Skip to content

Key Regulatory Topics: Weekly Update 23 December 2021 – 6 January 2022

Headlines in this article

Related news and insights

Publications: 20 February 2024

FCA and PRA enforcement themes and trends 2023: a shake-up

Blog Post: 09 February 2024

Payment Systems Regulator finalises policy positions on Authorised Push Payments Fraud - What does this mean for Payment Service Providers?

Publications: 08 February 2024

2024: Regulation gets 'smart'?

Publications: 06 February 2024

Webinar - Ahead of the Curve: A changing payments landscape

In this period we bid farewell to 2021 and 24 LIBOR settings and welcomed 2022 and the application of a range of new prudential measures in the UK. It was, however, a relatively quiet period for the regulators. The FCA published a statement on the extension of the PRIIPs exemption for UCITS funds and in Europe, ESMA published final reports on appropriateness and execution-only requirements under MiFID II and guidelines on delayed disclosure under MAR in relation to prudential supervision.


Operation Resilience: the FCA and PRA’s new regime – 18 January 9.00-10.00am

On 31 March, the FCA and PRA’s new operational resilience regimes will enter force. These apply to a wide variety of firms, including banks, building societies, payments and electronic money institutions, and certain investment firms. In this session, we will take a look at the practical steps that firms should be taking, including identifying their important business services, setting impact tolerances and mapping the resources that underpin these. We will also consider some of the issues of interpretation presented by the new rules, as well as the implications for firm’s governance.

Register here.

FCA’s new Consumer Duty – 20 January 9.00-10.00am

The FCA’s new consumer duty requires firms and senior managers “to act to deliver good outcomes for retail customers”. Its significance will be marked by the introduction of a 12th Principle for Businesses and a suite of specific rules for firms (PRIN) and senior managers (COCON), with the FCA’s objective being to create ‘a significant shift in both culture and behaviour’ in firms. It seeks to impose wide ranging obligations on manufacturers and distributors (both widely defined) of products and services for prospective and actual retail customers. Bearing in mind the FCA’s wider transformation programme, this introduces a new opportunity for the FCA to intervene and take action against firms and individuals it considers to be falling short of the requisite standards. The latest consultation closes on 15 February 2022 and final rules will be published by 31 July 2022. Firms are expected to have until 30 April 2023 to fully implement the new duty. This seminar will cover the key components of the Consumer Duty, including the implications and practical considerations for firms’ approaches to governance, senior management accountability, product and proposition design and risk management.

Register here.

2022 – The year in regulation – 26 January 9.00-10.00am

Our annual financial services horizon scanning seminar will again provide an overview of upcoming and expected changes for UK firms. Partners from our UK team will consider developments including the latest MiFID Review and other financial markets regulation initiatives, resolvability assessments and operational resilience, the Banking Package, updates in relation to the regulation of digital assets and ongoing changes to the UK regulatory framework in light of Brexit.

Register here.


FCA update on temporary authorisation regime for DRSPs

On 5 January, the FCA reminded firms that the temporary authorisation regime for MiFID-authorised EEA DRSPs to provide a data reporting service in the UK ended on 31 December 2021. An updated list of authorised or verified DRSPs is available on the FCA’s website.



FCA updates webpage on cancelling a temporary permission

On 5 January, the FCA updated its webpage on cancelling a temporary permission for firms in the temporary permissions regime (TPR) or the supervised run-off (SRO) regime. The webpage distinguishes between: (i) firms that previously passported into the UK under Schedule 3 or Schedule 4 to FSMA and (ii) payments institutions, registered account information service providers and electronic money institutions that previously passported into the UK. Firms in the TPR or SRO that no longer have business which requires them to have UK permission can apply to the FCA to cancel their temporary/limited permission and leave the UK regulatory perimeter. However, firms should note that the process will vary significantly depending on the facts that apply to them and the FCA sets out further information for (i) firms that have or will close their UK business and want to exit the TPR; (ii) firms that want to exit the TRP but have UK business to run off; and (iii) firms in SRO that have closed their UK business and want to exit the SRO.


