competent authorities and provide guidance on selecting the most effective tools for different purposes; (iii) emphasise the importance of a robust follow-up process and set out different aspects that competent authorities should consider when determining the most effective follow-up action; (iv) provide further guidance on the implementation of a robust supervisory strategy and plan, to ensure that competent authorities allocate their supervisory resources according to the risk exposure of subjects of assessment under their supervision; (v) clarify competent authorities’ obligations as regards the AML/CFT supervision of groups; (vi) highlight the importance of cooperation among competent authorities and between competent authorities and other stakeholders. In particular, the guidelines recognise that supervisory cooperation is important not only when supervising cross-border groups, but also in respect of domestic groups and subjects of assessments; and (vii) provide further guidance on how competent authorities can determine the type of guidance needed within the sector and how to communicate this guidance in the most effective manner. The revised guidelines will be translated into the official EU languages and national authorities will then have two months to report whether they comply. The revised guidelines will apply three months after publication of the official language versions, when they will repeal and replace the original 2016 version of the guidelines. Alongside the revised guidelines, the EBA has published a factsheet on AML and CTF supervisory colleges and a factsheet on its approach to monitoring the functioning of these colleges.

Press release


Colleges factsheet

Approach to monitoring colleges factsheet

EBA guidelines on cooperation and information exchange between prudential and AML/CFT supervisors and FIUs

On 16 December, the EBA finalised its guidelines setting out how prudential supervisors, AML/CFT supervisors and financial intelligence units (FIUs) should cooperate and exchange information in relation to AML/CFT, in line with provisions laid down in the CRD. The guidelines set out general provisions and practical modalities for the cooperation and information exchange while respecting the autonomy of the supervisors/units respective roles. The requirements apply domestically and on a cross-border basis, regardless of the institutional setting of the authorities. In particular, the guidelines facilitate and support the cooperation and information exchange throughout the supervisory life cycle covering authorisations of new institutions, on-going supervision including the risk assessment, and, where relevant, the imposition of supervisory measures and sanctions, including the withdrawal of the authorisation. The guidelines apply from 1 June 2022.

Press release



Please see the Fund Regulation section for an update to ESMA’s Q&As on the application of the AIFMD, as to whether managers of undertakings investing in crypto-assets are subject to the AIFMD.

Council of the EU MiDLT final compromise text

On 21 December, the Council of the EU published the final compromise text of the proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology (MiDLT), having reached a provisional agreement with the EP. The text will now be formally adopted by the Council and the EP, at which point it will be published in the OJ. It will enter into force 20 days later and apply nine months after this date.

Press release

MiDLT final compromise text

Fund regulation

Please see the Sustainable Finance section for the FCA’s policy statement and final rules relating to enhancing climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers.

Delegated Regulation amending PRIIPs KID RTS published in OJ

On 20 December, Commission Delegated Regulation (EU) 2021/2268 amending the regulatory technical standards (RTS) laid down in Commission Delegated Regulation (EU) 2017/653 as regards the underpinning methodology and presentation of performance scenarios, the presentation of costs and the methodology for the calculation of summary cost indicators, the presentation and content of information on past performance and the presentation of costs by packaged retail and insurance-based investment products (PRIIPs) offering a range of options for investment and alignment of the transitional arrangement for PRIIP manufacturers offering units of funds referred to in Article 32 of PRIIPs Regulation as underlying investment options with the prolonged transitional arrangement laid down in that Article, was published in the OJ. Among other things, the Delegated Regulation sets out: (i) new methodologies underpinning the calculation of appropriate performance scenarios and a revised presentation of these scenarios, as well as standards for information on past performance that needs to be provided by some investment funds; (ii) revised summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs; (iii) a modified methodology underpinning the calculation of transaction costs; and (iv) modified rules for PRIIPs that offer a range of options for investment. The Delegated Regulation shall enter into force on the 20th day following that of its publication in the OJ (9 January 2022). It shall apply from 1 July 2022. However, Article 1, point 13 shall apply from 1 January 2022.

Delegated Regulation

Quick fix amendments to PRIIPS Regulation and UCITS Directive published in OJ

On 20 December, Regulation (EU) 2021/2259 amending the PRIIPs Regulation as regards the extension of the transitional arrangement for management companies, investment companies and persons advising on, or selling, units of UCITS and non-UCITS, and Directive (EU) 2021/2261 amending the UCITS Directive as regards the use of key information documents (KIDs) by management companies of UCITS, were published in the OJ. The legislation extends the transitional arrangement exempting companies from the requirement to provide retail investors with a KID until 31 December 2022. The amendment to the UCITS Directive also specifies that a KID should be considered as satisfying the requirements applicable to key investor information. The legislation entered into force on 21 December, the day after their publication in the OJ.



ESMA updates Q&As on application of UCITS Directive

On 17 December, ESMA updated its Q&As on the application of the UCITS Directive. ESMA has added: (i) two new questions with regards to issuer concentration: (a) on how securities issued by certain issuers (for example, sovereign issuers) under Article 54(1) are treated; and (b) where a UCITS has a hedged share class in a different currency, whether unrealised FX profits and losses should be counted towards the net asset value of the hedged share class and be taken into account when calculating the counterparty risk limit under Article 52(1); and (ii) as to whether advance notice for the marketing of new share classes of UCITS is required where the host and home Member States have already been notified for cross-border marketing.


ESMA updates Q&As on application of AIFMD

On 17 December, ESMA updated its Q&As on the application of the AIFMD, with a new Q&A as to whether managers of undertakings investing in crypto-assets are subject to the AIFMD. ESMA states that collective investment undertakings raising capital from a number of investors to invest in crypto-assets in accordance with a defined investment policy for the benefit of those investors will qualify as an AIF. As the AIFMD does not provide for a list of eligible or non-eligible assets, AIFs may in principle invest in any traditional or alternative assets as long as the AIFM can ensure compliance with the AIFMD. However, more specific investment and risk diversification requirements for AIFs investing in cryptoassets as well as limitations regarding the target investors of such AIFs may exist at national level. ESMA notes that it is important to assess on a case-by-case basis and that market participants and NCAs should pay attention to the guidance provided in the ESMA guidelines on key concepts of the AIFMD. ESMA reminds market participants and investors of the high risks involved in investments in crypto-assets.


