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Key Regulatory Topics: Weekly Update 17 - 22 July 2020

Our weekly update on key regulatory topics affecting the financial services sector.

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HMT on amending the transitional period for third country benchmarks under the UK BMR 

On 22 July, HMT published its policy statement setting out its rationale for extending the transitional period for third country benchmarks under the UK BMR from 31 December 2022 to 31 December 2025. This will allow UK supervised entities to continue using benchmarks provided by administrators located outside the UK in new financial contracts and instruments without these benchmarks being registered with the FCA. This prevents the risk of UK firms losing access to important benchmarks provided by non-UK administrators who are unable or unwilling to apply for continued market access through the existing third country regime under the UK BMR. HMT explains that as of June 2020, only a limited number of third-country benchmarks or administrators have come through the current EU BMR access routes. HMT will bring this measure forward at the next legislative opportunity. The Government will also consider and operationalise potential changes to ensure an appropriate third country benchmarks regime for the UK.

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ISDA published version 8 of Brexit FAQs

On 21 July, ISDA published the eighth version of its FAQs addressing the possible UK position post-Brexit. The following regulatory FAQs have been updated as of 30 June 2020: (i) Q16, Q16.1 and Q16.2 on access to the EU financial markets; (ii) Q17, Q18 and Qs 20-22 on EMIR; (iii) Q30 and Q31 on amendments to the ISDA Master Agreement and transfers of existing contracts; and (iv) Q32 on the EU BMR. 

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HoL EU Services Sub-Committee presses for clarity on future relationship in financial services

On 20 July, the House of Lords (HoL) EU Services Sub-Committee published a follow-up letter written to Economic Secretary to the Treasury, John Glen about UK-EU equivalence decisions, future UK-EU regulatory cooperation and the Government’s plans for financial services and the role for Parliament. The Committee set out a number of follow up questions to a discussion held with the Government, including: (1) the UK-EU equivalence decisions – when the Government’s own equivalence decisions are expected and whether these will only be published alongside the EU’s decisions, which are not expected until the autumn; (ii) how will the Government’s equivalence decisions process with the EU interact with their equivalence decisions with third countries and its forthcoming guidance document; (iii) how the voluntary framework mooted by Michel Barnier will differ from the structured dialogue being proposed by the Government and what limitations this would entail; and (iv) how the Government will ensure sufficient parliamentary scrutiny of the UK’s future regulatory framework and whether its consultation on the second phases of its financial service future regulatory framework review will outline specific proposals to enable parliamentary oversight. 

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City of London Corporation analysis of UK cross-border trade in services with Australia

On 20 July, the City of London Corporation published a report on UK cross-border trade in services with Australia. This report: (i) identifies policy areas where joint focus, either through free trade agreement negotiations or other trade tools such as mutual recognition agreements and regulatory dialogue, could address some of these common goals by seeking to understand the implications for UK based firms of the recent changes to the Australian licensing regime for foreign financial services providers; (ii) analyses the experiences of UK based firms doing business, or seeking to do business in Australia, in the fields of asset management, banking and payments; and (iii) addresses some crosscutting issues that have arisen out of interviews and which affect firms across a range of sectors. The report makes a number of recommendations, most importantly in relation to Australia’s new licensing regime which will significantly increase the compliance burdens and costs imposed on UK based firms – the report suggests that the UK government seek an exemption to the regime as part of wider trade negotiations or in absence of this opportunity, seek the effective operationalisation of the new regime for UK firms. 

