Financial services update – 33 / 37 观点
The topics covered in this month's newsletter include:
Our coverage of the latest updates from the regulators in response to the coronavirus pandemic is available here.
The Prudential Regulation Authority (PRA) published its 2020/21 Business Plan on 9 April 2020. The Business Plan sets out the work programme for each of the PRA's strategic goals. It also includes a budget for the period 1 March 2020 – 28 February 2021. In addition, as expected, this year's Business Plan outlines the PRA's high-level actions to deal with COVID-19.
The strategic goals support the PRA's overall strategy (which in turns supports the PRA's statutory objectives) and are to:
The Financial Conduct Authority (FCA) published its 2020/21 Business Plan on 7 April 2020. In it, the FCA explains its strategic focus for the next three years and highlights its immediate concerns in responding to the coronavirus crisis. In its approach to dealing with COVID-19, the FCA has focused its efforts on ensuring:
The FCA also set out its five key priorities over the next three years. These are ensuring:
The FCA also recognised the need to work with the Government and stakeholders to shape the future regulatory framework in light of the recent challenges and the changes that will be brought about as a result of Brexit.
The FCA released the complaints data for the second half of 2019. The data showed an increased in complaints for regulated firms from 4.29 million (in the first half of 2019) to 6.02 million. The increase was mainly driven by payment protection insurance (PPI) complaints which increased by 75% and represented 62% of all complaints. Apart from PPI complaints, there was a 6% increase in all other complaints with the second most complained about product being current accounts (10% of all complaints).
In a statement published on 30 April 2020, the FCA stated that it will give the industry an additional 6 months to implement SCA for e-commerce (until 14 September 2021). For more detail, please see our COVID-19 update.
On 9 April 2020, the FSB published its stage 1 assessment report addressed to the G-20 on an assessment of existing arrangements and challenges for enhancing cross-border payments. Enhancing cross-border payments, by making them faster, cheaper, more transparent and inclusive, will have widespread benefits for all nations.
This will require addressing the frictions in the current process, such as AML and CTF, data protection considerations and addressing outdated legacy technology platforms. The FSB notes that financial and technological innovation are creating opportunities but also involves challenges and risks.
The PSR hosted a conference call led by Chris Hemsley, PSR Managing Director, to discuss APP scams. A note of the call released by the PSR on 6 April 2020 highlights several key areas of discussion. Mr Hemsley addressed the current state of play, including looking at recent fraud statistics and the work being undertaken on fraud prevention.
He went on to consider the Contingent Reimbursement Model Code (the Code) and the data on reimbursement levels under the Code as well as the Financial Ombudsman Service's experience of complaints and potential barriers to take up of the Code.
He then discussed the long-term funding for no-blame situation. Mr Hemsley also outlined three possible paths forward: continue the current approach and work within the current rules, return to the concept of a Faster Payments Service) rule change as developed and proposed by the industry, or rely on action by the PSR.
On 3 April 2020, the European Commission published its consultation document on a retail payments strategy for the EU. As part of its Work Programme for 2020, the Commission aims to adopt an integrated EU payments market strategy alongside a Digital Finance Strategy.
The consultation is focused on four key objectives:
The outcome of this consultation will help the Commission prepare its Retail Payments Strategy, to be published in Q3 of 2020.
The Payment Systems Regulator (PSR) published its Annual Plan and Budget for 2020/21 on 31 March 2020. The key aims and activities set out for the year were developed before the coronavirus pandemic, and while the PSR will adapt its ways of working with people and business as the year progresses in light of COVID-19, much of the work will continue albeit to a revised timetable. Collaboration is at the heart of this year's plan and the PRA has identified seven key projects for 2020/21.
The PRA published a modification by consent on 9 April 2020, which contains amendments to the Leverage Ratio Part of the PRA handbook. The amendment allows firms to calculate the leverage ratio consistent with the Financial Policy Committee’s long-standing view on the appropriate treatment of unsettled sales against cash payables relating to unsettled purchases. It also contains amendments to the related disclosure and reporting of quarterly average figures.
The report showed that:
Given the data set used, the report does not reflect the impact of COVID-19 but provides a useful benchmark on the position of banks as they entered this period of economic turbulence. To allow banks to focus on their key priorities and to provide additional operational capacity, the BCBS will not collect Basel III monitoring data for the end-June 2020 reporting date.
On 7 April 2020, the European Insurance and Occupational Pensions Authority (EIOPA) published an Opinion on the remuneration policies and practices which provide incentives to take risks in the insurance and reinsurance market, and the provisions in place on remuneration to ensure sound and prudent management of the businesses to prevent the encouragement of excessive risk.
In the Opinion, the EIOPA aims to enhance supervisory convergence by focusing on a set of remuneration principles in the Solvency II Delegated Regulation ((EU) 2015/35) and targeting a reduced scope of higher-profile risk-taking staff. This aims to reduce the administrative burden while promoting a proportionate approach.
The Opinion should only be considered as guidance benchmarks/thresholds rather than hard targets; national competent authorities (NCAs) can adopt their own proportionate and flexible approaches.
The European Securities and Markets Authority (ESMA) published a final report, dated 3 April 2020, containing guidelines on performance fees in UCITS and certain types of AIFs, which are applicable to fund managers and NCAs.