ESAs update Q&As on PRIIPs KID

On 17 December, the ESAs updated its Q&As on the key information document (KID) requirements for packaged retail and insurance-based investment products (PRIIPs), as laid down in Commission Delegated Regulation (EU) 2017/653. The new Q&As relate to: (i) the application of Article 15(2) to different holding periods; (ii) market risk assessment: product categories; (iii) performance scenarios for category 1 PRIIPs; (iv) list of costs of PRIIPs other than investment funds; and (v) presentation of “total costs”.


Markets and markets infrastructure

Please see the FinTech section for the publication of the final compromise text of the proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology, after the Council of the EU reached provisional agreement with the EP.

Please see the Sustainable Finance section for the FCA’s policy statement and final rules containing changes to the listing rules to extend climate-related disclosure requirements to standard listed companies, together with new guidance for premium listed companies.

ESMA report on CRA market share calculation

On 22 December, ESMA published a report on the credit rating agency (CRA) market share calculation. This report lists the registered CRAs and types of credit ratings they issue, together with a calculation of CRAs’ revenues from credit rating activities and ancillary services at group level. It is intended to assist issuers and related third parties in meeting their obligation under Article 8d of the CRA Regulation that requires those that intend to appoint two or more CRAs to rate an issuance or entity, to consider appointing at least one CRA with no more than 10% of the total market share in the EU.


FCA extends temporary measures on 10% depreciation notifications

On 21 December, the FCA announced that it will extend its temporary measures on the requirement for firms to issue 10% depreciation notifications to investors (COBS 16A.4.3 UK) for a further 12 months until 31 December 2022. The FCA explains that the measures were put in place to help support firms during the market volatility linked to Covid-19 and the end of the Brexit transition period. It notes that findings from the Wholesale Markets Review have indicated support for removing or amending the requirement in the future and therefore the temporary measures will be extended whilst HMT and/or FCA policy work is concluded. During this period, the FCA won’t take action for breach of COBS 16A.4.3 UK for services offered to retail investors provided that the firm has: (i) issued at least one notification in the current reporting period, indicating to retail clients that their portfolio or position has decreased in value by at least 10%; (ii) informed these clients that they may not receive similar notifications should their portfolio or position values further decrease by 10% in the current reporting period ; (iii) referred these clients to non-personalised communications, perhaps made available on public channels, that outline general updates on market conditions (these could contextualise potential drops in portfolio or position value to help consumers meet their objectives, rather than making impulse decisions about their investments); and (iv) reminded clients how to check their portfolio value, and how to get in touch with the firm. For services offered to professional investors, the FCA will not take action for breach of COBS 16A.4.3 UK, provided that firms have allowed professional clients to opt-in to receiving notifications.


FCA extends temporary approach on supervision of commodity derivatives position limits

On 20 December, the FCA published a statement on the supervision of commodity derivatives position limits. The FCA refer to their December 2020 Supervisory Statement, which set out its approach to operating the MiFID markets regime after the end of the EU withdrawal transition period and in light of the potential constraints on market functioning due to the Covid-19 crisis. Until 1 January 2022, the FCA did not intend to take supervisory or enforcement action for positions that exceed limits where the position is held by a liquidity provider to fulfil its obligations on a trading venue. The FCA notes that so far, it has found no evidence of adverse effects from this relief. In light of the speech given by John Glen MP, Economic Secretary to the Treasury, on 23 November, which supported the continued use of this supervisory approach, the FCA confirm that it will extend this approach while the scope of the regime is being considered under HMT’s Wholesale Market Review. The FCA will review and reconsider its approach if there are indications of market abuse. The FCA expects firms to make their own assessment of whether the positions they take are positions resulting from their actions as a liquidity provider. Firms do not need to notify it of these assessments. However, the FCA states that it may ask a firm to explain its assessment at any time, such as when it breaches a position limit. The position should not be any larger than necessary to enable the firm to fulfil its role as a liquidity provider. The FCA will expect a firm to reduce its positions if it reports a breach and it is not able to show that it is engaged in genuine liquidity provision.


BCBS, CPMI and IOSCO extend call for comments on margining practice during March 2020

On 20 December, the BCBS, CPMI and IOSCO announced that it was extending the deadline for comments on its consultative report on margining practices during the March 2020 market turmoil until 26 January 2022. The report, which is part of the FSB’s work programme to enhance the resilience of the non-bank financial intermediation sector, looks at margin calls in March and April 2020, margin practice transparency, predictability and volatility across various jurisdictions and markets, as well as market participants’ liquidity management preparedness.

Press release

Critical Benchmarks (References and Administrators’ Liability) Act 2021

On 17 December, the Critical Benchmarks (References and Administrators’ Liability) Act 2021 was published. The Act supports the orderly wind-down of critical benchmarks. It enables the effective operation of the powers granted to the FCA under the Financial Services Act 2021 to oversee the wind-down of a critical benchmark. In particular, it provides legal certainty as to how contractual references to a critical benchmark should be treated where the FCA exercises powers under the BMR to provide for the continuity of an unrepresentative critical benchmark. It also grants an immunity to the administrator of a critical benchmark that is designated under Article 23A of the BMR where the administrator acts in accordance with specific requirements imposed upon it by the FCA. The Act came into force immediately.


FMSB draft statements of good practice for trading platform disclosures

On 17 December, the FMSB published a draft statement of good practices for trading platform disclosures. The FMSB explains that given the significant increase in the use of trading platforms in fixed income, currencies and commodities (FICC) markets, as well as increasing platform diversity due to technological change, disclosures play a key role in allowing market participants to understand trading practices and policies across different platform types and have access to sufficient information to understand how their orders or trade requests interact with other platform users and/or liquidity providers. The statement aims to promote consistency of key information disclosures as to how platforms operate irrespective of their regulatory classification. It builds on certain existing regulatory requirements and policy initiatives impacting platform operators and users, including relevant aspects of MiFID II and the FX Global Code. Such requirements and initiatives relate to both the operation and governance of trading platforms, and the obligations on trading platform participants. The deadline for comments on the draft statements is 25 February 2022.