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FCA update on end of ECD exclusion at the end of the transition period

On 17 July, the FCA, in a new webpage, provided an update as to what will change as a result of the end of the applicability of the Electronic Commerce Directive (ECD) exclusion in the UK at the end of the transition period. The ECD exclusion is on the basis that the host state regulator can rely on the regulation of the firm’s home state because both are within the same EEA regulatory framework. Following the end of the transition period, the ECD exclusion will fall away and EEA-based firms will no longer be able to use it to exempt themselves from UK regulation or from the UK Financial Promotion restrictions, or both, when providing online-only services into the UK market. The FCA advises EEA-based firms to consider whether they are affected by this change. The FCA advises affected firms wishing to continue doing new regulated e-commerce business in the UK to consider whether they require UK authorisation. Alternatively those wishing only to wind down their e-commerce business that falls within the exclusion, and that was entered into before the end of the transition period, will be able to do so under the provisions in Part 4 of the Electronic Commerce and Solvency 2 (Amendment etc) (EU Exit) Regulations 2019.

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FCA and ESMA confirm validity of MoUs on cooperation and information exchange at end of transition period

On 17 July, the FCA and ESMA released public statements confirming the validity of the previously agreed Memoranda of Understanding on cooperation and information exchange, which will come into effect at the end of the transition period. The MoUs were initially agreed in case the UK left the EU without a withdrawal agreement. In addition, ESMA urges financial market participants to finalise preparations and implement suitable contingency plans in advance of the end of the transition period. ESMA also confirms that it’s previously published Brexit statements, in particular ESMA’s general opinion to support supervisory convergence in the context of the UK withdrawing from the EU and sector-specific opinions, remain relevant and should continue to be followed.

FCA statement

ESMA statement


FCA consults on extending implementation deadlines for the Certification Regime and Conduct rules – Covid-19 

On 17 July, the FCA began consulting on extending the deadlines of a number of SM&CR related deadlines in order to keep them consistent with the already granted delay until 31 March 2021, for firms to have first assessed the fitness and propriety of their certified staff. The specific requirements that they are consulting on extending implementation deadlines until 31 March 2021 are: (i) the date the Conduct Rules come into force; (ii) the deadline for submission of information about Directory Persons to the FS Register; and (iii) changing references in the rules to the deadline for assessing Certified Persons as fit and proper. The FCA advises those firms that are able to certify staff and submit information about directory persons to the FS register before the new deadline to do so. The FCA will still publish details of certified employees of solo firms starting from 9 December 2020 on the FS Register as the FCA expects that this published information will be of immediate benefit to consumers and firms. The deadline for comments is 14 August. 

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FCA Feedback statement on intergenerational differences

On 22 July, the FCA published its feedback statement on its discussion on intergenerational differences in UK financial services. The feedback provided to the FCA included: (i) broad agreement with the 5 identified drivers and how the FCA suggested these might impact circumstances and needs - an ageing population, low interest rates, rising house prices, the changing nature of employment and changes to student funding; many respondents argued that financial services providers are developing products and services to meet changing needs, but that there is a problem with a lack of consumer and adviser awareness with others indicating that the industry could do more; (iii) respondents indicated that the lack of uptake of services that help consumers in making financial decisions was a key driver for harm, which, coupled with the fact consumers are increasingly responsible for key financial choices, exacerbates the negative consequences; and (iv) respondents felt public policy should play a role in improving financial literacy and awareness, calling on regulators to tackle unfair price discrimination in the market, particularly in relation to the loyalty penalty. The FCA will apply its project findings to their wider work in 2 ways: (i) responding to these project findings will form an important success measure for their delivery of the work sitting underneath the external priorities for work over the next 1-3 years in the Business Plan for 2020/21; (ii) using  future consumer and economic research to re-evaluate the financial circumstances and needs of different generations over time -  the findings will be used as a benchmark to reassess understanding of intergenerational differences over time through consumer and economic research. The FCA does not consider that it would be appropriate or proportionate to pursue bespoke remedies, including rule changes, in response to these findings.

