Financial Services Speedread 25 January 2023 edition
25 January 2023
IN THIS EDITION OF THE FINANCIAL SERVICES SPEEDREAD WE COVER THE FOLLOWING UPDATES: |
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Financial Markets 1. FCA: Webpage update on the Temporary Permissions Regime 2. European Commission: Summary of responses regarding the regime applicable to the use of benchmarks administered in a third country 3. FCA: Wholesale brokers portfolio letter 4. FCA: Consultation paper on streamlining transparency rules on structured digital reporting of annual financial statements by companies (CP23/2) 5. ESMA: Press release on marketing financial products 6. European Commission: Delegated acts amending RTS 1 and RTS 2 adopted 7. ESMA: Consultation paper on manual for post-trade transparency fields |
Banking and Prudential 8. BoE: Version 3.6.0 PWD release note on data collection for banks, building societies and investment firms 9. PRA: Dear CEO letter to UK deposit-takers and international banks 10. BoE: Updated webpages regarding LIBOR 11. FCA: Webpage update regarding UK EMIR |
Financial Crime 12. FCA: Decision Notice: Al Rayan Bank Plc |
Payments 13. EBA: Report on peer review regarding authorisation under the Payment Services Directive 14. HM Treasury: Review and call for evidence on Payment Services Regulations 15. HM Treasury: Post implementation review of the Payment Card Interchange Fee Regulations 2015 |
Digital Services and Fintech 16. UNIDROIT: Consultation on Digital Assets and Private Law |
Other 17. FCA: Podcast interview on the Consumer Duty |
FINANCIAL MARKETS |
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1. FCA: Webpage update on the Temporary Permissions RegimeOn 6 January 2023, the FCA updated its webpage to include additional information regarding the Temporary Permissions Regime (TPR). The FCA focuses on four scenarios, which might result in disciplinary actions against a TPR firm. These scenarios involve:
2. European Commission: Summary of responses regarding the regime applicable to the use of benchmarks administered in a third countryOn 10 January 2023, the European Commission published a summary of results and feedback from the consultation on the regime applicable to the use of benchmarks administered in a third country, carried out between 20 May and 12 August 2022. The consultation was conducted to assist the European Commission in understanding and seeking views on the expected effects that the EU Benchmark Regulation may have on the use of benchmarks in the EU and benchmarks provided outside the EU. Responses, from 64 valid contributions, indicated the following:
3. FCA: Wholesale brokers portfolio letterOn 11 January 2023, the FCA published a portfolio letter on its supervisory strategy for wholesale brokers. The letter sets out the FCA's view of the most important risks arising from wholesale brokers. The letter notes that since the FCA's last letter setting out its supervisory strategy for the sector in 2019 periods of sustained volatility have created heightened financial, credit and operational risks in many parts of the markets where wholesale brokers are active. The FCA's work suggests that wholesale broking firms continue to lag in terms of conduct and culture. Areas identified by the FCA include the following:
The FCA advises all CEOs to have discussed the letter with their fellow directors and/or the board and to have agreed actions and/or next steps by the end of February 2023. 4. FCA: Consultation paper on streamlining transparency rules on structured digital reporting of annual financial statements by companies (CP23/2)On 12 January 2023, the FCA published a consultation paper on streamlining transparency rules on structured digital reporting of annual financial statements. The consultation paper set out changes and proposals to streamline existing rules, which require certain companies with securities admitted to UK regulated markets to prepare, publish and file with the FCA their annual financial report in an electronic format and for the financial statement within it to be in a structured digital format. The FCA intends for structured digital reporting to support efficient price formation and investors' decision-making, which in turn promotes market integrity in line with the FCA's operational objective. The FCA is also proposing to simplify the structure of its current rules by:
The consultation paper will also be of interest to advisory firms and service providers who support companies in meeting their obligations under DTR 4.1. and the Technical Standards, as well as software vendors and other enterprises who supply the software and technology infrastructure that enable structured digital reporting. Regarding next steps, the FCA has asked for comments and feedback on the consultation paper by 24 February 2023. 5. ESMA: Press release on marketing financial productsOn 16 January 2023, the European Securities and Markets Authority (ESMA) published a press release in relation to marketing of financial products. The press release states that over the course of 2023, ESMA will launch a common supervisory action (CSA) with national competent authorities (NCAs) on the application of MiFID II disclosure rules with regards to marketing communications across the European Union. The purpose of this CSA is to ensure the consistent implementation and application of EU marketing rules, as well as enhance the protection of investors in line with ESMA's over-arching objectives. As part of the CSA, NCAs will review whether marketing communications are fair, clear and non-misleading and how firms select the target audience for the marketing communications, especially in the case of riskier and more complex investment products. The vulnerability of younger, less experienced investors was also highlighted in the press release. The CSA will closely consider marketing and advertising by firms through distribution channels, including apps, social media and collaborations with affiliates such as influencers. The CSA also presents an opportunity for ESMA to collect information about possible greenwashing practices observed in marketing communications and advertisements. 6. European Commission: Delegated acts amending RTS 1 and RTS 2 adoptedOn 17 January 2023, the European Commission adopted delegated acts amending regulatory technical standards laid down in Delegated Regulation (EU) 2017/587 as regards certain transparency requirements applicable to transactions in equity and non-equity instruments. These are RTS 1 (together with accompanying annexes) and RTS 2 (together with accompanying annexes). The amendments concern certain reporting fields, flags and transitional provisions. This follows ESMA's December 2022 opinion responding to the European Commission's proposed amendments. Among other things, the delegated act amending RTS 1:
Among other things, the delegated act amending RTS 2:
EU legislators will now review the draft delegated acts. If neither object, the delegated acts will enter into force 20 days after publication in the Official Journal of the EU. 7. ESMA: Consultation paper on manual for post-trade transparency fieldsOn 19 January 2023, ESMA published a consultation paper on a manual for post-trade transparency fields. This follows the adoption of delegated acts amending RTS 1 and RTS 2 by the European Commission in January 2023 (see above). Although the amendments have yet to be endorsed by EU co-legislators, the consultation is based on the texts adopted on 17 January 2023. The manual on post-trade transparency is intended to be a practical tool to support implementation of applicable post-transparency requirements. It will give a general overview of the post-trade transparency regime for equity, equity-like and non-equity instruments and will include in one single document: (i) legal references of Level 1 (MiFIR / MiFID II); (ii) legal references of Level 2 (RTS); (iii) legal references of Level 3 (Opinions/Guidelines); (iv) guidance included in previously published Q&As; and (v) new Level 3 guidance. ESMA states that the manual does not provide EU law interpretation or contain supervisory elements. Areas to be covered in the manual are: (i) the scope of instruments and transactions subject to post-trade transparency; (ii) the relevant entities in charge of the reporting and publication of post-trade transparency information; (iii) when post-trade transparency information has to be made public (real-time vs. deferred publication); (iv) post-trade transparency information to be made public, i.e. reporting fields and flags; and (v) the common aspects as well as the differences between the post-trade transparency regime and the transparency calculations in relation to the scope of instruments and transactions. The deadline for comments is 31 March 2023. |
BANKING AND PRUDENTIAL |
8. BoE: Version 3.6.0 PWD release note on data collection for banks, building societies and investment firmsOn 9 January 2023, the Bank of England (BoE) published a release note titled Version 3.6.0 PWD. This release note provided an update to the BoE's leverage ratio reporting framework, to support data collection relating to contingent leverage risks and trading exposures where these risks are most likely to arise. The BoE also updated its website to reflect the addition of Version 3.6.0 PWD to its data collection taxonomy. All other reporting frameworks remain unchanged and the BoE welcomes feedback on the release note by 3 February 2023. 9. PRA: Dear CEO letter to UK deposit-takers and international banksOn 10 January 2023, the PRA published letters concerning its key 2023 priorities and supervisory expectations to UK deposit takers and international banks. The PRA notes that the priorities and expectations it lists are not intended to be exhaustive, but provide an overview of its priorities for the year ahead. Key points from the letters include:
10. BoE: Updated webpages regarding LIBOROn 9 January 2023, the BoE updated its website to include additional information on the London Interbank Offered Rate (LIBOR). The updates were made on the following webpages:
The updates indicate that 27 LIBOR settings have ceased permanently, 3 'synthetic' GBP settings remain and 5 USD LIBOR settings are available until mid-2023. The BoE also notes that one and six month synthetic GBP LIBOR will cease at the end of March 2023 and three month synthetic GBP LIBOR will cease at the end of March 2024. 11. FCA: Webpage update regarding UK EMIROn 10 January 2023, the FCA updated its webpage to include additional information regarding the UK European Market Infrastructure Regulation (UK EMIR). UK EMIR covers derivates, central counterparties and trade repositories. The additional change indicates that following Treasury legislation, the period during which the Share Trading Obligation (STO) and Derivatives Trading Obligation (DTO) Temporary Transitional Power (TTP) directions may continue to apply, has been extended to 31 December 2024. |
FUND MANAGEMENT |
No updates for this edition of the FSS. |
SENIOR MANAGERS AND GOVERNANCE |
No updates for this edition of the FSS. |
FINANCIAL CRIME |
12. FCA: Decision Notice: Al Rayan Bank PlcOn 11 January 2023, the FCA issued a Decision Notice addressed to Al Rayan Bank Plc (Al Rayan) in respect of a fine for £4,023,600 imposed as a result of poor anti-money laundering systems in breach of Principle 3 of the FCA's Principles for Businesses. The FCA found that between 1 April 2015 and 30 November 2017, Al Rayan failed to take reasonable care to organise its affairs responsibly and effectively, with adequate risk management systems and have policies and procedures in place, comprehensive and proportionate to its business activities, to enable it to identify, assess, monitor and manage money laundering risk. In particular, the FCA found that Al Rayan did not have appropriate policies and procedures in relation to the application of enhanced due-diligence and establishing high-risk customers’ source of wealth and source of funds at the point of onboarding despite acknowledging the high-risk of financial crime. Al Rayan was also specifically made aware of the risks by the FCA during the relevant period, but it failed to remediate those weaknesses. In line with the FCA's three-year strategy, it will continue to raise the stakes for firms that do not prevent money laundering risks which harms confidence and integrity in the market and do not take their financial crime responsibilities seriously. Al Rayan agreed to settle early and so qualified for a 30 per cent. discount, thus reducing the financial penalty of £5,748,000 to £4,023,600. |