Draft Statement

EC adopts Delegated Regulation on supervision of approved publication arrangements and reporting mechanisms under MiFIR

On 17 December, the EC adopted a Delegated Regulation supplementing MiFIR by specifying criteria for derogation of the principle that approved publication arrangements (APAs) and approved reporting mechanisms (ARMs) are supervised by ESMA. The EC explains that Regulation (EU) 2019/2175, grants ESMA, from 1 January 2022, direct authorisation and supervisory powers over data reporting services providers, except for those ARMs and APAs that, by way of derogation from MiFIR on account of their limited relevance for the internal market, are subject to authorisation and supervision by a competent authority of a Member State. Article 2(3) of MiFIR gives the Commission power to adopt a delegated act on this derogation. The criteria take account of: (i) the extent to which the services are provided to investment firms authorised in one Member State only; (ii) the number of trade reports or transactions; and (iii) whether the ARM or APA is part of a group of financial market participants operating cross border. The Council of the EU and the EP will now scrutinise the Delegated Regulation. It will enter into force and apply on the third day following that of its publication in the OJ.

Delegated Regulation

ESMA updates Q&As on SFTR data reporting

On 17 December, ESMA updated its Q&As on SFTR data reporting. ESMA has added a new question explaining that in the case of the Overview report, trade repositories should calculate and express the aggregate positions in SFTs in their EUR equivalent value, irrespective of whether a position captures SFTs featuring the same or different currencies.


ESMA updates Q&As on CSDR

On 17 December, ESMA updated its Q&As on implementation of CSDR. ESMA has amended a question in its section on settlement instructions sent by CCPs in relation to how a CCP sending a settlement instruction stemming from the netting of transactions executed in various trading places should populate such a field with the ‘place of trading’. ESMA has also added a new question on participants’ settlement efficiency as to which settlement fails should be taken into account when calculating a participant's rate of settlement efficiency in accordance with Article 39(2) of the regulatory technical standards on settlement discipline.


ESMA regulatory approach to CSDR settlement discipline regime

On 17 December, ESMA published a statement to clarify the practical implementation of the EU CSDR settlement discipline regime. The CSDR settlement discipline regime is scheduled to start applying on 1 February 2022, however the co-legislators have agreed on an amendment to CSDR, to be introduced via the Proposal for a Regulation on a pilot regime for market infrastructures based on distributed ledger technology (MiDLT), which will allow ESMA to propose a later start date for the CSDR buy-in regime, while keeping the date of application of the penalties and reporting requirements unchanged. However, the adopted text of MiDLT is not expected to enter into force ahead of 1 February 2022. To avoid potential additional costs linked to any additional later change of the systems and processes of market participants implementing these measures, ESMA expects national competent authorities (NCAs) not to prioritise supervisory actions in relation to the application of the CSDR buy-in regime. Further with regards to the requirement in the Short Selling Regulation that CCPs include a buy-in regime in their operating rules, which is meant to be repealed upon application of the CSDR buy-in regime, ESMA expect NCAs to encourage CCPs to continue applying the buy-in rules currently implemented by them until the application of the revised CSDR buy-in regime.

Press release


ESMA assessment of systemically important UK CCPs

On 17 December, ESMA published a statement and report on the conclusions from its assessment of systemically important (Tier 2) CCPs established in the UK and of the risks they may pose to the financial stability of the EU. The report identifies three clearing services, one provided by LCH Ltd and two by ICE Clear Europe Ltd, as being of substantial systemic importance for EU financial stability and posing risks that may not be fully mitigated under the current EMIR regulatory framework. It concludes that the costs and risks of derecognising these services would outweigh the benefits to the EU at this time. The assessment nonetheless identified important risks and vulnerabilities in connection with a continued recognition of these clearing services due to all three clearing services having dominant market shares in one or more EU currency denominated products. Furthermore, insufficient supervisory powers, particularly in crisis events and including in the context of a Tier 2 CCP recovery or resolution, may hamper EU authorities’ access to timely information and the possibility to intervene effectively. The report includes four sets of policy measures as a response to identified risks and vulnerabilities: (i) considering appropriate incentives for reducing the size of EU exposures to Tier 2 CCPs; (ii) revising the comparable compliance framework; (iii) expanding ESMA’s supervisory and crisis management toolbox; and (iv) enhancing cooperation with UK authorities on CCP recovery and resolution. ESMA has also published the ESRB’s response to its consultation on the report, in which the ESRB confirmed that it agreed with ESMA's main findings. ESMA’s findings will also provide important input to the EC’s decision regarding the extension of its temporary equivalence decision for UK-based Tier 2 CCPs in early 2022.

Press release

Report part 1

Report part 2


ESRB response

Technical Standards (Electronic Reporting Format) (No 2) Instrument 2021

On 17 December, the FCA published the Technical Standards (Electronic Reporting Format) (No 2) Instrument 2021, which makes changes to the UK Transparency Directive European Single Electronic Format (TD ESEF) Regulation, together with the response to its consultation on the instrument (These were published as part of Handbook Notice 94, which we have summarised in our update below). These changes allow issuers to select from a wider range and more recent versions of International Financial Reporting Standard taxonomies to meet their obligations to ‘mark up’ (or tag) their annual financial statements under Disclosure Guidance and Transparency Rules (DTR) 4.1.14R and Article 4 of the UK TD ESEF Regulation. Issuers can choose between taxonomies for tagging their financial statements for the 2021 financial year: (i) the core taxonomy currently in PRA rules (2019 version of the ESEF taxonomy); (ii) the ESEF 2020 taxonomy (ESEF 2021 is yet to be adopted in EU law); and (iii) 2 versions of the UKSEF taxonomy issued by the FRC (2021 and 2022 taxonomy suites). Additionally, all issuers, including those incorporated overseas, who use UKSEF to meet their mandatory tagging obligations under Article 4 may mark up other parts of their annual financial report using tags contained in the broader range of taxonomies issued by the FRC. The FCA has also made some consequential changes to the TD ESEF Regulation to allow for differences in the technical specifications and filing rules associated with the different permitted taxonomies. The instrument came into effect immediately.


Handbook Notice 94

ISDA new fallbacks for additional IBORs

On 16 December, ISDA published a new set of fallbacks for derivatives referenced to certain interbank offered rates (IBORs) not covered by ISDA’s initial fallbacks rollout earlier this year. The new fallbacks cover IBORs in India (MIFOR), Malaysia (KLIBOR), New Zealand (BKBM), Norway (NIBOR), the Philippines (PHIREF) and Sweden (STIBOR), ensuring a robust replacement based on risk-free rates would automatically take effect if any of those benchmarks permanently ceases to exist. ISDA has published a supplement to the 2006 ISDA Definitions plus a new version of the 2021 ISDA Interest Rate Derivatives Definitions to enable parties to include the fallbacks into new derivatives transactions from today. The December 2021 Benchmark Module of the ISDA 2021 Fallbacks Protocol has also been published to allow firms to incorporate the fallbacks into all legacy derivatives contracts with counterparties that also adhere to the protocol. That module is effective immediately, and other modules covering additional IBORs may be published in future. The documents are available through ISDA’s ‘benchmark reform and transition from LIBOR InfoHub’.

