Skip to content

Key Regulatory Topics: Weekly Update 24 -30 June 2022

Headlines in this article

Related news and insights

Publications: 23 February 2024

Key Regulatory Topics Weekly Update 16 February to 22 February 2024

Publications: 22 February 2024

MiCAR under the microscope - Part 4: The CASP licensing regime

Publications: 20 February 2024

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

Publications: 16 February 2024

Key Regulatory Topics: Weekly Update 9 - 15 Feb 2024

It has been a busy week for cryptoasset regulation: the FATF called for legislators to make haste in extending the FATF travel rule to cryptoasset transfers and BCBS launched its second consultation on the cryptoassets’ prudential treatment. In Europe, the co-legislators reached provisional agreement on the proposed Markets in Cryptoassets Regulation and new rules on the transparency of cryptoasset transfers.

In the UK, the FCA sent a number of portfolio letters, setting out its supervisory priorities for lifetime mortgage providers, debt advice firms and mainstream consumer credit lenders.  The fair treatment and support of vulnerable customers features high on the list for each of these firm types. The FCA also launched a consultation on winding down 'synthetic' sterling LIBOR and US dollar LIBOR whilst the BoE published its final policy on its approach to ‘tiering’ non-UK central counterparties and to comparable compliance.

Capital Markets

Please see the Sustainable Finance section for: (i) the FCA’s Primary Market Bulletin No. 41 and Feedback Statement focusing on ESG integration in capital markets; and (ii) updates from ICMA’s Principles for incorporating sustainability into capital markets.


Please see the Fund Regulation section for Delegated Regulation (EU) 2022/975, which has been published in the OJ. The Delegated Regulation postpones the application date of certain PRIIPs-related disclosures.

Please see the Regulatory Reform Post Brexit section, for the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2022.

Please see the Other Developments section for FCA Handbook Notice No. 100, which covers, amongst other things, the legislative changes from the Claims Management (Relevant Connections) Instrument 2022 and Funeral Plans (No. 4) Instrument 2022.

FCA portfolio letter for lifetime mortgage providers

On 28 June, the FCA published a portfolio letter setting out its supervisory strategy for lifetime mortgage providers. These include: (i) fair treatment of consumers – the FCA are particularly concerned that consumers in this portfolio who are facing financial stress may be more susceptible to the purchase of unsuitable equity release products. The FCA expects firms to consider how the cost of living crisis is likely to impact consumers and take the necessary steps to support consumers and mitigate harm; (ii) product design and governance – the FCA expects lifetime mortgage providers to ensure that their products are designed to meet the needs of an identified target market and that they continue to perform as expected; (iii) fees and pricing structure – where the FCA sees evidence of potentially excessive fees being charged, it will ask these firms to explain how these have been calculated; (iv) relationships between lenders and intermediaries – the FCA is concerned with the risk that placement of business may be subject to conflicts of interest, for example to providers that offer the highest procuration fees or where there is an adviser – provider relationship. The FCA will intervene where it considers that there is a potential distortion to the market; (v) post-sale systems and controls – post-sale events, such as drawdowns and redemptions, can be relatively complex processes and can happen at a sensitive time for consumers or those acting on their behalf. The FCA expects providers to assure themselves that any customer-facing systems and controls are consistently delivering appropriate customer outcomes throughout the term of a product. The FCA expects firms to be able to demonstrate the steps being taken to address the risks covered in the letter.


FOS annual complaints data 2021/22

On 28 June, the FOS published its annual complaints data and insight covering the period from 1 April 2021 to 31 March 2022. Insights include: (i) the incoming complaint volumes returned to more normal levels than those of the 2020/21 financial year, with fewer complaints about PPI, Covid-19, guarantor loans and home credit; (ii) the FOS resolved 218,740 complaints in 2021/22, and the overall uphold rate was 38%. The FOS resolved 23% more cases in its general casework, meaning that it was able to significantly reduce the Covid-19 related-backlog; (iii) current accounts were the most complained about product and the most complained-about issue was in relation to administration or customer service; (iv) a substantial proportion of complaints were from victims of fraud and scams, with most relating to “authorised” fraud, where consumers are tricked into transferring money into accounts that they believe are legitimate. Complaints about “authorised” fraud increased by more than 20% than the previous year; and (v) the FOS saw increased complaints about unaffordable lending in second charge (repayment) loans. There has been an increase of vulnerability, debt and consumers falling behind on payments for a product they could never have afforded, with some loans carrying a 35% interest rate.

Data and insights

FCA portfolio letter for debt advice firms

On 27 June, the FCA published a portfolio letter setting out its supervisory strategy for debt advice firms. The FCA’s supervisory priorities include: (i) vulnerable customers – it is imperative that firms embed the fair treatment of customers in vulnerable circumstances into their business models and firm culture, in an effort to reduce harm. Firms need to remain alert to the changing situation of their customers and target their efforts in response; (ii) insufficient capacity – the FCA encourages firms to proactively forecast demand and plan accordingly; (iii) lead generators – the FCA expects firms that receive leads to ensure that they are compliant with their obligations in the Consumer Credit Sourcebook; and (iv) advice quality – firms should ensure that: (a) all advice given has regard to the best interest of customers, is appropriate to the individual circumstances of the customer and is based on a sufficiently full assessment of the financial circumstances of the customer; (b) customers receive sufficient information about the available options identified as suitable for the customers' needs; and (c) it explains the reasons why the firm considers the available options suitable and other options unsuitable. Quality of advice can also be compromised when firms offer non-compliant advice that is biased towards debt solutions that generate referral fees for the firm. The FCA expects firms to be able to demonstrate the steps being taken to address the risks covered in the letter.


