being better informedexecutive summary halfway to brexit: some progress, but risks remain...

Stand out for the right reasons, Financial Services Risk and Regulation April 2018

Being better informed FS regulatory, accounting and audit bulletin

PwC FS Risk and Regulation Centre of Excellence

April 2018

In this month’s edition:

• Prudential: EC focuses on non-performing exposures

• Conduct: Culture remains high on FCA’s agenda

• Prudential: Basel Committee eyes changes to market risk framework

• Brexit: In-depth analysis of what the transitional agreement means for firms

Executive summary Halfway to Brexit:

Some progress, but risks remain

Challenging asset managers to improve ‘value’

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

FS regulatory, accounting and audit bulletin – April 2018 PwC 1

‘Welcome to this edition of ‘Being

better informed’, our monthly FS

regulatory, accounting and audit

bulletin, which aims to keep you up to

speed with significant developments

and their implications across all the

financial services sectors.’

March was a busy month, as regulators

rushed to clear the decks before the end of

the first quarter of the year. In particular,

regulators and authorities published

important developments on culture,

non-performing exposures and

sustainable finance.

As part of its CMU agenda, the EC

announced an action plan for sustainable

finance, and a new regime for providers of

crowdfunding. The EC’s measures, to help

the EU meet climate change targets by

2030, include clarifying the duty of

institutional investors and asset managers

to disclose how they consider sustainability

factors in their strategy and investment

decision-making. In addition, it wants to

review whether prudential requirements for

banks and insurers should be re-calibrated

to reflect climate risks.

The EC is also proposing a voluntary regime

for crowdfunding service providers,

allowing them to elect to be authorised and

supervised by ESMA, or to continue to be

regulated under national rules. While these

proposals are still at an early stage, firms

should consider what they would mean for

their business if they did go ahead, while the

wider question of an increased remit for an

ESA, particularly in the context of Brexit,

should be food for thought for all firms.

The prudential regulatory agenda continues

to focus on non-performing exposures

(NPEs). The EC published legislative

proposals to amend the CRR to introduce

a prudential regulatory capital backstop to

address NPEs, as part of a wider package

of measures. The EC is encouraging the

development of secondary markets for

NPEs and wants to improve the ease of debt

recovery through accelerated out-of-court

collateral enforcement procedures. The CRR

amendment proposal is progressing in

parallel with CRR II and could apply in 2019.

Beyond the EU, the Basel Committee is

proposing changes to the market risk

framework. It consulted on revisions to the

minimum capital requirements for market

risk, designed to overcome the issues

identified in the new market risk framework

published in January 2016. The proposals

impact both standardised and internal

model approaches, and the scope of market

risk capital requirements. They also include

a recalibrated Basel II standardised

approach, applicable only to less

sophisticated banks. The proposals are set

to affect banks of all sizes, and could slightly

lower firms’ capital requirements.

Meanwhile in conduct, the FCA signalled

that culture remains high on its agenda by

issuing a discussion paper on the topic. The

FCA poses a number of questions for all

financial services firms to consider, focusing

on using behavioural science to guide

incentives and cultural change, and looking

beyond the role of leadership in driving

cultural change.

Last month also marked a major step

forward in the Brexit negotiations, with the

UK and EU reaching political agreement on

a 21-month transitional period. During the

transitional period, the UK will have full

access to the EU Single Market and Customs

Union, and will continue to apply EU law

and regulation. The announcement does not

provide total legal certainty, which will only

come when the entire withdrawal agreement

is ratified, although it has prompted UK

regulators to provide more clarity on their

approach to authorisation. As regulators begin

to clarify their positions on key Brexit issues,

and as a clearer picture starts to emerge on

what financial services access might look like

post-Brexit, in our feature article this month

we consider what the transitional agreement

means for firms, and how they should

navigate the uncertainties ahead.

Also this month, asset managers were

presented with a raft of measures in the

FCA's asset management market study

policy statement and consultation paper.

Our feature article examines the changes,

including a requirement for firms to publish

an annual assessment of how they have

achieved value for investors.

Next month, look out for our in-depth

analysis of the FCA’s business plan, in which

the conduct regulator sets out its priorities

and planned work for the year ahead.

Laura Cox

FS Risk and Regulation Centre of Excellence

020 7212 1579

[email protected]

Laura CoxLead Partner

PwC FS Risk and Regulation Centre of Excellence

Executive summary








How to read this bulletin?

Review the Table of Contents the relevant Sector sections to identify the news of interest. We recommend you go directly to the topic/article of interest by clicking in the active links within the table of contents.

Contents

Executive summary 1

Halfway to Brexit: Some progress, but risks remain 3

Challenging asset managers to improve ‘value’ 6

Cross sector announcements 8

Banking and capital markets 19

Asset management 28

Insurance 30

Monthly calendar 34

Glossary 38

Contacts 44








Last month marked a major step forward in

the Brexit negotiations, with the UK and EU

reaching political agreement on a 21-month

transitional period. After a slow start to the

political negotiations, the pace picked up

following the breakthrough agreement at

the European Council to start talks on the

transitional and future trade in December

2017. Now we’re halfway through the two-

year Article 50 process, the picture for

financial services is starting to become

clearer. In addition to agreement on the

transitional period, we’ve seen some limited

progress on what financial services access

might look like post-Brexit, and UK and

EU-27 regulators are continuing to develop

their thinking on firms’ Brexit plans and

post-Brexit models.

But despite the progress of recent months,

significant risks remain for financial

services firms. The agreement on a

transitional period is not yet legally binding,

and many uncertainties remain on future

financial services access, and the position of

regulators. Firms also need to consider what

EU legislative proposals they may need to

comply with during a transitional period.

So what does all this mean for firms? How

can they use the additional time afforded by

the agreement on a transitional period to

optimise their plans, while still mitigating

the risks of a hard Brexit outcome? And how

do they navigate the uncertainties ahead?

Transitional period – More time to prepare?

The agreement on a transitional period is

welcome. During the transitional period the

UK will have full access to the EU Single

Market and Customs Union. The UK

Government has also stated that the UK will

still be party to agreements reached by the

EU with third countries (e.g. the US and

Japan) on issues such as market access and

regulatory cooperation during the

transitional period.

Importantly though, the announcement

does not provide the total legal certainty

that firms may be looking for. Complete

certainty on the transitional will only come

after the entire withdrawal agreement is

ratified, which may not be until autumn

2018, or possibly early in 2019. There are a

number of issues remaining regarding the

UK’s withdrawal which are yet to be

resolved, most significantly the Irish border,

which has the potential to derail the

agreement on the transitional period. So

how does the agreement on the transitional

period impact firms’ Brexit plans?

Financial services firms currently

undertaking projects to prepare for Brexit

should not interpret the transition

agreement as an opportunity to press the

pause button, but should instead consider

how to use the space provided to optimise

their plans. Each financial services sector

faces different challenges due to Brexit (e.g.

the time it takes to obtain authorisation

approvals varies by sector and other than

for banks by Member State) but all firms

with significant UK/EU-27 cross border

business must overcome strategic and

operational issues to prepare for a loss of

reciprocal market access. Brexit

programmes are complex and firms will

likely find that unforeseen challenges arise

as their plans progress, potentially

lengthening project timeframes.

The transitional period should provide

firms with more time to prepare and enact

their Brexit programmes, including in

designing business models for EU-27

entities. Firms may decide to move back

some immediate deadlines, particularly as

UK regulators announced at the end of last

month that EEA firms passporting into the

UK have until the end of the transition

period to gain authorisation. But as of yet

EU-27 regulators have not given similar

public commitments, with some regulators

on the continent suggesting financial

services firms should continue with their

Brexit plans in the same fashion as before

the transitional period was agreed. So it’s

important that firms continue their dialogue

with regulators in the EU-27 to ensure any

plans to amend their implementation

timetables or other planned actions are

within regulators’ risk appetite.

Conor MacManusSenior Manager

020 7213 [email protected]

Halfway to Brexit: Some progress, but risks remain








Assuming the transitional period goes

ahead, the UK will continue to apply EU law

and regulation but will not have any say on

the development of the rules. This means

financial services firms in the UK need to be

aware that they may need to comply with

future EU legislation currently in the EU’s

legislative pipeline. These may include very

significant proposals such as EMIR II, CRR

II/CRD V, the prudential regime for

investment firms and reforms to the role of

the ESAs, although much will depend on

how much can be agreed ahead of the EP

elections in May 2019. The UK will also

apply any future EU regulation proposed

and agreed after March 2019, if it applies

before the end of the transitional period.

While the EU’s scope to propose, agree and

implement substantial changes to level 1

regulations and directives may be limited

in a 21-month period, other pieces of EU

regulation such as ESA Binding Technical

Standards are likely to be agreed and come

into force without input from the UK

authorities. These regulations have the

potential to significantly impact UK

financial services firms’ business models.

So during the transitional period it will be

important for firms to monitor and if

possible engage in the EU decision making

process, for example with EU-27 Member

States and members of the EP. Some UK

financial services trade bodies are already

considering how they can boost their

impact in Brussels post-Brexit.

Regulators develop Brexit positions

The position of regulators in both the UK

and EU-27 is having an important impact

on financial services firms’ Brexit

programmes and intended post-Brexit

operating models. In some areas regulators

have provided greater clarity on their

positions on certain Brexit issues. For

example, on 29 March 2018 the PRA

confirmed its risk appetite for EEA

branches of banks and insurers wishing to

operate in the UK post-Brexit. The PRA

will allow those branches that fall beneath

certain thresholds of systemic risk to

continue to operate as branches post-Brexit,

subject to certain criteria. The ECB also

continues to provide further details on its

developing thinking on important issues

such as booking models, outsourcing and

governance of the banks it will supervise

post-Brexit. The ECB continues to stress

the importance of local governance and risk

management capability in the euro area and

reducing the reliance on entities in the UK.

Recently Steven Maijoor, Chair of ESMA,

also sought to dampen concerns among

asset and wealth managers around ESMA’s

position on delegation of portfolio

management to the UK post-Brexit, stating

that ESMA does not see delegation as a

‘dirty word’.

Greater clarity from regulators is welcome,

but despite UK and EU-27 authorities

sharing similar objectives for financial

stability and consumer protection, there

remains a risk that UK and EU-27

regulators give financial services firms

contradictory messages on key issues. In

addition to UK regulators appearing to give

the transitional agreement greater weight

than their EU-27 equivalents, divergent

attitudes on issues such as booking models,

the clearing of euro denominated trades and

openness to branches may become more

pronounced as firms’ Brexit programmes

develop. Balancing the demands and

expectations of regulators on both sides

of the channel will be a key challenge for

firms undertaking significant business

model changes.

A future UK-EU framework for financial services?

The issue of access to the single market for

UK based financial services firms has been

a key concern for the UK Government and

financial services industry. As it stands, the

position of the UK Government and EU-27

on what market access should look like

post-Brexit remains far apart. But recently

there has at least been some further clarity

from both sides on their envisaged model.

On 7 March 2018 Chancellor Philip

Hammond set out in a speech the UK

Government’s vision for a relationship

between the UK and EU-27 for financial

services post-Brexit. Such a framework

could be included in a financial services

chapter of a free trade agreement between

the UK and EU. Building on work done by

industry groups such as the International

Regulatory Steering Group, Hammond

advocated a model of mutual recognition

which would allow reciprocal market access

close to those levels currently afforded

under passporting for financial services

firms based on recognition of each side’s

regulatory regimes. Recognition would not

require identical rules, but would be based

on each side’s regulatory framework

providing equivalent outcomes such as

financial stability and consumer protection.

An independent body would be tasked with

determining whether any divergence in

regulatory standards post-Brexit merited a

loss of market access.

In public the EU-27 has not been supportive

of the UK’s proposed mutual recognition

approach and it may be politically difficult

for the UK to secure such an outcome. But

for the first time, on 20 March 2018, the

Council (through its Article 50 committee)

took a position on what any future

relationship between the UK and EU-27 on

financial services might look like. The

Council’s position is that the future

relationship on financial services should be

market access for UK-based firms via

‘reviewed and improved equivalence

mechanisms’. It stresses that these

arrangements must preserve financial

stability, the integrity of the Single Market

and the autonomy of decision-making in the

EU. The UK Government and the financial

services industry have repeatedly argued

that equivalence would be an inadequate

means of access for UK firms, not least








because equivalence decisions can be

revoked by the EC at short notice. But the

UK Government will welcome the signal

that the EU-27 appears ready to discuss

financial services as part of the future

relationship. The EU is reviewing aspects of

its approach to equivalence, and any steps it

might take to improve its approach towards

equivalence (such as greater certainty in the

process and including equivalence

provisions in CRR and Solvency II)

would be welcome.

What should firms be doing now?

Despite the progress made, firms should

continue to plan on the basis that they will

lose access to the Single Market, and take

steps to ensure they can serve their EEA

clients post-Brexit. The transitional period

should give firms some much needed extra

time to plan for this eventuality, but firms

should still put plans in place to ensure

they’re fully prepared for loss of access to

the Single Market at the end of 2020 at the

very latest and continue with contingency

plans should the transitional period not

happen. EU-27 regulators are likely to

expect firms wishing to establish new

entities in the EU-27 to continue with the

application process, but more time and

analysis can be given to longer-term

business model decisions such as

staffing and infrastructure.

Firms should ensure they use the additional

breathing space provided by the transitional

period in the most efficient and effective

way. Those firms that use the additional

time to design and refine a post-Brexit

operating model that is cost effective and

meets the needs of clients and customers

may find that this is their competitive

differentiator over the medium and

long-term.

Ongoing engagement with regulators in the

UK and EU-27 remains important. Ensuring

regulators are comfortable with firms’

Brexit programmes and future operating

models is key. But helping regulators in the

EU-27 understand the impact of different

supervisory approaches on business models

and firms’ ability to provide financial

services will also help shape regulators’

developing thinking. So while firms have

some greater clarity, plenty more

work remains to be done and the next

12 months are critical for firms’ planning

and execution.








While firms are likely to find it challenging

to implement some of the new regulatory

requirements outlined in the asset

management market study policy statement

(PS 18-08) and consultation paper (CP 18 –

09), published by the FCA on 5 April 2018,

many will welcome the regulator’s

approach. Constructive dialogue between

the industry and the regulator has delivered

sensible and broadly workable solutions.

Firms will have to immediately start

considering the requirement to appoint

independent non-executive directors

(iNEDs), as well as assessing how they will

use their new flexibility to move investors

into cheaper share classes. Likewise, they

will need to engage quickly with the

enhanced requirement to assess value as

it could well require firms to undertake a

comprehensive review of how their fund

performance intersects with growth, returns

and costs, as the first reports potentially

due in Q4 2019 will capture activity

from Q4 2018.

Further, firms will need to review the new

proposals put out for consultation. The

proposals address long-standing issues in

terms of conveying fund objectives in a

clear way and representing the use of

benchmarks and fund performance

consistently. But they also pose potential

risks as the accuracy of marketing materials

and client communications will come

under even more scrutiny.

Most importantly, the FCA demonstrated

in the policy statement that it will be

responsive to industry concerns and will be

pragmatic in its approach. As a result, firms

should be optimistic that they will be able to

continue a constructive dialogue on these

proposals as well.

Putting ‘value’ in its proper context

While the FCA’s new value assessment

may be challenging to implement, it has

responded to feedback and delivered a

more balanced assessment with a better

focus on the overall service, than in its

policy proposal, which focused almost

exclusively on costs and charges. The new

rules require firms to perform and publish

an annual assessment of how they have

achieved value for investors, accounting

for a range of factors that include fund

performance, economies of scale and charge

comparison between fund management and

other services. To get this right firms will

need to think through how short-term

returns and costs intersect with fund

strategy and reinvestment, and whether

each fund’s cumulative approach is

maximising value for investors.

While the assessment’s wider scope will

arguably require a more comprehensive

review, it looks like the message of ‘cheaper

is always better’ has been avoided. Firms

will have slightly more flexibility in how

they tell their story as the FCA has removed

certain items from mandatory inclusion,

such as discussion of break points. Clearly

the trade-off is that relying on firms to tell a

story presents a hindsight regulatory risk, if

the FCA deems a story to be inappropriate,

uncompelling or insufficient.

The FCA also noted industry concerns over

the breadth of changes faced by the sector,

extending the implementation period in

response. While welcome, firms will need to

start planning early because the production

of annual value assessment reports will be a

significant new disclosure requirement.

Q4 2018 activity could be captured in the

first reports in Q4 2019.

Addressing share classes and box profits

Firms understandably pushed to make it as

easy as possible to convert investors into

more reasonably-priced share classes.

Revising its guidance, the FCA has indicated

that instead of requiring explicit consent on

an investor-by-investor basis, firms can

simply provide a one-off notification that

does not require an investor response.

While firms may only do this if their

prospectus allows it, the FCA’s guidance

explicitly states the regulator’s support for


https://www.fca.org.uk/publication/policy/ps18-08.pdf

https://www.fca.org.uk/publication/consultation/cp18-09.pdf









amending prospectuses to permit it

if necessary.

The FCA follows a similarly proportionate

approach in terms of box-profits. It avoided

imposing any restrictions on dual-priced

funds, but instead is imposing new

requirements on how the profits earned by

the manager are handled. The regulator has

banned outright the retention of any

earnings that are ‘risk free’ to the manager,

but has demonstrated flexibility with the

final rules, working with the industry to

achieve the right technical drafting. Firms

will have more discretion as to the recipient

of the reimbursement (fund vs individual

investors) and the payment frequency. Also,

firms will be able offset box profits with

losses on other sales and redemptions, to

account for circumstances where firms set

narrower dealing spreads than the

maximums permitted.

Making boards more independent

Consistent with its original proposal, the

FCA is requiring the boards of authorised

fund managers (AFMs) to have at least 25%

representation of independent directors (or

at least two iNEDs, whichever is higher).

While the regulator extended the

implementation deadline, firms still do not

have much time to identify the correct

candidates by September 2019. The FCA

also tweaked the eligibility requirements for

an iNED, so firms may first want to assess

eligibility of any existing iNEDs before

considering future needs. Within this, firms

must consider wider board experience and

knowledge, before potentially seeking

candidates in the market. Also, firms

should be aware that previous consultations

to extend the SMCR to asset managers did

not propose including ‘standard’ iNEDs in

scope the SMCR rules. Appointments made

under the existing SIF regime would require

FCA approval.