Press release

December 2021 Benchmark Module

Benchmark reform and transition from LIBOR InfoHub

ESMA on supervision of clearing and derivative trading obligations post benchmark transition

On 16 December, ESMA issued a statement on the implementation of the changes to the clearing obligation (CO) and derivative trading obligation (DTO) in light of the benchmark transition. ESMA clarifies the situation in which its proposed draft regulatory technical standards (RTS) on the CO and DTO will not enter into force in time for the transition to alternative benchmarks of EONIA or LIBOR-based OTC derivative contracts by the end of 2021. The draft RTS are currently subject to endorsement by the EC and will then be under review by the EP and the Council. As EONIA, GBP and JPY LIBOR are due to cease by the end of the year, and in view of the communication to stop referencing USD LIBOR as soon as practicable and in any event by 31 December, ESMA does not expect the liquidity criteria for the CO and the DTO to be met for OTC IRD classes referencing EONIA, GBP, JPY and USD LIBOR beyond the end of the year. ESMA encourages national competent authorities to take a risk-based approach to their supervisory tasks and not to prioritise their supervisory actions in relation to the CO and DTO for certain interest rate derivative classes from 3 January 2022. ESMA recommends voluntary clearing of derivative classes that will be included in the scope of the CO ahead of its start date.

Press release


ESMA 2021 annual report on application of waivers and deferrals

On 16 December, ESMA published its annual report on waivers and deferrals for equity and non-equity instruments covering the year 2020. The report includes an analysis based on waivers for which ESMA issued an opinion to the competent authority. It also provides an overview on the use of waivers and the application of the deferral regime in the EEA for trade transparency under MiFIR. Overall, ESMA observed no major change in market microstructure and waivers and deferrals regimes remain an integral part of the EEA market structure, specifically for ETFs and the bond market. The large in scale waiver is the most used and shares and exchange-traded funds are the instrument type for which waivers are requested most frequently. Consistent with 2019, ETFs are the instruments with the highest percentage of "dark" trading with respect to the overall volume traded in those instruments. The application of the discretionary deferral regime across all non-equity instruments by competent authorities continues resulting in a patchwork of national approaches across the EEA. The withdrawal of the UK from the EU at the end of 2020 meant that this was a transitional year, and in order to take a forward-looking approach ESMA did not include UK data for 2020 in the report. Wherever possible, a comparison with the UK and with last year’s findings were included in the report, to reflect the UK’s impact on EEA markets prior to Brexit.

Press release


FSB 2021 global monitoring report on non-bank financial intermediation sector

On 16 December, the FSB published a report on developments in the non-bank financial intermediation (NBFI) sector, up to end-2020. The main findings include: (i) total global financial assets exhibited strong growth in 2020, mainly driven by banks and central banks, which grew at their highest rate since the 2008 global financial crisis. In contrast to the trend over the past decade, the NBFI sector grew less than the banking sector and the sector’s share of total financial assets declined; (ii) despite the substantial volatility in financial markets during the first half of 2020, measures of vulnerability in NBFI appeared broadly stable when comparing 2020 to 2019. Largely unchanged measures of credit intermediation, maturity and liquidity transformation and leverage highlight the rapid response and impact of official sector intervention in the wake of the March 2020 market turmoil; and (iii) data availability and quality continue to evolve, and there is scope for further improvements to better capture vulnerabilities in NBFI. As part of its work programme to enhance the resilience of the NBFI sector, the FSB will consider further enhancements to the annual monitoring exercise in light of the Covid-19 experience.


Payment services and payment systems

EPC reminder on implications of Brexit for all SEPA payment scheme participants

On 21 December, the EPC published a reminder with regards to the measures that SEPA payment scheme participants should have implemented as of 1 January 2021. The EPC explains that due to Brexit, the UK is a third country under the EU Funds Transfer Regulations and therefore additional information is required to be sent with payments into/from the UK. The EPC has been notified that some EEA-based SEPA payment scheme participants are not complying with the extra information requirements, notably regarding the need to provide the full address of the originator/debtor. The EPC urges all SEPA payment scheme participants concerned to complete as soon as possible the identification of their customers with incoming and outgoing cross-border SEPA transactions involving both a UK and an EEA payment account, and to ensure that all customers concerned provide the necessary extra SEPA transaction data.


PSR extends Specific Direction 8

On 17 December, the PSR extended Specific Direction 8, which requires LINK to do all it can to fulfil its commitment to maintain the broad geographic spread of free-to-use ATMs. It will now remain in place until end of March 2022. The PSR will consider the feedback to its October consultation before deciding whether to issue an entirely new specific direction.

Press release

Specific Direction 8a

PSR response to consultation on lowering risks to delivery of NPA

On 16 December, the PSR published its response to its consultation on lowering risks to the successful delivery of the New Payments Architecture (NPA), as well as the revised Specific Directions (SD) 2 and 3. Three substantive changes are highlighted by the PSR: (i) it changed the SD2 reporting requirements so that Pay.UK must submit a plan for developing the Bacs strategy to the PSR by 31 March 2023 and then submit subsequent reports on progress within nine months of the previous report; (ii) it moved the SD3 compliance deadline to 1 July 2026 (rather than 1 April as originally proposed) to provide for some additional contingency given there is less certainty about the baseline plan upon which the deadline is based; and (iii) it reinstated provisions in SDs 2 and 3 that allow the PSR to amend the compliance deadlines for those directions recognising that with a programme of the size and scale of the NPA, factors outside of Pay.UK’s direct control could arise that mean it is unable to meet these deadlines. The changes implemented as a result of the new SDs 2 and 3 come into force on 1 January 2022 and the PSR states that it will carefully monitor Pay.UK’s compliance with the requirements of the updated directions.