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Outcome of Joint Committee of ESAs review of PRIIPs Key Information Document

On 21 July, the Joint Committee of the ESAs published a letter to the EC setting out the outcome of their review of the key information document (KID) for packaged retail and insurance-based investment products (PRIIPs). Following a consultation in October 2019, a final report was submitted to the three Boards of Supervisors of the ESAs in June 2020. The draft RTS was adopted at the EBA and ESMA Boards on the basis of qualified majority voting. At the EIOPA Board, although a large number of members agreed with the draft RTS, it did not receive the support of a qualified majority. Those Board members that did not support the RTS, generally argued that a partial revision of the PRIIPs Delegated Regulation is not appropriate at this stage, prior to a comprehensive review of Regulation (EU) No 1286/2014 as envisaged in Article 33 of the Regulation. A number of Board members also indicated that for investment funds, they would prefer the past performance graph from the UCITS key investor information document to be included in the PRIIPs KID itself, rather than in a separate publication. Given that the draft RTS was not adopted by the three ESA Boards, the ESAs are not in a position to formally submit an RTS to the EC. 

ESAs letter

Final draft report

HMT consultation on regulatory framework for approval of financial promotions

On 20 July, HMT began consulting on a proposal to amend the current process by which financial promotions by unauthorised firms are approved. HMT propose to establish a regulatory ‘gateway’, which a firm must pass through before it is able to approve the financial promotions of unauthorised firms. Any firm wishing to approve the financial promotions of unauthorised firms would first need to obtain the consent of the FCA. HMT have outlined two possible options: (i) restrict approval of the financial promotions of unauthorised firms through the imposition of requirements by the FCA; and (ii) specify the approval of financial promotions communicated by unauthorised persons as a ‘regulated activity’ under FSMA. The deadline for comments is 25 October. 

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Pleases see the other sections for product specific updates relating to Covid-19. 

Business and Planning Act 2020 receives Royal Assent

On 22 July, the Business and Planning Act received Royal Assent introducing measures to help the economy recover from Covid-19, which (amongst other areas) ensure Bounce Back Loans will be facilitated by disapplying unfair relationships provisions in the Consumer Credit Act 1974 for lending made under them - this permanent change will apply with effect from 14 May 2020, throughout the UK. 

Bill documents

Moratorium and restructuring plan process now available to co-op and community benefit societies

On 18 July, the Part A1 process allowing companies to obtain a moratorium and the Part 26A process allowing companies in financial difficulty to use the new restructuring plan process introduced by the Corporate Insolvency and Governance Act 2020 was made available, with some amendments, to co-operative and community benefit societies. The changes were made by the Co-operative and Community Benefit Societies and Credit Unions (Arrangements, Reconstructions and Administration) (Amendment) and Consequential Amendments Order 2020. The expedited passage of the regulations was deemed necessary due to the Covid-19 pandemic.

Statutory Instrument 

Explanatory memorandum

Financial crime

Please see our investigations insight blog for a post on senior management accountability in the Asia Pacific region. For many years, regulators across the globe have been extolling the importance of senior management accountability and an appropriate culture for financial institutions. In the Asia-Pacific region, the Securities Futures Commission (SFC) led the vanguard with the introduction of its Manager In Charge regime in 2017. This was followed by regulators in Australia and Singapore proposing their own regulatory regimes by which to impose accountability on senior management. Has Covid-19 and the need for governments to support sector economies put an end to this regulatory priority? Recent developments in the region suggest not.

Investigatory Powers Act 2016 (Commencement No. 12) Regulations 2020

On 22 July the Investigatory Powers Act 2016 (Commencement No. 12) Regulations 2020 came into force, bringing into force the remaining provisions of the Investigatory Powers Act 2016 (IPA). This includes: (i) removing the power of particular public authorities to obtain communications data outside of the IPA 2016 without the consent of the telecommunications operator or the postal operator holding the communications data; (ii) repealing  Chapter 2 of Part 1 of the Regulation of Investigatory Powers Act 2000 (RIPA), dealing with the acquisition, authorisation for and disclosure of communications data; (iii) amending the scope of the powers of the Investigatory Powers Tribunal (IPT) to investigate complaints relating to the conduct that may be permitted or required under Part 3 of the IPA; (iv) bringing into scope of the IPT, complaints about the giving, or purported giving, of a notice under section 49 of RIPA (notices requiring disclosure). 