Although iNEDs play a valuable role

regardless, firms need to recognise that

good candidates may be hard to find. Also,

in many cases fund managers remain the

best situated to address regulatory concerns

and will need to remain proactive despite

the board’s expanded role. Smaller firms

may find this requirement especially

difficult, but the FCA remained firm that

all authorised funds would benefit from

expanded independent oversight. Given

that the FCA was originally considering

much more radical changes to board

structure, firms should recognise that it

listened to the industry’s views.

Scrutinising benchmarks

Disclosure remains a high priority for the

FCA and is the principal focus of the

accompanying consultation paper.

Although firms generally support

requirements to convey objectives in plain

language, the FCA is demanding specificity,

which may limit firms’ flexibility to adjust

to new market circumstances. For example,

a firm may outline a broad equities strategy

in its prospectus but actually invest

primarily in small cap companies. The

new guidance would require the firm to

specifically identify its small cap strategy,

which would in turn lead to inconsistent

disclosure if it moved toward large cap

companies in response to market dynamics.

Also, the regulator is expecting index

trackers and partly active funds to be

much clearer about their strategies and

investment constraints than they have

in the past.

The FCA appears especially concerned with

benchmarks, whether as a constraint on a

fund’s portfolio construction, as a target or

as a comparator. The proposed rules would

limit firms’ use of different benchmarks in

various circumstances, such as presenting

their funds’ past performance against

different benchmarks in separate consumer

documents. In addition, firms would have to

explain to investors why they are using

certain benchmarks and, more importantly,

explain how performance can be assessed

in the absence of a benchmark.

Adjusting to the new landscape

In its latest market study output, the FCA

has been sensitive to industry concerns and

has tried to produce a pragmatic set of

proposals, which should deliver value to

consumers. But, firms should also recognise

that they will need to deal with a wide range

of new requirements. They will now need to

begin assessing the impact these changes

will have on their business and processes.

Unsurprisingly, given the FCA’s focus on

governance, management and boards will

need to work collaboratively to address how

best to handle significant new changes to

board structure, how they articulate their

value mission to both themselves and to

their investors, and navigate complex

procedural steps like moving investors into

new share classes and allocating box profits.

Also, as evidenced by the consultation

paper, there are still more changes on the

horizon that firms need to assess and, even

more importantly, engage with the FCA on.

With a further consultation on the wider

disclosure requirements, and the interaction

with other unfinalised rules, implementing

these changes will remain a key focus for

firms over the next year.








In this section:

Regulation 8

Brexit 8

Capital and liquidity 8

Conduct 9

Consumer issues 9

Finance 9

Financial crime and enforcement 11

Market infrastructure 11

Operational resilience 11

Pensions 12

Reporting 12

Retail products 12

Supervision 12

Transaction reporting 13

Wholesale markets 13

Accounting 14

Accounting and financial reporting 14

Our publications 14

Also this month 14

A brief round up of other regulatory

developments

Regulation

Brexit FCA seeks information on EEA firms

The FCA published a survey on 9 May 2018,

for FCA-regulated EEA firms and funds

wishing to take advantage of the UK’s

temporary permissions regime post-Brexit.

In December 2017 HMT announced it

would legislate if necessary to create a

temporary permissions regime for those

firms currently operating in the UK through

passporting rights. The FCA is seeking

further information on the firms which

may use the temporary permissions

regime. The survey closes on 11 May 2018.

Bundesbank urges caution on Brexit transitional

Andreas Dombret, Member of the Executive

Board of the Bundesbank, gave a speech on

20 March 2018 on the financial

fragmentation caused by Brexit. In his

speech Dombret welcomed the agreement

between the UK Government and EU-27

on a transitional period. But he cautioned

banks not to pause with their Brexit

planning. Dombret said it is too early for

firms to ‘lay back’, and emphasised that the

transitional period is not certain until the

entire withdrawal agreement is ratified. He

also set out his view that an inevitable

consequence of Brexit would be increased

financial fragmentation, and voiced

scepticism over the mutual recognition

model for market access proposed by the

UK Government.

Transition permission positions

The BoE, FCA and PRA have welcomed the

transitional agreement reached by the UK

Government and the EU. On 28 March 2018

the BoE wrote to the CEOs of CCPs

operating in the UK; CCPs’ preparations for

the UK’s withdrawal from the European

Union: update following March 2018

European Council. Meanwhile, the PRA

wrote to CEOs and branch managers of

banks, designated investment firms and

insurers; Firms’ preparations for the UK’s

withdrawal from the European Union:

update following March 2018 European

Council. The BoE and PRA’s presumption is

that there will continue to be a high degree

of supervisory cooperation between the UK

and the EU after Brexit.

In light of the transitional agreement, the

BoE and PRA consider it reasonable for

firms currently carrying on regulated

activities in the UK under passporting rights

to plan on the basis that they will be able to

continue undertaking these activities during

the transitional period. They suggest that

authorisation in the UK will only be needed

by the end of the transitional period. The

regulators recommend EEA firms consider

how they can best use the additional time

provided by the transitional period.

The FCA published a Statement on EU

withdrawal following the March European

Council, also on 28 March 2018. For FCA

solo-regulated firms, the FCA’s expectation

is that they should take advantage of the

temporary permissions regime the UK

Government has committed to create in

order to continue operating in the UK after

the UK leaves the EU in March 2019.

Capital and liquidity Harmonising the EU covered bond market

The EC published a Proposal for a directive

on the issue of covered bonds and covered

bond public supervision and amending

UCITS IV and BRRD and a Proposal on

amending CRR as regards exposures in the

form of covered bonds on 12 March 2018.

This forms part of the EC’s CMU agenda.

The proposed directive is set to create a

harmonised, EU-wide covered bonds

framework, establishing common

definitions and standards. This includes a

common definition of covered bonds – a

debt obligation issued by a credit institution

and secured by a cover pool of assets which

covered bond investors have a direct

recourse to as preferred creditors. It also

defines the structural features of covered

bonds, including in relation to:


https://www.fca.org.uk/eu-withdrawal/survey-eea-inbound-passported-firms

https://www.bis.org/review/r180322b.htm

https://www.bankofengland.co.uk/-/media/boe/files/letter/2018/ccps-preparation-for-the-uk-withdrawal-from-the-eu-update-march-2018.pdf?la=en&hash=E3B138932B00125C93C149D6A9321AC31FE9DF3F





https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2018/firms-preparations-for-the-uk-withdrawal-from-the-eu-update-march-2018.pdf?la=en&hash=FD310274EDB28E2A0440228F3DD928E4BB725457




https://www.fca.org.uk/news/statements/fca-statement-eu-withdrawal-following-march-european-council



https://ec.europa.eu/info/law/better-regulation/initiative/184870/attachment/090166e5b929766d_en




https://ec.europa.eu/info/law/better-regulation/initiative/184835/attachment/090166e5b929604c_en










dual recourse against the issuer and the

cover pool assets

bankruptcy remoteness

eligibility criteria for assets backing

the covered bond, setting a high

quality threshold

shared asset pools, facilitating access

to covered bond funding by smaller

credit institutions

liquidity buffer requirements for

cover pools

cover pool monitoring

transparency and disclosure

requirements.

The proposals also cover the requirements

for allowing the use of a ‘European Covered

Bonds’ label, a designation intended to help

investors distinguish covered bonds from

riskier instruments. In addition, it defines

the tasks and responsibilities for the

supervision of covered bonds by NCAs.

Finally, there are also provisions for the EC

to assess whether a general equivalence

regime for third-country covered bond

issuers and investors is necessary

or appropriate.

The CRR amendment proposal introduces a

requirement on a minimum level of

overcollateralisation (a level of collateral

that exceeds the coverage requirements)

and requirements on substitution assets.

The proposed level is set at 2% and 5%

depending on the assets in the cover pool.

This strengthens the requirements for

covered bonds to qualify for preferential

capital requirement risk-weights under

existing CRR provisions. The EC welcomes

feedback on both its CRR amendment and

directive proposals by 15 and 16 May

2018 respectively.

Conduct Culture still on the menu

The FCA re-affirmed that culture remains

a major focus of its regulatory agenda,

by releasing a discussion paper on

Transforming culture in Financial Services

on 12 March 2018.

The paper is divided into four themes:

is there a ‘right’ culture?

managing culture – the role

of regulation

the role of reward, capabilities and

environment in driving behaviours

the role of leadership in cultural change.

The paper includes a series of essays on

these topics by academics and industry

thought leaders. The essays look at issues

such as creating a culture of care rather

than a duty of care, and challenges with the

measurement and management of culture.

The FCA does not expect firms to provide

formal feedback on the discussion paper.

Instead, the FCA hopes the paper will

provide a basis for further debate. It plans

to continue to engage with the industry

on improving culture.

Consumer issues CFDs and BOs – ESMA protects investors

ESMA agreed to temporary product

intervention measures for firms that

market, distribute or sell contracts for

difference (CFDs) and binary options (BOs)

to retail investors, issuing guidance and

frequently asked questions on 27 March

2018. The measures include:

a ban on marketing, distributing or

selling BOs to retail investors

a restriction on marketing, distributing

or selling CFDs to retail investors.

ESMA intends to adopt and publish the

measures in the Official Journal in the

coming weeks. The intervention measures

will be introduced for three months and

ESMA will consider if they should be

extended. The measures will apply one

month after publication in the Official

Journal for BOs, and two months after

publication in the Official Journal for CFDs.

Firms that market, distribute or sell these

products should monitor developments to

determine when they will be required to

implement these measures. These firms

should also develop systems and controls

to implement the measures when they

come into force.

In a statement released the same day, the

FCA says it supports ESMA’s action, and

expects to consult on permanently applying

these measures to firms offering CFDs and

BOs to retail clients.

Finance Launching a green action plan

The EC unveiled its Action Plan: Financing

Sustainable Growth (COM(2018) 97 final)

together with a Factsheet and FAQ on 8

March 2018. It aims to boost capital for

sustainable investment so the EU can

achieve targets under the Paris Climate

Agreement by 2030.

It notes that current levels of investment

are insufficient and identifies a set of wide-

ranging actions to address the shortfall.

The first of these is to develop a

classification system or taxonomy for

sustainable activities. The EC aims to

introduce a proposed taxonomy regulation

in May 2018 with a view to adopting the

regulation and delegated act(s) by Q3 2019.

Once in place, the taxonomy would support

the creation of an EU Ecolabel for financial

products. It would also facilitate a review of

whether prudential requirements for banks

and insurers should be re-calibrated to

reflect climate risks.

In other areas, more immediate impacts are

scheduled. In May 2018 the EC proposes to

clarify the duty of institutional investors

and asset managers to disclose how they

https://www.fca.org.uk/publication/discussion/dp18-02.pdf

https://www.esma.europa.eu/sites/default/files/library/esma35-43-1000_additional_information_on_the_agreed_product_intervention_measures_relating_to_contracts_for_differences_and_binary_options.pdf

https://www.esma.europa.eu/file/47740/download?token=iDXHEEcK

https://www.fca.org.uk/news/statements/fca-statement-esma-temporary-product-intervention-retail-cfd-binary-options

https://ec.europa.eu/info/sites/info/files/180308-action-plan-sustainable-growth_en.pdf

https://ec.europa.eu/info/sites/info/files/180308-action-plan-sustainable-growth_en.pdf

https://ec.europa.eu/info/sites/info/files/180308-action-plan-sustainable-growth-factsheet_en.pdf

http://europa.eu/rapid/press-release_MEMO-18-1424_en.htm








consider sustainability factors in their

strategy and investment decision-making.

More generally, in Q2 2018 it plans:

amendments to the MiFID II and IDD

delegated regulations to include

sustainability in suitability assessments

to develop sustainability benchmarks to

come into operation once the taxonomy

is in place

to consider further amendments to

CRA1 to integrate sustainability factors

with a progress report pencilled in for

Q3 2019.

To strengthen disclosure and accounting

rules, the EC aims in Q2 2019 to: publish

a fitness check on EU legislation on public

corporate reporting, amend its guidance

on non-financial reporting, and adopt a

delegated act on the prospectus contents

for green bond issuances.

The action plan forms part of the CMU

package of proposals and sets out ambitious

targets for sustainability finance. But, given

EP elections in May 2019 and the

subsequent appointment of a new EC

president, we must anticipate changes

in both targets and timelines.

Improving cross-border crowdfunding

Seeking to expand the cross-border

provision of crowdfunding services, the EC

proposed regulations for a voluntary

regime for crowdfunding service providers

(CSPs) on 8 March 2018. If implemented,

the regime will provide an EU-wide

passport in exchange for common standards

and ESMA supervision. The EC is proposing

a voluntary regime for CSPs that sits

alongside national regulation, meaning

CSPs can elect to be authorised and

supervised by ESMA or continue to be

regulated under national rules.

The EC expects firms to opt for the EU

regime, which will be designed to make it

easier for platforms to match investors and

opportunities on a cross-border basis. Firms

opting for the voluntary EU regime will

need to adhere to new rules around investor

suitability, disclosure and marketing. But,

since this will be on a voluntary basis, CSPs

could continue to take advantage of the

arbitrage opportunities that the regulation

seeks to address.

Some firms may want to continue under

national rules, since the crowdfunding

passport would not be available for MiFID

firms or for transactions above a certain

size. Also, the proposed rules limit the use

of intermediary vehicles, which are a

common form of investment structuring.

By giving ESMA authorisation and

supervisory authority under the new

regime, the EC continues the trend of

strengthening the centralised oversight

of the ESAs.

Providing crowdfunding disclosure

The EC proposed information that

crowdfunding issuers must disclose to

investors under the proposed crowdfunding

regulation on 8 March 2018. Issuers need

to provide information about themselves,

such as management details and products

offered, as well as a description of the

crowdfunding project. These offering

details include:

minimum target capital to be raised

deadline for reaching the target and

consequences if the target is missed

amount of own funds committed

change of the composition of the

issuer’s capital or loans related to

the crowdfunding offer.

Reflecting the EC’s concerns about using

special purpose vehicles, the issuer also

needs to disclose whether the issuer is

different to the project owner. In addition,

the EC is proposing that issuers provide

details around any loan agreements used to

finance the project and other types of credit

intermediation. Finally, issuers need to

disclose fee information and details of the

securities being offered (such as terms of

subscription and payment).

Pushing for progress on CMU

Accompanying the recent flurry of CMU

developments, the EC published a

communication Completing the CMU by

2019 – time to accelerate delivery on

9 March 2018.

While largely a summary of recent

initiatives and the broader CMU agenda,

the EC’s communication also contains some

important messaging. Specifically, the EC

calls on the co-legislators to accelerate the

adoption of last year’s proposed

amendments to the treatment of third-

country CCPs, as well as finalising the

ESA review.

Does regulation impede infrastructure investment?

The FSB published Survey on financing

and regulation over the life cycle of

infrastructure projects on 15 March

2018. The FSB plans to use the survey

to assess the effect that G20 financial

regulatory reforms post-crisis have had

on the cost and availability of financing

for infrastructure. This is a component

of its wider review on the impact of

G20 regulatory commitments on

economic growth.

The FSB’s review aligns with more localised

projects assessing the cumulative impact,

and perhaps unintended consequences, of

post-crisis reform. These include the CMU

call for evidence and a focus on deregulation

by the Trump administration.

Securitisation repositories – consulting on registration

ESMA launched consultations on Draft

technical standards on the application for

registration as a securitisation repository

and Technical advice on fees for

securitisation repositories on 23 March

2018. ESMA proposes that the

securitisation repository application

includes the following information:

https://ec.europa.eu/info/law/better-regulation/initiative/181605/attachment/090166e5b9160b13_en



http://eur-lex.europa.eu/resource.html?uri=cellar:bb607299-22c2-11e8-ac73-01aa75ed71a1.0018.02/DOC_1&format=PDF

http://eur-lex.europa.eu/resource.html?uri=cellar:bb607299-22c2-11e8-ac73-01aa75ed71a1.0018.02/DOC_1&format=PDF

http://www.fsb.org/2018/03/fsb-survey-on-financing-and-regulation-over-the-life-cycle-of-infrastructure-projects/



https://www.esma.europa.eu/sites/default/files/library/esma33-128-109_consultation_paper_securitisation_repositories_application.pdf



https://www.esma.europa.eu/sites/default/files/library/consultation_paper_ta_fees_securitisation_repositories.pdf

https://www.esma.europa.eu/sites/default/files/library/consultation_paper_ta_fees_securitisation_repositories.pdf








general arrangements – securitisation

types, risk transfer methods and

underlying exposure types

operational arrangements – operational

risk mitigation, disaster recovery and

data backup preparations

safeguarding arrangements – preventing

illegitimate use of information,

recording data and enabling timely

access to correct or modify data

submissions.

In the second consultation it proposes a

single registration fee for new registrations

and extensions of existing registrations, as

well as an annual supervisory fee based on

the repositories’ applicable turnover.

The consultations are relevant to

securitisation market infrastructures,

investors, securitisation issuers and

public bodies involved in securitisations.

Responses should be submitted by

23 May 2018.

Financial crime and enforcement FCA refreshes financial crime guide

The FCA issued a Guidance Consultation on

Proposed guidance on financial crime

systems and controls: insider dealing and

market manipulation (GC18/1) on 27

March 2018.

It updates the Financial Crime Guide to

include a new chapter on insider dealing

and market manipulation, giving examples

of good and bad market practice on

detecting, reporting and countering the risk

of financial crime. Apart from this, it plans

minor amendments to the rest of the Guide

plus a complete re-numbering so it will be

more accessible and searchable online.

The new chapter is relevant to firms subject

to SYSC 6.1.1R which arrange or execute

transactions in financial markets. The

FCA intends to publish a response to the

consultation in autumn 2018, with the new

Guide coming into effect on 1 October 2018.

The consultation closes on 28 June 2018.

Market infrastructure FCA explains compulsory contributions under BMR

The FCA issued policy statement PS18/5:

Powers in relation to LIBOR contributions

on 14 March 2018, setting out its

methodology for compelling LIBOR

contributions under BMR.

The FCA will use its ‘compulsion powers to

protect the representativeness of LIBOR if

it is necessary for market integrity or

consumer protection, and in accordance

with the BMR where applicable’. But it

emphasises it does not expect to need

to use its compulsion powers.

If exercising its power to compel

contribution, the FCA states it would:

consider the significant cost and time

for new banks to contribute input data

decide whether to treat

currencies/tenors differently at the

time compulsion is required

use IBA’s definition of the underlying

market: ‘the interbank and corporate

unsecured wholesale funding market for

GBP, USD, EUR, CHF and JPY involving

large banks that have good credit quality

and a presence in the UK’

consider actual participation of

contributors in the underlying market or

their potential participation in a related

market (e.g. interest rate futures,

forward rate agreements, interest rate

swaps, foreign exchange swaps

and repos).