ESMA considers supervisory convergence as essential on this issue, as the current different practices across NCAs creates risks of regulatory arbitrage and inconsistent levels of investor protection. ESMA's proposed guidelines on performance fees are as follows:
On 31 March 2020, ESMA published a consultation paper on draft implementing technical standards (ITS) under Regulation (EU) 2019/1156 on cross-border distribution of funds.
The Regulation provides that ESMA shall draft ITS to determine standard forms, templates and procedures for the publication and notifications that NCAs are required in relation to:
This is the first stage in the development of these ITS and Annex IV contains the text of the draft ITS on which ESMA is seeking feedback
ESMA will consider all comments received by 30 June 2020 and expects to publish a final report by 2 February 2021.
On 20 April 2020, the Council of EU published two final compromise texts, on the Regulation on European crowdfunding service providers and on the Directive making amendments to the MiFID II Directive relating to crowdfunding. The texts follow a note from the Council's General Secretariat to its Permanent Representative Committee.
ESMA signed a Memorandum of Understanding (MoU) with the Monetary Authority of Singapore (MAS) on 17 April 2020. The MoU establishes binding requirements which are equivalent to the requirements under Article 30 of the Benchmarks Regulation ((EU) 2016/1011).
The purpose of the MoU is two-fold:
The MoU also allows EU financial institutions to continue using Singapore's financial benchmarks (eg SIBOR and the Singapore Dollar Swap Offer Rate) as a reference rate in their EU contracts.
On 8 April 2020, the International Organisation of Securities Commissions (IOSCO) published a press release setting out its reprioritized work programme to effectively deal with the coronavirus pandemic.
It has decided to focus its resources on areas directly impacted by COVID-19, such as, market-based finance. IOSCO will continue projects which are close to completion including their work related to G-20 deliverables and projects in relation to asset management linked to FSB recommendations.
However, it will pause or delay work involving industry participation such as the analysis of the use of Artificial Intelligence and Machine Learning by market intermediaries and asset managers.
On 23 April 2020, the Tribunal published its judgment against the FCA's decision to issue a decision notice, on 23 May 2019, to Financial Services (Euro) Limited (FSE), pursuant to which the Authority decided to cancel FSE's Part 4A permission. The Tribunal upheld FSE's arguments, that its inability to pay its fees and levies were an outcome of the FCA's investigations into FSE and its director.
The investigation resulted in its failure to obtain professional indemnity insurance and, as a consequence, FSE decided not to trade meaning it could not afford the payments. The Tribunal held that, in treating this as a routine case of a firm failing to meet the thresholds, the FCA failed to take into account a number of relevant factors in reaching its decision for example the relevance of the ongoing investigations and whether the FCA ought to have refrained from taking enforcement action pending the outcome.
The Competition & Markets Authority (CMA) wrote a letter to Metro Bank plc, on 20 April 2020, about two breaches of Part 6 of the Retail Banking Market Investigation Order. Metro Bank breached the Order by failing to send alerts that informed customers of the charges to unarranged overdrafts, and by delivering some of these alerts after 10am. In remediation, Metro Bank will pay £11.4m (plus 8% compensatory interest) to the 128,564 affected customers by Summer 2020.
The FOS published issue 151 of their newsletter on 14 April 2020. It provides guidance to consumers and businesses trying to contact the FOS, which is experiencing high demand for their services, and also information on avoiding fraud and scams. In it, the FOS announced an increase to the maximum amount they can require a financial services firm to pay (£355,000 from £350,000). Importantly the FOS also published its 2020/21 plans and budget setting out its complaints targets and strategy for the comping year in light of COVID-19.
On 20 April 2020, the FSB published a consultative document on a toolkit of effective practices for cyber incident response and recovery. Cyber resilience and financial stability are key elements of the FSB's work programme. Accordingly, the FSB is developing a toolkit to provide financial institutions with a set of effective practices to respond to and recover from a cyber incident to limit any related financial stability risks.
The toolkit aims to draw on the responses from various stakeholders, a review of existing standards and case studies, workshops and bilateral meetings with stakeholders and insights from NCAs based on their supervisory work.
The toolkit is structured across seven components (governance, preparation, analysis, mitigation, restoration, improvement, and co-ordination and communication) and comprises 46 effective practices that organisations have adopted. It is not intended to provide a one-size-fits-all solution or even prescribed standards, but rather, effective practices to allow organisations to develop over time.
The FSB invites responses to this document by 20 July 2020.
The Serious Fraud Officer has confirmed that Tesco Stores Ltd has satisfied its obligations bringing the Deferred Prosecution Agreement (DPA) to an end as of 10 April 2020. Pursuant to the DPA, Tesco Stores Ltd paid a £132 million fine (including costs) and implemented an ongoing compliance monitoring programme.
The Officer of Financial Sanctions Implementation (OFSI) announced on 31 March 2020 that it had imposed two monetary penalties against Standard Chartered Bank for breaches of Article 5(3) of EU Council Regulation 833/2014 and Regulation 3B of The Ukraine (European Union Financial Sanctions) (No.3) Regulations 2014.
Following a review by the Economic Secretary to the Treasury, the penalties were upheld with slightly different penalty amounts, £11.9 million and £19.6 million. As Standard Chartered Bank made a voluntary disclosure, in line with OFSI's guidelines, the penalties include a 30% reduction. The penalties are the largest that OFSI has levied to date for breach of financial sanctions regulations.
Who is the current Chair of the Treasury Select Committee?
The answer to last month's question is £355,000.