Response paper

Press release

Prudential regulation

SRB approach to CRR discretion on leverage and MREL calibration

On 22 December, the SRB announced that it will monitor regulatory changes related to competent authorities’ discretion to temporarily exclude certain exposures to central banks from the calculation of an institution’s total exposure measure (i.e. leverage amount), due to the effects that it may have on the calibration of the final MREL targets and compliance with the requirements on 1 January 2024. This temporary measure was used by the ECB in response to Covid-19 and banks may benefit from the measure until end of March 2022. The SRB explains that it will monitor whether competent authorities will deem it necessary to extend or not the measure beyond March 2022 and the impact in the computation methodology of the leverage amount that might lead to consequences for the final MREL targets. If needed, the SRB will take corrective actions in the annual MREL setting by re-calibrating the final targets on the basis of changed leverage amounts and requirements. In practice, this means that if the relief is not extended, the SRB will re-calibrate MREL targets based on the leverage amount including central bank exposures. The monitoring of compliance with the build-up towards the final MREL targets will also take this into account.


ITS on supervisory reporting and disclosures of investment firms published in OJ

On 22 December, Commission Implementing Regulation (EU) 2021/2284 laying down implementing technical standards (ITS) for the application of the IFR with regard to supervisory reporting and disclosures of investment firms. The ITS specify the templates, reporting dates and definitions relating to the supervisory reporting and disclosure requirements for investment firms under IFR. The provisions on disclosures and reporting reflect mandates in Articles 49(2) and 54(3) respectively of the IFR. The Implementing Regulation will enter into force on 10 January 2022, the 20th day following its publication.

Implementing Regulation

PRA 2021 list of UK G-SIIs

On 21 December, the PRA published its 2021 list of Global Systemically Important Institutions (G-SIIs), their respective sub-categories, applicable scores and G-SII buffers. The three G-SIIs identified are HSBC Holdings Plc, Barclays Plc and Standard Chartered Plc. The G-SII buffer rates will apply from 1 January 2023 and the list will be updated annually.

CRD webpage

FCA reminds non-CRR firms of notification deadline under TP7 MIFIDPRU

On 21 December, the FCA published an IFPR newsletter to remind FCA investment firms (including BIPRU, exempt CAD firms, local firms and exempt commodities firms) and their parent undertakings who have not been subject to the UK CRR definition of capital and that wish to count their existing instruments as own funds for the purpose of MIFIDPRU 3, to notify the FCA via Connect no later than 1 January 2022. The FCA notes that for groups that intend to use the group capital test (including groups that will be relying on the deemed permission under MIFIDPRU TP 3.3R), each GCT parent undertaking that is not currently subject to the UK CRR definition of capital will need to make this notification (see MIFIDPRU 3.7.4R and MIFIDPRU TP 7.4R). The FCA explains that the benefit to firms and parent undertakings of this notification is that if the instruments meet the relevant conditions and the FCA has been notified of that fact by no later than 1 January 2022, the firm or parent undertaking will not require separate permission from it to classify their pre-MIFIDPRU capital instruments as own funds under MIFIDPRU 3.


EBA consults on RTS on performance-related triggers in STS on-balance-sheet securitisations

On 20 December, the EBA began consulting on draft regulatory technical standards (RTS) specifying and, where relevant, calibrating the minimum performance-related triggers for simple, transparent and standardised (STS) on-balance-sheet securitisations that feature non-sequential amortisation. With the purpose of standardisation, the amended Securitisation Regulation sets out that sequential amortisation shall be applied to all tranches of STS on-balance-sheet securitisations. However, as a derogation, STS on-balance-sheet securitisation might feature non-sequential amortisation to avoid disproportionate costs of protection, as long as some minimum performance-related triggers determine the application of sequential amortisation. This will ensure that tranches providing credit protection have not already been amortised when significant losses occur at the end of the transaction. The draft RTS further specify the minimum backward and forward-looking triggers, and set out that, for two of them, their level should be determined by the parties involved in securitisation transactions, as they are transaction specific and depend on the assessment made by the parties of the riskiness of the underlying exposures at inception. However, the RTS establish a level for the additional backwards-looking trigger to ensure for all STS on-balance-sheet securitisations featuring a non-sequential amortisation that under no circumstances the credit enhancement of the retained senior tranche falls below a certain threshold, in comparison with that at origination, as a result of the amortisation of the protected tranches. The deadline for comments is 28 February 2022.

Press release


EBA final draft RTS package on reclassification of investment firms as credit institutions

On 20 December, the EBA published a package of two final draft regulatory technical standards (RTS) regarding: (i) the reclassification of investment firms as credit institutions; and (ii) the provision of information for the effective monitoring of credit institution thresholds. Article 8a of CRD IV, which was introduced by the IFD, specifies the triggers for when a systemically important investment firm must seek authorisation as a credit institution. Broadly, the trigger is that the average of the firm's monthly total assets, calculated over a period of 12 consecutive months on a solo consolidated basis, is equal to or exceeds EUR 30 bn. The draft RTS cover areas relevant for the calculation and implementation of the EUR 30 bn threshold, including the accounting standards for the determination of asset values, the methodology for implementing the solo and the group test, as well as the procedure to calculate the total assets on a monthly basis and the treatment of assets belonging to European branches of third-country groups. The EBA states that particular consideration was given to the scope and corresponding methodology for the calculation of the total assets to be compared with the EUR 30 bn threshold and the draft RTS have undergone subsequent amendments to enhance the comparability of treatment for all undertakings relevant for the threshold in accordance with the regulatory framework. The second set of draft RTS specify harmonised reporting requirements to provide competent authorities with the tools for carrying out the ongoing monitoring of the EUR 30 bn threshold. The draft RTS contain a set of templates in order to assist competent authorities in verifying the relevant information. They will be submitted to the EC for endorsement following which they will be subject to scrutiny by the EP and the Council before being published in the OJ. They are expected to apply from June 2022, subject to the legislative process being concluded in time.

Press release and Annexes

RTS on reclassification

RTS on monitoring of thresholds

EBA final draft ITS on supervisory reporting requirements regarding COREP, asset encumbrance, ALMM and G-SII reporting

On 20 December, the EBA published final draft implementing technical standards (ITS) amending the ITS on supervisory reporting as regards COREP, asset encumbrance, additional liquidity monitoring metrics (ALMM) and G-SII reporting. Proportionality was a key consideration in the proposed changes, making reporting requirements better suited to the size and risk of the institutions. In particular, the EBA has introduced the necessary amendments that will exempt small and non-complex institutions from reporting several liquidity metrics, including the concentration of funding by product type, the funding price for various lengths of funding, information on roll-over of funding, as well as more granular data on asset encumbrance. The EBA also implements simplifications for medium-sized institutions, which will be exempted from reporting liquidity metrics on roll-over of funding. The EBA also introduced some changes to reflect amendments to the prudential framework and bring the reporting up to date in the light of changing user needs. The reporting on securitisation has been amended to implement the changes to the prudential requirements brought by the Capital Markets Recovery Package. With respect to the reporting on own funds and own funds requirements, the EBA introduced some minor amendments to obtain a deeper understanding of institutions’ use of the option to exempt certain software assets from the deduction from own funds. Furthermore, the definition of the level of asset encumbrance has been amended. Regarding the reporting of information for identifying G-SIIs and assigning G-SII buffer rates, the EBA has expanded the scope of application of the reporting obligation, to include standalone entities that meet the relevant criteria, and not only banking groups The draft ITS will be submitted to the EC for endorsement before being published in the OJ. The first reference date for the application of the ITS is expected to be 31 December 2022. The expected implementation period for the proposed changes is one year. The final draft ITS are part of the 3.2 reporting framework release, and the technical package will be published in the Q1 2022.

