2024年1月11日
Financial services update – 11 / 59 观点
In this month's update:
On 28 December 2023, the FCA published a webpage entitled "Duty calls: Future-proofing finance for everyone" outlining its key achievements and milestones from the last 12 months, in light of its three-year strategy. Some of the achievements mentioned include:
New Sustainability Disclosure Requirements tackling greenwashing.
The webpage also outlines the FCA's enforcement-related milestones, which we have covered in the "Enforcement" section of this update.
On 21 December 2023, the UK and Swiss governments signed the Berne Financial Services Agreement, which is an agreement on mutual recognition in financial services. HM Treasury has published a document setting out the benefits of this agreement for the UK, and the Swiss Federal Department of Finance has published a document outlining the key points in the agreement. The governments have also signed a side letter regarding auxiliary services for insurance, and a side letter regarding financial market infrastructures. The new agreement mutually recognises that the UK and Swiss supervisory frameworks for financial services are equivalent. The agreement enables cross-border business activities, regulatory and supervisory cooperation, and access to markets.
On 19 December 2023, the FCA, Bank of England and the PRA published their CBEST thematic report, the first time the report has been published in full.
CBEST stands for "Critical National Infrastructure Banking Supervision and Evaluation Testing" and is part of the regulators' supervisory tools to assess the cyber resilience of firms' and financial market infrastructures' (FMIs) important business services.
The report contains cyber resilience good practices and insights, including recommendations and guidance from the National Cyber Security Centre.
Firms and FMIs should embed the findings of the report into their cyber strategies, in particular the role and importance of cyber hygiene and the need to simulate a range of cyber testing scenarios.
Given the fundamental importance cyber resilience plays in the broader context of maintaining firms'/FMIs' operational resilience, it is a top priority for regulators. Disruptions from cyber resilience can impact financial stability, cause significant harm to consumers or other market participants, or disrupt market confidence.
On 8 December 2023, the FCA and HM Treasury published a joint discussion paper on proposals for closing the advice gap. The proposals aim to help consumers make better informed investment and pensions decisions, and come as part of the Advice Guidance Boundary Review. The discussion paper sets out three main proposals to achieve this:
The exploration of a simplified form of advice that enables firms to support consumers with simpler needs and smaller amounts to invest.
The scope of the review does not include general insurance, mortgages, and debt advice.
The paper closes to comments on 28 February 2024.
On 8 December 2023, HM Treasury published a response to its May 2023 call for proposals on the key metrics that the FCA and the PRA should publish in relation to their new secondary growth and competitiveness objectives (which we covered in our June 2023 update). In the response, the Treasury announced that regulators will publish a range of metrics relating to operational efficiency and management information, international competitiveness, regulatory burden, policy and implementation, and digital and innovation. The FCA and PRA expect to publish the first editions of new metrics either as part of the next editions of their regular quarterly reporting, by the first report on the new secondary objectives by summer 2024, or in their 2023-24 annual reports.
The PRA has also published details of its metrics in an appendix to the consultation paper on the PRA's approach to policy under the regulatory framework as amended by the Financial Services and Markets Act 2023.
On 8 December 2023, the House of Commons Treasury Committee published a report outlining the progress of the Edinburgh Reforms. For more information on the Edinburgh Reforms, please see our December 2022 article. The report is the second report of the 2023-24 session, and includes formal minutes. The report concludes that:
The time gaps between policy objective announcements by HM Treasury and the implementation of changes to rules have been too long. The Committee notes that the Treasury's responses to consultations and subsequent implementing steps take considerable time.
On 8 December 2023, the FCA published a document setting out the aims the forthcoming consumer investments policy initiatives will work towards. The document sets out five initiatives that it would like to see developed in the consumer investment sector: accessible support, diverse products and services, a realistic approach to risk, useful information for consumers, and appropriate consumer protections. The FCA has also published its latest Consumer Investments data review, covering the period between April 2022 and March 2023.
On 7 December 2023, the FCA published a consultation paper on new rules to enable reasonable access to cash for personal and business customers in the UK. The proposals come following the new powers granted to the FCA under FSMA 2023. The FCA proposes a new regulatory regime where designated firms would be required to:
Provide customers with clear information about where they can access cash services.
The consultation closes for comments on 8 February 2024.