After assessing data from 49 banks that

meet the criteria for LIBOR contributors,

the FCA determines that LIBOR would not

be more representative by increasing the

number of contributors.

The target audience for this policy

statement is LIBOR’s administrator IBA,

the 20 LIBOR panel banks and potential

contributors. There is no rule change and

no action is required.

Consulting on euro reference rate

The ECB published its Second public

consultation on the publication by the ECB

of an unsecured overnight rate on 15 March

2018. The ECB encourages market

participants to offer comments on the

proposed methodologies as well as

operational and technical aspects of the

fallback reference rate.

The new unsecured rate will be based on

money market transactions in accordance

with BMR. It will reflect borrowing costs of

Eurozone banks, but it will not be limited to

interbank transactions. The ECB plans to

announce the start and production dates for

the new rate later this year. Comments are

due by 20 April 2018.

Operational resilience ECB targets cyber risks

Sabine Lautenschlager, ECB Executive

Board Member and Supervisory Board

Vice-Chair, discussed the ECB’s work to

strengthen banks’ cyber resilience in a

speech on 9 March 2018.

She said the ECB has conducted thematic

reviews on cyber risk and outsourcing, and

found there is some concentration of risk in

the companies to which banks outsource IT

functions. Following this, Lautenschlager

explained the ECB aims to carry out on-site

inspections of IT and cyber risks every three

or four years at large banks. She also

confirmed the ECB plans to conduct a

thematic review of IT risks in banking.

Speaking at the same event, ECB Executive

Board Member Benoit Coeure announced

the launch of the Euro Cyber Resilience

Board – a forum to improve the cyber

resilience of FMIs and their critical service

providers, in line with international

standards. The Euro Cyber Resilience Board

https://www.fca.org.uk/publication/guidance-consultation/gc18-01.pdf




https://www.fca.org.uk/publications/policy-statements/ps18-5-powers-relation-libor-contributions

https://www.fca.org.uk/publications/policy-statements/ps18-5-powers-relation-libor-contributions

https://www.ecb.europa.eu/paym/pdf/cons/euoir/consultation_details_201803.pdf



https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp180309_2.en.html

https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp180309_1.en.html








will have no formal powers to impose

binding measures, but the ECB aims for it to

introduce voluntary positions by consensus.

The ECB will chair the forum, working

closely with national central banks and

other EU public authorities.

Pensions FCA toughens pension transfer advice

The FCA confirmed new rules on pension

transfer advice, in PS18/6: Advising on

Pension Transfers – feedback on CP17/16

and final rules and guidance on 26 March

2018. Transfer advice must be provided as a

personal recommendation that takes

account of a customer’s personal

circumstances. The majority of the rule

changes came into force on 1 April 2018,

with the remaining changes mostly due to

come into force on 1 October 2018, and the

final amendments on 6 April 2019.

The FCA also consulted on further changes,

including requiring advisers giving pension

transfer advice to have the same

qualifications as investment advisers, in

CP18/7: Improving the quality of pension

transfer advice, also published on 26 March

2018. The FCA seeks further views on

whether it should ban contingent charging

structures, where a fee for advice is only

paid when a transfer goes ahead. The

consultation closes on 25 May 2018.

Tackling risks in pensions

The FCA and TPR issued a joint call for

input, Regulating the pensions and

retirement income sector: Our strategic

approach on 19 March 2018. The regulators

are seeking views on the biggest risks in the

sector, and how they should tackle these

risks. Over the next five to ten years, the

FCA and TPR propose focusing on the

following issues:

access to pensions

effective governance and secure funding

making sure pension savings are safe

value for money

supporting good choices and outcomes

for consumers.

The FCA and TPR also want to clarify their

respective regulatory remits, and how they

work together.

The regulators ask for comments by

19 June 2018. They plan to publish

information on their final strategic

approach later this year.

Reporting Challenging public reporting requirements

In line with CMU objectives of streamlining

regulation and lightening the obligations of

firms accessing capital markets, the EC

consulted on 21 March 2017 on a Fitness

Check on the EU Framework for Public

Reporting by Companies.

The EC looks at whether national

divergences in reporting requirements

impede cross-border business, as well as

whether the EU’s framework for SMEs

strikes the right balance between market

access and investor protection. The EC also

seeks views on whether the correct

information is currently being captured by

reporting frameworks. More broadly, the

EC is considering if legislation such as the

Transparency Directive aligns well with

more granular reporting frameworks for

different types of businesses.

The consultation period closes on

21 July 2018.

Retail products FCA: Customers exposed to drawdown risks

The FCA published Non-advised drawdown

pension sales review: summary of findings

on 28 March 2018. Firms are broadly

meeting their requirements to communicate

clearly with customers, across written,

telephone and online communications.

Despite this, the FCA identifies that with

the advent of the pension freedoms, some

customers appear not to be fully engaging

with the information and so are potentially

exposing themselves to harm. It says

customers appear not to be fully engaged

with the risks of drawdown and may be at

risk of running out of money in retirement.

The findings are closely aligned with the

FCA’s retirement outcomes review interim

findings. It says the sales review findings

will inform the final report of the retirement

outcomes review, which it plans to issue by

June 2018.

Supervision FCA eyes more pre-emptive supervisory approach

The FCA consulted on Our Approach to

Supervision and Our Approach to

Enforcement on 21 March 2018 as part

of a series in which it aims to explain its

approach to regulation in more depth,

as committed to in its Mission.

In its Approach to Supervision, the FCA

aims to be more forward looking and pre-

emptive, by focusing on business models

and the drivers of behaviour in firms. It

states this is because firms’ strategies and

cultures are at the root cause of most major

failings. Explaining how its focus on culture

permeates its approach to supervision, the

FCA says it looks at drivers of behaviour in

firms such as: the firm’s purpose, staff

incentives, governance arrangements

and the attitude and competence of

leadership staff.

In its Approach to Enforcement, the FCA

explains its powers and how it conducts

investigations. The conduct regulator is

reviewing its penalties policy and intends

to consult on this later this year. The FCA

is also carrying out a fuller review of its

enforcement guide, and aims to consult on

this in 2019.

The consultations on its approach close on

21 June 2018. The FCA plans to publish

final approach documents later this year.






https://www.fca.org.uk/publication/call-for-input/call-for-input-regulating-pensions-retirement-income-sector.pdf



https://ec.europa.eu/info/sites/info/files/2018-companies-public-reporting-consultation-document_en.pdf



https://www.fca.org.uk/publication/multi-firm-reviews/non-advised-drawdown-pension-sales-review.pdf

https://www.fca.org.uk/publication/multi-firm-reviews/non-advised-drawdown-pension-sales-review.pdf

https://www.fca.org.uk/publication/corporate/our-approach-supervision.pdf

https://www.fca.org.uk/publication/corporate/our-approach-supervision.pdf

https://www.fca.org.uk/publication/corporate/our-approach-enforcement.pdf

https://www.fca.org.uk/publication/corporate/our-approach-enforcement.pdf

https://www.fca.org.uk/publications/corporate-documents/our-mission








BoE consults on fees for FMIs

The BoE proposed introducing a new levy-

based funding structure for the supervision

of FMIs, in Consultation Paper: Fees

regime for FMI supervision 2018/19 on

14 March 2018. The consultation, produced

jointly with HMT, provides a summary of

the feedback received to a consultation in

August 2017 on the broad principle of

applying a levy to FMIs.

The BoE asks for feedback on the proposed

fee ratio between different categories of

FMIs, the estimated fees for 2018/19, the

process for levying fees and a draft statutory

instrument from HMT which would allow it

to levy the fees. The consultation closes on

9 May 2018.

Providing certainty for cross-border claim assignments

Seeking to remove barriers to cross-border

transactions, the EC proposed rules on

12 March 2018 that would create uniform,

EU-wide criteria for which national law

would apply for the assignment of claims.

Financial parties assign claims under a wide

range of transactions, including

collateralisation to secure loans or

refinancing through securitisations.

Problems arise when claims are assigned to

multiple parties, or third parties claim an

economic interest as creditors to an

insolvency estate.

Currently, the courts of different countries

would treat the claim differently due to

divergent national interpretations of which

law applies, resulting in significant legal

uncertainty and loss of investment. The

proposed rules lay out that, as a general

rule, the law of the country where the

assignor has its habitual residence will

govern the third-party effects of assignment

of claims but that securitisations will be

governed by the law of the assigned claim.

The EC notes that the obligations of the

parties to the contract are already governed

by the Treaty of Rome’s approach to conflict

of laws and so are outside the scope of these

proposed rules.

Simplifying cross-border transactions

The EC published a Communication on the

proprietary effects of transactions in

securities on 12 March 2018. The EC aims

to provide clarity on how conflicts of laws

should be managed for third-party claims

on cross-border securities transactions.

Such transactions are governed by three

different EU directives. While all of these

directives define the applicable law by

reference to the place of the relevant

account, the EC identifies a discrepancy

in the text between the place where the

account is ‘located’ versus where it

is ’maintained.’

While the EC confirms that ‘located’ and

‘maintained’ should be interpreted to have

the same meaning across the directives, it

acknowledges that there remain divergences

among member states as to what constitutes

the site of the account’s location. As such,

there can be ambiguity over which national

law should apply for disputes. Some

jurisdictions look to the place where the

custody services are provided while others

look to the broader administration of

the account.

The EC indicates that it will continue to

monitor whether this communication yields

more consistent legal interpretation. But

as the communication appears to simply

acknowledge, as opposed to address,

national divergences, it seems likely that

this problem will persist until the EC and

ESMA provide improved definitional clarity

of what constitutes an account’s location.

Transaction reporting Reviewing transaction reporting legal barriers

The FSB published a survey on the legal

barriers to OTC reporting on 23 March

2018. It seeks stakeholder input on whether

member jurisdictions have removed hurdles

to reporting, such as blocking statutes and

client confidentiality rules.

The FSB argues that such barriers may

require trade reports to be de-identified,

which significantly impairs the value of the

information to regulators. The consultation

closes on 25 April 2018.

ESMA guidelines on internalised settlement reporting

ESMA published Final Report: Guidelines

on Internalised Settlement Reporting on

28 March 2018. ESMA clarifies the scope

and process of internalised settlement

reporting, and the exchange of information

between it and NCAs. Specifically,

ESMA details:

The scope of data to be reported by

settlement internalisers

The entities responsible for reporting

to NCAs

Data reporting parameters

The process for NCAs to submit

internalised settlement reports to ESMA

The process for NCAs to submit reports

on potential risks from internalised

settlement activity to ESMA

Access to data by NCAs.

The guidelines are relevant for NCAs and

settlement internalisers, and apply from the

date of their publication on ESMA’s website.

Wholesale markets Targeting venue volatility

IOSCO published a consultation on

Mechanisms Used by Trading Venues to

Manage Extreme Volatility and Preserve

Orderly Trading on 7 March 2018.

IOSCO seeks industry comment on its

recommendations that trading venues

implement volatility control mechanisms

with appropriate calibration,

recordkeeping and monitoring. It also

proposes expanded communications

between trading venues, the market and

regulators when mechanisms are triggered

during extreme volatility. Comments are

due by 6 May 2018.

https://www.bankofengland.co.uk/-/media/boe/files/paper/2018/fees-regime-for-financial-market-infrastructure-supervision-2018-19.pdf?la=en&hash=ABED7FF859B2002D53C6C2A5DE53D74CB6561EA3


http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=COM:2018:96:FIN&from=EN

https://dm.pwc.com/RCH/Pages/Communication%20on%20the%20proprietary%20effects%20of%20transactions%20in%20securities



http://www.fsb.org/2018/03/fsb-survey-of-reporting-entities-on-legal-barriers-to-otc-derivatives-trade-reporting/



https://www.esma.europa.eu/sites/default/files/library/esma70-151-1258_final_report_-_csdr_guidelines_on_internalised_settlement_reporting.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-151-1258_final_report_-_csdr_guidelines_on_internalised_settlement_reporting.pdf

http://www.iosco.org/library/pubdocs/pdf/IOSCOPD594.pdf










Accounting

Accounting and financial reporting FRC issues updated accounting standards

The FRC issued new editions of all UK and

Ireland accounting standards on 28 March

2018, including:

Foreword to Accounting Standards

FRS 100 Application of Financial

Reporting Requirements

FRS 101 Reduced Disclosure

Framework

FRS 102 The Financial Reporting

Standard applicable in the UK and

Republic of Ireland

FRS 103 Insurance Contracts

Implementation Guidance to

accompany FRS 103 Insurance

Contracts

FRS 104 Interim Financial Reporting

FRS 105 The Financial Reporting

Standard applicable to the Micro-

entities Regime.

It updates the standards to reflect the

triennial review amendments issued in

December 2017, and other amendments.

It also revises the Foreword to reflect

changes to legislation that prescribe the

FRC as the accounting standard setter for

the Republic of Ireland (previously the

standards were promulgated in Ireland

by Chartered Accountants Ireland).

Financial instruments – Presentation of interest revenue

The IFRS published its conclusion on the

presentation of interest revenue for

particular financial instruments (IFRS 9

Financial Instruments and IAS 1

Presentation of Financial Statements) on

23 March 2018. It concludes that the line

item ‘interest revenue’ can only contain

interest income on assets that are measured

at amortised cost or fair value through other

comprehensive income (subject to the effect

of applying hedge accounting to derivatives

in designated hedge relationships).

Our In brief – IFRS Interpretations

committee agenda decision on the

presentation of interest revenue for certain

financial instruments considers the impact

of this conclusion on financial services

entities, especially banks for which interest

revenue or net interest margin is a key

performance indicator.

Our publications IFRS News

The March 2018 issue includes

the following articles:

Adopting IFRS or preparing a

transaction document? You may

be subject to different transition

requirements when applying

IFRS 9, 15, 16 and 17

IFRS Interpretations committee agenda

decision on the presentation of

interest revenue for certain

financial instruments.

March accounting reminders

Our March accounting reminders – IFRS

and UK GAAP outlines reporting

requirements as at 31 March 2018. It

includes the standards that apply at this

date; and the standards are published but

effective at later dates and hence required

to be disclosed plus a summary of the latest

topical issues.

New IFRSs for 2018

Our In depth publication New IFRSs for

2018 outlines of the key requirements of

new IFRS standards and interpretations

effective in 2018.

Also this month

BoE

The BoE published Green Notice 2018/03

on 21 March 2018 relating to data collection

on securities holdings and securitisation

vehicles. Once finalised, these green notices

will appear in the statistical notice to

reporting institutions.

CMA

The CMA released its 2018/2019 Annual

Plan on 29 March 2018, setting out the

CMA’s ambitions for the year ahead. They

include protecting vulnerable consumers

and having an increased role in

international competition matters.

EBA

The EBA published the list of EU

regional governments and local

authorities treated as exposures to

central governments in accordance

with Article 115(2) of CRR on 22 March

2018. This publication relates to the

capital requirements calculation for

credit risk and applies to banks,

building societies and PRA designated

investment firms in the UK.

The EBA issued a Consultation Paper on

the application of the existing JCESA

Guidelines on complaints-handling to

authorities competent for supervising

the new institutions under MCD and/or

PSD2 (EBA/CP/2019/02) on 27 March

2018. It proposes extending the

guidelines to credit intermediaries and

non-credit institution creditors under

MCD and account information service

providers and payment initiation service

providers under PSD2. The consultation

closes on 27 May 2018. The EBA

intends the guidelines to apply from

1 May 2019.

EC

Supporting the CMU agenda of using

financial technology to expand investment

opportunities and market integration, the

EC published a Fin Tech Action Plan on 8

March 2019. This plan includes an EU

Fintech Laboratory, blockchain forums,

https://www.frc.org.uk/document-library/accounting-and-reporting-policy/2018/frs-100-application-of-financial-reporting-standar
















http://www.ifrs.org/news-and-events/updates/ifric-updates/march-2018/#7









https://inform.pwc.com/inform2/content?action=resource&id=0000019679809825.pdf





https://www.bankofengland.co.uk/statistics/notice/2018/green-notice-2018-03

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/696351/AnnualPlan-201819-PDF__1_.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/696351/AnnualPlan-201819-PDF__1_.pdf

http://www.eba.europa.eu/documents/10180/585167/List+of+EU+regional+governments+and+local+authorities+treated+as+exposures+to+central+governments+%28Article+115+CRR%29





http://www.eba.europa.eu/documents/10180/2169743/Consultation+Paper+on+the+application+of+the+Joint+Committee+Guidelines+on+complaints-handling+to+the+new+institutions+under+MCD+and+PSD2+%28EBA-CP-2018-02%29.pdf






http://ec.europa.eu/transparency/regdoc/rep/1/2018/EN/COM-2018-109-F1-EN-MAIN-PART-1.PDF








cybersecurity workshops and best practices

for regulatory sandboxes.

ECB

The ECB published the outcome of

its consultation on release 13.0 of

TARGET2, its real-time gross

settlement system, on 16 March 2018.

The ECB published a Collective

agreement between TARGET-2 central

banks and CSDs using the TARGET-2

Platform on the treatment of

outstanding securities transactions on

6 March 2018. The agreement entered

into force on 20 March 2018.

ECON

ECON published a Draft Report on the

proposal for a regulation of the EP and the

Council on a Pan-European Personal

Pension Product (PEPP) on 5 March 2018.

It sets out the EP’s proposed amendments

to the draft text, which will be forwarded to

the Council, EC and national parliaments.

EDPS

The European Data Protection

Supervisor issued Opinion 3/2018 on

online manipulation and personal data

on 19 March 2018. It focuses on how

personal information is used to target

individuals and groups, the fundamental

rights at stake and relevant laws for

mitigating the threats. It recommends

greater collaboration between data

protection authorities and regulators to

safeguard the rights and interests

of individuals.

The European Data Protection

Supervisor published Guidelines on the

use of cloud computing services by the

European institutions and bodies on

21 March 2018. The guidance seeks to

provide practical advice to EU

institutions on complying with their data

protection obligations when considering

the use of cloud computing services.

EIOPA

EIOPA published a keynote speech by

Gabriel Bernardino, Chairman of EIOPA,

Preserving regulatory certainty: The

review of insurers’ capital requirements on

27 March 2018. Bernardino summarised the

findings of EIOPA’s 2018 Review of the

Solvency II Delegated Regulation which

resulted in its second set of advice to the EC

on specific items in the Solvency II

Delegated items in Regulation (published

on 28 February 2018).