FCA portfolio letter for mainstream consumer credit lenders

On 27 June, the FCA published a portfolio letter setting out its supervisory strategy for mainstream consumer credit lenders (MCCLs). The key risks of harm to consumers, identified by the FCA, include: (i) that consumers in this portfolio who are facing financial stress may be more susceptible to the purchase of unsuitable products. The FCA expects firms to consider how the cost-of-living crisis is likely to impact consumers and take the necessary steps to support consumers and mitigate harm. The FCA expects firms to support customers struggling with personal debt or showing signs of financial difficulty during this period, signposting them to debt advice charities; (ii) that firms might be seeking to increase business by lowering the stringency of affordability checks, especially given the context of the wider economic background that currently prevails. The FCA expects firms to undertake reasonable and proportionate checks on customers and asses their income and non-discretionary expenditure. Firms should monitor the effectiveness of their creditworthiness assessment policy and procedures and consider what management information and metrics they could use to help inform this. The customer should not only be able to maintain obligations they have a contractual or statutory duty to make, but repayment of the credit should not have a significant adverse impact on their financial situation; (iii) persistent debt strategies adopted are insufficient to enable customers to pay down their persistent debt within a reasonable time; and (iv) firms do not deal with their s75 CCA responsibilities appropriately. The FCA is reviewing data from firms to ensure that they are meeting their responsibilities. The FCA expects firms to be able to demonstrate the steps being taken to address the risks covered in the letter.


EBA response to EC’s call for advice on Mortgage Credit Directive review

On 24 June, the EBA published an opinion and report in response to the EC’s Call for Advice on the Mortgage Credit Directive (MCD) review. While the EBA observed that the MCD has led to greater consumer protection and harmonisation of mortgage practices, it identified some specific issues to be addressed and proposes: (i) revising the requirements on pre-contractual and advertising information to provide consumers with the appropriate information to make an informed decision and to compare products; (ii) ensuring that the requirements on information disclosure are fit for digital channels; (iii) introducing additional consumer protections measures when AI systems are used for creditworthiness assessment; (iv) introducing borrowers-based measures in the information provided to consumers to promote responsible lending and borrowing while contributing to financial stability; and (v) establishing an EU-wide definition of ‘green mortgages’ to encourage sustainable lending and borrowing.

Letter to EC

Opinion and report

Press release

Fees and Levies

BoE consults on fees regimes for incoming CSDs and CCPs

On 30 June, the BoE began consulting on the fees regimes for incoming central counterparties (CCPs) and central securities depositories (CSDs). For CCPs the BoE’s proposals include: (i) a £50,000 base recognition fee (replacing the current £35,000) on incoming CCPs at the point of recognition under Article 25 of UK EMIR and a supplemental recognition fee for Tier 2 CCPs which the BoE anticipates will be in the order of £150,000; (ii) to introduce a flat comparable compliance assessment fee of £30,000 payable by Tier 2 CCPs that submit a reasoned request for comparable compliance to the BoE under EMIR Article 25a(1); and (iii) an annual fee on recognised incoming CCPs for monitoring and/or supervision. For CSDs the BoE’s proposals include levying: (a) a £45,000 recognition fee (replacing the current £30,000) on incoming CSDs at the point of recognition; and (b) an annual fee for monitoring and/or supervision once CSDs have been recognised. The deadline for comments on both consultations is 15 September. The BoE proposes to implement the changes on 1 December.

CSD consultation

CCP consultation

PRA 2022/23 regulated fees and levies

On 30 June, the PRA published a policy statement setting out its regulated fees and levies rates for 2022/23. No changes have been made to the proposals outlined in the consultation. The PRA’s annual funding requirement (AFR) for 2022/23 is £312.5 million, which is £24.9 million higher than the AFR for 2021/22 of £287.7 million. The 25% increase in the AFR is driven primarily by the PRA’s expanded role as a rule maker and an increased focus on operational resilience. The PRA notes that firms can use the FCA’s online fees calculator to calculate their individual fees based on the final rates. The PRA Fees Amendment (No 1) Instrument 2022, which makes the relevant changes to the PRA rulebook will enter into force on 1 July 2022.

Policy Statement

Fees instrument 2022/23

FCA online fees calculator

FCA 2022/23 regulated fees and levies

On 28 June, the FCA published a policy statement on regulated fees and levies rates for 2022/23 for the FCA, the FOS, Money and Pensions Service, the devolved authorities and HMT’s expenses in funding the teams that tackle illegal money lending. The figure for the FCA’s annual funding requirement has reduced since it consulted from £640.0m to £630.9m, which represents an increase of £17.2m (2.8%) over 2021/22. The fees payable have reduced slightly, from £591.0m when the FCA consulted to £581.5m. The Periodic Fees (2022/2023) and Other Fees Instrument 2022 (FCA 2022/27), will make the relevant amendments to the Fees manual and comes into force on 1 July. The FCA notes that firms can use its online fees calculator to calculate their individual fees based on the final rates. The FCA will invoice fee-payers from July 2022 onwards for their 2022/23 periodic fees and levies.

Policy statement

Fees instrument 2022/23

Online fees calculator

Financial Crime and Sanctions

Please see the FinTech section for the announcement from the EP and the Council that they have reached a provisional agreement on the proposed Regulation on information accompanying transfers of funds and certain cryptoassets.

Please see the Markets and Markets Infrastructure section for an objection from the EP to the EC’s proposed Delegated Regulation supplementing MiFID II with regard to RTS for the application of position limits to commodity derivatives and procedures for applying for exemption from position limits.

FATF update on implementation of standards on VAs and VASPs

On 30 June, the FATF published a targeted update on implementation of its Standards on virtual assets (VAs) and virtual asset service providers (VASPs), with a focus on the FATF’s Travel Rule. The report: (i) finds a continued need for many countries to strengthen understanding of ML/TF risks of the VAs and VASPs sector, and to rapidly implement the FATF’s Recommendation 15 to mitigate such risks. The report finds that jurisdictions have made only limited progress over the last year in implementing the FATF’s Travel Rule requirement. Of the 98 jurisdictions that responded to the FATF’s March 2022 survey, only 29 jurisdictions have passed relevant Travel Rule laws, and a small subset of these jurisdictions have started enforcement. The FATF highlights that there are now technological solutions available to facilitate Travel Rule compliance in practice, but the private sector need to continue to increase interoperability between solutions and across jurisdictions, and to work towards full compliance; and (ii) highlights the continued need for the FATF to monitor the growth of, and illicit financing risks associated with, DeFi and NFTs markets and unhosted wallets. To address the findings of the report, the FATF calls on all countries to rapidly implement the FATF’s Standards on VAs and VASPs, including the FATF’s Travel Rule.