In addition to the consultation, the FCA has published two webpages providing an overview of access to cash coverage in the UK at the end of Q4 2022 and at the end of Q1 2023.
The UK's cryptoasset financial promotion regime came into force from 8 October 2023. From 8 January 2024, those firms that were granted an extension by the Financial Conduct Authority (FCA) to implement certain "back end" rules will need to be fully compliant. For more information, please see our article.
On 18 December 2023, the Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations 2023 were published, alongside an explanatory memorandum. The Regulations enable the Bank of England (BoE) and the FCA to operate the Digital Securities Sandbox (DSS). The DSS will enable a more flexible regulatory environment to allow firms to test the use of developing technology, such as distributed ledger technology or other technology facilitating digital assets to perform the activities of a central securities depository (specifically notary, settlement and maintenance), and operating a trading venue. The BoE and FCA will provide more details on the operation of the DSS in due course.
The Regulations came into force on 8 January 2024.
On 11 December 2023, the Joint Committee of ESAs published a report providing an update on the functioning on innovation facilitators, being the innovation hubs and regulatory sandboxes. The report comes as part of the work programme of the European Forum for Innovation Facilitators which aims to promote co-ordination and co-operation among innovation facilitators in the EEA, and enhance innovation in the EEA financial sector. The report makes a number of findings on the practices, challenges, and limitations faced by national competent authorities (NCAs), and sets out recommendations to improve cross-sectoral and international co-ordination.
On 7 December 2023, the EBA published a consultation paper on draft RTS specifying the requirements for policies and procedures on conflicts of interest for issuers of asset-referenced tokens under Article 32(5) of Regulation (EU) 2023/1114 (MiCA).
The consultation closes on 7 March 2024. The EBA expects that the final RTS will be available when MiCA comes into force.
On 2 December 2023, the House of Commons Treasury Committee published a report on the UK Central Bank Digital Currency, also known as the digital pound. The report outlines the Committee's view on the necessity of a digital pound. Key points include:
The introduction of a digital pound might accelerate the decreasing reliance on physical cash, causing difficulties for those reliant on it.
Overall, the Committee supports further work on developing a digital pound, however, emphasises that this work should not distract from the BoE's main tasks of controlling inflation and maintaining financial stability.
On 14 December 2023, the ESG Data and Ratings Code of Conduct Working Group (DRWG) published the final version of its voluntary code of conduct. The principles-based code is for ESG ratings and data product providers, and sets out a practical guide to the application and interpretation of each of the principles. Once a provider signs up to the code, there will be a six-month implementation period for ESG ratings providers and a twelve-month implementation period for ESG data product providers. The International Capital Market Association will list all of the providers that sign up to the code on a webpage.
On 4 December 2023, the ESAs published a final report on draft RTS on the review of PAI and financial product disclosures in the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (SFDR). The European Securities and Markets Authority (ESMA) also published a press release explaining that the European Commission will study the draft RTS and decide whether to endorse them within three months. The draft RTS will be applied independently of the comprehensive assessment of SFDR announced by the European Commission in September 2023.
On 4 December 2023, the International Organisation of Securities Commissions (IOSCO) published a final report on supervisory practices to address greenwashing, following the 2021 IOSCO Recommendations. The report provides an overview of the regulatory and supervisory approaches, practices, and challenges encountered in the implementation of the initiatives addressing greenwashing in asset management, ESG ratings providers, and ESG data products providers. The report notes that greenwashing remains a high risk to the reputation of global sustainable finance markets.
On 29 November 2023, the House of Commons' Environmental Audit Committee published a report on the financial sector and the UK’s net zero transition. The report explores the role of the financial sector in achieving net zero emissions by 2050, and makes a number of recommendations, including that the government should develop a UK carbon border adjustment mechanism.
On 19 December 2023, the PSR published a policy statement setting out its final decision on tackling APP scams. In the policy statement, the PSR confirms that:
There are circumstances where a bank may reasonably consider that a person has not been sufficiently careful. This does not apply to vulnerable customers.
The PSR has also published the legal instruments which require Pay.UK and payment firms using the Faster Payments Scheme to implement the reimbursement policy. These include PSR Specific Direction 19, PSR Specific Requirement 1, and PSR Specific Direction 20.
The new requirements must be complied with from 7 October 2024. The PSR will establish a clarifications process to aid implementation.