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NCA annual report 2019/20

On 21 July, the National Crime Agency (NCA) published its annual report for 2019/20. This report details the NCA’s performance over the past year against the national priorities for serious and organised crime that are set out in the National Strategic Assessment, and the Agency’s operational priorities as agreed in the Annual Plan. With regards to money laundering, this year the NCA has improved its ability to respond to threats primarily through the first year of operation of the National Economic Crime Centre and through the Joint Money Laundering Intelligence Taskforce (JMLIT). During the year, as a direct result of JMLIT support: (i) 56 arrests were made; (ii) 3,740 bank customers had their accounts closed; and (iii) £3,398,776 in funds were restrained or seized. The NCA has been at the forefront of using new powers under the Criminal Finances Act 2017, including the continued use of Account Freezing Orders and Unexplained Wealth Orders. In the report the NCA also address the growing risk of fraud, now the most prevalent type of crime; and cyber-crime where the NCA is continuing to develop its understanding of attacks to better prevent potential assailants. 

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HMT consults on Economic Crime Levy

On 21 July, HMT began consulting on the introduction of an economic crime levy - the design principles of the levy, and how this levy could operate in practice, to ensure that it is proportionate and effective. The government believes it is fair that those whose business activities are exposed to money laundering risk pay towards the costs associated with responding to and mitigating those risks. The levy will complement other funding sources of the sustainable resourcing model, including a continuing public sector contribution. The levy aims to raise approximately £100 million per year from entities regulated for AML purposes and support reforms to the sustainable resourcing of economic crime, as outlined in the 2019 Economic Crime Plan. The government intends for the first set of levy payments to be made in 2022/23. However, this timeline is subject to the findings of this policy consultation and the time needed to develop the necessary collection infrastructure and go through the legislative process. The deadline for comments is 13 October. 

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Ireland and Romania ordered to pay penalties to EC for failing to transpose MLD4 

The ECJ has ruled on two applications brought by the EC in relation to the failure to adopt necessary measures to transpose MLD4 by the 26 June 2017 deadline. Ireland and Romania raised various arguments in their defence, including that the Commission's powers under Article 260(3) did not apply as it had not provided detailed statements of the reasons for its decisions, and that they had eventually fulfilled their obligations. The ECJ concluded that both Ireland and Romania had not adopted all the measures necessary to ensure that MLD4 was transposes and as a result must pay a lump sum of 2 and 3 million Euros respectively. 

EC v Ireland

EC v Romania


HMT begins independent Fintech Strategic Review

On 20 July, HMT launched a review into the UK’s financial technology industry to identify opportunities to support further growth in the sector. The intention of this review is to establish priority areas for industry, policy makers, and regulators to explore with five work-streams providing recommendations on: skills and talent, investment, national connectivity, policy, and international attractiveness. The review will be chaired by Ron Kalifa, with Innovate Finance and the City of London Corporation providing the secretariat. The review will aim to complete and report back to HMT at the start of 2021. 

Press release

Terms of reference

HMT consults on expanding financial promotions regime to unregulated cryptoassets

On 20 July, HMT began consulting on a proposal to expand the perimeter of the financial promotions regime to include certain unregulated cryptoassets. Currently, security tokens that fall within the regulatory perimeter of the RAO are captured by the FPO as “controlled investments”, and e-money tokens are regulated separately under Electronic Money Regulations 2011. Promotion of either is subject to the financial promotions regime. In order to bring the relevant activities into scope, the government proposes to include certain unregulated cryptoassets in the list of controlled investments, and to amend a number of the current controlled activities. Applying the financial promotions regime to too broad an array of cryptoasset activity could stifle innovation without a proportionate benefit to consumer protection. Therefore, the Government’s proposed definition includes only those cryptoassets that are both fungible and transferable. The Government therefore intends to amend the controlled activities to incorporate activities in relation to the buying, selling, subscribing for or underwriting of qualifying cryptoassets. The Government also proposes to add a new exemption to the FPO. The Government wishes to ensure that vendors merely offering to accept cryptoassets in exchange for their goods or services, and buyers merely offering cryptoassets to pay for goods or services, in the same manner as they would accept pound sterling payments, are not captured. The deadline for comments is 25 October. 

