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

Being better informed

FS regulatory, accounting and audit bulletin

FS Regulatory Insights August 2019

In this month’s edition: Conduct: FCA consults on vulnerable customers guidance

Basel III: EBA reveals impact study results

Insurance: EIOPA issues draft outsourcing guidelines

Analysis: The changing face of retail banking

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

1 PwC | FS regulatory, accounting and audit bulletin | August 2019

Executive summary

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.

In the run up to the summer holiday period, our regulators remained as busy as ever, with particularly important developments on topics such as Basel III implementation, outsourcing and vulnerable customers.

Operational resilience remains high on supervisors’ and regulators’ agendas. After the EBA issued revised guidelines on outsourcing arrangements earlier this year, EIOPA last month published draft guidelines on how the outsourcing provisions in Solvency II should be

applied to cloud service providers by insurance firms. The guidelines draw on the EBA’s documents, and cover topics such as: due diligence on service providers, risk assessments, and monitoring and oversight of cloud outsourcing. They will apply from 1 July 2020 for new arrangements or those amended through the normal course of business, and from 1 July 2022 for existing arrangements.

Turning to asset management, the EC published final rules to support the cross-border distribution of funds in the Official Journal. The rules introduce a Directive amending UCITS and AIFMD with regard to cross-border distribution of investments, and a Regulation on facilitating cross-border distribution of investments and amending EuVECA, EuSEF and PRIIPs. The Directive aims to enable asset managers to engage in pre-marketing activities to gauge the interest of potential investors while the Regulation aims to align national requirements for marketing funds and regulatory fees, and harmonise requirements for the verification of marketing material by NCAs. Firms distributing investment funds should revise policies, processes and controls in light of the new legislation, particularly in relation to pre-marketing of funds.

In prudential banking developments, the EBA presented the results of its Basel III implementation QIS, in response to the EC’s call for advice. The results show how the full

implementation of Basel III in the EU will impact minimum capital requirements, and the related capital shortfall. They serve as a reminder to banks that they should undertake a thorough capital assessment to identify their capital needs and whether they will meet these needs through retained earnings or issuing capital instruments.

In the UK, the FCA consulted on its long-awaited guidance on the fair treatment of vulnerable customers. The regulator makes clear that it expects a culture of doing the right thing for vulnerable customers to permeate throughout firms. It also outlines ways in which firms can best identify, manage and monitor vulnerable customers. In light of the proposed guidance, firms should take steps such as reconsidering their customer culture, improving systems for monitoring customer vulnerability, and focusing on the touchpoints in their business where vulnerability could lead to harm. Following the consultation period, the FCA plans to issue revised draft guidance for further comment.

Meanwhile HMT kicked off its review of the future regulatory framework for financial services, publishing a call for evidence on the first phase of the review. The first phase will focus on how to better coordinate regulatory activity across UK regulatory institutions, before the review widens to consider broader issues, once the nature of the UK’s exit from the EU and its future relationship with the bloc

become clearer. HMT asks for views on how UK bodies work together to coordinate regulatory interventions for firms (for instance, how they assess the overall impact of simultaneous interventions), and on how firms and regulators can work together to make supervision more efficient. This review could have significant implications for the UK regulatory framework, so it’s important that firms engage with the process.

Staying with the theme of looking ahead, our feature article this month considers what the future holds for retail banking. Banks are facing strategic challenges as well as funding and margin pressures, as a result of recent regulatory interventions and shifts in consumer behaviour. We take an in-depth look at how banks can navigate these challenges, and adapt to a more digital, consumer outcomes focused market.

Hannah Swain Director, FS Regulatory Insights M: +44 (0) 7803 590553 E: swain.hannah@pwc.com

Hannah SwainDirector, FS Regulatory Insights

swain.hannah@pwc.com

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

2 PwC | FS regulatory, accounting and audit bulletin | August 2019

How to read this bulletin?

Review the Table of Contents and 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

The changing face of retail banking 3

Cross sector announcements 5

Banking and capital markets 16

Asset management 20

Insurance 22

Monthly calendar 26

Glossary 30

Contacts 36

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

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The changing face of retail banking

Tom BoydellManager

+44 (0) 7483 399332tom.boydell@pwc.com

Policy interventions, consumer behaviour and digitalisation have all contributed to a significant change in the way retail banks are accessed and used in the UK. Such change has come at a time when retail banks are also facing funding and margin pressures due to a combination of increased competition and direct product interventions by the FCA, set against a backdrop of historically low interest rates and an inflationary environment.

With such a range of competition and consumer pressures, it is important for retail banks to take stock of their current position in the market, their strengths, and to consider how their strategy can remain sustainable in a more digital, competitive and consumer outcomes focused industry.

Competition pressures

One key area affecting change in the retail banking industry is increased competition. This has manifested through firm-wide competitive pressures, combined with product-level competition initiatives against an increase in funding costs.

For firms, encouragement by HMT for new banking entrants, and a number of regulatory interventions by the FCA and PRA, have had a significant effect on competition within the market. This included HMT explicitly declaring the UK ‘open for business’ for new challenger banks, through to the FCA’s sandbox approach to encourage innovative new products and

services from both new and existing firms. Ring-fencing of retail banks was also a catalyst for the dumping of excess capital by larger banks into the mortgage market. While this has helped to keep rates low for customers, it has caused pressure on margins for some smaller banks – evidenced by recent mortgage book sales.

This squeeze on margins at a product level only seems set to continue with the FCA introducing a raft of mortgage competition measures to aid consumer comparison and switching. Further pressure on retail revenues will come from the FCA’s recent intervention in the overdraft market. A limit on how much can be charged on unarranged overdrafts, plus additional comparison measures, looks set to reinvigorate competition in this market as well. Banks will need to carefully consider their offering going forward in both markets to ensure stability amidst the changing environment.

Competition pressures also look set to affect funding costs within the retail banking market. The FCA is expected to publish next steps on its basic savings rate debate in the autumn. An outcome of this may be its preference to introduce a basic interest rate, which would likely reduce the advantageous funding position large retail banks with volumes of back-book savings customers currently enjoy (compared with smaller banks). In turn, pricing on other products such as personal loans or

credit cards may need to change in order to maintain margin levels – giving challenger banks an opportunity to compete on a more even footing. That being said, challenger banks have been successfully competing for current account deposits – a key retail funding source – for a number of years already. Maintaining this momentum to lower retail funding costs will be key to the survival of most challenger banks as their own margins become squeezed. Overall, as margins and funding costs are affected by regulatory interventions and competition, it does call into question whether free-if-in-credit banking remains viable. Any attempt to change this though could meet resistance by the FCA, which would be concerned for vulnerable consumers and the harm fee-bearing current accounts may bring.

Consumer pressures

Consumer behaviour is changing. Intergenerational differences, digitalisation, PSD2, AI and an increasingly cashless society are all influencing the way in which consumers interact with their financial lives, especially retail banking products and services. Firms must understand that, as a society, we are becoming more and more expectant of simplicity, efficiency, security and immediacy. If these needs are not taken into account when designing products and services, retail banks may find themselves struggling to attract and retain customers.