Press release

Final report

FCA to consult in 2022 on approach to firms subject to Dual-regulated firms Remuneration code

On 17 December, the FCA announced plans to consult in 2022 to clarify its approach for firms subject to the Dual-regulated firms Remuneration Code. This is in response to the PRA’s policy statement and new rules in relation to the identification of material risk takers (we have covered this item below). These changes include the revocation of the onshored PRA version of Commission Delegated Regulation (EU) No 604/2014 and insertion of the provisions of the revised Commission Delegated Regulation (EU) 2021/923 (MRT Regulation) into the Remuneration Part of the PRA Rulebook. Until the FCA consults on similar changes, there will be minor divergences in the regulators’ respective requirements. In any areas of inconsistency, the FCA consider a firm operating in compliance with the approach in the PRA’s policy statement, to also be operating in compliance with FCA requirements on MRT identification.

FCA dual-regulated firms webpage

EBA consults on amending ITS on mapping of ECAIs for securitisation positions

On 17 December, the EBA began consulting on draft implementing technical standards (ITS) amending Implementing Regulation (EU) 2016/1801 on the mapping of External Credit Assessment Institutions’ (ECAIs) credit assessments for securitisation in accordance with the CRR. The CRR amendments brought by the new Securitisation Framework have made it necessary to update the mapping tables accordingly. Following the amendments to Chapter 5 of the CRR, a hierarchy of approaches was set out to calculate capital requirements for positions in a securitisation, whereby institutions using the Securitisation External Ratings Based Approach shall calculate risk-weighted exposure amounts based on credit quality steps (CQSs) set out in the CRR. The amended Regulation reflects 18 CQSs for long-term external credit assessments, which ensures enhanced granularity and risk sensitivity with respect to the approaches previously considered in the Regulation. In addition, since the adoption of the Implementing Regulation, one additional ECAI has been established in the EU with methodologies and processes in place for producing credit assessments for securitisation instruments, two existing ECAIs have extended their credit assessments to cover securitisations, and ESMA has withdrawn the registration of an ECAI. These changes have been reflected in the mapping tables accordingly. The EBA also published individual draft mapping reports illustrating how the methodology was applied to produce the mappings. The deadline for comments is 31 January 2022.

Press release


EBA consults on amending ITS on benchmarking of internal models under CRD

On 17 December, the EBA began consulting on amendments to the Implementing Regulation for the 2023 benchmarking of internal approaches used in credit risk and market risk: (i) for credit risk, no changes are proposed with respect to the portfolio’s definition or data collection templates. However, in order to improve further the data collection and benchmarking analysis, some further clarifications are included in the instructions; and (ii) for market risk, in order to keep the exercise updated and informative for supervisors, the set of instruments is proposed to be extended. The proposal is to add a more complex set of instruments, that could provide additional information and analysis insights to supervisors and banks. For IFRS 9, no changes to existing templates are envisaged. The deadline for comments is 18 February 2022.

Press release


SRB MREL checklist on reported liabilities and sign-off form

On 17 December, the SRB published a checklist on reported liabilities, to be used by resolution reporting officers as a guide when filling out each quarterly reporting on MREL/TLAC under Article 1(a) of Commission Implementing Regulation (EU) 2021/763. It lists eligibility criteria and conditions that should be met for reported liabilities to be considered MREL eligible. The SRB has also published a sign-off form, which should be signed in line with Principle 1.1, indent 5 of the SRB’s Expectations for Banks confirming that procedures and controls were put in place to ensure that the reported data in the quarterly reporting correspond to liabilities that meet the eligibility criteria in the legislation (SRMR, BRRD, CRR). The sign-off form should be submitted to the relevant National Resolution Authority, starting with the quarterly reporting with reference date 31 December.

Press release


Sign-off form

PRA policy statement on identification of material risk takers under remuneration regime

On 17 December, the PRA published a policy statement on the identification of material risk takers (MRTs) for the purposes of its remuneration regime. It also contains the PRA’s final policy: (a) amendments to the Remuneration Part of the PRA Rulebook, in relation to the criteria for identifying (MRTs) and relevant definitions; (b) revocation of the PRA version of Commission Delegated Regulation (EU) No 604/2014 (MRTs Regulation); (c) updated Supervisory Statement (SS) 2/17 ‘Remuneration’, which reflects the rule changes and the amended process for excluding an employee identified as an MRT solely based on the quantitative criteria; and (d) consequential changes to the Certification Part of the PRA Rulebook, and to SS28/15 ‘Strengthening individual accountability in banking’, which mirror the Remuneration Part changes. The PRA has made two changes to the policy as consulted on: (i) deletion of the reference to the MRTs Regulation in the Certification Part of the PRA Rulebook, which has been replaced with the relevant, updated rules in the Remuneration Part; and (ii) minor clarification that the threshold referred to in Rule 3.3A(2) of the Remuneration Part should be calculated on an individual entity basis and not at the consolidated level. The changes to the Remuneration Part of the PRA Rulebook take effect on 30 December 2021, and are required to be implemented by firms from the first performance year which starts after this date. The changes to the Certification Part of the PRA Rulebook take effect on 1 March 2022.