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Markets and markets infrastructure

Please see our section on Brexit for HMT’s policy statement on amending the transitional period for third country benchmarks under the UK BMR. 

Bloomberg Begins Publishing Calculations Related to IBOR Fallbacks

On 21 July Bloomberg and ISDA announced that Bloomberg Index Services Limited (BISL) has begun calculating and publishing fallbacks that ISDA intends to implement for certain key interbank offered rates (IBORs). ISDA will soon publish amendments to its standard interest rate derivatives definitions to incorporate these new fallbacks, which are adjusted versions of various risk-free rates (RFRs). Calculations published by BISL include the adjusted RFR (compounded in arrears), the spread adjustment and the ‘all in’ IBOR fallback rates for the following IBORs across various tenors: the Australian dollar Bank Bill Swap Rate, the Canadian Dollar Offered Rate, Swiss franc LIBOR, EURIBOR, euro LIBOR, sterling LIBOR, HIBOR, euroyen TIBOR, yen LIBOR, TIBOR and US dollar LIBOR.

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Council of the EU adopts new rules for crowdfunding platforms

On 20 July, the Council of the EU announced that it has adopted at first reading, new rules to improve the way crowdfunding platforms operate across the EU: (i) the proposed Regulation on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937; and (ii) the proposed Directive amending MiFID II, relating to crowdfunding. The new framework is part of the capital markets union's project which aims at providing an easier access to new financing sources. The new rules will cover crowdfunding campaigns of up to EUR 5 million over a 12 month period. Larger operations will be regulated by MiFID and the prospectus regulation. Reward- and donation-based crowdfunding fall outside the rules' scope since they cannot be regarded as financial services. The regulation now needs to be adopted by the EP at second reading before it can be published in the OJ and enter into force.

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ESMA opinion on assessment of pre-trade transparency waivers for equity and non-equity instruments

On 17 July, ESMA published an opinion on the assessment of pre-trade transparency waivers for equity and non-equity instruments under MiFIR. In the process of assessing the compliance of notified waivers with the MiFIR pre-trade transparency requirement for equity and non-equity instruments, ESMA noted a number of recurring issues and thus considers it necessary to provide guidance in this opinion. The opinion is meant as a clarification of the MiFIR requirements and does not create any new obligations for NCAs or market participants. The opinion covers issues relating to: (i) specific types of waivers, including large-in-scale, order management facility and negotiated transactions waivers; (ii) combinations of different types of waivers; and (iii) applying for pre-trade transparency waivers. The opinion, ESMA explains, replaces the guidance of the Committee of European Securities Regulators and ESMA’s opinions on waivers from pre-trade transparency under the MiFID I.

Press release


Payment services and payment systems

EC adopts legislative proposal for codified Regulation on cross-border payments

On 17 July, the EC adopted a legislative proposal for a new Regulation on cross-border payments in the EU. The purpose of this proposal is to undertake a codification of Regulation (EC) No 924/2009 on cross-border payments in the EU. The new Regulation will supersede the various acts incorporated in it whilst fully preserving the content of the acts being codified and hence does no more than bring them together with only such formal amendments as are required by the codification exercise itself. The proposed Regulation will now be considered by the Council of the EU and the EP, who will operate under the accelerated legislative process that applies to codification proposals. The EC intends for the new Regulation to enter into force on 20 April 2021. 

Legislative proposal


Prudential regulation

Please see our section on Sustainable finance for the FSB’s stocktake of financial authorities’ experience in including physical and transition climate risks as part of their financial stability monitoring. 