Press release

Targeted update

Council agrees partial mandate on proposed Regulation establishing EU AML Authority

On 29 June, the Council announced that it has agreed its partial position on the proposed Regulation creating an EU AML Authority (AMLA). In its position, the Council: (i) adds powers to AMLA to directly supervise certain types of credit and financial institutions, including crypto asset service providers, if they are considered risky; (ii) entrusts AMLA to supervise up to 40 groups and entities - at least in the first selection process – and to ensure a complete coverage of the internal market under its supervision; and (iii) gives more powers to the general board in the governance of AMLA. The Council’s position is partial as it has not yet agreed on the location at which AMLA will have its seat. The Council has published two notes setting out is partial mandate for negotiations with the EP.

Press release

Council note 1

Council note 2

HMT review of UK’s AML/CFT regulatory and supervisory regime

On 24 June, HMT published a review of the UK's AML/CFT regime. The review focused on improving the effectiveness of the MLRs and ensuring the application of effective risk-based controls across the regulated sector. HMT’s conclusions include in relation to: (i) supervision – while reform is needed, the best scale and type of reform is not yet clear. The government has laid out a shortlist and will consult further on options for reform; (ii) specific regulations – the government is committed to continuing to align with and champion the FATF’s recommendations; (iii) objectives – the government will set out clear new objectives to the MLRs, in line with the FATF’s methodology and embedding a renewed definition of effectiveness; (iv) risks – the government will use existing processes including the national risk assessment to consider emerging ML/TF risks and consider sectors for addition to the MLRs; (v) wider levers for effectiveness – the government continues to engage with stakeholders to deepen its understanding of the application of new technologies, the challenges faced by small or newly regulated firms, the incentives of the current system and the supervisory approach to the risk-based approach; and (vi) guidance – the government will seek to make the existing guidance more streamlined, consistent and clear, and consider requests for further guidance on a case-by-case basis. The government is due to publish its second Economic Crime Plan later this year, and many areas of interest from this review will be considered further.



We have published the second episode of our podcast series “Further headwinds ahead in the UK retail crypto market?” focusing on new UK financial promotions regime rules. Topics covered in this podcast include: (i) the proposals to extend the financial promotions regime to unregulated cryptoassets; (ii) who will be caught by the extension and what they will need to do to comply with the new regime; and (iii) when it is expected to take effect. You can listen to it here.

Please see the Financial Crime and Sanctions section for a report from FATF on the implementation of its Standards on virtual assets and virtual asset service providers, with a focus on the FATF’s Travel Rule

Please see the Prudential Regulation section for BCBS’ second consultation on the prudential treatment of banks' cryptoasset exposures.

Provisional agreement on MiCA

On 30 June, the EP and the Council announced that they have reached provisional agreement on the proposed Markets in Cryptoassets Regulation (MiCA). Key provisions agreed by negotiators for those issuing and trading crypto-assets (including asset-reference tokens and e-money tokens) cover transparency, disclosure, authorisation and supervision of transactions. In addition, the new legal framework will support market integrity and financial stability by regulating public offers of crypto-assets. Finally, the agreed text includes measures targeted at consumer protection and against market manipulation, money laundering, terrorist financing and other criminal activities. Negotiators have agreed that: (i) in order to avoid any overlaps with updated legislation on AML, MiCA does not duplicate the provisions as set out in the newly updated transfer of funds rules (we have covered this item below). However, MiCA will task the European authorities with maintaining a public register of non-compliant crypto-asset service providers (CASPs); (ii) non-fungible tokens (NFTs) will be excluded from the scope except if they fall under existing cryptoasset categories. Within 18 months the EC will be tasked to prepare a comprehensive assessment and, if deemed necessary, a specific, proportionate and horizontal legislative proposal to create a regime for NFTs and address the emerging risks of such new market; and (iii) significant CASPs will have to disclose their energy consumption. ESMA will prepare RTS on these obligations to provide the market with clear guidance on how such disclosures should be carried out. Within two years, the EC will have to provide a report on the environmental impact of cryptoassets and the introduction of mandatory minimum sustainability standards for consensus mechanisms, including the proof-of-work. The provisional agreement is subject to approval by the Council and the European Parliament before going through the formal adoption procedure.

EP press release

Council press release

Provisional agreement on proposed Regulation extending ‘travel rule’ to cryptoassets

On 29 June, the EP and the Council announced that they have reached a provisional agreement on the proposed Regulation on information accompanying transfers of funds and certain cryptoassets. The proposal extends the scope of the ‘travel rule’ to transfers of cryptoassets, requiring cryptoasset service providers (CASPs) to collect and make accessible certain information about the originator and the beneficiary of the transfers of cryptoassets they operate. In particular, the new agreement requires that the full set of originator information travel with the cryptoasset transfer, regardless of the amount of cryptoassets being transacted. The rules would also cover transactions from un-hosted wallets when they interact with hosted wallets managed by CASPs. In case a customer sends or receives more than 1000 euros to or from their own un-hosted wallet, the CASP will need to verify whether the un-hosted wallet is effectively owned or controlled by this customer. The co-legislators agreed that the GDPR remains applicable to transfers of funds, and that no separate data protection rules will be set up. If there is no guarantee that privacy is upheld by the receiving end, data such as names and addresses required by the travel rule should not be sent. Co-legislators chose to align the timetable for application of this regulation with that of MiCA. The EP, the Council and the EC are now working on the technical aspects of the text. Thereafter, the agreement must be approved by the Economic and Monetary Affairs and Civil Liberties and Justice Committees and the EP as a whole, before it can enter into force.