On 18 December 2023, the PSR published a consultation paper on expanding variable recurring payments. The consultation paper proposes a phased expansion of variable recurring payments to additional low-risk use cases. The consultation is relevant for stakeholders in the payments industry, and closes to comments on 2 February 2024.
On 13 December 2023, the PSR published its interim report covering provisional findings of its market review into UK-EEA consumer cross-border interchange fees. The PSR concludes that market intervention may be needed to address concerns about increasing cross-border interchange fees and proposes a fee cap on UK-EEA consumer card-not-present transactions. This could happen in two stages:
A lasting cap on these interchange fees in the future, once further analysis has been carried out to establish an appropriate level.
The PSR welcomes feedback until 31 January 2024 and the final report is due in the first quarter of 2024. If the PSR concludes that the market is not working well and warrants intervention, a consultation will follow on with a remedy package.
On 7 December 2023, the PSR published reporting guidance for APP scams. The guidance is for Payment Service Providers who are required to report and publish APP scams data under Specific Direction 18. It follows the PSR's March 2023 policy statement on measures to improve transparency on APP scam data.
On 7 December 2023, the European Payments Council published its 2023 payment threats and fraud trends report. The report provides an insight into the latest developments on threats affecting payments, including cybercrime and fraud. It aims to help stakeholders involved in payments to decide on possible actions to tackle these issues. The report covers recent attacks and the most important threats. It covers "fraud enablers" in the payments sector, including social engineering, phishing, malware, advanced persistent threats, and others. The report provides an analysis of each threat alongside suggestions for mitigation.
On 7 December 2023, the PSR published a news update on its website noting that it welcomes the FCA's consultation on the rules for access to cash (see the item in the General Financial Services Regulation section above). The news update confirms that the PSR will retain its role in regulating the LINK ATM network. It will also support the FCA in its new role in protecting the UK's cash infrastructure.
On 11 December 2023, the EBA published a peer review report on the supervision of treatment of mortgage borrowers in arrears. The EBA carried out the review in response to the current high interest rate environment. The peer review looks into the effectiveness of NCAs' conduct supervision on the Mortgage Credit Directive’s (MCD) requirements for creditors to exercise reasonable forbearance before foreclosure proceedings are initiated. The Peer Review Committee found that there were differences in the level of scrutiny which NCAs apply to MCD creditors. The report sets out best practices in this area that might be of benefit for other NCAs to adopt. Overall, it was found that conduct supervision has been effective and NCAs have adapted their supervision to reflect the new economic environment and risks to mortgage borrowers. The EBA will follow up on the review in two years.
On 5 December 2023, the FCA published its final report covering its market study into the credit information market. This follows the FCA's November 2022 interim report on the same topic. The report focuses on the 12 remedies it proposes to take forward in relation to issues with data quality and coverage, consumer awareness in terms of accessing and disputing credit information, timely reporting of key metrics, and the effectiveness of the Steering Committee on Reciprocity. The remedies centre around the key themes of governance, data quality, competition and innovation, and consumer engagement.
On 5 December 2023, the FCA announced that it has launched a new interim working group on credit reporting. It has also published the terms of reference for the new group. The interim working group's role will involve making recommendations to the FCA on the design, implementation, and operations of the proposed Credit Reporting Governance Body. It will comprise 12 members with representation from various parts of the financial services credit information industry. The group will launch in January 2024 and will provisionally run for up to nine months, subject to the development of a workplan.
On 12 December 2023, the PRA published a policy statement setting out its first set of near-final rules on the implementation of the Basel 3.1 standards relating to market risk, credit valuation adjustment, counterparty credit risk, and operational risk. This follows the corresponding November 2022 consultation, which we covered in our January 2023 update. The PRA intends to publish a second near-final policy statement in the second quarter of 2024, which will set out the PRA's final policy on issues consulted on but not addressed in this recent policy statement. The PRA will also subsequently publish a final policy statement with all of the final policy materials and technical standards in relation to the Basel 3.1 standards once the Treasury has revoked the relevant provisions in the UK Capital Requirements Regulation.
On 8 December 2023, the PRA published a consultation paper regarding its approach to policy. The consultation sets out the approach that the PRA proposes to take to policy under the regulatory framework as amended by FSMA 2023. The approach includes its objectives and regulatory principles, international engagement, creation and maintenance of the prudential policy framework, and the PRA Rulebook. It builds upon the PRA's September 2022 discussion paper on the same topic. The consultation closes on 8 April 2024.