Financial crime

ESMA final report on review of MAR guidelines on delayed disclosure

On 5 January, ESMA published its final report on the amendment of the Market Abuse Regulation (MAR) guidelines on delayed disclosure in relation to prudential supervision. The Guidelines are adding certain cases to the list of legitimate interests of issuers for delaying public disclosure of inside information. The Guidelines also introduce clarifications on whether firms would be in possession of inside information in relation to institution-specific Supervisory Review and Evaluation Process (SREP) decisions, with particular reference to the Pillar 2 Capital Requirements (P2R) and Capital Guidance (P2G). The amended Guidelines clarify the following: (i) in case of redemptions, reductions and repurchases of own funds subject to supervisory authorisation, institutions have a legitimate interest to delay the disclosure of inside information until the prudential competent authority has authorised the transactions; (ii) there is a legitimate interest for the institution to delay the disclosure of the draft SREP decision informally communicated to an institution, until that decision becomes final following the completion of the decision-making process of the prudential competent authority; and (iii) in respect of the content of the SREP decisions, the P2R are expected to be considered as inside information and as highly likely to be price sensitive whereas P2G may only be inside information. Examples of situations where price sensitivity is expected are when: (a) the difference between the P2G and the institution’s level of capital is not minor and is likely to involve a major reaction by the institution, such as a capital increase; and (b) the institution’s P2G is not in line with market expectations, so a price impact can be expected. The Guidelines will be applicable 2 months after the publication of translations.

Final report

EBA opinion on ‘de-risking’

On 5 January, the EBA published an opinion on the detrimental impact of unwarranted de-risking and ineffective management of money laundering and terrorist financing risks, as well as the steps competent authorities should take to tackle this issue. De-risking refers to decisions taken by financial institutions not to provide services to customers in certain risk categories. De-risking can be a legitimate risk management tool but it can also be a sign of ineffective money laundering (ML) and terrorist financing (TF) risk management, with at times severe consequences. The EBA’s findings suggest that de-risking has a detrimental impact on the achievement of EU’s objectives, in particular in relation to fighting financial crime effectively and promoting financial inclusion, competition and stability in the single market. The EBA considers that its regulatory guidance on how to manage ML/TF risks, if applied correctly, should help avert unwarranted de-risking. Further, the EBA identified a number of steps competent authorities and the EC and co-legislators could take. The EBA: (i) encourages competent authorities to engage more actively with institutions that de-risk and with users of financial services that are particularly affected by de-risking, to raise mutual awareness of their respective rights and responsibilities; and (ii) advises the EC to clarify, in the Payment Account Directive (PAD), the interaction between AML/CFT requirements and the right to open and use a payment account with basic features, and to take advantage of the forthcoming review of the Payment Services Directive (PSD2) to ensure more convergence in the way payment institutions access credit institutions’ payment accounts services. The EBA is committed to following-up with competent authorities on the actions they have taken to tackle unwarranted de-risking going forward.


JMLSG amendments to ‘monitoring customer activity’ in its guidance

On 29 December, the Joint Money Laundering Steering Group (JMLSG) published amendments to Part I Chapter 5.7 (Monitoring customer activity) of its Guidance, together with a clarificatory amendment to Part II Sector 16 (first page). The new text is available under the “Revisions” tab under “Guidance”, and has been submitted to HM Treasury for Ministerial approval.

Press release



Please see the ‘Markets and Markets Infrastructure’ section for ESMA’s call for evidence on DLT Pilot Regime.

Fund regulation

ESMA publishes letter to EC on reverse solicitation

On 3 January, ESMA published a letter, dated 17 December 2021, from Verena Ross, Executive Director, to John Berrigan, Director General, Directorate-General for Financial Stability, Financial Markets and Capital Markets Union, on a request for support in relation to the report on reverse solicitation. It responds to the 24 September 2021 letter from John Berrigan to Natasha Cazenave, Executive Director, ESMA. ESMA was invited to ask National Competent Authorities (NCAs) for input on a number of questions relating to the use of reverse solicitation by asset managers and the impact on passporting activities. In the letter, ESMA: (i) explains that almost all NCAs have no readily available information on the use of reverse solicitation either via asset managers or investor associations. However, a couple of NCAs provided some interesting information on the extent to which reverse solicitation is used in their jurisdiction that allows ESMA to share some anecdotal evidence of the use of reverse solicitation within the Union. Unfortunately, in the absence of quantitative information for other Member States, it is difficult at this stage to draw any conclusion for the rest of the Union; (ii) in an attempt to obtain information on this practice, ESMA states that the EC may consider contacting directly market participants such as asset managers, depositories or account holders, possibly via national and European trade associations, which may have such information and, if not, could consult their members. ESMA is of the view that using the proportion of foreign investors in funds may not be an appropriate proxy for all jurisdictions, in particular for home jurisdictions from where funds are passported significantly across the Union. One solution could be to use the proportion of foreign investors from countries where funds are not notified for cross-border marketing but this information might be difficult to obtain; and (iii) regarding the possible extension of the notification portal referred to in Article 13(2) of the Regulation to enable the exchange of notifications of cross-border marketing between NCAs, ESMA confirms that this extension has been proposed for prioritisation in the context of the 2022 IT ESMA budget.