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

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One of the clearest examples of this behaviour change is the rise in digital payments and the new business models that have accompanied it in the form of prepaid cards with digital interfaces. This trend towards digital services is not likely to end either. With PSD2 slowly filtering through the banking system, new payment and aggregation business models could start challenging banks for ownership of consumer relationships and data. In order to fend off such challenge, retail banks must embrace new technology in all its forms. Whether this be an enhanced use of AI to tailor customer journeys or ensuring more reliable cyber security, retail banks will need to keep pace with their digital competitors in order to meet customer expectations.

A cashless, digitally enabled society also has other strategic implications for larger retail banks. Since 2015 wider cost pressures within banks has led to the closure of over 3,000 branches. This has resulted in rural communities, small and medium businesses and vulnerable customers being largely underserved or inconvenienced. But with increasing pressure from Government to cease branch closures and from the FCA and PRA to maintain fair access for all (especially vulnerable consumers), banks must find a solution to sustain services. Something must change.

One idea that is currently being trialled is a ‘banking hub’ – multiple banks in one branch sharing costs between them. If successful this could help to maintain a physical branch network across the UK, but the issue still remains of distance to such branches for some

customers and the over one million consumers who remain unbanked.

In order to stay relevant and continue to attract customers, retail banks need to embrace technology and evolve in-line with customer expectations. But in doing so, banks must also be aware of the fact that being attractive to all customers usually comes at an operational cost, which may pose some challenging strategic questions for some.

Challenge and change

With such competing pressures, banks have much to consider as they develop strategies for the years to come. Incumbents face the challenges of competition from more agile counterparts which can more readily tap into the digital needs of consumers, while also facing a threat to traditional retail income sources from regulatory interventions. Branch network costs will also continue to raise difficult questions around access and viability.

Challenger banks, however, especially those that are online-only, will likely struggle to maintain the levels of growth enjoyed thus far. The digitally enabled segment of society who aren’t customers will grow ever smaller, and financially-savvy individuals are still likely to have salaries paid to higher interest bearing accounts (typically with incumbents). Challengers should be thinking about their next steps in order to enter the mainstream now that loyal customer bases have been established. Focusing on a particular customer segment or product seems a logical place to start.

Whichever business model is employed, all banks must continue to adapt in order to stay relevant. The pressures faced by the retail banking market could mean we witness consolidation across products, services and customer segments – with firms potentially dropping less profitable lines of business. This could eventually lead to loan book sales, or mergers and acquisitions in a bid to streamline services and improve user experiences.

For the majority of consumers though, the changing face of banking should only continue to become more beneficial. Consumers can expect to see more tailored customer journeys, bespoke offers of insurance and lending rates, advanced analytics, more impactful communication strategies and simpler, easier comparison and switching services.

As with all change, the challenges must first be overcome to realise the benefits. A number of these challenges have already been conquered within retail banks, but as pressures show no sign of relenting, the face of retail banking is set to continue changing for some time yet.

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

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Cross sector announcements

In this section:

Regulation 5 Benchmarks 5 Brexit 6 Conduct 6 Consumer issues 6 Disclosure 7 Financial crime 7 Governance 8 Market infrastructure 8 MiFID II 8 Pensions 8 Supervision 10 Sustainability 10 Wholesale markets 11 Accounting 11 IAS 12 11 Also this month 11 A brief roundup of other regulatory developments

Regulation

Benchmarks EU benchmark reform: Dear CEO letter

ECB Banking Supervision sent a Dear CEO letter to significant institutions (SIs) in relation to their preparation for the interest rate benchmark reforms and the use of RFRs on 3 July 2019. SIs are required to provide by 31 July 2019:

a board-approved summary of the SI's assessment of key risks and a detailed action plan to mitigate them, address pricing issues, implement process changes

contacts of the managers responsible for overseeing the implementation of the action plan.

Also by 15 September 2019, SIs need to respond to a questionnaire aimed at helping the ECB supervisors assess the significance of the benchmark reform and transition of each SI.

EONIA to €STR legal action plan

The Working Group on euro RFRs published recommendations on EONIA to €STR legal action plan on 16 July 2019. As of 2 October 2019, market participants are recommended to:

use €STR + 8.5 bps as the EONIA fallback rate for all products and purposes

avoid entering into new contracts using EONIA, especially if they mature after end-2021

replace EONIA or include robust fallbacks in legacy contracts maturing after end-2021 by entering into bilateral negotiations to cancel/restructure those contracts so that the parties can enter into new €STR contracts

include robust fallbacks in new EONIA contracts maturing after end-2021

clarify in contracts signed before 2 October 2019 that EONIA methodology will change as of that date and that references to EONIA should be read as references to the revised EONIA.

In addition to these general recommendations, the group also recommends measures for specific asset classes (derivatives, collateral agreements, cash products). Finally, it provides two templates (in Annex 1 here) for fallback language for new cash products. Market participants can tailor the wording for each asset class.

FCA reiterates LIBOR transition expectations

Andrew Bailey, FCA CEO, gave the speech LIBOR: preparing for the end on 15 July 2019. His key new message is for banks and borrowers in the loan market: banks should explain the transition changes to their

Hannah SwainFS Regulatory Insights

swain.hannah@pwc.com

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

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corporate and retail customers, including the potential risks of continuing with LIBOR.

In addition, Bailey reiterated that:

compounded overnight SONIA can be used in most cash contracts instead of term SONIA

there is no guarantee that efforts to produce term RFRs will be successful (or when such rates will become available)

after end-2021, LIBOR will likely fail the regulatory test of representativeness, thus prohibiting its use in new contracts

the conversion to SONIA is perhaps the hardest in the bond market, where investors’ consent is required

transition is the least advanced in the loan market, but some change is underway

the best way for firms to avoid conduct risk is to stop writing new contracts using LIBOR.

During the second half of 2019, the RFRWG intends to assess the potential options for dealing with the ‘tough legacy’, i.e. those legacy contracts that can’t convert to SONIA nor add fallbacks.

Brexit BoE updates rules for new Article 50 deadline

The BoE issued CP18/19 UK withdrawal from the EU: Changes following extension of Article 50 on 4 July 2019. The consultation runs until 18 September 2019 and updates a number of temporary Brexit powers of the BoE and PRA affected by extending the Article 50

deadline to 31 October 2019. The BoE also proposes to fix certain deficiencies and make other consequential changes to rules or Binding Technical Standards (BTSs) required as a result of the new Brexit date.

The EU withdrawal process has seen the UK onshore (introduce to UK law) a number of different elements of EU law. The change to the Brexit deadline means some new elements of EU law introduced since the original Article 50 deadline in March 2019 should now also be included as ‘retained EU law’ by the UK. Authorities must also occasionally make minor changes to onshored legislation to ensure that it works in the way it is supposed to. CP18/19 follows similar consultations from the Bank and PRA for this purpose.