EP

The EP issued a Draft Report on a proposal

for a regulation for the free flow of non-

personal data in the EU on 1 March 2018.

This regulation, along with the GDPR, aims

to provide a coherent set of rules covering

all types of data in the EU.

ESMA

ESMA published Double volume cap

mechanism (DVCM) data under MiFIR

on 7 March 2018. The updated trading

volumes and calculations are used to

limit waivers of the equity transparency

obligation and restrict trading in dark

pools. ESMA postponed implementation

of the DVCM until March due to

incomplete data when MiFID II came

into effect in January 2018.

ESMA published updated EMIR

validation rules on 1 March 2018,

revising the reporting requirements

under Article 9 for ETFs and product

identification under MIFID II.

ESMA published updated MiFID II Q&A

on 23 March 2018, providing additional

guidance for inducements, costs and

charges and post-trade reporting.

ESMA updated its Q&A on MiFID II and

MiFIR commodity derivatives topics on

27 March 2018, providing new or

revised answers to the topics of position

limits and position reporting.

ESMA published an updated version of

its Questions and Answers on MAR on

23 March 2018. It amends Q&A 5.1

dealing with the disclosure of inside

information related to Pillar II

requirements, to include consideration

of whether information received from

the SRB in relation to its MREL exercise

meets the criteria of inside information.

ESMA issued updated Questions &

Answers on the implementation of

CSDR on 23 March 2018. It provides

further details on authorisation and

supervision of CSDs, conduct of

business rules and requirements

for CSD links.

ESMA published its latest Risk

Dashboard on 20 March 2018. ESMA

notes that European securities markets,

infrastructures and investors remain at

risk of volatility. It also re-iterates its

concerns about retail investors investing

in speculative and risky products,

such as virtual currencies and Initial

Coin Offerings.

Steven Maijoor, Chair of ESMA, gave a

speech on 20 March 2018 setting out his

views on Brexit, the CMU and the ESAs

review. Maijoor sought to reassure firms

that ESMA is not opposed to delegation

to third countries in the context of

Brexit, if properly managed. He also

voiced his support for proposals from

the EC which would give greater powers

to ESMA and the other ESAs.

ESMA published Guidelines on position

calculation by trade repositories under

EMIR on 27 March 2018 to facilitate

the monitoring of systemic risk.

ESMA consulted on Supplementary

guidance on the endorsement regime of

the CRA Regulation seeking to provide

clarity on whether an internal

requirement at a third-country CRA is

considered to be as stringent as a

requirement in the CRA Regulation. The


https://www.ecb.europa.eu/paym/t2/shared/pdf/professionals/release_13/Outcome_of_the_first_user_consultation_on_the_TARGET2_release_13_0.pdf

http://www.ecb.europa.eu/paym/t2s/progress/pdf/collective_agreement.pdf

http://www.ecb.europa.eu/paym/t2s/progress/pdf/collective_agreement.pdf

http://www.ecb.europa.eu/paym/t2s/progress/pdf/explanatory_note-entry_into_force_of_collective_agreement.pdf

http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&reference=PE-618.225&format=PDF&language=EN&secondRef=01




https://edps.europa.eu/sites/edp/files/publication/18-03-19_online_manipulation_en.pdf

https://edps.europa.eu/sites/edp/files/publication/18-03-16_cloud_computing_guidelines_en.pdf



https://eiopa.europa.eu/Publications/Meetings/2018-03-27%20Public%20Hearing%20SCR%20Review.pdf


https://eiopa.europa.eu/Publications/Consultations/EIOPA-18-075-EIOPA_Second_set_of_Advice_on_SII_DR_Review.pdf






https://www.esma.europa.eu/press-news/esma-news/mifid-ii-esma-publishes-double-volume-cap-data

https://www.esma.europa.eu/press-news/esma-news/mifid-ii-esma-publishes-double-volume-cap-data

https://www.esma.europa.eu/press-news/esma-news/esma-updates-emir-validation-rules

https://www.esma.europa.eu/press-news/esma-news/esma-updates-emir-validation-rules

https://www.esma.europa.eu/sites/default/files/library/esma35-43-349_mifid_ii_qas_on_investor_protection_topics.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-28_cdtf_qas.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-28_cdtf_qas.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-145-111_qa_on_mar.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-708036281-2_csdr_qas.pdf



https://www.esma.europa.eu/sites/default/files/library/esma71-99-964_steven_maijoor_bvi_reception_keynote.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-151-1272_guidelines_on_position_calculation_by_trade_repositories



https://www.esma.europa.eu/sites/default/files/library/esma33-9-235_consultation_paper_on_draft_guidelines_under_the_cra_regulation.pdf










ESMA updated its Q&A on the

Benchmarks Regulation on 22 March

2018, clarifying how governance and

control provisions apply to supervised

entities during the transitional period.

ESMA published an Opinion on the

treatment of packages under the

trading obligation for derivatives

on 21 March 2018, clarifying the

circumstances where orders composed

of two or more financial instruments

are subject to the MiFID II/MIFIR

trading obligation.

ESMA clarified in Final Report:

Amendments to Commission Delegated

Regulation (EU) 2017/587 on 26 March

2018 that the quotes published by

systematic internalisers should reflect

the minimum price increments

applicable to EU trading venues.

ESMA updated its Q&A on Prospectus

Related Topics on 28 March 2018,

clarifying what needs to be included as a

profit forecast as part of a prospectus.

ESMA updated its Q&As on MiFID II

and MiFIR market structures topics on

28 March 2018. It updates answers on

controls and suitability checks for DEA

provider’s and the tick size regime, and

includes a new question on public

disclosure of trading venues fees.

ESMA published updated Q&As on

MiFID II and MiFIR transparency

topics on 28 March 2018, addressing

the applicability of the derivatives

trading obligation to non-par swaps.

FATF

The FATF updated its International

standards on combating money laundering

and terrorist financing on 16 March 2018.

FCA

The FCA summarised its upcoming

publications in Policy development

update on 2 March 2018.

The FCA consults on various minor

changes, in CP18/6: Quarterly

Consultation No 20 on 2 March 2018.

It covers changes to: the prudential

sourcebook for investment firms,

reporting requirements in the

supervision manual, and rules under

the Payment Services Regulations 2017.

The consultation closed on 3 April 2017

for chapters 2 and 4, and closes on

13 April 2018 for chapter 5 and

3 May 2018 for chapter 3.

The FCA published MiFID II – LEI

update on 2 March 2018, announcing

that the amendment to the LEI

validation rule required to implement

ESMA’s postponement of the LEI

requirement was effective on 10 March

2018. As of 12 March 2018, firms should

submit or resubmit, as the case may be,

any postponed transaction reports

pending the update.

Andrew Bailey, Chief Executive of the

FCA, delivered a speech on

Transforming culture in financial

services on 19 March 2018. He set out

the FCA’s thoughts on the drivers of

poor conduct, developments on culture

in recent years, the importance of

incentivising good behaviours, and the

importance of diversity in the

workplace.

On 23 March 2018 the FCA reminded

societies registered under the Co-

operative and Community Benefit

Societies Act 2014 on its webpage

Changes to audit requirements for

registered societies that the thresholds

for the exemption from the requirement

for a financial statement audit are

increasing. The changes take effect

from 6 April 2018.

The FCA signed an Enhanced Co-

operation Agreement with the

Australian Securities and Investments

Commission on 22 March 2018, seeking

to promote innovation in financial

services by providing a framework for

co-operation between the two

regulators. On the same day, HMT

launched the FinTech Sector Strategy

outlining plans to encourage growth of

the sector in the UK. Both documents

signal the UK’s continued commitment

to developing the FinTech sector.

Chris Woolard, Executive Director of

Strategy and Competition at the FCA,

gave a speech on 19 March 2018 setting

out the FCA’s plans to create a global

regulatory sandbox, to allow financial

services firms to test innovative financial

products on a cross-border basis. The

FCA is seeking input on how a global

sandbox could work and is engaging

with international counterparts.

The FCA published correspondence with

the ABI about the EU Withdrawal and

Insurance Communications on 12

March 2018. It discusses key Brexit

issues that insurers need to

communicate to customers. These

matters include inbound and outbound

passporting and cover for customers

travelling to the EU.

FIA

Taking a lead role in the implementation

of MiFID II/MiFIR indirect clearing,

on 21 March 2018 the FIA (the trade

organisation for the futures, options and

centrally cleared derivatives markets)

published a wide range of contractual

language that firms can use to set up

their segregated collateral accounts.

FMSB

The FICC Markets Standards Board

published a Transparency Draft Standard

on Secondary Market Trading Error

Compensation on 20 March 2018, setting

out behaviours designed to improve the

payment of compensation for trading

errors. Wholesale secondary FICC market

participants should review the transparency

draft and provide comments by 2o June

https://www.esma.europa.eu/sites/default/files/library/esma70-145-114_qas_on_bmr.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-145-114_qas_on_bmr.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-156-322_opinion_packages_and_to.pdf



https://www.esma.europa.eu/press-news/esma-news/esma-clarifies-mifir-quoting-obligations-systematic-internalisers



https://www.esma.europa.eu/press-news/esma-news/esma-adds-new-qa-profit-forecasts

https://www.esma.europa.eu/press-news/esma-news/esma-adds-new-qa-profit-forecasts

https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-38_qas_markets_structures_issues.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-38_qas_markets_structures_issues.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-35_qas_transparency_issues_0.pdf



http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf



https://www.fca.org.uk/news/policy-development-update

https://www.fca.org.uk/news/policy-development-update



https://www.fca.org.uk/markets/mifid-ii/legal-entity-identifier-lei-update

https://www.fca.org.uk/markets/mifid-ii/legal-entity-identifier-lei-update

https://www.fca.org.uk/news/speeches/transforming-culture-financial-services

https://www.fca.org.uk/news/speeches/transforming-culture-financial-services

https://www.fca.org.uk/firms/registered-societies-introduction/changes-audit-requirements-registered-societies

https://www.fca.org.uk/firms/registered-societies-introduction/changes-audit-requirements-registered-societies

https://www.fca.org.uk/publication/mou/enhanced-fca-asic-cooperation-agreement.pdf

https://www.fca.org.uk/publication/mou/enhanced-fca-asic-cooperation-agreement.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/692880/Fintech_Sector_Strategy_web.pdf

https://www.fca.org.uk/news/speeches/regulating-innovation-global-enterprise

https://www.fca.org.uk/publication/correspondence/correspondence-abi-fca-eu-withdrawal.pdf









https://fia.org/articles/eight-sets-indirect-clearing-terms-published

https://fia.org/articles/eight-sets-indirect-clearing-terms-published

http://fmsb.com/wp-content/uploads/2018/03/Secondary-Market-Trading-Error-Compensation-FINAL-TD_2.pdf










2018. A final standard is expected to be

published following consultation.

FOS

The FOS set out its plans and budget for the

coming year, including expected numbers of

complaints for different financial products,

in Our plans for the year ahead – 2018/19

on 28 March 2018.

FRC

The FRC published its Strategy 2018/21

Budget and Levies 2018/19 on 26 March

2018. Priorities for the coming year

include a comprehensive update of the

Corporate Governance and Stewardship

Codes, a review of how audit should in

future serve the public interest and a

new system for audit firm monitoring

and supervision.

On 31 March 2018 the FRC Called for

participation by listed companies,

investors/analysts and technology

experts for help with its investigation

into the use of artificial intelligence and

related technologies in the production

and consumption of corporate reporting

data. The investigation will occur over

the summer and it expects to report in

autumn 2018.

FSB

The FSB published Supplementary

Guidance to the FSB Principles and

Standards on Sound Compensation

Practices – The use of compensation

tools to address misconduct risk on 9

March 2018. It provides guidance to

firms and supervisory authorities on

how practices such as in-year bonus

adjustment, malus and clawback can be

used to mitigate misconduct risk.

The FSB published its seventh annual

Global Shadow Banking Monitoring

Report 2017 on 5 March 2018. It

assesses trends and risks from shadow

banking from 29 jurisdictions based on

data up to the end of 2016. It includes

Luxembourg for the first time

The FSB published reporting guidelines

for securities financing transactions on

5 March 2018. The EU institutions are

likely to incorporate many of these data

standards into their final SFTR

reporting framework to facilitate the

FSB’s global aggregation of financial

stability data in repo and security

lending markets.

FSB Chair Mark Carney set out the

organisation’s priorities for the

Argentine G20 Presidency, in a letter

to G20 Finance Ministers and Central

Bank Governors. The FSB published the

letter on 18 March 2018, ahead of the

G20 meeting of Ministers and

Governors on 19-20 March 2018.

Gambling Commission

The Gambling Commission published the

fourth edition of it guidance for casinos on

the prevention of money laundering and

combating the financing of terrorism on

14 March 2018.

IAIS

The IAIS is developing a Common

Framework (ComFrame) for the supervision

of Internationally Active Insurance Groups.

It published a Summary of main

consultation comments on ComFrame

and their resolution on 1 March 2018.

It intends to consult on the overall

ComFrame material in August 2018, with

a view to adopting both revised Insurance

Core Principles and Overall ComFrame

in 2019.

IMF

Christine Lagarde, Managing Director of

the IMF, wrote a blog titled Addressing the

Dark Side of the Crypto World on

13 March 2018, highlighting the dangers of

cryptocurrencies such as their potential use

for money laundering and financing

terrorism. She also commented on tools to

mitigate the risks, such as developing a

global regulatory framework.

IOSCO

IOSCO published a report on Senior

Investor Vulnerability on 12 March 2018,

outlining the approach that national

regulators should take in protecting

elderly investors.

JCESA

On 15 March 2018 the JCESA published

its final report on Big Data, analysing its

impact on consumers and financial firms.

The ESAs found that while the development

of Big Data poses some potential risks to

financial services consumers, the benefits

of this innovation currently outweigh these.

JMLSG

The JMLSG published a consultation on

proposed revisions to sector 12: Asset

finance and sector 17: Syndicated lending

in Part II of its AML/CTF Guidance on 8

March 2018. It notes that the majority of

changes are relatively minor. The

consultation closed on 30 March 2018.

PRA

The PRA published the updated rulebook:

CRR firms: Groups (level of application)

instrument 2018 on 29 March 2018. It

indicates the application of various CRR

rules at solo or consolidated levels and

applies to banks, building societies and

PRA-designed investment firms in the UK.

The PRA published the updated

supervisory statement SS13/13 market risk

on 29 March 2018. It sets out the PRA’s

expectations of firms in relation to market

risk and applies to banks, building societies

and PRA-designed investment firms that

have a trading book.

The PRA published the updated rulebook:

CRR firms: internal capital adequacy

assessment (amendment) instrument 2018

on 29 March 2018. The update relates to the

market risk capital requirements calculation

for stock index futures and applies to banks,

http://www.financial-ombudsman.org.uk/publications/our-plans-2018-19.pdf

https://www.frc.org.uk/getattachment/644a8555-41b3-45c8-8f09-51114f2183ff/FRC-Strategy-2018-21-(March-2018).pdf

https://www.frc.org.uk/getattachment/644a8555-41b3-45c8-8f09-51114f2183ff/FRC-Strategy-2018-21-(March-2018).pdf

https://www.frc.org.uk/getattachment/068addb7-0523-4ddd-96fd-d5601881000a/Call-for-participants-AI.pdf

https://www.frc.org.uk/getattachment/068addb7-0523-4ddd-96fd-d5601881000a/Call-for-participants-AI.pdf

http://www.fsb.org/wp-content/uploads/P090318-1.pdf









http://www.fsb.org/wp-content/uploads/P180318.pdf

http://www.gamblingcommission.gov.uk/PDF/AML/Prevention-of-money-laundering-and-combating-the-financing-of-terrorism.pdf

https://www.iaisweb.org/page/events/stakeholder-meetings/file/72366/summary-of-main-consultation-comments-on-comframe-and-their-resolution



https://blogs.imf.org/2018/03/13/addressing-the-dark-side-of-the-crypto-world/

https://blogs.imf.org/2018/03/13/addressing-the-dark-side-of-the-crypto-world/

http://www.iosco.org/news/pdf/IOSCONEWS490.pdf

http://www.iosco.org/news/pdf/IOSCONEWS490.pdf

http://www.eba.europa.eu/documents/10180/2157971/Joint+Committee+Final+Report+on+Big+Data+%28JC-2018-04+%29.pdf

http://www.jmlsg.org.uk/consultations

http://www.jmlsg.org.uk/download/10024



https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps618app4.pdf?la=en&hash=6A88F92734CEDE2BB6964EEE5EAB5DEA088E25AB



https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss1313update.pdf?la=en&hash=FA90E3630E0123FA2B69FCB3B4F04BB420054FF2

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps618app2.pdf?la=en&hash=771811D4A35473D699578A2EBA8914AB7AE3E6A5










building societies and PRA-designed

investment firms with trading books.

The PRA confirmed the FSCS Management

Expenses Levy Limit (MELL) for 2018/2019

in policy statement in PS5/18 Financial

Services Compensation Scheme –

Management Expenses Levy Limit 2018/19

on 29 March 2018. The MELL for 2018/19

is £77.7 m.

The PRA released Policy Statement PS6/18

which contains feedback to chapters 2 to 6,

9 and 10 of last October’s CP18/17

Occasional Consultation Paper on 29

March 2018. The changes took effect

from 30 March 2018.

The PRA published policy statement

PS6/18: Responses to CP18/17 ‘Occasional

Consultation Paper’ – Chapters 2 to 6, 9

and 10 on 29 March 2018. This implements

a number of minor changes to the PRA’s the

rules and guidance, including relating to

Solvency II life insurance product reporting

and amendments concerning CRD IV and

the CRR.

TC

The TC published a letter from FOS dated

20 March 2018 responding to its questions

about ‘troubling’ findings aired on the

Channel 4 Dispatches programme. Noting

FOS’s announcement of an independent

review, the TC wants prior sight of its terms

of reference, full publication of the review’s

findings and to take evidence from

the reviewer.

UK Parliament

The UK Parliament launched a

consultation on the Data Protection Bill

on 6 March 2018, seeking views from

those with relevant experience or special

interest in the Bill to be considered by

the Public Bill Committee. The deadline

for submitting written evidence closed

on 27 March 2018.

The UK Parliament published a FSMA

amendment order to exempt businesses

borrowing from P2P platforms from

FCA and PRA authorisation for the

activity of accepting deposits. These

businesses are not usually financial

services firms, and the Government

believes requiring them to be authorised

might discourage crowdfunding activity.