17 December letter

24 September letter

FCA statement on extension of PRIIPs exemption for UCITS funds

On 29 December, the FCA published an update for firms regarding PRIIPs RTS (Regulatory Technical Standards) Article 18 and related rules. As part of the Financial Services Act 2021, Parliament legislated to extend the UCITS exemption in the PRIIPs Regulation by 5 years – from 31 December 2021 to 31 December 2026. The FCA thus intends to make consequential amendments to the UK PRIIPs RTS and the associated Handbook guidance to reflect the new end date of the UCITS exemption in the UK’s PRIIPs Regulation. The required consequential amendments will focus on: (i) article 18 of the PRIIPs Regulatory Technical Standards onshored via the Commission Delegated Regulation (EU) 2017/653 legislation; (ii) COLL 4.7.1A G (1)(b); and (iii) COBS 13.1.1B G (1). The FCA does not propose to take enforcement action against firms for breach of Article 14(1) if they provide a UCITS key investor information document or a non-UCITS retail schemes key investor investment document in accordance with Article 14(2).


Markets and markets infrastructure

FCA finalises notices on changes to LIBOR as of end-2021

On 4 January, the FCA published a press release summarising the effect of the final notices in respect of the transition from LIBOR it released on 1 January, and provided an overview of the changes to LIBOR as of end-2021. The notices include: (i) a notice of permitted legacy use by supervised entities regarding Article 23C Benchmarks Regulation; (ii) a notice of requirements concerning Article 23D Benchmarks Regulation; and (iii) a notice of modifications, as well as an additional notice of proposed modifications, under Annex 4 Benchmarks Regulation. The notices are now all effective. The LIBOR settings that have ended are: (i) all euro and Swiss franc LIBOR settings; (ii) the overnight / spot next, 1-week, 2-month and 12-month sterling and Japanese yen LIBOR settings; and (iii) the 1-week and 2-month US dollar LIBOR settings. Further changes include: (i) from 1 January, Article 23A LIBOR benchmarks will be calculated in a way that does not rely on submissions from panel banks, called 'synthetic' LIBOR. These benchmarks may be used in all legacy contracts except cleared derivatives, as aligned with the November 2021 draft notice; (ii) in the sterling, Japanese yen, Swiss franc and euro LIBOR derivative markets, cleared contracts were converted to risk-free rates towards the end of 2021. Most uncleared derivative contracts in these currencies will also start using risk-free rates from 1 January, under industry-agreed fallback language adopted through the ISDA protocol; (iii) synthetic yen LIBOR will cease at the end of 2022. Availability of synthetic sterling LIBOR is not guaranteed beyond end-2022, so firms’ efforts to transition away from it should continue. The FCA also reminds market participants that new use of synthetic LIBOR is banned; and (iv) the remaining 5 US dollar LIBOR settings will continue to be calculated using panel bank submissions until mid-2023. However, new use of US dollar LIBOR is also now banned, with limited exceptions. The US dollar risk-free rate SOFR is already being widely used in new business. Firms should now focus on converting their legacy US dollar LIBOR contracts by mid-2023.

Press release

Article 23C Benchmarks Regulation

Article 23D Benchmarks Regulation

Annex 4 Benchmarks Regulation notice of modifications

Annex 4 Benchmarks Regulation Additional notice

IBA launches GBP SONIA Spread-Adjusted ICE Swap Rate

On 4 January, ICE Benchmark Administration launched the GBP SONIA Spread-Adjusted ICE Swap Rate as a Benchmark, as previously announced on 22 December 2021. The launch follows the successful publication by IBA of GBP SONIA Spread-Adjusted settings on an indicative, ‘Beta’ basis since May 2021. The settings are published for tenors ranging from one to 30 years and are determined in line with the methodology proposed by the Working Group on Sterling Risk-Free Reference Rates in its paper “Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate (ISR)”.