On 7 December 2023, the Council of the EU published the compromise text for the CRD VI Directive, and the compromise text for the CRR III Regulation. The Council's General Secretariat also published a corresponding note which explains that the texts reflect the provisional political agreement between the Council and the European Parliament, reached in June 2023. The texts also take into account the outcome of a technical review by the Council and the European Parliament in November 2023, as well as minor technical comments made by member states' delegations to the Council.
On 5 December 2023, the PRA published a policy statement on scope, criteria, liquidity and disclosure requirements under the strong and simple framework. In the statement the PRA outlines the changes it has made to the proposals concerning simpler-regime firms in CP5/22, CP16/22, CP4/23, and CP14/23. These changes include changes to the terminology, the modification by consent process for consolidation groups, and the implementation deadlines for rules relating to the definition of a small domestic deposit taker (SDDT). The PRA intends to consult on simplifications to Pillar 2 and buffer requirements for SDDTs and SDDT consolidation entities in Q2 2024.
On 20 December 2023, the FCA published a consultation paper entitled Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms. The consultation paper proposes a new UK listing structure and sponsor regime. The proposals, among others, include the creation of a UK Listing Rules (LRs) sourcebook to replace existing LRs, as well as changes to current sponsor competence rules under LR 8.
The consultation period relating to LR 8 proposals closes on 16 February 2024. The consultation proposals regarding the replacement to the current LR sourcebook close to comments on 22 March 2024.
On 15 December 2023, ESMA published updated Q&As concerning the Regulation on European crowdfunding service providers for business (EU) 2020/1503 (ECSPR). There are new Q&As relating to prudential requirements in Article 11(2)(c) ECSPR, the definition of "crowdfunding service" in Article 2(1), and sophisticated investors.
On 6 December 2023, the Joint Associations (comprising the Association of Financial Markets in Europe, the Futures Industry Association, the International Capital Markets Association, the International Swaps and Derivatives Association Inc, and the International Securities Lending Association) published an updated version of the MRRA, with the aim of simplifying reporting across differing EU regulatory regimes. The Joint Associations have published an updated explanatory memorandum to the MRRA as well. The MRRA is a template agreement used for documenting regulatory reporting arrangements for derivatives and securities financing transactions entered into using industry standard documentation.
On 4 December 2023, the FCA published a consultation paper on reforming the commodity derivatives regulatory framework. The proposals broadly aim to improve the ability to identify risk through new requirements that result in additional data reporting, and ensure that the system of position limits is agile enough to respond to rapidly changing market events. The proposals also seek to deliver fair and proportionate regulation by removing requirements that impose unnecessary burdens on firms.
The consultation closes to comments on 16 February 2024. The FCA will then consider any feedback and make amendments to the Handbook as necessary.
On 1 December 2023, the FCA set out in a webpage its expectations under the Consumer Duty for firms offering retail distribution of fractional interests in the publicly traded shares of ordinary commercial companies. The FCA reminds firms offering fractional shares that they must act in good faith, avoid causing foreseeable harm, and support consumers in their financial objectives. The page sets out several characteristics of fractional share models that firms should consider when assessing whether they are delivering good outcomes for consumers. The FCA will work closely with the Treasury and HMRC as they develop their proposal to permit certain fractional shares contracts as eligible ISA investments.
On 12 December 2023, the FCA published a letter it had sent to the Chief Executives of investment platforms and self-invested pension plan (SIPP) operators. The letter sets out the FCA's concerns on the increasing amounts of interest earned on customers' cash balances in the last 18 to 24 months due to rises in the BoE base rate. The letter reminds firms that the FCA expects them to have fully implemented the Consumer Duty. The FCA also expects firms to comply with cross-cutting rules and warns firms against both retaining interest and taking an account fee on customers' cash.
The FCA requires that investment platforms and SIPP operators review their approaches to the expectations outlined in the letter, and provide the FCA with the confirmations and information requested in the letter by 31 January 2024. Firms must make the corresponding changes by 29 February 2024.
On 6 December 2023, HM Treasury published a policy note on the Money Market Funds Framework, alongside the draft Money Market Funds Regulations 2024. The new Regulations will replace the retained EU law version of the Regulation on money market funds (EU) 2017/1131. HM Treasury are open to comments on the draft Regulations until 24 January 2024. It will confirm the timings of adoption in due course.