EP press release

Council press release

FCA Cryptosprint outputs

On 29 June, the FCA provided an update on the outcome of its recent series of Cryptosprints. Views from participants included: (i) applying a principles-based approach would help accommodate the pace of technology and market evolution; (ii) technology neutrality was essential to avoid policymakers ‘picking winners’ in developing markets; (iii) having a clear digital taxonomy (ideally internationally) would help in developing a regime for cryptoassets. Due to the digital nature of the taxonomy, it can be updated regularly, and would enable regulators to classify cryptoassets and apply relevant rules based on product types, relevant activities, and underlying technology; (iv) ‘reinventing the wheel’ with new regulatory standards should be avoided. Participants suggested that existing rules and tools should be used where possible, for example the Client Assets Sourcebook rules around custody of assets or the Open Banking type model for transparency, rather than creating bespoke new standards. The FCA has set up workstreams to further understand what future crypto-standards and requirements may mean for other areas, including: ESG considerations, redress, market conduct, operational resilience, and insolvency. A common theme highlighted during the CryptoSprint was an imbalance of information between consumers and service providers, and challenges faced by consumers to fully understand the risks associated with investing in cryptoassets. Through the InvestSmart campaign, the FCA aims to raise awareness and educate retail consumers by highlighting the risk of investing in cryptoassets.

Cryptosprints outputs

Terms of reference for the Open Banking Joint Regulatory Oversight Committee

On 24 June, the FCA and PSR published the terms of reference for the Open Banking Joint Regulatory Oversight Committee. The Committee’s role is to oversee the planning and preparation for the future Open Banking entity, oversee the transition to the future entity, and to consider the vision and strategic roadmap for further developing Open Banking. The Committee, led jointly by the FCA and the PSR, will also be responsible for overseeing and, where applicable, monitoring the future entity, once set up, until a permanent regulatory framework is in place. The Committee will draw up proposals for the design of the future Open Banking entity by the end of the year. Transition to the future entity is expected to take place during Q4 2022/Q1 2023.

Terms of reference

Fund Regulation

Delegated Regulation postponing application date of certain PRIIPs-related disclosures

On 24 June, Delegated Regulation (EU) 2022/975 was published in the OJ. The Delegated Regulation: (i) postpones the application date of certain PRIIPs-related disclosures to 1 January 2023 (instead of 1 July 2022 as initially foreseen in Delegated Regulation (EU) 2021/2268); (ii) prolongs the application of Article 14(2) of Delegated Regulation (EU) 2017/653 until 31 December concerning the ability to use UCITS Key Investor Information to provide specific information for the purposes of disclosures relating to PRIIPs offering a range of options for investment. The Delegated Regulation will enter into force on 14 July, 20 days after its publication in the OJ.

EC press release

Delegated Regulation

Markets and Markets Infrastructure

ESMA re-prioritisation of 2022 deliverables

On 30 June, ESMA published a letter sent to the Chair of the EC setting out which deliverables it has identified that can be deprioritised or postponed in order for it to deliver on its 2022 work programme, which include: (i) annual reports in relation to CSDR implementation, accepted market practices under MAR and supervisory measures and penalties under EMIR; (ii) two reports in relation to the EMIR Refit; (iii) a report on the efficiency of SFTR reporting and on SFTR fees; and (iv) the STS Peer Review. The specific reasons for the delay/deprioritisation of each of the deliverables are summarised in the annex and have been discussed with Commission staff in the relevant groups and committees.


BoE final policy on EMIR 2.2 implementation

On 30 June, the BoE published its final policy on its approach to ‘tiering’ non-UK central counterparties (CCPs) and to comparable compliance. After the temporary recognition regime expires, incoming CCPs will need to be recognised by the BoE under UK EMIR. Incoming CCPs will be assessed to establish the degree to which they might pose risks to UK financial stability. They will initially be triaged against whether they: (i) held at least £10bn of UK clearing member initial margin; (ii) held at least £1bn of UK clearing member default fund contributions; or (iii) have an interoperability arrangement in place with a UK CCP. An incoming CCP that does not meet any of these criteria will usually be classified as a Tier 1 CCP. CCPs for which the BoE has determined that it is possible to place an informed reliance, appropriate to the risks, on a CCP’s home authority will also be designated Tier 1. Tier 1 CCPs will not be subject to direct UK supervision and regulation. An incoming CCP that is designated Tier 2 (where that CCP is systemically important or likely to become systemically important for the financial stability of the UK) will be subject to direct UK supervision and regulation. However, under UK EMIR Article 25a incoming Tier 2 CCPs may request that the BoE carry out a comparable compliance assessment of whether the CCP may be deemed to satisfy compliance with certain UK EMIR requirements through complying with the applicable home regime. Where comparable compliance has been granted, the BoE will defer to the home authority for these specific areas. The BoE sets out its: (a) principles for assessing comparable compliance; (b) process for assessing comparable compliance; (c) approach to any exemption the incoming CCP may have under the applicable home regime that is comparable to any of the exemptions set out under UK EMIR; (d) supervisory approach where comparable compliance has been granted; (e) process for reviewing and withdrawing comparable compliance decisions; and (f) approach to requests for a comparable compliance reassessment. The implementation date for the final policy on tiering and comparable compliance is 1 December.

Press release

Statement of policy – comparable compliance

Policy statement – comparable compliance

Policy statement – tiering

Statement of policy – tiering

EP objects to EC MiFID II RTS on application of position limits to commodity derivatives

On 30 June, the EP published a motion for a resolution to object to the EC’s proposed Delegated Regulation supplementing MiFID II with regard to RTS for the application of position limits to commodity derivatives and procedures for applying for exemption from position limits. The EP calls on the EC and ESMA to fully evaluate the role and extent of speculation in the determination of commodities prices and raw materials while emphasising the need to urgently enhance financial transparency of the market trading of commodities, especially for food, energy and raw materials for fertilisers against insider dealing, market manipulation and price distortions, by strengthening reporting requirements through pubic registers of activities of market dealers, brokers and traders. The EP requests that the EC submit a new delegated act which addresses these concerns.


EEA Joint Committee Decisions amending Annex IX (Financial Services) to EEA Agreement

On 30 June, the following Decisions of the EEA Joint Committee that amend Annex IX (Financial Services) to the EEA Agreement, were published in the OJ: (i) Decision No. 12/2022, which incorporates Commission Delegated Regulation (EU) 2021/1254, correcting Delegated Regulation (EU) 2017/565, supplementing MiFID II as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive; and (ii) Decision No. 13/2022, which incorporates the following Commission Implementing Decisions (CID) on the recognition of the legal, supervisory and enforcement arrangements as equivalent to certain requirements of Article 11 of EMIR: (a) CID (EU) 2021/1103; (b) CID (EU) 2021/1104; (c) CID (EU) 2021/1105; (d) CID (EU) 2021/1106; (e) CID (EU) 2021/1107; and (f) CID (EU) 2021/1108. The Decisions entry into force is stated as 5 February 2022, provided that all the notifications under Article 103(1) of the EEA Agreement have been made.