PRA policy statement for CP 3/20 – Chapter 8: Securitisation: Updates to Significant Risk Transfer

On 22 July, the PRA published its final policy for Chapter 8 of Consultation Paper (CP) 3/20 ‘Occasional Consultation Paper – March 2020’. The PRA received no responses to this chapter of the consultation, and has made no changes to draft policy. However, it is taking the opportunity to update a footnote reference to include the date Supervisory Statement 9/13 ‘Securitisation: Significant Risk Transfer’ is being updated. The policy changes will take immediate effect. The PRA will publish feedback and final policy for the other chapters at a later date, as responses are still being considered.

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PRA consultation on approach to new and growing banks

On 22 July, the PRA began consulting on it proposed approach to supervising new and growing, non-systemic UK banks. All the proposals are clarifications of the PRA’s current supervisory approach with the exception of: (i) proposed changes to the calculation of the PRA buffer for new banks; and (ii) setting expectations in relation to solvent wind down plans. The consultation proposes to: (a) create a new supervisory statement (SS); (b) reference the new SS in paragraph 5.25 of SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’; and (c) reference the new SS in paragraph 9.45 of the Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’. The purpose of the proposals is to: (1) help banks understand how and why PRA expectations increase as they grow; (2) clarify the expectations of a new and growing bank as it matures; (3) clarify that in a competitive environment it is normal to see both the entry and exit of banks (the PRA does not seek to operate a zero-failure regime and works with the Bank as resolution authority, if necessary, to ensure banks are able to fail in an orderly way, without threatening financial stability); and (4) communicate the PRA’s aim for banks to have positive regulatory relationships through open, constructive, and forward-looking communication. The PRA proposes that the amendments set out in this CP would take effect in the first half of 2021. The deadline for comments is 14 October. 

EBA study into ways to reduce reporting costs

On 22 July, the EBA launched a questionnaire addressed to all European banks and a call for case studies to collect evidence on reporting costs as well as industry views on ways to reduce such costs and make the supervisory reporting more efficient. The cost of compliance study focuses on: (i) understanding the actual reporting costs incurred by institutions in relation to supervisory reporting, and in particular in relation to the EBA implementing technical standards (ITS) on supervisory reporting; (ii) assessing the effects of a reduction of some specific reporting requirements on costs and supervisory effectiveness; and (iii) assessing whether the reporting costs were proportionate with regard to the benefits delivered. The final report to be developed by the EBA will include recommendations on how to reduce reporting costs by looking at both technological improvements and reducing some reporting requirements, where the costs outweigh the benefits. Responses to the qualitative questions are expected by 1 October, while responses to the quantitative questions as well as the submission of case studies are expected by 31 October.

Press release 

Explanatory note to exercise

General introduction to exercise

Introduction to questionnaire

Industry questionnaire 

Case studies note 

EBA consults on guidelines specifying the conditions for the substitution approach in the context of “tri-party transactions” for large exposures purposes

 On 22 July, the EBA began consulting on guidelines detailing the three conditions institutions should comply with when they decide to make use of the alternative treatment with regard to tri-party repurchase agreements facilitated by a tri-party agent. Under the alternative treatment, institutions can replace the total amount of the institution’s exposure to a collateral issuer due to tri-party repurchase agreements facilitated by a tri-party agent, with the full amount of the limits that the institution would instruct the tri-party agent to apply to securities issued by the collateral issuer. To conduct such a replacement, institutions must verify that the tri-party agent has in place appropriate safeguards to prevent breaches of the limits instructed by the institution and the NCA must not have expressed to the institution any material concerns. Another condition is that the sum of the limit instructed by the institution to the tri-party agent, and any other exposures of the institution to the collateral issuer does not exceed that set out in the CRR. The Guidelines specify the conditions and frequency for determining, monitoring and revising the limits that the institution would instruct the tri-party agent to observe. The Guidelines will apply from June 2021. The deadline for comments is 22 October.