A consultation paper on updating the regime for money market funds (MMFs) was also published on 6 December 2023. The paper contains the FCA's response to its May 2022 discussion paper (which we covered in our June 2022 update) on MMFs' resilience and explains why some policy options were not implemented. The FCA is consulting on two significant changes to current MMF regulation that aim to increase the usable liquidity of MMFs.
The consultation will close on 8 March 2024.
On 5 December 2023, the Joint Committee of the ESAs published an updated version of its consolidated Q&As on the Regulation on key information document requirements for packaged retail and insurance-based investment products (PRIIPs). The sections of the Q&As that have been updated include general topics, market risk assessment, product categories, performance scenarios, multi-option products, and investment funds.
On 4 December 2023, the FCA published a consultation paper on the implementation of the overseas funds regime. HM Treasury is currently considering the equivalence of UCITS that are authorised and supervised in the EEA. The FCA is consulting now to make changes to its Handbook so that if equivalence determinations are made, overseas funds can be recognised, and firms can be made aware of a new UK marketing route.
The consultation closes to comments on 12 February 2024. The FCA intends to publish final Handbook rules and a policy statement in the first half of 2024.
On 28 December 2023, the FCA published a webpage entitled "Duty calls: Future-proofing finance for everyone" (as covered in the "General financial services regulation" section of this update) setting out the details of the fines it issued in 2023. The webpage also discusses the enforcement actions it took in the same year. The key points include:
Fines totalling over £17 million were issued to three firms for inadequate AML systems and controls.
On 6 December 2023, the FCA announced that it had written to the Treasury Committee to state that it would not be taking enforcement action following investigations into NCM Fund Services Ltd and Northern Provident Investments Ltd, the two firms that approved the financial promotions of Blackmore’s mini-bonds. Blackmore went into administration in 2020, leading to around 2,000 people losing a total of around £46 million. The letter to the Treasury Committee explains that:
The FCA did not find evidence of sufficiently serious breaches relating to the firms' approval of the financial promotions to justify taking enforcement action against either firm.
On 30 November 2023, the FCA announced that it had used its powers under the Competition Act 1998 to impose fines on Dollar East (International Travel & Money Transfer) Ltd, Hafiz Bros Travel & Money Transfer Limited, and LCC Trans-Sending Limited (including its parent company, Small World Financial Services Group Limited) for breaching competition law. The fines together total over £150,000. The FCA found that in 2017, the three firms had a price fixing agreement on the exchange rates they offered to customers in Glasgow for converting British pounds to Pakistan Rupees, when transferring money to Pakistan. The FCA also found that the firms had fixed the transaction fee charged to customers when making certain money transfers from the UK to Pakistan. All firms admitted to price fixing and their fines have been discounted accordingly.
The FCA has written to other money transfer firms in Glasgow to remind them of their competition law obligations.
On 7 December 2023, the IRSG published a report on anti-money laundering and beneficial ownership. The report assesses the effectiveness of the current beneficial ownership regime used to tackle money laundering and sets out actionable recommendations on how to help achieve a more effective coordinated global approach to beneficial ownership transparency. Overall, the report concludes that international collaboration is needed to combat the risk of money laundering effectively.
On 4 December 2023, HM Treasury updated the Money Laundering Advisory Notice: High Risk Third Countries. The updated advisory notice reflects changes made by the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No 2) Regulations 2023 (SI 2023/1306) that came into force on 5 December 2023 and substitutes the existing list of high-risk third countries with a new list. The new list is aligned with the Financial Action Task Force's lists, and adds the countries of Bulgaria, Cameroon, Nigeria, South Africa, and Vietnam.
On 1 December 2023, the FCA published a Memorandum of Understanding (MOU) it has with the OFSI, replacing the MOU from April 2019. The MOU sets out the arrangements for co-operation and the exchange of relevant information between the OFSI (which is part of HM Treasury) and the FCA in carrying out their respective functions. The two bodies will keep the effectiveness and efficiency of co-operation under the MOU under regular review.
The answer to last month's question: According to the FCA's financial promotions quarterly data for Q3 2023, retail lending had the highest number of amend/withdraw outcomes.
According to the recently published Treasury Committee report on a digital pound, electronic deposits held with commercial banks represent what percentage of the money held by households and businesses?