Decision No. 12/2022

Decision No. 13/2022

FCA consults on winding down ‘synthetic’ sterling LIBOR and US dollar LIBOR

On 30 June, the FCA began consulting on winding down 'synthetic' sterling LIBOR and US dollar LIBOR. The FCA aims to understand whether: (i) outstanding contracts that reference the 1, 3 and 6-month synthetic sterling LIBOR settings have had time to transition to an alternative benchmarks, or to make provision to do so and therefore it is no longer appropriate to require continued publication. The information currently available suggests that the 1- and 6-month settings could be retired without prohibitive disruption, while the position for the 3-month setting is less clear, given its use in mortgages. The FCA recognises there are potential difficulties converting mortgages where lenders require active consent from retail borrowers. The FCA reiterates that it will not compel the administrator of LIBOR to continue to publish LIBOR rates for the convenience of those who could take action to convert their contracts, but have not done so. The FCA can compel its continued production for up to one year at a time, for a maximum period of 10 years; and (ii) whether the remaining US dollar LIBOR settings can be wound down in an orderly fashion when the panel ends on 30 June 2023, and if not, whether a synthetic US dollar LIBOR rate might be appropriate for certain contracts that are not within scope of LIBOR-related federal legislation. The FCA hopes to understand whether there are any insurmountable barriers to transitioning outstanding US dollar LIBOR contracts before or upon the cessation of the panel, and if so, the size and nature of any exposures that market participants expect may remain at that point The deadline for comments is 24 August. The FCA also reminds market participants that the synthetic yen LIBOR settings will cease at end-2022, and market participants using these rates must prepare for this.


EMMI second annual review of EURIBOR hybrid methodology

On 29 June, the European Money Markets Institute (EMMI) communicated the outcome of the second annual review of the Hybrid Methodology for EURIBOR. The review aimed at confirming that the benchmark remains robust, resilient, and representative of its underlying market on the one hand, and at identifying any potential for further beneficial recalibrations, on the other hand. The analysis suggests that four non-material adjustments would improve the methodology: (i) enlarging the 12-months maturity window of Level 1 by 15 days; (ii) using the previous 5-days banks’ contributions to calculate the SAF used to determine Level 2.1; (iii) using the previous banks’ contributions to calculate the adjustment used to determine Level 2.2; and (iv) qualifying a Level 2.2 rate as eligible if the original volume of the trade is higher than EUR 10 million. The amendments will be implemented on 3 October.

Press release

FMSB statement of good practice on trading platform disclosures

On 28 June the FMSB finalised its statement of good practice on trading platform disclosures. Establishing best practices around what platform operators should disclose to their participants, the paper covers all areas of the fixed income, currencies and commodities markets and includes platforms that are considered to be trading venues under existing regulation (e.g., MiFID II) and those that are not (e.g., Single Dealer Platforms). The statement: (i) develops six areas of guidance, calling for platform arrangements to contain information about trading protocols, counterparty name disclosure, prioritisation, use of last look and trade dispute resolution; (ii) covers the potential obligations on platform participants, exploring systems and risk controls, configuring credit and providing names of personnel authorised to access the platform; and (iii) examines outages including disclosure expectations around suspension of trading: (a) when trading is expected to resume; (b) the status of orders or quotes on resumption of trading; and (c) information regarding the cause of trading cessation.

Press release

Statement of good practice

ESMA will not publish August SI regime data for non-equity instruments other than bonds and CTP data

On 28 June, ESMA announced that it will not publish the 1 August systematic internaliser (SI) regime data for non-equity instruments other than bonds and consolidated tape (CTP) data. This is due to operational constraints which prevent it from performing the scheduled calculations. The non-publication of the data means that the mandatory SI regime will not apply from 15 August to 14 November, and investment firms will not need to perform the SI-test for non-equity instruments other than bonds. However, investment firms can continue to opt into the SI-regime in the interim period. The SI-calculations for non-equity instruments other than bonds will resume on 1 November, based on an observation period from 1 April to 30 September. Investment firms will then be required to perform the SI determination by 15 November. The publication of the SI-data for equity, equity-like instruments and bonds will not be affected, and will be made available by 1 August, as planned. Therefore, investment firms are required to perform the SI test for those asset classes and comply with the related obligations by 15 August. The CTP calculations will resume at the next regular publication date on 1 February 2023 based on an observation period from 1 July 2022 to 31 December 2022. ESMA reminds reporting entities of their obligations to continue reporting transparency data also in the absence of the August publication for non-equity instruments other than bonds, in order to ensure that the transparency data covers trading activity necessary for subsequent transparency calculations.


PRA review into use of SIMM model under on-shored EMIR

On 28 June, the PRA sent a letter to large banks to share the findings of its review of their use of the Standardised Initial Margin Methodology (SIMM) model. The PRA found that the existing governance process, in which firms rely primarily on ISDA for updating SIMM or negotiating add-ons for model underperformance, may: (i) for some counterparties, result in margin levels not adequate to cover for risks at the 99% confidence level as required by regulations; and (ii) not be adequate to ensure timely action is taken to remediate model underperformance (especially if relating to a firm’s unique portfolio of trades and risks), which is ultimately the responsibility of firms themselves. The PRA notes that in September, a large number of smaller counterparties, of which many are hedge funds, will enter in scope of on-shored EMIR as the roll-out of mandatory margining for non-centrally cleared OTC derivatives reaches its close-to-final stage. The PRA expects that a significant share of these funds may have portfolios with risk profiles materially different from those to which SIMM has to date been predominantly applied and therefore it is even more critical that SIMM model governance can enable firms to promptly identify and remediate model underperformance. The PRA expects firms to take the steps listed in the letter to remediate these issues by December and then report the findings to their supervisors.