Policy statement

Webpage and Appendices

ESRB report on overlap between capital buffers and minimum requirements

On 17 December, the ESRB published a report on the overlap between capital buffers and minimum requirements for EU credit institutions. The report investigates the interaction between capital buffers and the minimum requirements under all three frameworks: (i) the risk-weighted framework aimed at increasing the resilience of banks; (ii) the leverage ratio requirement; and (iii) the resolution framework. It explores regulatory constraints that may prevent banks from using their buffers and that may also render authorities’ decisions to release capital buffers ineffective. It assesses the interactions and resulting constraints, first from a conceptual perspective and then by performing empirical analyses of the scope and magnitude of overlaps and then suggests options for mitigating the overlap issue and indicated their implications. The ESRB’s conclusions include that: (a) when buffers overlap with parallel minimum requirements, buffer usability is inevitably constrained; (b) for the macroprudential framework to be effective, facilitating the usability of buffers within the multi-restrictive framework is important, not least when a macroprudential authority releases a buffer. The results show that, on aggregate, buffer usability will already be limited once the leverage ratio becomes binding in mid-2021, and that usability may further decline once MREL requirements apply in 2022 and 2024; (c) fully Basel-compliant implementation of the output floor might help to increase buffer usability, although it is unlikely to eliminate all overlaps entirely. Other forthcoming regulatory changes, such as Pillar 2 leverage ratio requirements will also affect the nature and magnitude of interactions between buffers and other parallel requirements; (d) the macroprudential review undertaken by the EC in 2022 and the ongoing review of the crisis management and deposit insurance framework offer a window of opportunity for legal changes. The ESRB has provided an interactive simulation tool to authorities to allow them to investigate the interaction between buffers and minimum requirements.


Council compromise text and ECON draft report on proposed Daisy Chain regulation

On 21 December, the Council of the EU published its compromise text for the proposal for a regulation amending the CRR and BRRD as regards the prudential treatment of global systemically important institution (GSII) groups with a multiple point of entry resolution strategy and a methodology for the indirect subscription of instruments eligible for meeting the minimum requirement for own funds and eligible liabilities (otherwise known as the Daisy Chain proposal). The proposal aims to address resolution related issues that have been identified since the revised TLAC/MREL framework became applicable in 2019. Discussions will now be launched with the EP with a view to agreeing the final text. Also, on 17 December, ECON published its draft report, setting out suggested amendments to the draft EP legislative resolution.

Council press release

Council proposed text

ECON Draft report

EBA next EU-wide stress test in 2023

On 17 December, the EBA announced that the next EU-wide stress test would be carried out in 2023, in line with the decision to aim for a biennial exercise. In 2022, the EBA will perform its regular annual transparency exercise.

Press release

EBA feasibility study on integrated reporting system under CRR

On 16 December, the EBA published a report on a 2 year feasibility study of an integrated reporting system to collect statistical, resolution and prudential data, under Article 430C CRR. The report also contains the EBA’s view on what a feasible integrated reporting system could look like and provides further details the feasible immediate next steps to move towards integration and what areas require further investigation and deep analysis. The EBA’s view is that a more integrated reporting system could be feasible to achieve, considering that the level of integration depends on the fulfilment of necessary conditions, including a positive balance of costs and benefits, as well as an adequate allocation of resources, adequate level of integration of data definitions in the common data dictionary, the implementation of necessary changes to the legal framework (relating to substantive reporting requirements, i.e. other than competent authorities’ powers) and stakeholder buy-in. The report found that: (i) there is wide agreement that a common data dictionary for prudential, statistical and resolution data collection is a key building block of an integrated reporting system; (ii) there is support to further explore the possibility to increase the level of granularity

for the reporting requirements, where feasible, in the context of an integrated reporting system, as a way to further increase the efficiency of the reporting process, but not as a pre-condition to having such a system; (iii) there is support to further assess the possibility to create a Central Data Collection Point; (iv) there is a need for strong governance arrangements; and (v)developing a more integrated system should be done mindful of the progress already achieved in the area of integration so far. Any change should be implemented gradually so as not to disrupt the current processes. The EBA is committing to further investigate and cooperate with relevant stakeholders to leverage the work already done and the lessons learned from the different initiatives as an endeavor towards a common vision of integrated reporting across prudential, resolution and statistical reporting. This work will contribute to the EU supervisory data strategy.

Press release




Sustainable finance

EC and Platform on Sustainable Finance information on sustainability disclosures under Article 8 of Taxonomy Regulation

On 20 December, the EC and the EU Platform on Sustainable Finance provided supplementary information in order to help users of the EU taxonomy with disclosures required under Article 8 of the Taxonomy Regulation: (i) a non-binding FAQ on how financial and non-financial undertakings should report Taxonomy-eligible economic activities and assets in accordance with Article 8; (ii) to supplement the FAQ, the Platform’s considerations on voluntary information as part of Taxonomy-eligibility reporting; and (iii) the EU taxonomy NACE alternate classification mapping, which maps selected industry classification systems and how they relate to the description of economic activities in the EU Taxonomy Climate Delegated Act. The Taxonomy Climate Delegated Act sets out technical screening criteria for economic activities that contribute to climate adaptation and climate mitigation. The mapping table is intended to help users identify their activities among those described in the Taxonomy Climate Delegated Act. Activity references and descriptions in the table do not prevail over activity descriptions in the Delegated Act.


Platform considerations

NACE alternate classification mapping

FCA policy statements, final rules and guidance on climate-related disclosures

On 17 December, the FCA published two policy statements on: (i) enhancing climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers (PS 21/24); and (ii) Listing Rules changes to extend climate-related disclosure requirements to standard listed companies (PS21/23), accompanied by new guidance for premium listed companies, together with final amendments to the Listing Rules. Issuers of standard listed shares, or equity shares represented by certificates (global depositary receipts) will need to include a statement in their annual financial reports setting out whether their disclosures meet the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). If they do not, they will need to explain why. FCA-regulated asset managers and asset owners - including life insurers and pension providers - will have to disclose how they take climate-related risks and opportunities into account in managing investments. They will also have to make disclosures about the climate-related attributes of their products. Changes to the FCA’s proposed amendments are set out in the policy statements. The FCA plans further engagement on extending the regime to issuers of standard listed debt (and debt-like) securities under LR 17 with a view to a related consultation. The FCA intends to publish a feedback statement on ESG integration in UK capital markets, focusing on the sustainable debt market and the role of ESG data and rating providers, in H1 2022. The FCA plans further engagement on extending the regime to issuers of standard listed debt (and debt-like) securities under LR 17 with a view to a related consultation. The FCA intends to publish a feedback statement on ESG integration in UK capital markets, focusing on the sustainable debt market and the role of ESG data and rating providers, in H1 2022. The rules set out in both policy statements will come into effect from 1 January 2022. The rules for asset managers and asset owners (PS 21/24) will have a phased implementation with the rules initially applying to the largest firms from the 1 January 2022 and coming into effect for smaller firms one year later. The first public disclosures will need to be made by 30 June 2023.