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps518.pdf?la=en&hash=FBB52888CB94F7AFCF2ED0EC971D3A96D0650CA4



https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps618.pdf?la=en&hash=F2D1125B2A6460D7490BE647FDFAA9CE91C7F7AE

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2017/cp1817.pdf?la=en&hash=7DDF31CA5B78322B5F6591CE656E13B354E22B33

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2017/cp1817.pdf?la=en&hash=7DDF31CA5B78322B5F6591CE656E13B354E22B33




https://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news-parliament-2017/financial-ombudsman-letters-chairs-statement-17-19/

https://www.parliament.uk/business/news/2018/march/have-your-say-on-the-data-protection-bill/

http://www.legislation.gov.uk/uksi/2018/394/pdfs/uksi_20180394

http://www.legislation.gov.uk/uksi/2018/394/pdfs/uksi_20180394








In this section:

Regulation 19

Capital and liquidity 19 Conduct 22 Innovation 22 Payments 22 Retail products 24 Stress testing 24 Supervision 24

Also this month 25


developments

Regulation

Capital and liquidity ECB urges ICAAP and ILAAP improvements

The ECB launched consultations on its

Guide to the ICAAP and Guide to the ILAAP

on 2 March 2018. This is relevant to

significant Eurozone banks that are directly

supervised by the ECB. It follows the ECB’s

January 2016 supervisory expectations

letter to banks and its February 2017

multi-year plan that included earlier

draft versions of these guides.

The ECB indicates that the purpose of these

more detailed guides is to inform banks of

its expectations concerning their ICAAPs

and ILAAPs, as well as providing

transparency over its interpretation of the

relevant provisions of CRD IV. After two

cycles of ICAAP and ILAAP assessments,

the ECB identifies significant differences in

approaches taken by banks and ‘a need for

improvements at all banks’.

It encourages banks to address identified

gaps and weaknesses in consultation with

their supervisors. But the ECB

acknowledges that ‘it will take time to arrive

at adequate ICAAPs and ILAAPs’. The ECB

aims to finalise the guides in the second half

of 2018, and intends that supervisory teams

apply them from 2019. The consultation

period closes on 4 May 2018.

Bearing down on non-performing exposures

The EC published a Proposal for a

regulation on amending CRR as regards

minimum loss coverage for non-

performing exposures (NPEs) on 14 March

2018. This is a prudential backstop intended

to address the build-up of future rather than

existing NPEs and is set to apply to

exposures that originate after

14 March 2018.

The proposals define NPEs and forbearance

measures. NPEs comprise exposures in

default under existing CRR provisions, but

also include exposures that are impaired

under applicable accounting standards, are

30 days past due or have benefitted from

forbearance measures (subject to time

limits and other conditions). Forbearance

measures refer to the refinancing or

modification of the terms and conditions

of debt obligations which ‘would not have

been granted had the financial situation

of the obligor not deteriorated’.

The proposed CRR amendment introduces a

deduction from regulatory capital of any

shortfall between the level of accounting

impairment recognised and specified

backstop levels that increases with the age

of NPEs. For example, a secured exposure

deemed non-performing for between two


https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/icaap_ilaap/ssm.icaap_guide_201803.en.pdf

https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/icaap_ilaap/ssm.ilaap_guide_201803.en.pdf

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/160108letter_nouy.en.pdf

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/170220letter_nouy.en.pdf?2c9dad63efa508627e40d24d06eea5c9

http://ec.europa.eu/finance/docs/policy/180314-proposal-regulation-non-performing-loans_en.pdf











and three years that is past due by more

than 90 days would attract a minimum

regulatory impairment requirement of

10%. Beyond eight years the requirement

is 100%.

This proposal is a component of a range of

initiatives concerning risk reduction in the

EU that forms part of the EC’s current

plans on Completing the banking union.

Alongside the NPE proposal, the EC

published a Second progress report on the

reduction of non-performing loans in

Europe. An accompanying AMC Blueprint

provides guidance on setting up national

centralised asset management companies

for the transfer of banks’ troubled loans.

To encourage the development of secondary

markets for NPEs and improve the ease of

debt recovery through accelerated out-of-

court collateral enforcement procedures, the

EC also published a Proposal for a directive

on credit servicers, credit purchasers and

the recovery of collateral. Finally, the EC

released Q&As on this package of measures

and the EBA published its advice to the

EC which supports the development of

these NPE proposals.

The EC welcomes comments on both

its proposals by 14 May 2018.

Managing non-performing exposures

The EBA published its consultation paper

Draft Guidelines on management on non-

performing and forborne exposures on 8

March 2018. The level of non-performing

exposures (NPEs) in the EU remains high

by historical standards. These guidelines

are part of a wider set of initiatives to tackle

NPEs in the EU, both existing NPEs and

those that could arise in the future.

Through these guidelines, the EBA aims

to reduce banks’ NPEs by providing

supervisory guidance to ensure firms

effectively manage their NPEs and forborne

exposures. The guidelines also have due

regard to ensuring consumers are treated

fairly throughout the loan life-cycle. The

guidelines address the development and

implementation of an NPE strategy. This

incorporates the elements of the governance

and operations of a NPE workout

framework with aspects relating to direction

and decision making, the NPE operating

model, internal control framework, NPE

monitoring as well as early warning

processes. The EBA recognises that an NPE

strategy and related operational framework

may not be necessary for banks with lower

levels of NPEs. It suggests NPEs of 5% of

total exposures, subject to NCA discretion,

as the threshold.

The guidelines also cover forbearance,

recognition of NPEs, impairment

measurement and collateral valuation.

Finally, the guidelines include requirements

concerning NCAs’ assessment of banks’

NPE management as part of the SREP. The

EBA aims to finalise the guidelines during

summer 2018 and intends that they take

effect from 1 January 2019. The

consultation closes on 8 June 2018.

ECB sets out non-performing loan provisioning

The ECB published its Addendum to the

ECB Guidance to banks on non-performing

loans (NPLs): supervisory expectations for

prudential provisioning of non-performing

exposures on 15 March 2018. It sets out

expected levels of impairment provisions

that increase with the age of NPLs. This is

relevant to Eurozone banks deemed

significant institutions and so supervised

by the ECB. It applies to loans that become

non-performing after 1 April 2018.

The guidance is non-binding and the ECB

indicates that: ‘The addendum is not in

itself a Pillar 2 measure and does not seek

to impose obligations on banks. The

addendum simply indicates what the ECB

expects from the banks when they assess

their risk exposures and serves as a starting

point for a discussion with each individual

bank on whether it has made adequate and

timely provisions for NPLs.’

The ECB’s rate of provision build-up with

age for secured lending is faster than the

EC’s March 2018 CRR amendment

proposals to introduce a pillar 1 impairment

provision prudential backstop for NPLs to

all firms within the scope of CRD IV. It sets

a 40% provisioning level expectation after

three years (EC proposal – 17.5%) and

reaches 100% provisioning after seven years

(EC proposal – eight years). Unsecured

exposures are similar with 100%

provisioning after two years.

During supervisory dialogue, the ECB

intends to discuss with each bank

divergences from its provisioning

expectations. The ECB expects to

incorporate the results of this supervisory

dialogue from the 2021 SREPs onwards.

The ECB suggests that ‘banks should

prepare themselves and use the next two

years to review their credit underwriting

policies and criteria with a view to reducing

the emergence of NPLs, particularly given

the current benign economic conditions’.

EC consults on Basel IV implementation

The EC published a targeted Exploratory

consultation on the finalisation of Basel III

on 16 March 2018. This concerns the

implementation in the EU of the Basel

Committee’s Basel III: Finalising post-

crisis reforms published in December 2017.

But it indicates that the leverage ratio

related element of these reforms is being

incorporated into the ongoing negotiations

of the November 2016 CRD IV/CRR II

banking package. It intends to deal with

the remaining elements of the reforms

separately and this consultation covers:

standardised approach for credit risk

IRB approaches for credit risk

credit valuation adjustment

risk framework

operational risk framework

output floor.

http://ec.europa.eu/finance/docs/law/171011-communication-banking-union_en.pdf

http://ec.europa.eu/finance/docs/policy/180314-communication-non-performing-loans_en.pdf



http://ec.europa.eu/finance/docs/policy/180314-staff-working-document-non-performing-loans_en.pdf

http://ec.europa.eu/finance/docs/policy/180314-proposal-directive-non-performing-loans_en.pdf



http://europa.eu/rapid/press-release_MEMO-18-1803_en.htm?locale=en

http://www.eba.europa.eu/documents/10180/2087449/EBA+Report+on+Statutory+Prudential+Backstops.pdf

http://www.eba.europa.eu/documents/10180/2087449/EBA+Report+on+Statutory+Prudential+Backstops.pdf

http://www.eba.europa.eu/documents/10180/2150622/Consultation+Paper+on+Guidelines+on+management+of+non-performing+and+forborne+exposures+%28EBA-CP-2018-01%29.pdf


https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.npl_addendum_201803.en.pdf







https://ec.europa.eu/info/sites/info/files/2018-basel-3-finalisation-consultation-document_en.pdf


https://www.bis.org/bcbs/publ/d424.pdf









The EC seeks views on the impact on firms’

businesses of these remaining elements

and requests details as well as quantitative

estimates of those areas with the most

significant effects. The consultation closes

on 12 April 2018.

Tweaking Pillar 3 disclosures

The Basel Committee published for

consultation a technical amendment, Pillar

3 disclosure requirements – regulatory

treatment of accounting provisions on 22

March 2018. It concerns minor changes to

three templates of the March 2017 Pillar 3

consolidated and enhanced framework.

With the introduction of expected credit

loss (ECL) accounting requirements, some

supervisory authorities are adopting

transitional arrangements to phase-in the

impact on regulatory capital of these ECLs.

One proposed change requires additional

disclosure by G-SIBs of their ‘fully loaded’

levels of total loss-absorbing capacity had

the transitional arrangements not been

applied. The existing framework templates

already cater for the corresponding impact

on other capital and leverage ratios. The

other changes concern providing additional

analysis of accounting impairment

provisions between those deemed specific

and general, together with disclosure of

the rationale for the allocation.

The Basel Committee intends that the

amendments take effect from 1 January

2019. The comment period closes on

4 May 2018.

Ensuring internal model consistency

The ECB proposed a guide to internal

models – general topics chapter and related


2018. The ECB wants to ensure a common

and consistent application of relevant

regulation on internal model for banks

directly supervised by the ECB.

It focuses on non-model specific principles

including implementation of the IRB

approach, governance, internal validation,

internal audit, change management and

third part involvement. The ECB intends

model-specific guidance to follow covering

credit, market and counterparty credit risks.

The ECB released a preliminary version of

the whole guide in February 2017 and this

draft already draws on initial feedback from

banks as well as experience from its targeted

review of internal models project. The ECB

plans a public hearing on 18 April 2018 and

the consultation closes on 28 May 2018.

Revising the market risk framework

The Basel Committee consulted on

Revisions to the minimum capital

requirements for market risk and proposed


2018. This follows its decision to extend the

implementation date of the market risk

standard to 1 January 2022 to give banks

additional time to develop systems

infrastructure and for the Committee to

address certain aspects of the framework.

Proposed changes to the standardised

approach relate to enhancing its risk

sensitivity and recalibration of risk weights

for interest rate risk, FX risk and equity

risk. Revisions to the internal model

approach relate to the assessment process

to determine whether the internal models

appropriately reflect the risks of individual

trading desks. The Committee also clarifies

the requirements for identifying the eligible

risk factors for internal modelling and

clarifies the scope of exposures subject to

market risk capital requirements. Finally,

following its June 2017 proposals on a

Simplified alternative to the standardised

approach the Basel Committee opts for and

includes in this consultation a recalibrated

Basel II standardised approach as an

alternative intended for banks with less

material market risk exposures. The

Committee intends its calibration to be

‘slightly more conservative’ than the revised

‘full’ standardised approach.

The Committee points out that the scope for

material potential revisions to the market

risk framework are limited to those included

this consultation. The consultation closes on

20 June 2018.

Clarifying credit risk mitigation

The EBA published its Report on the credit

risk mitigation (CRM) framework on

19 March 2018. This is the fourth and last

phase of its review of IRB approaches to

credit risk set out in its February 2016

roadmap. This aims to identify the

regulatory actions necessary to address the

key drivers of variability in the

implementation of IRB models. In addition

to CRM, the roadmap includes a review of

supervisory practices, a harmonised

definition of default and the clarification

of modelling approaches used by firms.

The EBA recommends a number of targeted

amendments to the CRR for consideration

by the EC intended to better clarify how

CRM related provisions are applied in

practice. It acknowledges there is a case

for a more comprehensive overhaul of the

CRM framework, but based on stakeholder

feedback, it considers this is better deferred,

pending ongoing international

developments in this area. On the same

theme, it recognises there is limited

guidance within the CRR on the application

of the CRM framework for firms applying

the advanced IRB approach. To provide

more clarity and reduce differences in

practices, it plans to develop separate

guidelines to address this.

The EBA also highlights that it still has

existing mandates under the CRR to

develop three CRM-related RTS concerning

liquid assets, recognition of conditional

guarantees and internal models approach

for master netting agreements. These cover

only specific aspects of the framework

which it considers are not expected to have

a significant impact on firms. The EBA

indicates that it does not intend to progress

these until further notice, given their

limited benefit.






https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/internal_models/ssm.guidegeneraltopics.en.pdf?450d12852b90a730172529b462c7d6e3

https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/internal_models/ssm.guidegeneraltopics.en.pdf?450d12852b90a730172529b462c7d6e3

https://www.bankingsupervision.europa.eu/legalframework/publiccons/html/internal_models_faq.en.html

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/trim_guide.en.pdf






http://www.eba.europa.eu/documents/10180/2087449/EBA+Report+on+CRM+framework.pdf

http://www.eba.europa.eu/documents/10180/2087449/EBA+Report+on+CRM+framework.pdf

https://www.eba.europa.eu/-/eba-sets-out-roadmap-for-the-implementation-of-the-regulatory-review-of-internal-models








Conduct Incentivising consumer credit staff?

The FCA published its Policy Statement

Staff Incentives, remuneration and

performance management in consumer

credit – Feedback to CP17/21 and final

rules (PS18/7) together with its Finalised

Guidance Staff Incentives, remuneration

and performance management in

consumer credit (FG18/2) on

27 March 2018.

Firms that carry out consumer credit

activities and have staff that deal directly

with customers must identify and put in

place policies and procedures to manage the

risks to customers arising from staff

incentives and performance management.

In developing their approach, firms should

review the guidance for examples of good

and poor practice in areas such as scheme

design, performance management,

governance and controls and risk

management.

Firms must ensure they are compliant with

the new rules by 1 October 2018. The FCA

plans to monitor compliance through its

supervisory work and may undertake a

separate review at a later date.

Innovation The road ahead for FinTech

The EBA published its FinTech

Roadmap on 15 March 2018, outlining

its priorities for the upcoming year and

providing an indicative timeline for the

completion of these tasks.

These priorities include:

monitoring the regulatory perimeter,

including assessing authorisation and

licencing approaches to FinTech firms,

and analysing regulatory sandboxes and

innovation hubs to identify a set of best

practices to enhance consistency and

facilitate supervisory coordination

monitoring emerging trends and

analysing the impact on incumbent

institutions’ business models and the

prudential risks and opportunities

arising from FinTech

promoting supervisory best practices on

assessing cybersecurity and promoting a

common cyber threat testing framework

addressing potential national barriers

preventing FinTech firms from scaling

up services to consumers across the

single market, and the appropriateness

of the current regulatory framework for

virtual currencies

identifying and assessing money

laundering/terrorist financing risks

associated with regulated FinTech

firms, technology providers and

FinTech solutions.

EBA officials have consistently touched on

the theme of ensuring FinTech firms are

regulated in a proportionate manner,

and this remains a focus under the

FinTech Roadmap.

ECB gives FinTech application guidance

The ECB published its Guide to applications

for licence applications (for credit

institutions) and Guide to applications for

FinTech credit institutions on 23 March

2018. The ECB explains the general

application process and the assessment

requirements regarding governance, risk

management, capital and other relevant

issues for credit institutions. The guide for

FinTech credit institutions complements the

first guide and is aimed at FinTech entities,

detailing aspects of the supervisory

assessment of licence applications that are

particularly relevant to banks with FinTech

business models.

Both guides reflect the ECB’s desire to drive

consistent supervisory practices across the

euro area by promoting a common

interpretation of the licensing criteria,

ensuring that FinTech credit institutions

face an equally robust authorisation process

to more traditional credit institutions.

The ECB stresses that all entities must meet

supervisory capital requirements, have

adequate governance and risk management

systems in place, and ensure that members

of its management body pass a fit and

proper assessment.

Payments All change for cash?

HMT consulted on Cash and digital

payments in the new economy to coincide

with the Chancellor’s Spring Statement on

13 March 2018. It seeks views on how to

support the transition from cash to digital

payments while ensuring that those who

need to can still pay by cash. But the

minority who use cash for tax evasion or

money laundering will face a crackdown.

The consultation hit the headlines for

questioning the continued need for 1p and

2p coins. Surveys suggest that 60% are used

in a transaction once before ending up in

piggy banks or being thrown away. HMT

questions the economic wisdom of the Royal

Mint producing 500 million of these coins

each year to replace those falling out of

circulation. It asks for details of current and

future needs for cash in active circulation

and examples of how other countries

manage a declining demand for cash.

On the digital payment front, HMT notes

that cash has fallen from being 62% of all

payments by volume in 2006 to 40% in

2016, with a predicted fall to 21% by 2026.

It asks for input on future payment methods

and details of any barriers to making digital

payments – particularly higher process

costs to merchants for processing debit

card payments compared to cash.

Finally, the Government is keen to

understand how it can prevent cash being

used to evade tax or launder money. It notes






https://www.fca.org.uk/publication/finalised-guidance/fg18-02.pdf




http://www.eba.europa.eu/documents/10180/1919160/EBA+FinTech

http://www.eba.europa.eu/documents/10180/1919160/EBA+FinTech

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.201803_guide_assessment_credit_inst_licensing_appl.en.pdf

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.201803_guide_assessment_credit_inst_licensing_appl.en.pdf

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.201803_guide_assessment_fintech_credit_inst_licensing.en.pdf

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.201803_guide_assessment_fintech_credit_inst_licensing.en.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/689234/Cash_and_digital_payments_in_the_new_economy.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/689234/Cash_and_digital_payments_in_the_new_economy.pdf








other countries impose limits on cash

transactions and asks if the UK should

impose a similar limit and, if so, how much.