RETAIL SERVICES |
No updates for this edition of the FSS. |
PAYMENTS |
13. EBA: Report on peer review regarding authorisation under the Payment Services DirectiveOn 11 January 2023, the European Banking Authority (EBA) published its peer review report (the Peer Review) on the authorisation of payment institutions (PIs) and e-money institutions (EMIs) under the revised Payment Services Directive (PSD2). The Peer Review also considers the extent to which competent authorities (CAs) implement the 2017 EBA Guidelines on authorisation, which were issued in support of PSD2. The Peer Review indicates that CAs have largely implemented the 2017 EBA Guidelines and where implemented, the Guidelines have achieved their objective of greater consistency and transparency in the authorisation information that prospective PIs and EMIs have to submit. However, the Peer Review equally notes that some CAs have not fully implemented the 2017 EBA Guidelines in relation to obtaining the full set of information from applicants. There are also significant divergent practices in relation to the assessment of business plans, applicants' governance arrangements and internal control mechanisms. As a result, applicants remain subject to different supervisory expectations regarding certain requirements for authorisation as a PI or EMI across the EEA. To assist with this divergence, the report sets out best practices developed by some CAs that might be of benefit for other CAs to adopt. These include:
In addition, the Peer Review recommended that, as part of the EBA's ongoing PSD2 review process, the European Commission should clarify the delineation between the different categories of payment services, clarify the applicable governance arrangements for PIs and EMIs and mandate the EBA to develop a common assessment methodology for granting authorisation as a PI or an EMI. 14. HM Treasury: Review and call for evidence on Payment Services RegulationsOn 13 January 2023, the Government published a review of the Payment Services Regulations 2017 and a call for evidence on how UK payments regulation should adapt to continue to meet the Government’s aims and address the specific challenges highlighted in the review. Challenges include keeping pace with market developments, such as developing an ecosystem for Open Banking and the emergence of cryptoassets. Although the focus of the statutory review is on the Payment Services Regulations 2017, the Government is also using the call for evidence as an opportunity to seek views in relation to the Electronic Money Regulations 2011; the Cross Border Payments Regulation; and other areas pertinent to payment services in the UK. The Government is assessing the current regime against the following objectives: achieving agile and proportionate regulation; ensuring appropriate trust and protection for consumers; ensuring the resilience and integrity of UK's payment market; and fostering competition, in the interests of consumers. The deadline for comments is 7 April 2023. 15. HM Treasury: Post implementation review of the Payment Card Interchange Fee Regulations 2015On 13 January 2023, HM Treasury issued a post-implementation review of the Payment Card Interchange Fee Regulations 2015 (PCIFRs). The PCIFRs implemented aspects of the Interchange Fee Regulation 2015 (IFR), which caps interchange fees charged for the acceptance of consumer debit and credit cards. The PCIFRs principally designated the Payment Systems Regulator (PSR) as the competent authority to monitor IFR, while the FCA was also designated as co-competent, specifically in relation to monitoring and enforcing compliance with certain articles under the IFR. The Government considers that the policy objective of appointing an appropriate competent authority with powers to enforce the IFR has been achieved. The Government notes that the Future Regulatory Framework Review will ensure that the competent authorities have the powers they need in future to be able to replace direct regulatory requirements in retained EU law, including in relation to payments policy. It confirms that the wider approach to interchange fee policy will be determined under the Future Regulatory Framework Review. The Government confirms that when the interchange fee policy is reviewed, adjustments may be needed to the powers of the authorities under the PCIFRs. |
DIGITAL SERVICES AND FINTECH |
16. UNIDROIT: Consultation on Digital Assets and Private LawOn 10 January 2023, the International Institute for the Unification of Private Law (UNIDROIT) published a consultation regarding the draft UNIDROIT principles on digital assets and private law. The consultation aims to discuss and highlight principles designed to facilitate transactions in digital assets and ensure that the principles are well suited to application in different contexts, including both civil law and common law jurisdictions, as well as developing or emerging markets. It recommends that states adopt legislation consistent with these principles. UNIDROIT also seeks feedback from parties operating and engaged in the digital asset industry, on whether the ideas proposed in the consultation sufficiently address the private law issues which arise in digital asset transactions. The deadline to submit comments and feedback to the consultation is 20 February 2023. |
ESG |
No updates for this edition of the FSS. |
OTHER |
17. FCA: Podcast interview on the Consumer DutyOn 17 January 2023, the FCA released the transcript of its podcast interview with the FCA's Manager of Consumer Policy Outcomes, Richard Wilson. The 'Inside FCA Podcast' host, Ozge Ibrahim, asked Richard Wilson a series of questions regarding the Consumer Duty. The key questions and responses include:
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The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.