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Key Regulatory Topics: Weekly Update - 25 August 2017 - 31 August 2017

01 September 2017



FMLC publishes letter sent to the MoJ on the EU (Withdrawal) Bill 2017 

On 31 August, the FMLC published a letter to the MoJ following their email (dated 14 July) seeking comments on the EU (Withdrawal) Bill 2017. The letter draws attention to issues of legal uncertainty stemming from Clause 3 of the Withdrawal Bill, which concerns the incorporation of direct EU legislation. The letter concludes by stating that the FMLC will contribute further research and analysis when the statutory instruments made pursuant to powers set out in the Withdrawal Bill are published.

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Capital markets and market infrastructure  

Euro repo market – EMMI publishes responses to consultation on new reference index for euro repo market

On 29 August, the EMMI published a summary of the stakeholder feedback it received to its June consultation on a new reference index for the euro repo money market. Points of interest from the feedback include: (i) all respondents provided feedback that EMMI's proposed structure for the new repo index's specification was appropriate; (ii) some feedback indicated concerns about the use of the word "secured" in EMMI's statement of underlying interest, which has now been amended. EMMI emphasises that the underlying interest of an index reflects the economic concept the index intends to measure, and should be phrased in broad, yet clear, terms that guarantee its durability over time; (iii) the majority of respondents agreed with EMMI's proposal to consider repos conducted at a floating rate as eligible input. Further qualifying criteria for the index referenced in these transactions will have to be defined, mainly to avoid potential future self-reference; and (iv) in terms of use of the new repo benchmark, the feedback was mixed. An accompanying press release explains that EMMI will publish information about the key features and characteristics of the index soon.

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EMIR –ESMA publishes responses to consultation on CCP conflicts of interest management 

On 25 August, ESMA published responses to its June consultation on guidelines relating to the management by CCPs of conflicts of interest under EMIR. Respondents include: (i) ISDA; (ii) FIA and (iii) EACH. ESMA expects to publish the final version of the guidelines by the end of 2017.

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PPI – FCA launches campaign on complaints deadline 

On 29 August, the FCA announced a new campaign designed to create awareness of the deadline to make a complaint about PPI. The FCA has introduced a deadline of 29 August 2019 to prompt customers into deciding whether to check if they had PPI and whether they want to make a complaint. The campaign is being paid for by the 18 firms, including banks, building societies and credit card providers, who had the most PPI complaints. Firms have also agreed to a number of steps to ensure that the complaints process is as easy as possible for their customers. These include: (i) providing an option for people to submit their complaint online; (ii) ensuring that complaint forms are as easy to understand as possible and do not put customers off complaining; (iii) providing support to vulnerable customers who may need extra help to submit complaints; and (iv) providing useful and free-to-use PPI checking processes.

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Government confirms final form of proposals to tackle cold calling and pensions fraud 

On 25 August, the Government confirmed clear proposals aimed at tackling pensions fraud, and cold calling. The cold calling ban is intended to send an unambiguous message to consumers that no legitimate firm will ever cold call them about their pension. In future, only calls where consumers have expressly requested information from a firm, or where an existing client relationship exists, will be regarded as "legitimate". The Information Commissioner's Office will be responsible for enforcing the ban, which is intended to be finalised during the course of 2017. Restrictions on pension transfers will also be introduced to give scheme trustees greater scope to refuse to make a transfer where the receiving scheme may be fraudulent. The member's statutory right to transfer will be limited to specific situations, such as where the receiving scheme is a personal pension scheme operated by an FCA authorised firm or entity, or where there is a "genuine employment link" to the receiving occupational pension. This new regime will be progressed during 2017 but will not be finalised until the master trust authorisation regime is in place. Finally, restrictions will be put in place to make it harder for fraudulent schemes to be set up, including requiring all new pension scheme registrations to be made through an active company.

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Financial crime  

Please see our eAlert: China: China Proposes New Amendments to Strengthen the Commercial Bribery Law

Please see the Consumer/Retail section for an update on pensions fraud. 


BCBS publishes consultation on implications of FINTECH for banks and supervisors 

On 31 August, the BCBS published a consultative document (BCBS415) on the implications of FinTech for banks and their supervisors. In light of the growth of FinTech, the BCBS has set up a task force to assess how it may affect the banking industry and the activities of supervisors in the near to medium term. The consultative document includes various future potential scenarios, together with their specific risks and opportunities, and summarises the BCBS's main findings and conclusions. The BCBS is concerned that the rapid adoption of enabling technologies and the emergence of new business models pose an increasing challenge to incumbent banks. It has identified ten key observations and related recommendations on supervisory issues for consideration by banks and bank supervisors: (i) the overarching need to ensure safety and soundness and high compliance standards without inhibiting beneficial innovation in the banking sector; (ii) the key risks for banks related to fintech developments, including strategic/profitability risks, operational, cyber and compliance risks; (iii) the implications for banks of the use of innovative enabling technologies; (iv) the implications for banks of the growing use of third parties, via outsourcing and/or partnerships; (v) cross-sectoral cooperation between supervisors and other relevant authorities; (vi) international cooperation between banking supervisors; (vii) adaptation of the supervisory skillset; (viii) potential opportunities for supervisors to use innovative technologies ("suptech"); (ix) relevance of existing regulatory frameworks for new innovative business models; and (x) 10 key features of regulatory initiatives set up to facilitate fintech innovation. The deadline for comments is 31 October.