Progress on access to payment systems

The PSR published its third Access and

governance report on payment systems:

update on progress together with a fact

sheet on 14 March 2018.

It reports an increase in new direct

participants in the interbank payment

systems, CHAPS, Faster Payments and

Bacs. Seven PSPs joined one or more

systems in 2017 and early projections

for 2018 anticipate a further 11 direct

participants. The PSR says participants find

the process is quicker, with one PSP joining

Faster Payments in seven months – the

quickest on-boarding to date.

PSPs will also have more options for access

as two new indirect access providers (IAPs)

started operations in 2017. The PSR expects

the new IAPs will promote competition,

bringing the potential for lower prices. On

the governance side, both operators and

IAPs are continuing work on more

transparent information and engagement

with service-users.

But the PSR flags several changes that

will affect its future work on access

and governance:

in H1 2018, Bacs, Faster Payments and

the new Image Clearing System for

cheques will consolidate under the New

Payment System Operator

from 13 January 2018, PSD2 gave the

PSR a greater focus on ensuring access

rules and conditions are objective,

non-discriminatory and proportionate

when the BoE took over CHAPS and its

infrastructure in November 2017, the

PSR lost its regulatory remit over the

CHAPS operator but will continue to

regulate direct participants in CHAPS

Finally, the PSR notes that, despite

significant positive developments, there is

still room for improvement. To coincide

with publication of its access report, it

launched a separate review of its 2015

general and specific directions relating

to access to and governance of payment

systems to ensure they remain appropriate

and effective.

Changing direction on payment systems

The PSR published a Review of PSR

Directions made in 2015 Directions on

access, governance and participants’

relationships with the PSR (General

Directions 1 to 6 and Specific Direction 1)

(CP 18/1) on 14 March 2018. It seeks views

on whether to change the general directions

(GDs) and special direction (SD) so they

remain relevant and proportionate, reflect

market realities and take into account

future developments.

GD2, GD3 and SD1 relate to access to

interbank and card payment systems.

The PSR proposes aligning GD2 to the

substantive access test in the Payment

Services Regulations 2017 (the 2017 Regs).

It plans to revoke GD3 and replace it with

a GD under the 2017 Regs for monitoring

compliance with Regulation 103. On SD1, it

wants to broaden its scope to cover not just

large sponsor banks but also other indirect

access providers.

GD4, GD5 and GD6 apply to the governance

of interbank payment systems. The PSR is

considering revising GD4 and GD6 to

ensure they deliver good outcomes for

service-users. It suggests adopting an over-

arching principle setting out its expected

outcomes. It plans to revoke GD5 as wider

governance controls will address

any concerns.

GD1 requires participants in payment

systems regulated under FSBRA to have an

open and cooperative relationship with the

PSR. But it does not cover payment card

systems the PSR regulates under PSD2

and the Interchange Fee Regulation (EU)

2015/751 so it wants to address this

discrepancy. The PSR also plans to revise

the compliance reporting obligations in

GD2, GD3 and GD4 to minimise

regulatory costs.

The PSR plans to issue a policy statement

summarising responses to the consultation.

Any changes to the text of the directions will

be subject to separate consultation later

in 2018.


PSR reveals focus for year ahead

The PSR published its Annual Plan and

Budget 2018/19 and Factsheet on

20 March 2018, plus the text of PSR

Managing Director Hannah Nixon’s speech

at the launch event held on 21 March 2018.

It sets out planned activities for 2018/19

and expected operating costs of £14.9m.

Nixon announced that consumer protection

would take centre stage this year. The PSR

plans to continue to tackle authorised push

payment scams with a contingent

reimbursement model and to safeguard

free access to cash via ATMs.

Access to payments systems will remain key

in 2018. Following the consolidation of

Faster Payments, Bacs and the Cheque

Image Clearing System into the New

Payment System Operator (NPSO), the PSR

expects to see PSPs benefitting from a single

point of entry. It will also closely monitor

the NPSO’s implementation of the New

Payments Architecture to provide a modern

payments infrastructure.

Building on exploratory work in 2017, the

PSR plans to publish a discussion paper on

the use of data associated with payments in

April 2018 and to issue its thinking on the

rapid rise of contactless mobile payments in

the coming months.

https://www.psr.org.uk/sites/default/files/media/PDF/A-G-Report-March-2018.pdf



https://www.psr.org.uk/sites/default/files/media/PDF/A-G-Factsheet-2018.pdf

https://www.psr.org.uk/sites/default/files/media/PDF/A-G-Factsheet-2018.pdf

https://www.psr.org.uk/sites/default/files/media/PDF/PSR-CP18-1-Review-of-Directions-March-2018.pdf






https://www.psr.org.uk/sites/default/files/media/PDF/PSR-annual-plan-and-budget-2018-19.pdf

https://www.psr.org.uk/sites/default/files/media/PDF/PSR-annual-plan-and-budget-2018-19.pdf

https://www.psr.org.uk/sites/default/files/media/PDF/PSR-annual-plan-2018-19-Factsheet.pdf

https://www.psr.org.uk/psr-publications/speeches/hannah-nixon-speech-psr-annual-plan-launch-event-2018-19

https://www.psr.org.uk/psr-publications/speeches/hannah-nixon-speech-psr-annual-plan-launch-event-2018-19








New projects for 2018 include a deeper look

at card payment systems based on lessons

learned from monitoring implementation

of the Interchange Fee Regulation (EU)

2015/751. The PSR is also reviewing its 2015

Directions with the aim of issuing a policy

statement and further consultation later in

the year.

Retail products FCA reveals product governance review findings

The FCA shared findings of its review of

retail banks’ product governance, in Retail

banking: product governance review on 5

March 2018. It looked at two-year fixed rate

savings products from a sample of small to

medium-sized banks, examining how well

firms consider customers’ needs when they

design and sell products and provide after-

sales services. The FCA particularly focused

on how firms’ product governance

frameworks help them identify and manage

the ongoing conduct risks of their products.

It shares a number of examples of good

practice and areas for improvement. The

FCA did not find any breach of rules, so its

areas for improvement simply highlight

where banks can improve their practices

to achieve good outcomes.

Examples of good practice include firms

which set measures of customer outcomes

at the design stage and use them to assess

continuing performance, and those that

have set up customer panels and focus

groups to get customer feedback on both

outcomes and customer satisfaction.

To improve practices, the FCA states that

some firms need to strengthen their product

review processes to ensure they act on any

identified lessons or risks, for example by

recording the outcome of product reviews

more clearly.

FCA review motors forward

The FCA published Our work on motor

finance – update on 15 March 2018. It sets

out the main findings so far of its review

of the motor finance sector, and its major

areas of concern. The FCA finds that the

largest lenders’ approach to credit risk and

asset values appears robust. Arrears remain

generally low, although they have increased

modestly in recent years.

But the FCA identifies some areas of

concern, which it intends to focus on for

the remainder of the review:

whether firms are properly assessing

customer affordability – particularly

for people with lower credit scores

how firms are managing the risks

around commission arrangements

for dealers

whether firms provide consumers with

sufficient, timely and transparent

information to allow them to make

informed decisions

The FCA plans to publish its full findings

and any remedies by September 2018.

Stress testing BoE publishes 2018 stress test design

The BoE published Stress testing the UK

Banking System: key elements of the 2018

stress test on 16 March 2018, setting out its

annual cyclical scenario (ACS) for its fifth

annual stress test. As in previous years, this

exercise is designed to test the resilience of

the UK banking sector to severe

macroeconomic shock in addition to a

separate conduct risk assessment.

The ACS is a very similar macroeconomic

stress scenario to the 2017 exercise. It

reflects an economic downturn more severe

than experienced during the 2007/08 global

financial crisis. But this year’s hurdle rates

now incorporate capital buffers for domestic

systemic importance as well as global

systemic importance. The BoE also adopts a

pragmatic approach to embedding the

introduction of IFRS 9, the financial

instruments accounting standard, and it

intends to adjust hurdle rates to

compensate for the front-loaded impact of

expected credit losses. The BoE plans to

publish the results of the stress test at the

end of 2018 as part of its Financial

Stability Report.

Supervision Supporting new bank start-ups

The New Bank Start-up Unit (NBSU), a

joint PRA/FCA initiative, held a New Banks

seminar on 19 February 2018 for firms

considering applying for authorisation as a

bank, firms currently going through the

authorisation process and recently

authorised banks navigating the regulatory

requirements. The seminar covered five

stages of the authorisation process: early

stages, pre-application, application,

mobilisation and after authorisation.

It outlined the challenges arising during

each of the stages together with regulatory

expectations including:

determining whether becoming a bank

is suitable

clearly explaining the business model to

the regulators

submitting a complete application to

avoid delays to the process

using the mobilisation stage to resolve

outstanding issues such as raising

capital and completing the build of

IT systems

understanding the PRA’s and the FCA’s

supervisory focus after authorisation.

The NBSU also addressed the importance of

accessing payment systems, including the

availability of new access options and key

considerations throughout the

authorisation process.

Stemming the decline in correspondent banking

The FSB published a Progress report on the

FSB action plan to assess and address the

decline in correspondent banking and a

Stocktake of remittance service providers’

access to banking services on 16 March

https://www.fca.org.uk/publications/multi-firm-reviews/retail-banking-product-governance-review

https://www.fca.org.uk/publications/multi-firm-reviews/retail-banking-product-governance-review

https://www.fca.org.uk/publication/research/our-work-on-motor-finance.pdf

https://www.fca.org.uk/publication/research/our-work-on-motor-finance.pdf

https://www.bankofengland.co.uk/-/media/boe/files/stress-testing/2018/stress-testing-the-uk-banking-system-key-elements-of-the-2018-stress-test.pdf?la=en&hash=6A00F3E28248411FF638A2E55B6060B2FBB882A1



https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/new-bank/seminar-slides-190218.pdf?la=en&hash=6F588E1EC1D4CCC90EC09CD1B2434F2942932C3E

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/new-bank/seminar-slides-190218.pdf?la=en&hash=6F588E1EC1D4CCC90EC09CD1B2434F2942932C3E













2018. The reports form part of the FSB’s

work to address the impact of the decline

in correspondent banking on remittance

service providers (RSPs) – particularly in

developing countries where remittances are

a key source of household income. It sets

out key messages in a cover note delivered

to the March 2018 meeting of G20 Finance

Ministers and Central Bank Governors.

On correspondent banking, its work

includes supporting the development of a

due diligence questionnaire to standardise

collection of information on banks and

promoting industry initiatives on KYC and

the use of LEIs in payment messages. It also

encourages public and private sector

initiatives to improve trust in AML/CTF

compliance and supervisory frameworks

in affected jurisdictions.

In its stocktake, the FSB sets out an action

plan to help RSPs access banking services. It

identifies 19 recommendations in areas such

as the promotion of dialogue between

stakeholders, the implementation of

international standards by national

authorities and the use of innovation and

technical assistance to facilitate improved

access for RSPs.

The FSB concludes that the correspondent

banking action plan is largely completed.

Now national authorities and banks must

implement it. Meanwhile its work on RSPs

continues. The FSB together with FATF, the

Global Partnership for Financial Inclusion

and the IMF/World Bank will monitor take-

up of the 19 recommendations and report

back to the G20 in July 2019.

Also this month

Basel Committee

The Basel Committee published its

Summary of post-assessment follow up

actions taken or planned by member

jurisdictions as of end-2017 to address

deviations from Basel Standards

identified through its jurisdictional

assessment programme. It also updated

its handbook for jurisdictional

assessments, expanding it to cover

NSFR and large exposures, as well as

its related suite of questionnaires.

The Basel Committee published its

thirteenth six-monthly Basel III

monitoring report on 6 March 2018.

It includes summarised results of

prudential measures based on the data

from 193 banks as at 30 June 2017,

applying Basel III standards as

agreed up to end-2015.

The Basel Committee published a press

release on 23 March 2018 outlining the

discussions at its 15-16 March 2018

meeting. These covered current policy

work such as the revision to the

assessment framework for G-SIBs as

well as longer term and ongoing

initiatives including preparing for future

assessments of the implementation of

the December 2017 finalised Basel

III standards.

The Basel Committee updated its

webpage Current data collection

exercises on 29 March 2018 with

updated versions of its monitoring

FAQs and monitoring workbook. This

includes changes relating to Basel III:

Finalising post-crisis reforms published

in December 2017.

The Basel Committee published

frequently asked questions on the Basel

III standardised approach for

measuring counterparty credit risk

exposures on 22 March 2018. The newly

added questions are shaded in yellow

and apply to all banks that follow

standardised approach for calculating

capital requirements for counterparty

credit risk.

The Basel Committee published the

frameworks for early supervisory

intervention on 29 March 2018. It will

help supervisory authorities to intervene

early and reduce the probability and

impact of a bank failure, which will in

turn promote financial stability.

Banking Standards Board

The Banking Standards Board published

a framework for firms to assess their

internal practices in Statement of

Principles for Strengthening

Professionalism: The role of the firm

on 12 March 2018. This builds on

regulatory initiatives, such as the

SM&CR, and reflects the expectations

of customers and clients of UK banks

and building societies.

The Banking Standards Board (BSB)

published its Annual Review 2017/2018

on 14 March 2018. The review reflects

the results of a survey of 25 banks in the

UK, and highlights improvements in

culture in the sector. The BSB also gives

an overview of its wider work on

achieving higher standards of behaviour

and competence in banking, and

its priorities for 2018.

Council

The Council adopted its position on the EC’s

proposed directive on combating fraud and

counterfeiting of non-cash means of

payment on 9 March 2018. Trilogues will

start once the EP has defined its position –

currently planned for June 2018.

Deutsche Bundesbank

Andreas Dombret, Member of the Executive

Board of the Deutsche Bundesbank, gave a

speech entitled, Where do we go from here?

The future of US-EU financial relations

following the finalisation of Basel III on 5

March 2018. He called for continued close

supervisory coordination in spite of the

differences between the approaches of the

EU and US.

EBA

Andrea Enira, Chair of the EBA, spoke

on 9 March 2018 on Designing a


https://www.bis.org/bcbs/implementation/summary_pafu.htm

https://www.bis.org/bcbs/implementation/summary_pafu.htm

https://www.bis.org/bcbs/implementation/rcap_jurisdictional.htm

https://www.bis.org/bcbs/implementation/rcap_jurisdictional.htm

https://www.bis.org/bcbs/publ/d434.htm

https://www.bis.org/bcbs/publ/d434.htm

https://www.bis.org/bcbs/implementation/rcap_role.htm



https://www.bis.org/press/p180323.htm

https://www.bis.org/press/p180323.htm

https://www.bis.org/bcbs/qis/

https://www.bis.org/bcbs/qis/

https://www.bis.org/bcbs/qis/biiiimplmonifaq_mar18.pdf

https://www.bis.org/bcbs/qis/biiiimplmonifaq_mar18.pdf

https://www.bis.org/bcbs/qis/biiiimplmoniwb_mar18.xlsx









https://www.bankingstandardsboard.org.uk/bsb-statement-of-principles-for-strengthening-professionalism/



https://www.bankingstandardsboard.org.uk/annual-review-2017-2018

http://www.consilium.europa.eu/en/press/press-releases/2018/03/09/fighting-fraud-with-non-cash-means-of-payment-council-agrees-its-position/

http://data.consilium.europa.eu/doc/document/ST-6472-2018-REV-1/en/pdf



https://www.bis.org/review/r180308c.htm



http://www.eba.europa.eu/documents/10180/2151635/Andrea+Enria%27s+speech+on+FinTech+at+Copenhagen+Business+School+090318








Regulatory and Supervisory Roadmap

for FinTech. Following the EC’s CMU

focus on regulatory sandboxes and best

practices, he talked about reducing

arbitrage opportunities through

consistency of authorisations and

ensuring that prudential and AML

requirements keep up with

technological change.

The EBA published its thirteenth six-

monthly CRD IV-Basel III monitoring

exercise – results based on data as of 30

June 2017 on 6 March 2018. It includes

summarised results of prudential

measures based on the data from 138

EU banks, applying current EU

definitions (except for NSFR for which

Basel III standards are applied in the

absence of finalised EU definitions).

EC

Regulation (EU) 2018/389 laying down

RTS under PSD2 for strong customer

authentication and common and secure

open standards of communication was

published in the Official Journal on

13 March 2018, bringing to a close one

of the EC’s most hotly debated RTS. It

entered into force on 14 March 2018

and, with limited exceptions, applies

from 14 September 2019.

The EC published a legislative proposal

to make two amendments to the cross

border payments regulation (EC)

924/2009 on 28 March 2018. One

requires all EU cross border payments

in euros to cost the same as domestic

payments. Currently this applies only

within the euro area. The other requires

consumers to be told of currency

conversion costs before they make a

payment in another EU currency.

The proposal is open to feedback until

30 May 2018.

ECB

The ECB published its SSM Supervisory

Manual – European banking

supervision: functioning of the SSM

and supervisory approach on 16 March

2018. This complements at a more

detailed level its existing Guide to

banking supervision.

The ECB issued its Annual Report on

supervisory activities – 2017 on 26

March 2018. In addition to a review of

its activities during the year as

supervisor of significant institutions in

the Eurozone it also outlines its SSM

priorities for 2018.

ECON

The ECON published an analysis by

Alexander Lehmann, Non-resident Fellow

at Bruegel, on Cash outflows in crisis

scenarios: do liquidity requirements and

reporting obligations give the SRB

sufficient time to react? on 19 March 2018.

Lehmann argues that further work is

needed to strengthen the Eurozone

resolution framework – particularly closer

SRB-ECB coordination, harmonisation of

payments moratoria and a credible ECB

backstop for funding banks in resolution.

EP

The Economic Governance Support Unit

of the EP published a Review of the 2017

SREP results on 15 March 2018, covering

banks directly supervised by the ECB.

It supports the EP’s view that more

disclosure by both banks and the ECB

may be beneficial.

ESRB

The ESRB published its Summary

Compliance Report – ESRB

Recommendation on funding of credit

institutions ESRB/2012/2 on 14 March

2018. The ESRB made recommendations in

2012 to NCAs, authorities with a macro-

prudential mandate and the EBA intended

to improve funding conditions and restore

resilience in banks and confidence in them.

In this report the ESRB assesses the

implementation of those recommendations.

FCA

The FCA published a Final Notice for

former Co-op Bank Chair Paul Flowers

on 6 March 2018, banning him from

performing any function in relation to

regulated activity, on the grounds that

he is not a fit and proper person. The

notice may be of interest to other firms

as it explains why the FCA believes

Flowers fell below the standards

expected of him, and its view of the role

of chair as ‘a special position of trust

and influence’.