EMIR equivalence decisions for CCPs in China and Israel

On 24 June, two Implementing Decisions on EMIR equivalence were published in the OJ: (i) 2022/984 on the equivalence of the regulatory framework of the People’s Republic of China for central counterparties (CCPs) that are authorised to clear OTC derivatives in the interbank market and supervised by the People’s Bank of China to the requirements of EMIR; and (ii) 2022/985 on the equivalence of the regulatory framework for CCPs in Israel to the requirements of EMIR. The Decisions enter into force on 14 July, 20 days after their publication in the OJ.



Payment Services and Payment Systems

EPC updates SEPA Request-to Pay scheme rulebook

On 30 June, the EPC updated its SEPA Request-to Pay (SRTP) scheme rulebook, which covers the set of operating rules and technical elements (including messages) that allow a Payee to request the initiation of a payment from a Payer in a wide range of physical or online use cases. The update has no operational impact at this stage but specifies that as of 30 November 2023 the SRTP scheme participants will have the obligation to at the minimum exchange SRTP messages based on application programming interfaces (APIs) to ensure full reachability. However, if they wish, scheme participants can use their APIs now.


PSR consults on remedies following card-acquiring market review

On 29 June, the PSR published its provisional decision in relation to remedies following the card-acquiring market review, together with a direction to give effect to the proposals. The PSR’s remedies are: (i) summary boxes containing bespoke key price and non-price information to be sent individually to each merchant and shown prominently in their online account which can be used alongside new online quotation tools to help merchants compare prices and other service features more efficiently; (ii) trigger messages to prompt merchants to shop around and/or switch to be sent by providers of card-acquiring services to their merchant customers and shown prominently in their online account; and (iii) a maximum duration of 18 months for Point of Sale (POS) terminal lease and rental contracts, and maximum 30 days’ notice after any renewal. The PSR proposes that: (a) summary boxes, online quotation tools and trigger messages are to be implemented for all merchant customers of directed providers with turnover below £50 million; (b) POS terminal contractual remedies are to be implemented for all merchant customers of directed providers with turnover below £10 million; and (c) that the remedies are to be implemented no later than three months after the direction giving effect to the proposals is made. The deadline for comments is 3 August.

Press release

Provisional decision

Prudential Regulation

ITS on benchmarking of internal approaches and reporting requirements for 2022 benchmarking exercise

On 30 June, Commission Implementing Regulation (EU) 2022/951 amending Implementing Regulation (EU) 2016/2070 as regards benchmark portfolios, reporting templates and reporting instructions to be applied in the EU for the reporting under Article 78(2) CRD IV was published in the OJ. The amendments are in relation to the 2022 benchmarking exercise, in order to adapt the exposures or positions that are included in the benchmark portfolios to appropriately match the focus of the competent authorities and the EBA in 2022, including to add the benchmarking of the loss given default (LGD) parameters. The Implementing Regulation will enter into force on 20 July, the 20th day following its publication in the OJ.

Implementing Regulation

Second BCBS consultation on prudential treatment of banks’ cryptoasset exposures

On 30 June, the BCBS began its second consultation on the prudential treatment of banks' cryptoasset exposures, building on the first consultation’s proposals. The basic structure of the proposal in the first consultation is maintained, with cryptoassets divided into: (i) Group 1 – eligible for treatment under the existing Basel Framework with some modifications; and (ii) Group 2 – unbacked cryptoasset and stablecoins with ineffective stabilisation mechanisms, which are subject to a new conservative prudential treatment. The main changes are: (a) the development of the specific standards text for inclusion in the Basel Framework in the form of new chapter; (b) elaboration and refinement of the classification conditions, with a revised stabilisation test for Group 1b (stablecoins); (c) the introduction of an add-on to risk-weighted assets to cover infrastructure risk for all Group 1 cryptoassets; (d) Group 2 cryptoassets that meet a set of hedging recognition criteria (i.e. Group 2a) may be subject to modified versions of the market risk requirements, which permit a limited degree of hedge recognition in the calculation of a bank’s net exposure; (e) the capital requirements that will apply to cryptoassets have been delinked from their classification as tangible or intangible assets under the accounting standards; (f) the proposal relating to operational risk and resilience has been clarified to delineate more clearly between risks that would be covered by the operational risk framework, and those that should instead be captured in the credit and market risk frameworks; (g) additional detail added to specify the application of the liquidity risk requirements, including the treatment of crypto-liabilities (i.e. bank issued cryptoassets); and (h) introduction of an exposure limit, which will initially limit a bank’s total exposures to Group 2 cryptoassets to 1% of Tier 1 capital. The BCBS notes that the standards may be tightened if shortcomings in the consultation proposals are identified or new elements of risks emerge. The deadline for comments is 30 September.

Press release


RTS on determining indirect exposures to a client from derivatives and credit derivatives contracts

On 28 June, Commission Delegated Regulation (EU) 2022/1011 supplementing the CRR with regards to RTS specifying how to determine the indirect exposures to a client arising from derivatives and credit derivatives contracts where the contract was not directly entered into with the client but the underlying debt or equity instrument was issued by that client, was published in the OJ. Article 390(5) of the CRR, as amended by CRR II, requires institutions to add these indirect exposures to the total exposures to a client. The RTS specify the appropriate methodology institutions should use to calculate the indirect exposures and a separate methodology for derivative contacts that have multiple underlying reference names. The RTS differentiate between options on debt and equity instruments, credit derivative contracts, and other derivatives that have a debt or equity instrument as the underlying asset. The Delegated Regulation will enter into force on 18 July, 20 days after its publication in the OJ.

Delegated Regulation

PRA timetable for submission of Basel 3.1 and FRTB implementation pre-applications

On 27 June, the PRA published a letter on its expected timetable for firms to submit new internal model approach (IMA) and standard approach (SA) applications, ahead of the UK’s implementation of Basel 3.1 and the Fundamental Review of the Trading Book (FRTB). The PRA’s proposed approach includes that: (i) it does not intend to consult on any temporary extension of the existing modelling regimes or permissions given that the new market risk rules introduced by FRTB are substantially different to the current rules; (ii) in order to allow sufficient time to review and come to a decision on prospective model applications ahead of the assumed implementation date of 1 January 2025, and to ensure that any new IMA permissions are effective on or about this date, the PRA would expect firms to submit final pre-application materials at least 12 months in advance, by 1 January 2024. Firms submitting after this should expect to have to use the SA at least for an initial period, pending the completion of their model review; (iii) the PRA expect that certain provisions in the new SA will require regulatory permission and it expects firms to submit any related pre-application materials at least 12 months before implementation; (iv) in order to gain further assurance on the accuracy and consistency of firms’ implementation of the SA, the PRA will conduct a further round of benchmarking. This will cover all PRA-regulated firms in scope of the new SA, and will take place in 2023/2024. The PRA will work closely with ISDA to facilitate this exercise; and (v) it will conduct in depth reviews on firms’ implementation progress on: (a) Q4 2022 – Default Risk Charge; (b) Q1 2023 – Risk factor eligibility test; (c) Q2 2023 – Non-modellable risk factors; and (d) Q3 2023 – P&L attribution test and back-testing.