Section A of the consultation sets out changes the BoE and PRA want to make to their temporary transitional powers. These changes account for the knock-on effect of the new date, but also clarify language in rules relating to the temporary powers of the PRA and BoE.

Section B sets out technical clarifications to the language of onshored BTSs on indices and recognised exchanges for use in prudential calculations of credit institutions and investment firms; bilateral margining; and establishing insurance special purpose vehicles (ISPVs). Section B also includes technical clarifications to the PRA rulebook relating to ISPVs, inclusion of appropriate references to Gibraltar in onshored Solvency II rules, and other minor changes and clarifications.

Conduct FCA finalises cryptoasset guidance

The FCA published PS 19/22: Guidance on Cryptoassets - feedback and final guidance to CP19/3 on 31 July 2019. It outlines the key considerations for firms determining whether a token or activity falls within the FCA’s regulatory perimeter, and indicates relevant rules. The FCA includes a number of case studies and examples to help firms with this assessment.

The FCA has made drafting changes to improve clarity, including the addition of ‘e-money tokens’ to its cryptoasset taxonomy, recognising that e-money tokens fall within the regulatory perimeter under the Electronic Money Regulations and can sometimes overlap with other token classifications. This strengthens the definition of unregulated cryptoassets, namely utility and exchange tokens. Other changes include additional content on ‘stablecoins’ - tokens designed to be less volatile by pegging them to fiat currency, buckets of cryptoassets, other types of assets or algorithms - and on ‘airdrops’ - the distribution a cryptoasset, typically for free, to multiple consumer wallet addresses.

Consumer issues FCA focuses on vulnerable consumers

The FCA published guidance consultation GC19/3: Fair treatment of vulnerable consumers on 23 July 2019. It outlines ways in which firms can best identify, manage and monitor vulnerable consumers (VCs) across all financial services sectors, through good and poor practice examples.

The FCA focuses on three areas. Firstly, in relation to culture and purpose, it expects a culture of doing the ‘right thing’ for vulnerable consumers to permeate across all levels of firms – from the board to customer-facing staff. This is part of a broader move from the regulator to expect a more customer-centric approach from firms with a focus on VCs.

Secondly, concerning people and skills, the FCA indicates firms need to ensure staff have the necessary skills to identify and deal with the needs of their VCs and that outcomes are monitored to spot issues in a timely way and to continuously improve. Lastly, the FCA reinforces previous messages that firms need to utilise the understanding they gain about customer needs to better design products, services and communication strategies.

In response to the increased need to obtain, store and share personal data, the FCA also includes its views on GDPR and the Data Protection Act 2018. In particular, it notes Special Category Data and the need to understand processing conditions. Following feedback from this consultation the FCA intends to consult further on revised draft guidance including on any further interventions it considers necessary. The consultation closes on 4 October 2019.

FCA clarifies fair pricing framework

The FCA published FS 19/04 – Fair Pricing in Financial Services: summary of responses and next steps on 18 July 2019. It outlines feedback from DP18/09 Fair Pricing in Financial Services (October 2018) on its concerns re pricing practices and their impact

Executive summary The changing face of

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Banking and capital markets

Asset management Insurance Monthly calendar Glossary

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on consumers, especially the most vulnerable and least resilient.

The FCA is proposing a six question framework to assess the fairness of the following pricing practices:

firms charging different prices to different consumers based solely on differences in consumers’ price sensitivity (‘price discrimination’)

firms charging existing customers higher prices than new customers (‘loyalty pricing’ or ‘inertia pricing’).

Overall respondents are broadly supportive of the framework. But in response to more detailed feedback, the FCA adds further clarification on how it plans to apply the framework in practice and on the questions.

The FCA intends to follow the framework for the first time in its General Insurance Pricing Practices Market Study. It also plans to formally embed the framework into its regulatory approach, commencing with a discussion paper on the review of its principles scheduled for late 2019/early 2020.

FCA confirms rules on CFD restrictions

The FCA published CP19/8: Restricting contract for difference (CFD) products sold to retail clients on 1 July 2019. This follows CP18/38: Restricting CFD products sold to retail clients and a discussion of other retail derivative products, published in December 2018.

The final rules include a series of permanent restrictions on the sale and distribution of

CFDs and similar products (e.g. so-called turbo certificates) to retail clients. These include leverage limits of between 30:1 and 2:1 by collecting minimum margin as a percentage of the overall exposure that the CFD provides, and a requirement to close out a customer’s position when their funds fall to 50% of the margin needed to maintain their open positions on their CFD account. These proposals are broadly aligned with ESMA’s EU-wide temporary intervention measures related to CFDs, but would apply on a permanent basis.

Firms carrying out marketing, distribution or selling in, or from, the UK of CFDs or CFD-like options to retail clients, will be required to comply with the product intervention rules from 1 August 2019 for CFDs and 1 September for CFD-like options.

These changes are intended to address the FCA’s concerns about the harm to retail investors being caused by the design and distribution of some complex CFDs and related products. These concerns have been long-standing and persist despite focused supervisory work over several years aimed at improving firms’ conduct.

FCA proposes retail ban for cryptoasset derivatives

The FCA published CP19/22: Restricting the sale of cryptoasset investment products on 3 July 2019. It proposes a ban on the sale, marketing and distribution of derivatives – namely contracts for difference (CFDs), futures and options – and exchange traded notes (ETNs) referencing certain cryptoassets, to all retail consumers. This ban would apply to firms

selling, marketing or distributing in, or from, the UK.

The proposals capture unregulated and transferable cryptoassets, which are those:

not classed as specified investments or e-money

capable of being transferred or traded via a platform or forum

not limited to being transferred to their issuer or a network participant in exchange for goods or services.

The proposal will impact firms issuing or creating in-scope products, those involved in the distribution chain (e.g. brokers), marketers and operators of trading platforms. Firms will need to ensure those products to which the ban applies are no longer offered to retail investors. But positions already opened by retail investors do not need to be closed.

Relevant firms should review the proposals and engage with the consultation process and the wider debate surrounding retail CFDs. Firms should begin to determine the volume of their customers this ban will apply to in order to pre-empt any shock to their order book. Those reliant upon retail business will need to make fundamental changes to their overall strategy.

The consultation closes on 3 October 2019. The FCA hopes to publish final rules in early 2020.

Disclosure ESMA provides further guidance on Prospectus Regulation

ESMA consulted on Draft guidelines on disclosure requirements under the Prospectus Regulation and revised Q&As related to the Prospectus Regulation on 12 July 2019.

The consultation sets out proposals aimed at ensuring that market participants and NCAs have a consistent interpretation of disclosure requirements under the Regulation. It addresses topics including the disclosure of an issuer’s historic financial information, profit forecasts, working capital statements, and capitalisation and indebtedness. The EU regulator believes the guidelines will ultimately help to ensure that issuers provide investors with complete, comprehensible and consistent information across EU markets, in line with the ambitions of the Prospectus Regulation. The consultation closes on 4 October 2019. ESMA will consider feedback and intends to publish final guidelines in Q2 2020.