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EBA consults on draft technical standards on default probabilities and losses given default for default risk model under the internal approach

On 22 July, the EBA launched a consultation on draft RTS on requirements that an internal methodology or external sources used under the internal default risk model are to fulfil for estimating default probabilities and losses given default under Article 325bp(12) of Regulation (EU) No 575/2013 (as amended by CRRII). Institutions using the internal model approach (IMA) to compute own funds requirements for market risk are required to compute additional own funds requirement using an internal default risk model for their positions in traded debt and equity instruments included in IMA trading desks. These draft RTS clarify the requirements to be met for the estimation of PDs and LGDs under the default risk model. In particular, the draft RTS specify that any internal methodology used to calculate PDs and LGDs under the default risk model should meet all requirements applied for the internal ratingsā€based approach. In addition, these RTS specify the requirements that external sources are to fulfil for their use under the default risk model, thus reflecting similar qualitative requirements as those applicable to an internal methodology. The deadline for comments is 22 October.

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Sustainable finance

FSB stocktake of financial authorities’ experience in including physical and transition climate risks as part of their financial stability monitoring

On 22 July, the FSB published a stocktake considering financial authorities’ experience of including climate-related risks in financial stability monitoring. Its findings include: (i) around three-quarters of survey respondents consider, or are planning to consider, climate-related risks as part of their financial stability monitoring; (ii) authorities also consider the implications of these risks for financial institutions with climate-related credit and market risks faced by banks and insurers appearing more advanced than that of other risks, or of risks faced by other types of financial institutions; (iii) work is hindered by a lack of consistent data on financial exposures to climate risks and difficulties translating climate change outcomes into changes in those exposures; and (iv) some authorities report having set out – or being in the process of setting out – their expectations as to firms’ disclosure of climate-related risks, though micro prudential supervision is still in its early stages. The FSB will conduct further work by October 2020 to assess the channels through which physical and transition risks could impact the financial system and how they might interact. Particular focus will be given to the potential amplification mechanisms and cross-border effects, and to prioritising channels that could materialise in the short-to-medium term. The FSB will also consider the scope for work to assess available data through which climate-related risks can be monitored, as well as any data gaps.

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EC adopts Delegated Regulations supplementing BMR on sustainable finance issues

On 22 July, the EC published the adopted texts of three Commission Delegated Regulations supplementing the BMR on the following sustainable finance issues: (i) setting out the explanation required to be included in the benchmark statement about how environmental; social and governance factors are reflected in each benchmark provided and published; (ii) lay down the minimum content of the explanation of how the key elements of the benchmark methodology reflect environmental, social and governance factors for each benchmark, with the exception of interest rate and foreign exchange benchmarks, as well as the standard format to be used.; and (iii) setting out the minimum standards that EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks should meet in order to be labelled as such, and laying down the transparency requirements on the methodology for both benchmarks. If neither the Council of the EU nor the EP object, the regulations will be published in the OJ and enter into force 20 days later.

Commission delegated regulation (i)

Commission delegated regulation (ii)

Commission delegated regulation (iii)

Other developments

EBA report on benchmarking of remuneration practices in EU banks 2017/18

On 22 July, the EBA published a report on benchmarking of remuneration practices in EU banks for 2017/18 and high earners data for 2018. The report’s findings include: (i) the number of high earners in EU banks receiving a remuneration of more than EUR 1 million increased slightly by 1.58% compared to 2017 and by 44.09% compared to 2010; and (ii) the average ratio of variable to fixed remuneration for all high earners increased from 127% in 2014 to 139% in 2018, with the observed remuneration levels of high earners reaching up to EUR 39 million. As in previous years, the report shows that remuneration practices within institutions were not sufficiently harmonised. In particular, the application of deferral and pay out in instruments differed significantly across Member States and institutions. The EBA notes that this is mainly due to differences in the national implementation of CRD that in many cases allow for waivers of these provisions when certain criteria are met. Following the amendments of CRD, which will apply as of the end of 2020, a higher degree of harmonisation is expected.