Press release

PS 21/23

PS 21/24

Other developments

Joint Statement from UK-US Financial Regulatory Working Group

On 17 December, the UK-US Financial Regulatory Working Group published a statement following their fifth meeting. The Working Group meeting focused on seven themes: (i) international and bilateral cooperation. The participants discussed the importance of co-operation to preserving the global portfolio management delegation model, to promoting the free flow of cross-border data and to other areas; (ii) sustainable finance. In particular, participants provided an update on the development of climate-related financial disclosures and the management of climate-related financial risks, consistent with their respective mandates. In addition, participants discussed ongoing cooperation on international efforts to address climate change issues within the financial sector, including the G20 Sustainable Finance Roadmap, and the FSB’s Roadmap for Addressing Climate-Related Financial Risk; (iii) crypto-assets and CBDCs, (iv) benchmark transition, taking stock of ongoing efforts in relation to the LIBOR transition, market developments, the risks associated with newly created credit-sensitive rates, and transition implications for other jurisdictions; (v) cross-border regimes. Participants welcomed the SEC’s recent order granting substituted compliance in connection with UK security-based swap dealers; (vi) critical third-party providers, particularly those that provide services across borders and across sectors; and (vii) banking and insurance. The next Working Group meeting is expected to take place in the spring of 2022.


FCA Handbook Notice 94

On 17 December, the FCA published Handbook Notice 94, which sets out changes to the FCA Handbook made by the FCA board on 25 November and 16 December. The Handbook Notice reflects changes made by eighteen Handbook instruments: (i) Perimeter Guidance (Payment Services) Instrument 2021; (ii) Technical Standards on Strong Customer Authentication and Common and Secure Methods of Communication (Amendment)(No 2) Instrument 2021; (iii) Claims Management (Fees Rules) Instrument 2021; (iv) Claims Management Instrument 2021; (v) Conduct of Business Sourcebook (Final Nudge to Pensions Guidance) Instrument 2021; (vi) Listing Rules (Primary Market Effectiveness) (Dual Class Share Structure) Instrument 2021; (vii) Listing Rules (Primary Markets Effectiveness) (Minimum Market Capitalisation) Instrument 2021; (viii) Listing Rules (Primary Markets Effectiveness) (Shares in Public Hands) Instrument 2021; (ix) Listing Rules (Primary Markets Effectiveness) (Reform and Modernisation) Instrument 2021; (x) Conduct of Business Sourcebook (Amendment) Instrument 2021; (xi) Technical Standards (Markets in Financial Instruments Regulation) (Best Execution) Instrument 2021; (xii) Listing Rules (Disclosure of Climate-Related Financial Information) (No 2) Instrument 2021; (xiii) Disclosure of Climate-Related Financial Information (Asset Manager and Asset Owner) Instrument 2021; (xiv) LIBOR Transition Miscellaneous Instrument 2021; (xv) Value Measures Reporting and Monitoring (Amendment) Instrument 2021; (xvi) Technical Standards (Electronic Reporting Format) (No 2) Instrument 2021; (xvii) UK Emission Trading Scheme (No 2) Instrument 2021; and (xviii) Supervision Manual (Reporting No 17) Instrument 2021.

Handbook Notice 94

UK and Australia sign Free Trade Agreement

On 16 December, the UK and Australia signed a new Free Trade Agreement (FTA), which had been agreed in principle in June. It is the first new trade agreement signed by the UK since Brexit. The FTA is broad in scope and includes, for example, commitments relating to: (i) the eventual elimination of almost all tariffs on trade in goods (subject to rules of origin requirements); (ii) market access for trade in services and investment, and sectoral commitments on financial services, telecommunications and other areas; (iii) special visa arrangements for business travel and young persons; (iv) digital trade and cross-border data flows; (v) access to public procurements; (vi) regulatory standards, including in relation to labour and environmental standards and competition policy. The parties will now need to complete their domestic requirements to ratify and implement the FTA before it can enter into force. The UK government has explained in its draft explanatory memorandum that it will need to introduce new primary and secondary legislation to implement the agreement.

Press release

Collection of Documents

Islamic Finance Services Board adopts standard on core principles for Islamic finance regulation

On 16 December, the Islamic Finance Services Board (IFSB) published a new standard on core principles for Islamic finance regulation. The new standard contains a comprehensive set of 25 core principles that apply to payment systems, CSDs, securities settlement systems, CCPs and trade repositories (collectively, FMIs) that undertake Shariʿah-compliant activities and transactions. The standard is designed and issued to ensure that the essential infrastructure supporting global Islamic financial markets are robust and effectively address the specificities of Islamic finance and contribute to the stability of the industry. The new standard complements the CPSS-IOSCO Principles for Financial Market Infrastructure and its associated Disclosure Framework and Assessment Methodology, and addresses, in particular, those areas in which these either do not deal, or deal inadequately with the specificities of Islamic finance. It also takes into account lessons learned from the Covid-19 pandemic, particularly in areas relating to the operational resilience of FMIs.

Press release


CLLS response to FCA consultation on new approach to decision makers

On 16 December, the Regulatory Law Committee of the City of London Law Society (CLLS) published its response (dated 17 September) to the FCA's July consultation on issuing statutory notices and a new approach to decision makers. The CLLS’s key points include: (i) it disagrees with the FCA’s proposal that the Regulatory Decisions Committee (RDC) should no longer be retained for non-urgent decisions, such as authorisations, straight-forward cancellations, interventions and refusing an applications for individual approval. The CLLS is concerned that, without the RDC's involvement, individuals may not feel they have been given an opportunity to present their case and have their matters heard, particularly if they are not given the opportunity to make oral representations. The CLLS consider that the RDC is an important component of due consideration within the FCA, serving a quasi-independent function, to ensure that such decisions are made after due scrutiny and by people independent of the FCA executive; and (ii) concerning oral representations, the CLLS disagree with the proposal to only allow them in exceptional circumstances. Its primary concern is that authorisation and approval applications do not lend themselves well to a decision-making process that is entirely in writing. Oral representations could serve as a mechanism for the FCA to better ensure that it has all relevant facts and matters for its decisions – notably when those seeking to make representations are less experienced or able to address fully what may involve interpretations of complex matters. The interactive nature of oral representations can potentially speed up the process whereby the FCA obtains additional information where it is clearly needed for it to fulfil its public law responsibilities.