The revised Q&As clarify that financial intermediaries distributing their own securities would qualify as an issuer for the purposes of Article 23(3) of the Regulation. ESMA also confirms that an offer of securities initially made using a base prospectus approved by national laws implementing the Prospectus Directive can continue using a base prospectus that is approved under the Prospectus Regulation.

Financial crime UK cracks down on economic crime

The UK Government published its Economic Crime Plan 2019-2022 on 12 July 2019. The Government sets out a number of key priority areas for combating economic crime to

Executive summary The changing face of

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maintain the UK’s position as one of the safest and most transparent places to conduct business. These priority areas revolve around:

better information sharing across public and private sectors

utilising technological innovations to strengthen detection and monitoring capabilities

greater transparency of ownership of legal entities and arrangements

reform of the Suspicious Activity Reporting regime.

In addition, the Government intends to develop a financial crime regime for cryptoassets with the FCA. It aims to go beyond current international standards to deliver ‘one of the most comprehensive responses globally’. To monitor the effectiveness of the plan, the Government proposes seven key performance questions, supported by evaluation reports of specific work programmes.

EC reviews financial crime framework

The EC published a communication towards better implementation of the EU’s anti-money laundering and countering the financing of terrorism framework on 24 July 2019. The EC summarises a number of reports released on the same day relating to the EU’s AML and countering the CTF frameworks. These reports include a supranational risk assessment of AML and CTF issues affecting the EU, an assessment of central bank account registers

for interconnectivity, security and efficiency together with a report on cooperation between Financial Intelligence Units.

The EC indicates that together, these reports highlight the need for a number of changes to improve AML and CTF consistency and cohesiveness across the EU. It acknowledges that current regulatory developments are set to address some of the shortcomings – e.g. improved information on beneficial ownership through the transposition of AMLD5. But, it notes that gaps still remain and further effort is needed. This includes giving consideration to converting AMLDs into directly applicable regulation.

Governance Final rules on SM&CR extension

The FCA issued PS19/20: Optimising the Senior Managers and Certification Regime and feedback to CP19/4 on 26 July 2019. It contains the final rules to extend the SM&CR to FCA solo-regulated firms, including claims management companies, the new directory of individuals working in financial services and minor amendments for the existing regime for dual regulated firms, including confirmation that Heads of Legal are not in scope of the SMR.

Firms affected by the changes will move to the new regime on 9 December 2019 (or as soon as a claims management company is fully authorised). To facilitate this, on 17 July 2019, HMT issued the Statutory Instrument 2019 No. 1136 (C. 35) which confirms the timeline of applicability of SM&CR extension.

Market infrastructure ESMA clarifies EMIR Refit and MIFIR misalignment

ESMA issued a public statement on 12 July 2019 to address the misalignment created by

EMIR Refit between the scope of counterparties subject to the EMIR clearing obligation (CO) and those subject to the MiFIR derivatives trading obligation (DTO). Small FCs and NFCs are exempted from the CO, but are still subject to the DTO. Acknowledging this inconvenience, ESMA expects NCAs not to take supervisory action in relation to the MiFIR DTO against those counterparties exempted from the CO.

Moreover, Category 3 FCs subject to the CO will also be subject to the DTO starting from the same application date of the CO under EMIR Refit, i.e. four months after they notified their NCA and ESMA that they are above the clearing thresholds.

MiFID II ESMA consults on trade data prices and consolidated tape

ESMA published Consultation Paper: MiFID II/MiFIR review report on the development in prices for pre- and post-trade data and on the consolidated tape for equity instruments on 12 July 2019.

MiFID II/MiFIR aims to ensure fair access to market data and establish a legal framework for the provision of a consolidated tape (CT). ESMA argues that, so far, no CT has emerged and that MiFID II has not delivered on its objective in relation to access to market data. The consultation, therefore, examines the reasons for a lack of an equity CT. ESMA suggests this can be explained by three main factors: the lack of commercial incentive to operate a CT, an overly restrictive regulatory

framework, and competition from non-regulated entities.

The consultation paper suggests that the emergence of a CT would provide clear benefits, including through centrally providing post-trade information on the trading activity for equity instruments in a single format. ESMA puts forward some initial ideas for establishing a CT, drawing on experiences in the US and Canada. The EU regulator considers that high data quality, mandatory financial contribution by trading venues and Approved Publication Arrangements to the CT, and mandatory consumption of the CT by market data users.

The deadline for responding to the consultation is 6 September 2019. Based on stakeholder feedback, ESMA will publish a final report, which it intends to submit to the EC by December 2019.

Pensions EIOPA eyes governance and risk management

As EIOPA sees governance and risk management of pension funds as key to ensuring the protection of pension scheme members, it published four Opinions for national supervisors on 10 July 2019, as follows:

Opinion on the use of governance and risk assessment documents in the supervision of IORPS

Opinion on the practical implementation of the common framework for risk assessment and transparency for IORPs

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Opinion on the supervision of the management of operational risks faced by IORPs

Opinion on the supervision of the management of environment, social and governance risks faced by IORPs.

EIOPA aims to help supervisors implement the IORP II Directive consistently and lay the foundation for the future supervisory convergence of pension funds' own-risk assessment. This is to ensure sound risk management for the better protection of members and beneficiaries and alignment with society's sustainability goals.

Implementing the personal pension regulatory framework

Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP) appeared in the Official Journal on 25 July 2019. This outlines the regulatory framework for financial providers wishing to offer PEPPs under the new voluntary scheme for saving for retirement to be offered across the EU. It is intended to complement existing public and occupational pension systems. The regulation applies 12 months after the related delegated acts are published in the Official Journal.

The EC is working with EIOPA on the delegated and implementing acts. It is aiming to enable the first PEPPs to come on to the market around late 2021.

Reforming pension scheme investment consultancy market

The Department for Work and Pensions (DWP) consulted on delivering the CMA

recommendation for trustee oversight of investment consultants and fiduciary managers on 29 July 2019. This follows the CMA’s December 2018 Investment consultants market investigation report and its subsequent June 2019 Investment consultancy and fiduciary management market investigation Order 2019. These require actions by HMT, TPR, the FCA as well as the DWP.

The DWP seeks views on draft Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations, which it intends to bring into pensions law two of the CMA order remedies and one of the CMA’s recommendations. These are set to change the way in which pension schemes govern their relationships with investment consultants and fiduciary management providers.

The draft legislation includes requiring trustees of occupational pension schemes (subject to limited exceptions) to carry out a tender process for fiduciary management services. It also obliges the trustees to set specific strategic objectives for investment consultants in order to better assess performance and value for money. Finally, it grants TPR authority to oversee the new duties on pension scheme trustees that arise from these requirements.

The DWP proposes that these regulations take effect from 6 April 2020. The consultation closes on 2 September 2019.