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Please see the Consumer/Retail section for an update on PPI complaints. 

ICPs – IAIS publishes report on findings of self-assessment and peer review of ICPs 13 and 24 

On 30 August, the IAIS published a report on the findings from a self-assessment and peer review (SAPR) of certain ICPs. The report includes high-level findings of the SAPR on ICPs 13 (Reinsurance and other forms of risk transfer) and 24 (Macro-prudential surveillance and insurance supervision) and the standards linked to those ICPs. It also sets out recommendations on the steps that committees of the IAIS could take to enhance observance and understanding of the assessed ICPs. Every IAIS region was represented in the SAPR, with 39% of IAIS members participating. The assessment questionnaire consisted of 32 questions covering 13 standards.

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ICPs – IAIS and A2ii report on supervisory capacity building and development needs 

On 30 August, the IAIS published a report on the findings from its supervisory capacity building and development needs survey. The report was prepared by the IAIS implementation committee in co-operation with the Access to Insurance Initiative (A2ii). The IAIS periodically conducts surveys to assess capacity building and development needs for supervisors. The survey took place from 29 August to 28 October 2016 and 45 jurisdictions completed the assessment. The findings are viewed as broadly illustrative of IAIS members. Key findings from the report relate to: (i) institutional information; (ii) staffing and professional development; and (iii) promotion of capacity building resources.

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MiFID II – FCA new webpage on position limits for commodity derivative contracts 

On 30 August, the FCA published a new webpage on position limits for commodity derivative contracts under the MiFID II. Under MiFID II, all commodity derivatives will be subject to position limits. The webpage lists the commodity derivative contracts that the FCA has currently identified as trading on a UK trading venue which, from 3 January 2018, will have a bespoke position limit set against them. The list will be subject to change and firms are encouraged to check it regularly. Any other commodity derivatives not listed in the table and traded on a UK trading venue (but not traded in significant volumes on a venue in another member state) will, from 3 January 2018, be subject to a limit of 2,500 lots. The webpage includes notes that provide further clarification for firms. Amongst other things, these state that: (i) references to "trading venue" encompass regulated markets, MTFs and OTFs, as defined under MiFID II; (ii) the list of contracts is based on the most recent market data available to the FCA; and (iii) if market participants would like more certainty on the treatment of a particular contract under the position limit regime, they are advised to contact the relevant trading venue for assistance.

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MiFID II – EC publishes Delegated Regulation on amending MiFID II systematic internaliser definition 

On 28 August, the EC published the text of a Delegated Regulation amending Delegated Regulation (EU) 2017/565 as regards the specification of the definition of SIs. Delegated Regulation (EU) 2017/565 supplements the MiFID II as regards organisational requirements and operating conditions for investment firms and defined terms. Articles 12 to 16 expand on the definition of an SI as set out in Article 4(1)(20) of the MiFID II. The EC adopted the Delegated Regulation on 28 August. The next step will be for the Council of the EU and the EP to consider the Delegated Regulation. If neither the Council nor the EP object to the Delegated Regulation, it will be published in the OJ. It will enter into force on the day after its publication in the OJ and will apply from 3 January 2018.

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Prudential regulation  

CRDV IV – Implementing Regulation on changes to benchmarking portfolios and reporting instructions under CRD IV published in OJ 

On 31 August, EC Implementing Regulation amending Implementing Regulation 2016/2070 as regards benchmarking portfolios and reporting instructions under the CRD IV was published in the OJ. The Implementing Regulation is based on draft ITS submitted by the EBA to the EC. There was not a public consultation as the amendments to Implementing Regulation 2016/2070 are limited in scope and nature. It will enter into force 20 days after its publication in the OJ (that is, 20 September).

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SSM – ECB finalises amendments to Regulation on reporting of supervisory financial information 

On 28 August, the ECB published a Regulation (dated 25 August), amending the ECB Regulation on reporting of supervisory information (SSM Financial Reporting Regulation). The SSM Financial Reporting Regulation applies to credit institutions in the SSM. It supplements EC Implementing Regulation 680/2014, which sets out financial reporting requirements for firms within the scope of the CRR. The amendments reflect changes introduced by EC Implementing Regulation 680/2014 on supervisory reporting to align reporting on FINREP with the requirements of IFRS9. The amending Regulation was adopted by the ECB's Governing Council and enters into force 20 days after its publication in the OJ. The amending Regulation will apply to: (i) supervised entities applying IRFS for the first time as at the first reporting reference date falling within their next financial year after 31 December; (ii) significant supervised entities that are subject to national accounting frameworks from 1 January 2018; (iii) less significant supervised entities that are subject to national accounting frameworks from 1 January 2018; and (iv) less significant supervised entities that are subject to national accounting frameworks from 1 January 2019.

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Please see our eAlert: South Africa President signs the Financial Sector Regulation Act, 2017 into law ​