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FCA findings from 2019/20 assessment of remuneration policies and practices

On 22 July, the FCA published a letter sent to remuneration committee chairs setting out its findings from its 2019/20 assessment of remuneration policies, and how it will carry out this assessment in 2020/21. Overall the FCA saw firms continuing to embed conduct in their remuneration policies and practices through performance assessment measures, including conduct objectives and responding to misconduct by adjusting variable remuneration. The FCA focuses on: (i) accountability – the FCA will continue to ask firms how their firm’s remuneration policies reinforce healthy cultures, promote equality of opportunity and ensure that diversity and inclusion is embedded especially in the context of the current environment, in the midst of a pandemic; (ii) ex-post risk adjustments – the FCA found that in some cases firms were slow in concluding investigations into misconduct, failing to demonstrate how they aligned levels of adjustment with the findings; and (iii) diversity and inclusion – the FCA expects firms to consider the analysis from Gender and BAME pay gap reports, which provide a quantitative window into inequalities.

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FCA statement on fake financial services register website

On 22 July, the FCA made a statement that it is aware that there has been an attempt to reproduce its financial services register on a non-FCA website and that it is currently working to have the page taken down. The unofficial domain is

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HMT statement on changes to the FCA’s cancellation of authorisation process

On 20 July, HMT published a policy statement about intended changes to the FCA's process for cancelling firms' authorisations. The government intends to introduce a streamlined procedure to sit alongside the current one, which by itself is no longer deemed sufficient to allow the FCA to quickly remove authorisation where a firm is no longer carrying out FCA regulation activities. The government intends the new procedure to be triggered in situations such as where a firm fails to: (i) pay fees; (ii) file a return that it is required to submit; (iii) keep up to date its core information requirements; and (iv) respond to repeated FCA correspondence. Where any of the grounds are met, the FCA will be able to serve a first notice. If the firm does not respond within 28 days, including after a second notice is sent, the FCA will publish a notice on its website and on the firm's FCA register entry. One month after this, the FCA will cancel the firm's authorisation. The firm will be able to contact the FCA at any point during the process and in the unlikely occasion it is unable to, the new process will allow for authorisation to be restored where required. The new process will apply solely to solo-regulated firms. The government intends to take forward this measure when Parliamentary time allows. Whilst this is not a formal consultation, the government would welcome views on these intended changes.

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UK-Singapore 5th Financial Dialogue: joint communiqué

On 20 July, HMT published a joint communiqué, following the fifth UK-Singapore Financial Dialogue. The Dialogue enabled an exchange of views on stronger financial and economic cooperation between the two countries in a number of key areas: (a) green finance - views were exchanged on supervisory practices and climate stress testing, and potential collaboration discussed about opportunities in green finance solutions and ambitions for COP26.1; (b) cyber security - both parties are engaged in ongoing discussions to conclude an MOU by end-2020 to enhance cyber security collaboration; (c) cross-border data flows - both parties affirmed the importance of greater cross-border data connectivity, to ensure that financial institutions can aggregate, store, process, and transmit financial data across jurisdictions to support their risk and business decisions; (d) pandemic risk financing and insurance - as international financial centres with strong insurance sectors, both parties discussed the importance of strengthening financial resilience against pandemic risks in a Covid-19 world, and potential policy responses to the pandemic protection gap; and (e) regulatory cooperation -possible areas for enhanced collaboration in cross-border financial regulation were discussed. The next Financial Dialogue is expected to take place in London in 2021.

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FCA, PRA and BoE joint consultation on the Financial Regulators’ Complaints Scheme

On 20 July, the FCA, PRA and BoE began consulting on the Financial Regulators’ Complaints Scheme. The regulators are proposing a revised scheme: (i) using plain language to make it more accessible and (ii) with a more detailed description of their approach to ex-gratia compensatory payments (i.e. goodwill payments) to help complainants understand what they can and cannot expect from the Scheme. Overall, the regulators expect the revised Scheme to help them work more efficiently by reducing the time spent on explaining the Scheme and dispelling misunderstandings, and increasing the time spent investigating the merits of complaints. The deadline for comments is 14 September.

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