Implementing pension retirement outcomes review measures

The FCA published PS19/21: Retirement Outcomes Review: feedback on CP19/5 and

our final rules and guidance on 30 July 2019 to support non-advised drawdown consumers who have difficulty making investment decisions. The FCA is also promoting competition by making charges incurred by consumers more transparent and comparable. The changes include:

introducing ‘investment pathways’ for consumers entering drawdown or transferring-in assets already in drawdown without taking advice

ensuring that consumers entering drawdown must take an active decision to invest mainly in cash

requiring firms to send annual cost and charges incurred information statements to both advised and non-advised consumers who have accessed their pension.

The investment pathways involve firms presenting non-advised consumers with four options for how they may choose to use their drawdown pot. Smaller providers don’t have to be able to offer all the pathway solutions themselves, but nonetheless must still present the required investment pathways. Firms must also ensure that non-advised consumers invested wholly or primarily in cash are warned of the potential risks.

These requirements are part of a wider package of measures designed to improve the quality of pension transfer advice and to help consumers obtain better value from their pension. The new requirements take effect from 1 August 2020.

Banning pension transfer contingent charging

The FCA published CP19/25: Pension transfer advice: contingent charging and other proposed changes on 30 July 2019. It addresses potentially poor advice, driven by conflicts of interest created by current remuneration structures. The proposals include:

banning contingent charging for defined benefit pension transfers and conversions, subject to specified exceptions

ensuring that in cases where contingent charging is permitted, firms charge the same amount for advice on pensions transfers and conversions as they charge when advice is non-contingent

introducing an abridged form of advice that can lead to a recommendation not to transfer, and which falls outside the proposed ban on contingent charging, in order to provide a low-cost alternative to full advice.

The regulator also seeks to address potential conflicts of interest arising where advisers receive ongoing fees for their advice. The FCA proposes that advisers demonstrate why any scheme they recommend is more suitable than the consumer’s workplace pension scheme. In addition, it consults on other measures to improve the functioning of the advice market, including clearer disclosures on charges and setting out how advisers can evidence customers’ understanding of advice.

These proposals are part of a wider package of measures designed to improve the quality of

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pension transfer advice and to help consumers obtain better value from their pension. The FCA expects to finalise these requirements in a policy statement in Q1 2020. The consultation closes on 30 October 2019.

FCA scrutinises competition in non-workplace pensions

The FCA published FS19/5: Effective competition in non-workplace pensions on 30 July 2019. It finds that many consumers are insufficiently engaged in the pension decision making process, and lack awareness of the charges they are paying. The FCA also suggests that products and charges are often too complicated to compare directly and indicates that this has led to a lack of price competition in the market.

It outlines a number of potential remedies intended to:

protect consumers who do not or cannot engage with their investment decision by requiring providers to offer one or more investment pathways

reduce charge complexity by enhancing cost disclosures to increase the ability to compare products and providers

promote charge transparency by requiring firms to provide clearer information on the total costs incurred by the consumer and their impact, both at the point of sale and on an ongoing basis

consider ways in which charges can be opened up to external scrutiny by requiring firms to regularly report standardised charges data to an independent body

which would collate and publish the information.

The regulator plans to issue a consultation paper on the simplification and disclosure remedies in Q1 2020. It also aims to issue papers on independent governance committee effectiveness and on a proposed value for money framework for pensions ‘at around the same time’. These potential remedies are part of a wider package of measures designed to improve the quality of pension transfer advice and to help consumers obtain better value from their pension. The FCA seeks views on its potential remedies and on any alternative suggestions to address the issues identified by 8 October 2019.

Supervision HMT kicks off regulatory framework review

HMT kicked off its review of the future regulatory framework for financial services, publishing its Call for Evidence: Regulatory Coordination on 19 July 2019. This marks the start of the first phase of the review, in which HMT aims to focus on how to better coordinate regulatory activity across UK regulatory institutions. In subsequent phases it intends to look at broader issues, once the nature of the UK’s exit from the EU and its future relationship with the bloc become clearer.

HMT asks for views on how UK bodies work together to coordinate regulatory interventions for firms – such as how they assess the overall impact of simultaneous interventions, and whether they request the right amount of information from firms as part of the policy-making process. It’s also seeking views on how

firms and regulators can work together to make authorisation, supervision and enforcement more efficient. This includes using new technology, and how firms might allow or facilitate data sharing between regulators.

The call for evidence closes on 18 October 2019.

EC updates third country equivalence policy

The EC updated its policy on Equivalence in the area of financial services on 29 July 2019, building on an earlier 2017 EC staff working document. It reiterates that equivalence is an EC unilateral tool for overseeing cross-border financial services in the EU, but can also help promote regulatory convergence globally and support integration of EU markets with the rest of the world.

The EC emphasises its ‘risk-sensitive approach’ to assessing equivalence. Third countries deemed more systemically important to EU markets will face more stringent assessments. While examining regulatory outcomes is the basis for equivalence findings and identical regimes are not required, it expects higher impact third countries to give ‘stronger assurances. that they are able to deliver the required outcome’. Equally, the EC signals that in relation to ongoing monitoring, it expects to be more sensitive to regulatory change in these higher impact countries.

Finally, the EC provides details of financial services related equivalence decisions it has adopted since January 2018. This includes repealing existing decisions for the first time. These relate to regulation of CRAs and

concern Argentina, Australia, Brazil, Canada and Singapore.

Sustainability UK Government launches Green Finance Strategy

The Government launched its Green Finance Strategy on 2 July 2019 with a speech by John Glen, the City Minister. The strategy aims to increase investment in sustainable projects and infrastructure in support of the Government’s ambitions for reaching net zero carbon emissions.

This strategy will attempt to make the UK financial services sector central to efforts aimed at tackling climate change. A key part of this is to set expectations for publicly listed companies and large asset owners to disclose, by 2022, how climate risk impacts their activities. The Government will work closely with the FCA and PRA to explore the most effective way of doing this, including whether mandatory disclosures are necessary. The FCA published, on 2 July 2019, a Joint Declaration with the PRA, TPR and FRC, welcoming the publication of the Government’s Green Finance Strategy and setting out a shared understanding of the financial risks and opportunities of climate change.

Other aspects of the strategy include Government funding for the Green Finance Institute, jointly with the City of London. The Government would also like to see greater cooperation between the public and private sectors, the creation of new opportunities for investors, and a strengthened UK reputation as a global hub for green finance.

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Wholesale markets Revising uncleared derivatives margin rules timeline

The Basel Committee and IOSCO issued their revised Margin requirements for non-centrally cleared derivatives (NCCD) on 23 July 2019. They update the 2015 framework, amending the timeline for the application of these rules.