News release

ESMA launches call for evidence on DLT Pilot Regime

On 4 January, ESMA published a call for evidence on distributed ledger technology (DLT). The call for evidence seeks input from stakeholders on the use of DLT for trading and settlement and on the need for amending the regulatory technical standards (RTS) on regulatory reporting and transparency requirements. The Regulation on a pilot regime for market infrastructures based on DLT (DLT Pilot) requires ESMA to assess whether the RTS developed under MiFIR relative to certain pre-and post-trade transparency and data reporting requirements need to be amended in order to be effectively applied to securities issued, traded and recorded on DLT. The areas covered in the call include: (i) RTS 1 (equity transparency); (ii) RTS 2 (non-equity transparency); (iii) RTS 3 (double volume cap and provision of data); and (iv) RTS on data reporting requirements – which are RTS 22 (transaction reporting), RTS 23 (reference data), RTS 24 (order record keeping), and RTS 25 (clock synchronisation). In addition, in relation to the transaction reporting exemption, the call for evidence seeks stakeholders’ views on possible effective ways to allow regulators’ access to information on: (i) transactions; (ii) financial instruments’ reference data; and (iii) transparency data. The aim is to ensure more efficient, secure, and cost-effective management of the data stored on DLTs while preserving its quality, usability and comparability. Stakeholders are invited to provide comments by 4 March. Based on the feedback received, ESMA will consider whether amendments to the RTS are necessary. If amendments are necessary, ESMA will consult on its proposal before submitting the final draft RTS to the EC for adoption. The DLT Pilot is expected to apply in early 2023.

Call for evidence

ESMA publishes guidance on appropriateness and execution-only requirements under MiFID II

On 3 January, ESMA published the final report on its Guidelines on certain aspects of the MiFID II appropriateness and execution-only requirements. The Guidelines cover several important aspects of the appropriateness process, including the: (i) information to be provided to clients about the purpose of the appropriateness assessment; (ii) arrangements necessary to understand clients and products; (iii) matching of clients with appropriate products and the effectiveness of warnings; and (iv) other related requirements, such as the execution-only exemption and record-keeping and controls. The report contains a feedback statement summarising the responses received during consultation and highlighting the amendments and clarifications introduced in the final guidelines. The Guidelines will be translated into the official languages of the EU and published on ESMA’s website. The publication of the translations will trigger a two-month period during which national competent authorities must notify ESMA whether they comply or intend to comply with the Guidelines. The Guidelines will apply six months after the date of the publication on ESMA’s website in all EU official languages.

Final report

Payment services and payment systems

Please see the ‘Financial Crime’ section for the EBA’s opinion on ‘de-risking’.

Prudential regulation

Please see the ‘Financial Crime’ section for ESMA’s final report on review of MAR guidelines on delayed disclosure.

Recovery and resolution

ECJ interpretation of requirement for ex-post definitive valuation under SRM Regulation

On 23 December, the ECJ considered the circumstances in which the SRB is required to produce an ex post definitive valuation under Article 20(11) of the Single Resolution Mechanism (SRM) Regulation. The judgment is also relevant to the interpretation of Article 36(10) of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), which has equivalent wording to Article 20(11) of the SRM Regulation. The ECJ stated that the SRB does not have an obligation to produce an ex-post definitive valuation in all scenarios under Article 20(11). In particular: (i) the words "ex-post" definitive valuation allow for “ex ante” definitive valuations. This is supported by the wording in Article 20(2), that a valuation should be considered to be definitive where all the Article 20(1) and (4) to (9) requirements are met; and (ii) since Article 20(12) relates to situations in which the SRB has recourse to the bail-in tool, the bridge institution tool or an asset management vehicle, the reference to Article 20(12) in Article 20(11) indicates that this valuation only applies in those situations.

Case C‑934/19

Sustainable finance

EC consults on Taxonomy Complementary Delegated Act covering certain nuclear and gas activities

On 1 January, the EC announced that it is consulting with the Member States Expert Group on Sustainable Finance and the Platform on Sustainable Finance on a draft text of a Taxonomy Complementary Delegated Act, under the Taxonomy Regulation, covering certain gas and nuclear activities. The EC considers there is a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future. Within the Taxonomy framework, this would mean classifying these energy sources under clear and tight conditions, in particular as they contribute to the transition to climate neutrality. To ensure transparency, the EC will amend the Taxonomy Disclosure Delegated Act so that investors can identify if activities include gas or nuclear activities, and to what extent, so they can make an informed choice. The Platform on Sustainable Finance and the Member States Expert Group on Sustainable Finance must be consulted on all Delegated Acts under the Taxonomy Regulation, and will have until 12 January to provide their contributions. The EC will then analyse their contributions and formally adopt the complementary Delegated Act in January 2022. It will be then sent to the co-legislators for their scrutiny.

Press release