The FCA issued a Dear CEO letter to

second charge lenders asking them to

review their mortgage lending processes

on 1 March 2018. Firms must review and

respond by 1 May 2018. Please see our

At a glance for more information.

HMRC

HMRC issued HMT-approved guidance

Money laundering supervision: guidance

for money service businesses, Trust

company service providers and high value

dealers on 7 March 2018. It aims to help

firms comply with the Money Laundering,

Terrorist Financing and Transfer of Funds

(Information on the Payer) Regulations

2017 (also known as the Wire Transfer

Regulations).

Official Journal

Regulation (EU) 2018/308 laying down

ITS under BRRD for reporting by

resolution authorities to the EBA in

relation to MREL was published in the

Official Journal on 2 March 2018. It

follows the EBA’s final report on the

ITS in September 2017.

PSR

The PSR launched consultation, CP18/8:

PSR regulatory fees, on 28 March 2018

seeking views on how it publishes annual

fees figures, other fees related policy issues

and publishing its decisions on fees



http://www.eba.europa.eu/documents/10180/2087449/CRDIV_CRR+-+Basel+III+Report+monitoring+exercise+-+June+2017.pdf



http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R0389&from=EN




http://europa.eu/rapid/press-release_IP-18-2423_en.htm




https://ec.europa.eu/info/law/better-regulation/initiatives/com-2018-163_en

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.supervisorymanual201803.en.pdf?bb1758ba6eeed5745826ff234006bcd7




https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssmguidebankingsupervision201411.en.pdf?807838fa2a8bb958749f411c432d1f3e

https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssmguidebankingsupervision201411.en.pdf?807838fa2a8bb958749f411c432d1f3e

https://www.bankingsupervision.europa.eu/press/publications/annual-report/pdf/ssm.ar2017.en.pdf?63a120afab30be18171c083089709229

https://www.bankingsupervision.europa.eu/press/publications/annual-report/pdf/ssm.ar2017.en.pdf?63a120afab30be18171c083089709229

http://www.europarl.europa.eu/RegData/etudes/IDAN/2018/614508/IPOL_IDA(2018)614508_EN.pdf






http://www.esrb.europa.eu/pub/pdf/recommendations/2017/esrb.reports180305_compliancereportonrecommendation2012_2.en.pdf




https://www.fca.org.uk/publication/final-notices/paul-john-flowers-2018.pdf

https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-second-charge-lenders.pdf

https://www.pwc.co.uk/industries/financial-services/insights/questions-over-second-charge-mortgage-lending-practices.html

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/686152/Money_Service_Businesses_Guidance.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/686152/Money_Service_Businesses_Guidance.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/686155/Trust_Or_Company_Service_Providers_Guidance.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/686155/Trust_Or_Company_Service_Providers_Guidance.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/686127/High_Value_Dealers_Guidance.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/686127/High_Value_Dealers_Guidance.pdf





http://www.eba.europa.eu/documents/10180/1946494/Draft+ITS+on+MREL+%28EBA-ITS-2017-06%29.pdf/98e42991-a043-4d89-aaf3-06226d7ecb17

https://www.psr.org.uk/sites/default/files/media/PDF/PSR-regulatory-fees-2018-19.pdf

https://www.psr.org.uk/sites/default/files/media/PDF/PSR-regulatory-fees-2018-19.pdf








allocation and collection methods. The


SRB

Elke König, Chair of the SRB, gave a speech

at a public hearing with ECON on 20 March

2018. König comments on the SRB’s

approach to resolution as shown by the

cases of Banco Popular and ABLV Bank,

as well as the current proposals to amend

BRRD, CRD IV and CRR.

TC

John Griffith-Jones, outgoing FCA

Chairman, submitted written evidence

to the TC on the level of contactless card

fraud transactions.

https://srb.europa.eu/en/node/508

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/treasury-committee/work-of-the-payment-systems-regulator/written/79870.pdf








In this section:

Regulation 28

Investment funds 28

Also this month 29


developments

Regulation

Investment funds Addressing cross-border fund distribution

The EC proposed regulatory amendments

to the AIFMD and UCITS frameworks on

12 March 2018, aimed at improving cross-

border distribution of investment funds.

While the total assets under management

for UCITS and AIFs have grown

considerably since the regimes were

introduced, there remains a notable

concentration of fund investment as the vast

majority of funds are marketed to investors

only in the jurisdictions of either the fund

or its manager. As part of the wider CMU

agenda for increased integration of financial

services, the EC hopes to improve this

situation by a mixture of lighter

requirements, improved regulatory

consistency and heightened

transparency of local obligations.

The proposed rules would require national

regulators to publish detailed information

on their marketing rules and fees. The EC

calls on ESMA to provide interactive

databases so firms can quickly learn what

is expected of them to operate cross-border

and how much it will cost. In addition, the

EC proposes to eliminate any national rules

that would make it mandatory for fund

managers to establish physical local

facilities to service retail investors. Instead,

all fund managers would have the ability to

communicate with their investors solely

through electronic and telephonic means,

as this has grown to be the preferred

method of interaction by investors and is

less complex and costly for firms.

Somewhat more controversially, the EC

proposes a consistent framework for ‘pre-

marketing’ that would narrow the activities

that would be exempt from marketing

requirements in some Member States.

Specifically, the EU-wide exemption would

only be available to generate interest in

funds that have yet to be established. While

the rationale appears to be that regulatory

consistency across the EU encourages

investment, even if the new rules are more

stringent in places, industry has already

expressed concerns that fund activity may

be limited by this approach.

Asset management










Also this month

CMA

The CMA published Working paper:

information on fees and quality as part

of its Investment Consultants Market

Investigation on 1 March 2018. It

presents the CMA’s analysis and

emerging findings to date in respect

of information available to pension

trustees on the fees and quality of

investment consultants and

fiduciary managers.

The CMA published a working paper

on Asset Manager product

recommendations on 22 March 2018 as

part of its market investigation into the

investment consultant (IC) market. The

CMA’s preliminarily findings are that IC

recommendations for asset management

products fail to outperform their

benchmarks and that such performance

has been misleadingly presented in

marketing materials.

The CMA published a working paper on

the supply of fiduciary management

services by investment consultancy

firms on 29 March 2018 as part of its

market investigation of the investment

consulting industry.

ESMA

ESMA published Guidelines on stress tests

scenarios under Article 28 of the MMFR on

21 March 2018.

FCA

The FCA published a web page dedicated

to its work on closet trackers on 14 March

2018. The regulator summarises its findings

from a thematic review on the topic, where

it found that only a quarter of funds were

adequately describing how investors’

money was being managed.

https://assets.publishing.service.gov.uk/media/5a96db4ae5274a5b87c30054/icm-information-on-fees-and-quality.pdf

https://assets.publishing.service.gov.uk/media/5a96db4ae5274a5b87c30054/icm-information-on-fees-and-quality.pdf

https://www.gov.uk/cma-cases/investment-consultants-market-investigation

https://www.gov.uk/cma-cases/investment-consultants-market-investigation

https://assets.publishing.service.gov.uk/media/5ab38614e5274a3dc898e294/asset-manager-product-recommendations.pdf

https://assets.publishing.service.gov.uk/media/5ab38614e5274a3dc898e294/asset-manager-product-recommendations.pdf

https://assets.publishing.service.gov.uk/media/5abba6b240f0b67d64e21b4c/icim-fm-conflicts-of-interest-working-paper.pdf




https://www.esma.europa.eu/sites/default/files/library/esma34-49-115_mmf_guidelines_on_stress_tests.pdf

https://www.esma.europa.eu/sites/default/files/library/esma34-49-115_mmf_guidelines_on_stress_tests.pdf

https://www.fca.org.uk/firms/authorised-and-recognised-funds/closet-trackers








In this section:

Regulation 30

Capital and liquidity 30 Operational resilience 30 Retail products 30 Reporting 31 Solvency II 31 Supervision 32

Accounting 32

Our publications 32

Also this month 32


developments

Regulation

Capital and liquidity EIOPA sets 2019 ultimate forward rate

EIOPA published Risk-free interest rate

term structures – Report on the Calculation

of the ultimate forward rate (UFR) for

2019 on 28 March 2018. It outlines how it

follows the standard method to calculate the

ultimate forward rate (UFR) to be applied

from 1 January 2019. For the euro it

calculates the UFR for 2019 to be 3.60%.

But, as the current UFR for the euro is

4.05% and the annual change of the UFR is

limited to 15 basis points, the applicable

UFR in 2019 is 3.90%.

Operational resilience How will climate change impact insurers?

The Sustainable Insurance Forum (SIF) and

the IAIS jointly published a Draft Issues

Paper on Climate Change Risks to the

Insurance Sector on 30 March 2018. The

SIF and IAIS aim to raise awareness for

insurers and supervisors of the challenges

presented by climate change, including

current and future supervisory approaches

for addressing these risks. The comment

period ends on 29 April 2018.

Retail products FCA value measures – what’s next?

The FCA published General Insurance

value measures data for the year ending

31 August 2017 on 1 March 2018. It includes

the second set of data from a pilot study to

assess the need for new rules to report value

measures data. The data relates to 36

insurers and covers the year ended 31

August 2017. It includes data on claims

frequencies, claims acceptance rates and

average claims pay-outs by insurer, for four

general insurance products:

Home insurance – Combined buildings

and contents

Home emergency insurance

Personal accident insurance sold as an

add-on to motor or home insurance

Key cover sold as an add-on to

motor insurance.

The FCA intends to decide later this year

whether it needs to collect a third set of data

for the year ending 31 August 2018.

Insurance

https://eiopa.europa.eu/Publications/Reports/Calculation%20of%20the%20UFR%20for%202019.pdf




https://www.iaisweb.org/page/consultations/current-consultations/draft-issues-paper-on-climate-change-risks-to-the-insurance-sector










MoJ reforms personal injury compensation system

The MoJ published the Civil Liability Bill

on 20 March 2018. It reforms how the

personal injury discount rate (PIDR),

also known as the Ogden rate, is set and

introduces new whiplash measures.

The MoJ introduces a formal process to

set the PIDR. It will require the Lord

Chancellor to set the PIDR at least every

three years following consultation with an

independent expert panel chaired by the

Government Actuary and, as at present,

HMT. It also outlines the method that must

be applied to calculate the PIDR, reflecting

the reality of how claimants actually invest

their money.

The new whiplash measures within the Bill

introduce a regulatory ban on seeking or

offering to settle whiplash claims without

medical evidence. It sets out a tariff of

compensation for pain, suffering and loss of

amenity for whiplash claims. In exceptional

circumstances, it also allows the Judiciary

to increase the compensation payable,

within limits. The MoJ intends to set final

whiplash tariff figures and the cap for

exceptional payments in supporting

regulations.

The MoJ also published the related Impact

assessments, fact sheets and Q&As and

Response to the Report of the Justice Select

Committee, also on 20 March 2018.

The second reading of the Bill is scheduled

for 24 April 2018.

Reporting EIOPA welcomes supervisory reporting review

EIOPA published a letter on 5 March 2018,

responding to the EC’s December 2017

consultation, Fitness check on supervisory

reporting. EIOPA confirms its commitment

to the project, while stressing that

supervisors need to have access to

meaningful data. It also emphasises that

under Solvency II, a risk-based regime,

much of the data collected is aimed at

meeting the prudential requirements on

risk management, technical provisions and

capital requirements rather than merely for

reporting purposes.

EIOPA to amend reporting and disclosure ITS

EIOPA launched a Consultation on the

amendments and corrections to the

Implementing Regulation (EU) 2015/2450

with regard to the templates for the

submission of information to the

supervisory authorities and to the EC

Implementing Regulation (EU) 2015/2452,

laying down ITS with regard to the

procedures, formats and templates of the

SFCR on 28 March 2018.

EIOPA requests feedback on various

corrections and amendments to the ITS

on reporting and disclosure. It includes

adjustments stemming from the delegated

regulation on infrastructure corporates,

EIOPA’s explanatory notes on variation

analysis templates and issues previously

identified in the Q&A process.

In addition, EIOPA proposes one correction

to its guidelines on financial stability

reporting and new validations to be applied

to the information submitted by reporting

entities under the ITS on reporting. It

intends to embed the validations in the

XBRL taxonomy version 2.3.0 prior to

publication in July 2018.

EIOPA plans to hold a public event on the

consultation for stakeholders on 12 April

2018. The comment period ends on

11 May 2018.

PRA seeks improved IMO reporting

The PRA published Feedback on data

quality & expectations for YE2017 and

Potential changes to data collection:

YE2018 on 7 March 2018. It outlines its

findings from general insurers’ Internal

Model Output (IMO) submissions for 2016

and confirms there will be no changes to

the data templates for 2017. The PRA uses

IMOs to monitor the performance of

approved internal models on an ongoing

basis. It performs checks on the large

volume of data involved to assess their

quality. The PRA encourages firms to

provide sufficient commentary in their

2017 returns to explain consistency

issues and anticipate queries and

resubmission requests.

The PRA is also seeking initial views on

possible improvements to IMO submissions

for 2018. It aims to remove or replace

unused data and request additional

commentary in places. It also plans to

clarify its instructions and improve the

format for templates as well as moving

to XBRL.

The PRA proposes to publish final updated

supervisory statements in Q4 2018. Firms

are required submit 2018 IMO solo returns

on 22 April 2019 and group returns on

3 June 2019.

Solvency II PRA plans policy change consultations

The TC published a progress update from

the PRA on Solvency II – outstanding

issues dated 27 March 2018. It covers

the PRA’s work since its February 2018

response to the TC’s inquiry into

Solvency II.

The PRA reports it is close to completing its

policy review regarding the risk margin and

plans to consult on the outcome and

implement changes by the year end.

https://services.parliament.uk/bills/2017-19/civilliability.html

https://www.gov.uk/government/publications/civil-liability-bill

https://www.gov.uk/government/publications/civil-liability-bill

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/689413/personal-injury-discount-rate-jsc-govt-response-web.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/689413/personal-injury-discount-rate-jsc-govt-response-web.pdf

https://services.parliament.uk/Bills/2017-19/civilliability/stages.html

https://eiopa.europa.eu/Publications/Letters/EIOPA-18-072%20Letter%20to%20Olivier%20Guersent%20on%20Fitness%20Check%20on%20Supervisory%20reporting.pdf

https://ec.europa.eu/info/sites/info/files/2017-supervisory-reporting-requirements-consultation-document_en.pdf

https://ec.europa.eu/info/sites/info/files/2017-supervisory-reporting-requirements-consultation-document_en.pdf

https://eiopa.europa.eu/Publications/Consultations/EIOPA-18-002-Cover%20Note_Public%20consultation.pdf










https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/solvency-ii/feedback-on-data-quality-and-expectations-for-ye2017.pdf?la=en&hash=7C8307D7CD34E30FDC5AE52CB38F0255D9C01F33

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/solvency-ii/feedback-on-data-quality-and-expectations-for-ye2017.pdf?la=en&hash=7C8307D7CD34E30FDC5AE52CB38F0255D9C01F33

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/solvency-ii/potential-changes-to-data-collection-ye2018.pdf?la=en&hash=47AD0C2EA055D2247B04183729346FD0BD3E0242

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/solvency-ii/potential-changes-to-data-collection-ye2018.pdf?la=en&hash=47AD0C2EA055D2247B04183729346FD0BD3E0242

https://www.parliament.uk/documents/commons-committees/treasury/Correspondence/2017-19/Sam-Woods-Solvency-II-270318.pdf%20dated%2027%20March%202018

https://www.parliament.uk/documents/commons-committees/treasury/Correspondence/2017-19/Sam-Woods-Solvency-II-270318.pdf%20dated%2027%20March%202018

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/report/response-to-treasury-committee-inquiry-into-solvency-2.pdf?la=en&hash=390A476FB288EB42E17966B680FF8F3D900033E0

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/report/response-to-treasury-committee-inquiry-into-solvency-2.pdf?la=en&hash=390A476FB288EB42E17966B680FF8F3D900033E0








Likewise it has nearly completed a dynamic

volatility adjustment policy review,

prompted by an Opinion published by

EIOPA in November 2017. The PRA

intends to consult on proposed policy

updates in the next few weeks.

The PRA also proposes, after reviewing the

costs and benefits, to consult on removing

the external audit requirement for the SFCR

of an estimated 150 smaller firms from the

end of 2018.

Considering Solvency II’s macroprudential impact

EIOPA published Solvency II tools with

macroprudential impact on 21 March 2018.

It is the second in a series of papers

intended to contribute to the debate on

systemic risk and macroprudential policy

from an insurance perspective.

EIOPA considers the tools or measures in

the Solvency II framework, which could

mitigate the potential sources of systemic

risk it identified in its first paper. It

concludes that the Solvency II tools with

macroprudential impact are mainly the

following long-term guarantees measures

and measures on equity risk:

Symmetric adjustment in the equity

risk module

Volatility adjustment

Matching adjustment

Extension of the recovery period

Transitional measure on

technical provisions

In addition, EIOPA considers measures

allowing EU authorities to prohibit or

restrict certain types of financial activities

to have similar objectives. EIOPA also

explores the macroprudential impact of

some of the long-term guarantees

measures under stress.

Supervision PRA augments third-country branch policy

The PRA published PS4/18 International

insurers: the Prudential Regulation

Authority’s approach to branch

authorisation and supervision and SS2/18

on 28 March 2018. It adds to its current

branch authorisation requirements

(SS44/15 Solvency II: third-country

insurance and pure reinsurance branches),

which remain unchanged.

As part of the authorisation process, the

PRA intends to consider the scale of UK

branch activity covered by the FSCS and

the impact of the failure of a firm with a UK

branch on the wider insurance market and

financial system. Its final policy includes

one material change to the draft supervisory

statement consulted on in CP30/17. It

increases the FSCS-protected liabilities

threshold from £200 million to £500m. So,

the PRA is expecting branches to have

under £500m of insurance liabilities

covered by the FSCS, otherwise the business

may need to be authorised as a subsidiary.

In particular, this supervisory statement is

relevant to EEA firms currently branching

into the UK under passporting

arrangements and intending to apply for

PRA authorisation in order to continue

operating in the UK after its withdrawal

from the EU. But following the agreement

between the UK and EU27 that there should

be an implementation period until the end

of 2020 as part of the UK’s withdrawal

agreement, the PRA confirms that firms

may plan on the assumption that PRA

authorisation will only be needed by the

end of the implementation period.