The regulatory authorities introduce a new phase (Phase 5), requiring entities with an aggregate average notional amount (AANA) of NCCD that exceeds €50bn to start exchanging initial margin from 1 September 2020. But they defer the date of application for those entities with an AANA of NCCD that exceeds €8bn (but less than €50bn) from 1 September 2020 to 1 September 2021 (Phase 6). The entities potentially benefitting from this deferral include small buy-side firms (i.e. asset managers, hedge funds, insurers and pension funds). Affected EU entities await amendment of the regulation that implement these requirements in the EU – EMIR related Regulation 2016/2251

Accounting

IAS 12 IASB proposes deferred tax accounting clarifications

The IASB published ED 2019/5 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Proposed amendments to IAS 12 on 17 July 2019. It proposes changes to IAS 12 ‘Income Taxes’ to clarify how companies account for deferred tax on leases

and decommissioning obligations. The comment period ends on 14 November 2019.

PwC publications Our July 2019 webcast – Accounting and

reporting updates considers:

GAAP updates – including IFRS 16 (Leases) implementation challenges

current and emerging trends in FTSE 350 reporting practices – including companies readiness to respond to the ‘stakeholder agenda’

other regulatory developments.

Our In brief – Impact of the reform of LIBOR and other similar rates on IFRS reporting at 30 June 2019 considers the potential impacts of LIBOR reform on financial reporting in the short term, in particular for hedge accounting.

In our new webcast – IFRS Technical update – June 2019 a panel of IFRS technical accounting partners discuss how IFRS 9 and IFRS 16 interact with other standards, the IFRS 3 amendment for the Conceptual Framework and recent IFRIC discussions.

Our June accounting reminders – IFRS and UK GAAP publication outlines IFRS and UK GAAP reporting requirements as at 30 June 2019. It includes the standards, interpretations and other guidance that apply at this date, and the standards that are published but effective at later dates and hence required to be disclosed, plus a summary of the latest topical issues.

The June IFRIC meeting covered IFRS 16 leasing, IFRS 15 revenue, IFRS 9 hedging, presentation of taxes and more. See PwC IFRS Talks – Episode 55: June 2019 IFRIC update for an overview.

Our publication Navigating the stakeholder agenda: A review of how reporting on stakeholder engagement in the FTSE 350 is developing considers how companies are already responding to the revised Corporate Governance Code and new reporting requirements around stakeholder engagement and section 172.

Also this month

BoE The BoE published its Fee regime for FMI supervision 2019/20 on 31 July 2019. In addition to confirming the supervisory fees for FY 2019/20, the BoE also disclosed the fee for non-UK CSDs recognition and confirmed that it will charge a fee at the point at which an FMI is authorised, recognised or designated.

EBA The EBA published a report on cross-border supervision of retail financial services on 9 July 2019. The EBA outlines the challenges faced by competent authorities regarding their organisational structures, enforcement capabilities and regulatory arbitrage. A number of recommendations are given to the EU, such as rules around jurisdictional shopping.

EC The EC’s Technical Expert Group on

Sustainable Finance (TEG) published a

Call for Feedback on its recent final report related to sustainability taxonomy on 4 July 2019. The taxonomy report proposes a classification system for environmentally-sustainable economic activities, intended to provide a framework to help policy-makers, firms and investors identify activities that contribute towards a low-carbon economy. Stakeholders are invited to provide feedback, by 13 September 2019, on the proposed climate change mitigation activities, climate change adaptation principles and criteria, usability of the proposed taxonomy and future development of the taxonomy.

The EC adopted an amendment to the PRIIPs delegated regulation on 3 July 2019. This formally extends the UCITS fund exemption from the PRIIPs regulation by two years to 31 December 2021. In practice, this transitional arrangement allows manufacturers of PRIIPs that offer UCITS funds to continue producing a KIID under the UCITS directive, as they did previously, rather than a KID under the PRIIPs regulation.

The EC provided an update on how the EU is delivering on the UN 2030 Agenda for Sustainable Development on 18 July 2019. The EC reinforced its commitment towards acting upon the Sustainable Development Goals, and has set up a European Consensus on Development which integrates the economic, social and environmental dimensions of sustainable development.

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The EC published a report on the review of the agreement between the EU and US on data sharing for the purposes of terrorist finance tracking on 22 July 2019. The EC concludes the agreement has been implemented successfully, but does outline a number of recommendations.

The EC published an assessment of recent alleged money laundering cases involving EU institutions on 24 July 2019. The EC highlights events that occurred within certain EU credit institutions and the responses from local competent authorities. The assessment acts as a summary of learning for the EU to take forward.

ECB The ECB confirmed the publication time for €STR on 11 July 2019. Hence, the new rate will be published at 8:00 CET on each TARGET2 business day and will be published on the ECB’s website. Also, on 10 July 2019, the ECB issued a Guideline on €STR’s governance, administration and oversight, transposing the relevant IOSCO Principles for Financial Benchmarks.

ESAs The ESAs published a report on the cross-border supervision of retail financial services on 9 July 2019. The report provides an overview of the EU rules with respect to consumer protection, conduct of business, and the cooperation between NCAs. It also assesses the extent to which they address the supervisory issues faced by NCAs and makes a number of policy recommendations.

ESMA ESMA updated its CSDR Q&As on 11 July

2019. It adds a new Q&A, which clarifies aspects regarding the scope of financial instruments subject to internalised settlement reporting.

ESMA updated its public register with the latest double volume cap (DVC) data under MiFID II on 5 July 2019. This includes DVC data for the period of 1 June 2018 to 31 May 2019, together with updates to historic data which had already been published. The data shows that there have been 47 breaches in equities at the 8% cap, applicable to all trading venues, and nine breaches in equities at the 4% cap that applies to individual trading venues.

ESMA updated its CSDR Q&As on 11 July 2019. The latest Q&As clarify that investment firms aren’t required to report client orders where the firms don’t execute the transfer orders themselves and instead forward them to a custodian, and that trade netting doesn’t qualify as internalised settlement.

ESMA updated its BMR Q&As on 11 July 2019. A new Q&A clarifies that €STR isn’t based on input data contributions, which means that banks that provide data to the ECB under the Money Market Statistical Reporting Regulation aren’t supervised contributors under BMR. The other new Q&A confirms that the scope of the BMR definition of commodity benchmarks isn’t identical to the scope of the definition of MiFID II/MiFIR commodity derivatives.

ESMA published a report on the status of licensing regimes of FinTech firms across the EU on 12 July 2019. The report concludes that NCAs do not typically distinguish between FinTech and traditional business models in their authorisation and licensing activities, since they authorise a financial activity and not a technology. The evidence suggests that at present most innovative business models can operate within the existing EU rules, so ESMA does not make additional recommendations for changes in EU regulation at this stage, in line with the EBA and EIOPA conclusions in their respective reports.

ESMA updated its EMIR Q&As on 15 July 2019. The changes were triggered by the entry into force of EMIR Refit and refer to the removal of the frontloading and backloading requirements; reporting obligations for funds, and block trades and allocations; the applicability of reporting to intragroup transactions; and reporting of notional amount for credit index derivatives.

ESMA consulted on Guidelines on certain aspects of the MiFID II compliance function requirements on 15 July 2019. It proposes amendments to the existing 2012 guidelines to: consider how the compliance function has changed as a result of MiFID II, reflect supervisory activities of NCAs in light of the MiFID II compliance function requirements, and provide additional clarification on certain aspects of the existing guidelines. The consultation closes on 15 October 2019, after which ESMA will

consider responses and publish final guidelines in Q2 2020.