ECB statement on treatment of banking union in assessment for G-SIBs

On 27 June, the ECB published a statement on the treatment of the European Banking Union (EBU) in the assessment methodology for global systemically important banks (G-SIBs). The ECB announces that in a targeted review, the BCBS has recognised the progress that had been made in the development of the EBU. The BCBS has agreed to give recognition in the G-SIB assessment framework to this progress through the existing methodology, which allows adjustments to be made according to supervisory judgement. Under this agreement, a parallel set of G-SIB scores will be calculated for EBU-headquartered G-SIBs and used to adjust their bucket allocations. These parallel scores recognise 66% of the score reduction that would result from treating intra-EBU exposures as domestic exposures under the G-SIB assessment methodology. Any downward adjustment of an EBU-headquartered G-SIB will be limited to a single bucket. This will not affect any bank’s classification as a G-SIB, or the scores or bucket allocations of banks outside the EBU.


HMT Sub-Committee calls for views on PRA’s ‘Strong and Simple Framework’ proposals

On 24 June, the HMT Sub-Committee on Financial Services Regulations published a call for views on the PRA’s ‘Strong and Simple Framework’ proposals. The proposals aim to simplify the prudential framework for smaller or ‘non-systemic’ banks and building societies, while maintaining their resilience. The Sub-Committee requests evidence on: (i) the proposal generally and the PRA’s consultation; (ii) its scope; (iii) whether the proposals are appropriate to safeguard financial stability, and the safety and soundness of individual firms; (iv) whether the proposals sufficiently simplify the rules for affected firms; (v) how the proposals should be implemented in the context of Basel 3.1 and/or any other relevant international rules or requirements; (vi) how the proposals should be implemented in the context of firms using their own Internal Ratings Based models; (vii) its effect on competition within the UK market; and (viii) the wording of the draft instrument. The deadline for comments is 11 July.

Press release

Call for Evidence

Regulatory Reform Post Brexit

The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2022

On 30 June, the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2022, was published. This instrument makes amendments to clarify the regulatory position of certain credit agreements, detailed in articles 60H and 60HA of the RAO, entered into by high-net worth individuals who have spent at least 183 days in the UK during the continuous period of 365 days ending with the date that the agreement is entered into. The explanatory memorandum sets out how during the transition period, a decision was taken to make credit agreements secured on a variety of high-value assets taken out to purchase property rights sit outside of regulation. This instrument follows on from that decision to ensure that the objective of high-net-worth individuals entering into credit agreements for the purpose of acquiring or retaining property rights in land or in an existing or projected building being exempt from regulation is achieved. This instrument limits the application of the exemption to high-net-worth individuals who are resident in the UK, defined as individuals who have spent at least 183 days in the UK during the continuous period of 365 days ending with the date that the agreement is entered into.


Explanatory memorandum

Sustainable Finance

We have published a new bulletin providing an update on recent ESMA, ESA and EC pronouncements with regards to the SFDR and the Taxonomy Regulation, as well as giving practical guidance on key points. You can read it here.

EC requests input from ESAs on greenwashing risks and supervision of sustainable finance policies

On 30 June, the EC published a request for input to the ESAs relating to greenwashing risks and the supervision of sustainable finance policies. The ESAs are requested to provide: (i) input on the occurrence of greenwashing and potential for greenwashing risks as well as an overview and assessment of supervisory practices, experience, convergence and supervisory capacities related to the prevention of greenwashing through available tools and powers at the time of this request. This should include whether existing tools and data are sufficient to adequately monitor and address greenwashing; (ii) a common high-level understanding of the key features of greenwashing complemented with more specific sectorial definitions where relevant and necessary; and (iii) early insight on whether current legal definitions aimed at addressing greenwashing are understood consistently by supervisors and market participants. The EC requests that the ESAs publish progress reports in 12 months and final reports in 24 months.


FCA Primary Market Bulletin No. 41 and Feedback Statement on ESG integration in capital markets

On 29 June, the FCA published the 41st edition of its Primary Market Bulletin. The FCA elaborates on its feedback statement to the discussion chapter included in CP21/18: Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets. In particular, the FCA covers important issues related to ESG-labelled debt instruments. The FCA: (i) encourages issuers of ESG-labelled Use of Proceeds (UoP) debt instruments to consider voluntarily applying or adopting relevant industry standards, such as the Principles and Guidelines that ICMA has developed for green, social, and sustainability bonds; (ii) reminds issuers, their advisors and other relevant market participants of their existing obligation to ensure any advertisement is not inaccurate or misleading, and is consistent with the information contained in the prospectus; (iii) encourages issuers and their advisors to consider verifiers’ and assurance providers’ expertise and professional standards, and to engage with second party opinion providers and verifiers who adhere to appropriate standards of professional conduct, such as ICMA’s Guidelines for External Reviewers; and (iv) sees a clear rationale for regulatory oversight of certain ESG data and rating providers and for a globally consistent regulatory approach informed by IOSCO’s recommendations on ESG data and ratings. The FCA will continue to work with HMT, who are considering bringing ESG data and rating providers within the FCA’s regulatory perimeter. In the feedback statement the FCA also explores the potential future regulatory actions, including developing an appropriate standard for UoP bonds and bringing verifiers and second party opinion providers within its regulatory remit.