The PRA also published Policy Statement

3/18; International banks: the Prudential

Regulation Authority’s approach to branch

authorisation and supervision and

Supervisory Statement 1/18; International

banks: the Prudential Regulation

Authority’s approach to branch

authorisation and supervision on 28

March. In these publications the PRA has

confirmed that it will not make any material

changes to the policy of bank branches

consulted on 20 December 2017 in

Consultation Paper (CP); 29/17

International banks: the Prudential

Regulation Authority’s approach to branch

authorisation and supervision. But the PRA

has made a number of clarifications to the

proposals it consulted on. These relate to

the definition of retail deposits and small

companies as well as the PRA’s approach

towards equivalence assessments of host

state supervisors and those bank branches

deemed to be systemic.

The new approach applies from

29 March 2018.

Accounting

Our publications PwC’s Insurance: insights to IFRS 17

In insights to IFRS 17 – 3 our IFRS 17

experts Gail Tucker and Susan Dreksler

discuss the optional premium allocation

approach under IFRS 17.

Also this month

EC

The EC published its Directive to postpone

the application date of the IDD to 1 October

2018 in the Official Journal on 19 March

2018. It applies, with retroactive effect,

from 23 February 2018.

https://eiopa.europa.eu/Publications/Opinions/2017-12-20%20EIOPA-BoS-17-366_Internal_model_DVA_Opinion.pdf

https://eiopa.europa.eu/Publications/Reports/Solvency%20II%20tools%20with%20macroprudential%20impact.pdf

https://eiopa.europa.eu/Publications/Reports/Solvency%20II%20tools%20with%20macroprudential%20impact.pdf

https://eiopa.europa.eu/Publications/Reports/Systemic%20risk%20and%20macroprudential%20policy%20in%20insurance.pdf

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/ps418.pdf?la=en&hash=425A712F2ADBD13330B21C7B94CA72A0464A8ABD




https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss218.pdf?la=en&hash=7028E1E5523C1C1309A3DE73206132EB5C75EBDB

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2015/ss4415.pdf?la=en&hash=1DBF4943211FAECDF1FD8AC6E066F23733F04C0F

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2015/ss4415.pdf?la=en&hash=1DBF4943211FAECDF1FD8AC6E066F23733F04C0F

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2017/cp3017.pdf


https://www.bankofengland.co.uk/prudential-regulation/publication/2017/international-banks-pras-approach-to-branch-authorisation-and-supervision












http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0411&from=EN%20








EIOPA

EIOPA published a keynote speech by

Gabriel Bernardino, Chairman of EIOPA,

Preserving regulatory certainty: The

review of insurers’ capital requirements on

27 March 2018. Bernardino summarised

the findings of EIOPA’s 2018 Review of the

Solvency II Delegated Regulation which

resulted in its second set of advice to the EC

on specific items in the Solvency II

Delegated items in Regulation (published

on 28 February 2018).

FCA

The FCA published correspondence with

the ABI about the EU Withdrawal and

Insurance Communications on 12 March

2018. It discusses key Brexit issues that

insurers need to communicate to customers.

These matters include inbound and

outbound passporting and cover for

customers travelling to the EU.
















Open consultations

Closing date for responses

Paper Institution

12/04/18 Exploratory consultation on the finalisation of Basel III EC

13/04/18 CP2/18 Changes in insurance reporting requirements PRA

20/04/18 Second public consultation on the publication by the ECB of an unsecured overnight rate ECB

22/04/18 CP18/3: Consultation on SME access to the FOS and Feedback to DP15/7: SMEs as Users of Financial Services FCA

27/04/18 Proposal for RTS adapting the base euro amounts for professional indemnity insurance and for financial capacity of intermediaries under the IDD

EIOPA

29/04/18 Draft Issues Paper on Climate Change Risks to the Insurance Sector IAIS

04/05/18 ECB Guide to the internal capital adequacy assessment process ECB

04/05/18 Proposal for a Directive amending MiFID II EC

04/05/18 Proposal for a Regulation on European Crowdfunding Service Providers for business EC

06/05/18 Mechanisms Used by Trading Venues to Manage Extreme Volatility and Preserve Orderly Trading IOSCO

07/05/18 CP5/18: Algorithmic trading PRA

09/05/18 Initiative on an integrated covered bond framework - COM(2018)94 EC

09/05/18 Regulation on facilitating cross-border distribution of investment funds EC

09/05/18 Assignment of claims EC

09/05/18 Fees regime for financial market infrastructure supervision 2018/19 BoE

11/05/18 Credit servicers, credit purchasers and the recovery of collateral EC

Monthly calendar


https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2018/cp218.pdf?la=en&hash=358F7BE3427F156A5A7E67858A24C2F40C0E09B8



https://eiopa.europa.eu/Publications/Consultations/Consultation_Paper-on_RTS_for_base_amounts_of_PII_version%20for%20publication_2018_01_30.pdf

https://eiopa.europa.eu/Publications/Consultations/Consultation_Paper-on_RTS_for_base_amounts_of_PII_version%20for%20publication_2018_01_30.pdf


https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/icaap_ilaap/ssm.icaap_guide_201803.en.pdf




https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2018/cp518.pdf?la=en&hash=89AB31B883DF430E36387BACCC93F15FC7A75A4A













Closing date for responses

Paper Institution

11/05/18 Statutory prudential backstops addressing insufficient provisioning for newly originated loans that turn non-performing EC

11/05/18 Consultation on amendments and corrections to the Implementing Regulation (EU) 2015/2450 with regard to templates for

the submission of information to supervisory authorities and to the EC Implementing Regulation (EU) 2015/2452, laying down ITS with regard to the procedures, formats and templates of the SFCR

EIOPA

16/05/18 CP6/18 Credit risk mitigation: Eligibility of guarantees as unfunded credit protection PRA

25/05/18 Pillar 3 disclosure requirements – updated framework Basel Committee

26/05/18 Review of Regulation on cross-border payments EC

28/05/18 Consultation on the draft ECB guide to internal models – General topics chapter ECB

05/06/18 Cash and digital payments in the new economy HMT

08/06/18 Review of the PSR Directions made in 2015 - Directions on access, governance and participants’ relationships with the PSR PSR

08/06/18 Draft Guidelines on management of non-performing and forborne exposures EBA





https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2018/cp618.pdf?la=en&hash=FDC3C115AE5B423A37BAA104C02D476F8EF12057




https://www.gov.uk/government/consultations/cash-and-digital-payments-in-the-new-economy










Forthcoming publications in 2018

Date Topic Type Institution

Accounting

TBD 2018 RTS on methods of prudential consolidation Technical standards EBA

Asset management

TBD 2018 UCITS V Level 2 Regulation, SFTR and consequential changes to the Handbook – PS to CP16/14

Policy statement FCA

Conduct

Spring 2018 Mortgage market study interim report Report FCA

May 2018 Results of high cost credit review and consultation on remedies Report and consultation FCA

Q4 2018 Mortgage market study final report Report FCA

Financial crime, security and market abuse

TBD 2018 RTS on central contract points under AMLD4 Technical standards EBA

April 2018 Recovering the costs of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS): fees proposals – PS to CP 17/35

P0licy statement FCA

Pensions

TBD 2018 Secondary annuity market – PS to CP16/13 Policy statement FCA

Securities and markets

TBD 2018 Technical standards on Securitisation Regulation Technical standards ESMA

TBD 2018 Technical advice and standards on Prospectus Regulation Technical standards ESMA

TBD 2018 Technical standards under EuSEF, EuVECA, ELTIF and SFTR Technical standards ESMA

TBD 2018 Technical standards on revised Short Selling Regulation Technical standards ESMA








Date Topic Type Institution

Supervision, governance and reporting

April 2018 Recovering the costs of the Office for Professional Body AML Supervision: fees proposals – PS to CP17/35


April 2018 Regulatory fees and levies: policy proposals for 2018/19 – PS to CP17/38


April 2018 FCA regulated fees and levies: Rates proposals 2018/19 Consultation FCA

Q2/Q3 2018 Reviewing the funding of the FSCS – PS to CP17/36 Policy statement FCA

Main sources: ESMA work programme; EBA work programme; EC work programme; FCA policy development updates.








ABC Anti-Bribery and Corruption

ABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AML Anti-Money Laundering

AMLD3 3rd Money Laundering Directive 2005/60/EC

AMLD4 4th Money Laundering Directive 2015/849/EU

AMLD5 5th Money Laundering Directive

AQR Asset Quality Review

ASB UK Accounting Standards Board

Banking Reform Act (2013)

Financial Services (Banking Reform) Act 2013

Basel II Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

Basel Committee

Basel Committee of Banking Supervision (of the BIS)

BBA British Bankers’ Association

BCR Basic capital requirement (for insurers)

BIS Bank for International Settlements

BoE Bank of England

BMR EU Benchmarks Regulation

BRRD Bank Recovery and Resolution Directive 2014/59/EU

CASS Client Assets sourcebook

CCA Consumer Credit Act 1974 (as amended)

CCB Countercyclical capital buffer

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CEBS Committee of European Banking Supervisors (predecessor of EBA)

CESR Committee of European Securities Regulators (predecessor of ESMA)

CET1 Common Equity Tier 1

CFTC Commodities Futures Trading Commission (US)

CGFS Committee on the Global Financial System (of the BIS)

CIS Collective Investment Schemes

CMA Competition and Markets Authority

CMU Capital markets union

COBS FCA conduct of business sourcebook

COCON FCA code of conduct sourcebook

CoCos Contingent convertible securities

COREP Standardised European common reporting

Council Generic term representing all ten configurations of the Council of the European Union

Glossary








CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009

CRA2 Regulation amending the Credit Rating Agencies Regulation (EU) No 513/2011

CRA3 Proposal to amend the Credit Rating Agencies Regulation and directives related to credit rating agencies COM(2011) 746 final

CRAs Credit Rating Agencies

CRD ‘Capital Requirements Directive’: collectively refers to Directive 2006/48/EC and Directive 2006/49/EC

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

CRD IV Capital Requirements Directive 2013/36/EU

CRR Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms

CSD Central Securities Depository

CSDR Central Securities Depositories Regulation (EU) 909/2014

CSMAD Criminal Sanctions Market Abuse Directive 2014/57/EU

CTF Counter Terrorist Financing

DEPP The FCA’s Decision Procedure and Penalties Manual

DG FISMA Directorate-General for Financial Stability, Financial Services and Capital Markets Union

DG MARKT Internal Market and Services Directorate General of the European Commission

DGS Deposit Guarantee Scheme

DGSD Deposit Guarantee Schemes Directive 2014/49/EU

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act (US)

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECOFIN Economic and Financial Affairs Council (configuration of the Council of the European Union dealing with financial and fiscal and competition issues)

ECON Economic and Monetary Affairs Committee of the European Parliament

ECP Eligible counterparty

EDIS European Deposit Insurance Scheme

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

ELTIF European long-term investment fund

EMIR Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (EU) No 648/2012

EP European Parliament

EPC European Payments Council

ESA European Supervisory Authority (i.e. generic term for EBA, EIOPA and ESMA)

ESCB European System of Central Banks

ESEF European Single Electronic Format

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

EU European Union

EURIBOR Euro Interbank Offered Rate

Eurosystem System of central banks in the euro area, including the ECB








EuVECA European Venture Capital Funds Regulation (EU) 345/2014

FAMR Financial Advice Market Review

FASB Financial Accounting Standards Board (US)

FATCA Foreign Account Tax Compliance Act (US)

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

FICC Fixed income, currencies and commodities

FiCOD Financial Conglomerates Directive 2002/87/EC

Fiat currency Currency whose value is underpinned by the strength of the issuing government, e.g. USD, GBP, euro and other major world currencies

FiCOD1 Amending Directive 2011/89/EU of 16 November 2011

FMI Financial Market Infrastructure

FMLC Financial Markets Law Committee

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FSA Financial Services Authority

FSB Financial Stability Board

FSBRA Financial Services (Banking Reform) Act 2013

FS Act 2012 Financial Services Act 2012

FSCP Financial Services Consumer Panel

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FSOC Financial Stability Oversight Council

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

GDPR General Data Protection Regulation

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

G-SIIs Global Systemically Important Institutions

HCSTC High Cost Short Term Credit

HMRC Her Majesty’s Revenue and Customs

HMT Her Majesty’s Treasury

IA Investment Association

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

IBA ICE Benchmark Administration

ICAAP Internal Capital Adequacy Assessment Process

ICAS Individual Capital Adequacy Standards

ICOBS Insurance: Conduct of Business Sourcebook

IDD The Insurance Distribution Directive (EU) 2016/97

IFRS International Financial Reporting Standards

ILAA Internal Liquidity Adequacy Assessment

ILAAP Internal Liquidity Adequacy Assessment Process

ILS Insurance-Linked Securities

IMAP Internal Model Approval Process








IMCO The European Parliament’s Committee on Internal Market and Consumer Protection

IMD Insurance Mediation Directive 2002/92/EC

IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision

IOSCO International Organisations of Securities Commissions

IRB Internal Ratings Based

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

KID Key Information Document

KYC Know your client

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

MA Matching Adjustment

MAD Market Abuse Directive 2003/6/EC

MAR Market Abuse Regulation (EU) 596/2014

Material Risk Takers Regulation

Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU of the EP and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile

MCD Mortgage Credit Directive 2014/17/EU

MCOB Mortgages and Home Finance: Conduct of Business sourcebook

MCR Minimum Capital Requirement

Member States Countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

MiFID II Markets in Financial Instruments Directive (recast) 2014/65/EU – also used to refer to the regime under both this directive and MiFIR

MiFIR Markets in Financial Instruments Regulation (EU) No 600/2014

MLRO Money Laundering Reporting Officer

MMF Money Market Fund

MoJ Ministry of Justice

MoU Memorandum of Understanding

MPC Monetary Policy Committee

MREL Minimum requirements for own funds and eligible liabilities

MTF Multilateral Trading Facility

NBNI G-SIFI Non-bank non-insurer global systemically important financial institution

NCA National competent authority

NDF Non-Directive Firms – firms that do not fall within Solvency II

NFC Non-financial counterparty under EMIR

NIS Directive Proposal for a directive of the EP and Council concerning measures to ensure a high common level of network and information security across the EU

NSFR Net Stable Funding Ratio

NST National specific template

NURS Non-UCITS Retail Scheme

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union








OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflect Lisbon Treaty and new supervisory infrastructure (2014/51/EU). Amends the Prospectus Directive (Directive 2003/71/EC) and Solvency II (Directive 2009/138/EC)

ORSA Own Risk Solvency Assessment

O-SIIs Other systemically important institutions

OTC Over-The-Counter

OTF Organised trading facility

PAD Payment Accounts Directive 2014/92/EU

PIFs Personal investment firms

PPI Payment Protection Insurance

P2P Peer to Peer

PERG Perimeter Guidance Manual

PRA Prudential Regulation Authority

Presidency Member State which takes the leadership for negotiations in the Council: rotates on 6 monthly basis

PRIIPs Packaged retail and insurance-based investment products

PSD2 The revised Payment Services Directive (EU) 2015/2366

PSP Payment service provider

PSR Payment Systems Regulator

QIS Quantitative Impact Study

QRT Quantitative Reporting Template

RAO Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)

RDR Retail Distribution Review

REMIT Regulation on wholesale energy markets integrity and transparency (EU) 1227/2011

RFB Ring-fenced bank

RFQ Request for quote

RONIA Repurchase Overnight Index Average

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SCR Solvency Capital Requirement (under Solvency II)

SCV Single customer view

SEC Securities and Exchange Commission (US)

Securitisation Regulation

Proposal for a Regulation of the EP and Council laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (COM(2015)472/F1)

SEPA Single Euro Payments Area

SFT Securities financing transaction

SFTR Securities Financing Transactions Regulation (EU) 2015/2365

SFO Serious Fraud Office

SIMF Senior Insurer Manager Function

SIMR Senior Insurer Managers Regime

SM&CR Senior Managers and Certification Regime

SME Small and Medium sized Enterprises

SMF Senior Manager Function








SOCA Serious Organised Crime Agency

Solvency II Directive 2009/138/EC

SONIA Sterling Overnight Index Average

SPV Special purpose vehicle

SREP Supervisory Review and Evaluation Process

SRB Single Resolution Board

SRF Single Resolution Fund

SRM Single Resolution Mechanism

SSM Single Supervisory Mechanism

SSR Short Selling Regulation (EU) 236/2012

SUP FCA supervision manual

T2S TARGET2-Securities

TC Treasury Committee

TLAC Total Loss Absorbing Capacity

TMTP Transitional Measure on Technical Provisions

TR Trade Repository

TPR The Pensions Regulator

UCITS Undertakings for Collective Investments in Transferable Securities

UCITS V UCITS V Directive 2014/91/EU

UKLA UK Listing Authority

UTI Unique Trade Identifier

XBRL eXtensible Business Reporting Language







At PwC, our purpose is to build trust in society and solve important problems. PwC is a network of firms in 158 countries with more than 236,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com/UK.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

© 2018 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

180316-114027-TN-OS

Contacts

Laura Cox 020 7212 1579

[email protected]

Hortense Huez

020 7213 3869

[email protected] Prudential regulation, Basel III, liquidity and funding

Andrew Strange

020 7804 6669

[email protected]

Retail distribution, SM&CR, upcoming regulatory change

Mike Vickery

0117 309 2403

[email protected]

Insurance, Solvency II

Hannah Swain 020 7212 2433

[email protected]

Operational resilience and financial crime

David Brewin 020 7212 5274

[email protected]

Client assets and prudential regulation

Penny Bruce

020 7212 1629

[email protected]

Recovery and resolution, consumer credit, structural reform

Luke Nelson

020 7213 4631

[email protected] MiFID II, conduct risk and benchmark reform

Tania Lee 07976 687547

[email protected]

Insurance, Solvency II

Sharon-Marie Fernando 020 7804 3062

[email protected] Investment funds, insurance

Dominic Muller 020 7213 2905

[email protected]

Derivatives reform, asset management, US and cross border, structured products

Megan P Charles 020 7804 0904

[email protected]

Consumer credit, payments, mortgages

Cheryl Wallace 020 7212 6983

[email protected]

MiFID II, US and cross-border regulation and benchmarks

Suddankumar Subbaroyan

020 7212 6003 [email protected] Basel III, liquidity and funding

Tessa Norman

020 7213 2508

[email protected] Publications and retail distribution

Conor MacManus

020 7213 8555 [email protected] Prudential regulation

mailto:[email protected]

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