ESMA published a statement on 12 July 2019, relating to the marketing, distribution and sale of CFDs to retail clients. It is concerned when firms advertise that retail clients could become a professional client on request and, separately, advertise the possibility of moving retail clients’ accounts to an intra-group third country entity. The statement warns against these practices on the grounds that they could be a circumvention of ESMA’s temporary product intervention measures on CFDs.

ESMA revised its MiFID II/MiFIR market structure and transparency Q&As on 12 July 2019. The new Q&As clarify the conditions under which the hedging exemption under Article 8 of MiFIR applies, and the treatment of constant maturity swaps under RTS 2 for the purpose of determining whether they have a liquid market.

ESMA revised its MiFID II investor protection Q&As on 11 July 2019. It includes a new Q&A on best execution, setting out criteria to help execution venues, for the purposes of RTS 27, classify financial instruments which do not have calibrated market sizes (i.e. Standard Market Size, Large in Scale, and Size Specific to the Instrument) and are traded on an EU trading venue.

ESMA published, on 18 July 2019, final advice on sustainability considerations in the credit ratings market, along with final

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guidelines on disclosure requirements applicable to CRAs. ESMA's advice suggests that approaches taken by CRAs to considering ESG factors can vary significantly across asset classes, and seeks to provide consistency. Separately, the final guidelines are intended to ensure greater transparency around where ESG factors are considered in CRAs’ credit assessments.

ESMA updated its Public Register for the Trading Obligation for derivatives under MiFIR on 23 July 2019. It added three French venues recently authorised (Tullet Prebon and ICAP EU OTFs, and TP ICAP EU MTF), where some of the classes of derivatives subject to the trading obligation are available for trading.

ESMA published Call for evidence: impact of the inducements and costs and charges disclosure requirements under MiFID II on 17 July 2019. Pursuant to Article 90 of MiFID II, this aims to gather insights on how effectively these two MiFID II investor protection regimes have embedded in the market. Stakeholders should provide feedback by 6 September 2019, after which the EC is expected to present a report to the Council and EP.

ESMA published revised Q&As on data reporting requirements under MiFIR on 29 July 2019. It revises an existing Q&A on how firms should populate Field 24 (expiry date) of RTS 23 for financial instruments without a defined expiry date but where population is mandatory. ESMA clarifies

that, in such circumstances, Field 24 should be populated with the value 9999-12-31, in accordance with the International Organisation for Standardisation format.

European CSD Association The European CSD Association (ECSDA) updated its draft ECSDA CSDR Penalties Framework on 3 July 2019. The framework aims to harmonise the settlement penalties mechanisms across all CSDs subject to CSDR.

European Money Markets Institute The European Money Markets Institute

(EMMI) announced on 3 July 2019 that it was authorised as a benchmark administrator under BMR by its competent authority. Following the authorisation of EMMI, ESMA issued a statement on 4 July 2019 confirming the compliance of EURIBOR with BMR and its inclusion in the ESMA benchmark register. The authorisation means that EU-supervised entities will be able to use EURIBOR beyond the end of the applicable BMR transitional period, i.e. from 2022 onwards.

The European Money Markets Institute (EMMI) published the EURIBOR Benchmark Statement on 17 July 2019. The statement covers: market or economic reality measured by the benchmark, potential limitations of the benchmark, input data and methodology, exercise of judgement/discretion by the administrator/contributors, cessation and change and of the methodology, and specific disclosures for interest rate and critical benchmark.

FATF FATF updated its Recommendations on 3 July 2019, in light of the finalisation of guidance relating to virtual assets (cryptoassets). The update includes an Interpretive Note to Recommendation 15, which outlines how it applies to virtual assets, and a number of new definitions.

FCA The FCA published policy statement,

PS19/19 – FCA regulated fees and levies 2019/20: Including feedback on CP19/16 and ‘made’ rules on 1 July 2019. It confirms its Annual Funding Requirement for 2019/20 at £588.5m, an increase of 2.7% and £14.6m on the previous year, as proposed in CP19/16.

The FCA announced on 5 July 2019 that it has extended the deadline for solo-regulated firms to submit their form for notification to be brought into the SM&CR. All solo-regulated firms will be brought into the regime from 9 December 2019. The FCA has extended the deadline for submitting forms for notification from 9 September 2019 to 24 November 2019.

The FCA published a speech on 4 July 2019 by Edwin Schooling Latter, Director of Markets and Wholesale Policy, on the regulator’s priorities for the pensions sector. He said the FCA’s key strategic priorities for the next few years are: value for money and improving consumer engagement. The regulator is considering possible additional measures to help consumers compare value for money, and

whether further interventions should be focused on providers or independent governance committees, or both.

The FCA launched a survey to improve the way it collects regulatory data from firms on 16 July 2019. The survey is intended to support the FCA’s plans to replace Gabriel, its data collection system, with a more efficient platform. The FCA plans to share more information about its data strategy plans later this year.

The FCA published the final Prospectus Regulation Rules Instrument 2019 on 15 July 2019. The instrument makes various changes to the FCA Handbook to align it with the EU Prospectus Regulation, and relates to the FCA’s PS19/12: Changes to align the FCA Handbook with the EU Prospectus Regulation, published in May 2019. The instrument came into force on 21 July 2019.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered a speech on AI and the future of regulation on 16 July 2019. He described how the FCA's focus on AI can be split into three aspects: continuity, public value, and collaboration. Ultimately, the speech sought to reassure consumers that there is a strong set of rules already in place to cope with current developments, while the relevant bodies collaborate to define the future framework.

The FCA introduced changes to its Handbook in Handbook Notice No 68 on 26 July 2019. These include changes relating

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to the Prospectus Regulation rules, individual accountability, conduct of business sourcebook and handbook administration. The updated changes came into force in July 2019 with the exception of the conduct of business sourcebook which will come into force on 1 August 2020.

The FCA published a progress update on its evaluation of the RDR and FAMR on 22 July 2019, following a call for input from industry stakeholders. Key emerging themes include widening consumer access to appropriate services, clarifying the boundaries between guidance and advice, enhancing consumer education and innovation in the investment advice market. The FCA will conduct additional research by surveying a sample of firms and reviewing data gathered through the Financial Lives survey, with the final report expected to be published in 2020.

The FCA published CP19/24: Recovering the costs of the Office for Professional Body Anti-Money-Laundering Supervision (OPBAS) on 29 July 2019. It has proposed a variable fee for professional body supervisors of £44.36 per supervised individual above the 6,000 person threshold for 2019/20, and welcomes comments by 25 September 2019.

The FCA proposed CP19/26: Draft technical standards on the content and format of STS notifications under the onshored Securitisation Regulation on 25 July 2019. These are precautionary arrangements to ensure that these

requirements become operative in the UK from 1 November 2019 in circumstances where they have not already entered into EU regulation and assuming a 31 October 2019 no-deal Brexit. The consultation closes on 27 August 2019.