Feedback Statement

The Principles updates for incorporating sustainability into capital markets

On 28 June, ICMA announced that the Green Bond Principles, Social Bond Principles, Sustainability Bond Guidelines and Sustainability-Linked Bond Principles, a collection of voluntary frameworks with the stated mission and vision of promoting the role that global debt capital markets can play in financing progress towards environmental and social sustainability, have published: (i) new definitions for green securitisation (Secured Green Collateral Bond, Secured Green Standard Bond) clarifying terminology and market practice, notably for collateral. A related Q&A has also been released; (ii) an updated registry of approximately 300 key performance indicators (KPIs) for Sustainability-Linked Bonds. An accompanying Q&A also addresses, among other issues, the materiality assessment of KPIs; (iii) a new Climate Transition Finance Methodologies registry with a list of tools to specifically help issuers, investors, or financial intermediaries validate their emission reduction trajectories/pathways as "science-based"; (iv) updated Guidelines for External Reviews, to facilitate the assessment of alignment with the existing Climate Transition Finance Handbook; (v) updated high-level mapping to the UN’s Sustainable Development Goals; (vi) a recommendations paper and proposed information template for providers of Green, Social and Sustainability Bond index services; (vii) a pre-issuance checklist for Green Bonds/Green Bond Programmes and an updated Sustainable Bond/Bond Programme Information Template; and (viii) new metrics for impact reporting: (a) for Green Projects relating to environmentally sustainable management of living natural resources and land use; and (b) for Social Projects (including an enriched list of social indicators and impact confirmation on target population.

Press release and documents

TNFD second iteration beta framework including initial guidance on metrics

On 28 June, the Taskforce on Nature-related Financial Disclosures (TNFD) released version 0.2 of its beta framework for nature-related risk and opportunity management and disclosure. This release builds on the first iteration release in March and features TNFD’s approach to metrics and additional guidance for market participants to start pilot testing. The second iteration includes several enhancements: (i) a draft architecture for metrics and targets and an illustrative set of assessment metrics to support pilot testers. The proposed approach distinguishes between assessment metrics and disclosure metrics, recognising that, as with mainstream financial management and reporting, what gets disclosed to report users is only a sub-set of what gets analysed internally to inform risk management and decision making; (ii) further guidance on how to undertake dependency and impact evaluation as well as the identification of priority locations as part of the Locate Evaluate Assess Prepare (LEAP) approach; (iii) an overview of the TNFD’s approach to the future development of additional guidance for market participants, including sector classification aligned with the approach taken by the International Sustainability Standards Board, the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures; (iv) enhancements to the LEAP approach for financial institutions; and (v) additional practical guidance for market participants interested in starting to pilot test the beta framework from 1 July 2022 to 1 June 2023. Ongoing market feedback will support the further design and development of the TNFD recommendations due in September 2023.

Press release


Outcome of ESMA call for evidence on ESG ratings

On 27 June, ESMA published a letter sent to the EC providing the findings from the call for evidence on the market structure for ESG rating providers. ESMA’s findings include that: (i) the structure of the market shows that there is a small number of very large non-EU providers, and a large number of significantly smaller EU entities; (ii) users of ESG ratings are typically contracting for these products on an investor-pays basis from several providers simultaneously. Their reasons for selecting several providers are to increase coverage, either by asset class or geographically, or in order to receive different nature of ESG assessments. The most common shortcomings identified by the users were a lack of coverage of a specific industry or a type of entity, insufficient granularity of data, and a lack of transparency around methodologies used by ESG rating providers. However, the provision of ESG ratings on an issuer-pays basis was also evidenced and more prevalent than anticipated; and (iii) entities covered by ESG ratings dedicate at least some level of resourcing to their interactions with ESG rating providers, although the amount largely depends on the size of the rated entity itself. Most respondents highlighted some degree of shortcoming in their interactions with the rating providers, most notably on the level of transparency as to the basis for the rating, the timing of feedback or the correction of errors. ESMA will continue supporting the EC in their assessment of the need for introducing regulatory safeguards for ESG ratings.

Press release


Other Developments

EBA updates guidelines on data collection exercises regarding high earners

On 30 June the EBA updated its guidelines on the data collection exercise on high earners. The update reflects the amended remuneration framework laid down in CRD, including the introduction of derogations to pay out a part of the variable remuneration in instruments and under deferral arrangements. In addition, the need to update these guidelines stems from the specific remuneration regime that has been introduced for investment firms in the IFD and IFR. The annual collection of data regarding high earners under the updated guidelines should start in 2023 for the financial year that ends in 2022. 

Press release


EBA final guidelines on remuneration and gender pay gap benchmarking exercise under CRD and IFD

On 30 June, the EBA updated its guidelines on the remuneration benchmarking exercise under CRD, to take into account additional requirements introduced by CRD V regarding the application of derogations and the benchmarking of the gender pay gap. The EBA also added guidance to harmonise the benchmarking of approvals granted by shareholders to use higher ratios than 100% between the variable and fixed remuneration. Separate guidelines on the remuneration and gender pay gap benchmarking exercise are provided for investment firms under the IFD. Specific templates for the benchmarking of the gender pay gap have also been introduced. Both the guidelines for credit institutions and the new guidelines for investment firms integrate the changes made to the remuneration and disclosure requirements under the CRD and the CRR and the new remuneration framework for investment firms under the IFD and the IFR. The approach taken in the guidelines for investment firms is consistent with the corresponding guidelines for banks.

Press release

Final guidelines CRD

Final guidelines IFD

EP to consider DORA in October

On 28 June, the EP indicated that it will consider the proposed Regulation on digital operational resilience in the financial sector (DORA) and the related legislative proposal for a Directive that clarifies and amends certain existing EU financial services directives to align them with DORA during its plenary session to be held from 17 to 20 October. Political agreement was reached between the EP and the Council in May.

DORA procedure file

Amending Directive procedure file

FCA Handbook Notice No. 100

On 24 June, the FCA published Handbook Notice No. 100. The FCA list the legislative changes set out in: (i) Claims Management (Relevant Connections) Instrument 2022. This instrument comes into force on 7 July; (ii) Funeral Plans (No. 4) Instrument 2022. This instrument comes into force on 29 July; and (iii) Handbook Administration (No. 60) Instrument 2022. This instrument came into force on 24 June.

Handbook Notice No. 100