FCA and BoE The FCA and the BoE signed an updated MoU on 18 July 2019. The updated MoU revises the framework in which the regulators co-ordinate their responsibilities. It reflects the expansion of the regulators' respective remits and organisational changes, including a change in the MoU's title to reflect the PRA's full integration into the BoE with its de-subsidisation in 2017.

FSB On 11 July 2019 the FSB launched a survey to gather input for developing a toolkit of effective practices relating to a financial institution’s response to, and recovery from, a cyber incident. The questions are aimed at identifying the key challenges and effective industry practices related to the Respond and Recover functions. The survey closes on 28 August 2019. Final publication of the toolkit is not due until late 2020.

HMT HMT published the draft Financial Services

(Miscellaneous) (Amendment) (EU Exit) (No 3) Regulations 2019 on 16 July 2019. The Regulations amend and revoke parts of retained EU law to address deficiencies arising from Brexit. They also make minor amendments to financial services statutory

instruments made under the European Union (Withdrawal) Act 2018.

HMT amended its Brexit Statutory Instrument for EMIR and explanatory memorandum on 25 July 2019. It accommodates changes brought by EMIR Refit to ensure that EMIR, as it will be applicable in EU law on 31 October 2019, continues to function effectively in the UK after Brexit. The document addresses the transfer of functions, the clearing obligation suspension, the pension fund clearing suspension, and intragroup transactions. Those provisions of EMIR Refit that don’t apply until after 31 October 2019 won’t form part of UK law on exit day, if the UK leaves the EU on 31 October 2019.

IBA IBA published a second update on its USD

ICE Bank Yield Index on 10 July 2019. The most important update is in relation to the methodology whereby the Index is determined by combining a term SOFR yield curve and a bank credit-spread curve based upon transactional data.

IBA updated its LIBOR Code of Conduct on 24 July 2019. The code defines the framework within which LIBOR contributors are expected to operate. It may also help LIBOR users in deciding whether LIBOR is appropriate for them to use in contracts.

IBA updated its LIBOR Benchmark Statement and the LIBOR Panel Bank Criteria on 24 July 2019.

IOSCO IOSCO released Statement on Communication and Outreach to Inform Relevant Stakeholders Regarding Benchmarks Transition on 31 July 2019. The statement is particularly relevant to firms with significant direct and indirect exposure to USD LIBOR. It conveys some key messages: RFRs provide a robust alternative to IBORs and can be used in the majority of products; the inclusion of robust fallbacks in new and existing IBOR should be a priority; and moving to RFRs now is the best risk mitigation to LIBOR cessation.

ISDA ISDA published preliminary results to its Supplemental Consultation on Spread and Term Adjustments for Fallbacks in Derivatives Referencing USD LIBOR, CDOR and HIBOR and Certain Aspects of Fallbacks for Derivatives Referencing SOR, on 30 July 2019. The overwhelming majority of respondents preferred the ‘compounded setting in arrears rate’ for the adjusted RFR and the ‘historical mean/median approach’ for the spread adjustment. They also cited a strong desire to use the same adjusted RFR and spread adjustment across all benchmarks covered by the supplemental consultation and the 2018 fallback consultation for the other IBORs.

Official Journal Commission Implementing Decision (EU) 2019/1274 and Commission Implementing Decision (EU) 2019/1275 of 29 July 2019 on the equivalence of the legal and supervisory frameworks applicable to benchmarks in Australia and Singapore in accordance with

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BMR were published in the Official Journal on 30 July 2019. These equivalence decisions allow EU BMR users to continue using any current and future ‘significant’ benchmarks in Australia and ‘designated’ benchmarks in Singapore.

The Risk Coalition The Risk Coalition opened a consultation on the principles and guidance for board risk committees and risk functions in the UK financial services sector on 12 July 2019. The guidance sets out to: develop a common understanding of the purpose and remit of board risk committees and risk functions; promote good practice of risk oversight; and provide a benchmark to support objective assessments. The consultation closes on 20 September 2019, with final guidance due to be published by the end of the year.

UK Government The Government published its response to

the TC’s May 2019 report on consumers’ access to financial services, on 11 July 2019. The TC had made a number of recommendations for both the Government and the FCA. As part of its response, the Government says it’s looking at whether further reform of the consumer credit regulatory regime is needed.

The UK Government published a note summarising a speech made by Business Secretary Greg Clark on 18 July 2019. Clark believes competition law reform is needed in light of big data and tech firms disrupting traditional markets. He highlighted the risk of markets with little

competition and potential new forms of harm that may occur.

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Banking and capital markets

In this section:

Regulation 16 Bank structures 16 Capital and liquidity 16 Payments 17 Accounting 17 PwC publications 17 Also this month 17 A brief roundup of other regulatory developments

Regulation

Bank structures Finalising the UK Resolvability Assessment Framework

The BoE and the PRA finalised their Resolvability Assessment Framework (RAF) on 30 July 2019. This includes a BoE policy statement, The BoE’s Approach to Assessing Resolvability (including five statements of policy) and a PRA policy statement PS15/19 Resolution assessment and public disclosure by firms that implements related rules and supervisory statement SS4/19 Resolution assessment and public disclosure by firms. The framework is the final major piece in the UK's resolution regime for banks and aims to establish the capabilities firms should have to be resolvable and accountable for their own resolvability.

The BoE’s assessing resolvability policy applies to UK banks and building societies with a resolution strategy of bail-in or partial transfer and to material UK subsidiaries of overseas-based banking groups. The BoE plans to evaluate firms against three resolvability outcomes that they must meet from 1 January 2022:

having adequate financial resources

being able to continue to do business through resolution and restructuring

being able to communicate and coordinate within the firm and with the authorities and markets.

The RAF includes the PRA’s requirements for major UK firms with £50bn or more in retail deposits to self-assess their readiness for resolution, submit their assessments to the PRA and publicly disclose a summary of their assessment report. Firms are required to submit their assessments every two years from October 2020 and publish their summaries every two years from June 2021. Repeating, the position it took at the consultation stage, the PRA indicates that it may consider at a later date, extending the application of some or parts of these requirements to other firms subject to resolvability assessment, subject to further consultation.

As part of the RAF the BoE also plans to make public statements concerning the resolvability of each of the major UK firms, ‘identifying any shortcomings where firms have more work to do’. It intends to publish its statements at the same time as, or as soon as possible after, the relevant firm’s public disclosure.

Capital and liquidity EBA assesses impact of Basel III

The EBA released its presentation on Basel III implementation: key findings from the impact assessment and policy recommendations from the public hearing it held on 2 July 2019. This is in response to the EC’s May 2018 call for

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advice on the finalised Basel III standards. The EBA indicates that it intends to make about 140 policy recommendations concerning credit and operational risk, the output floor and securities and financing transactions, covering many of them in this presentation.

Its QIS findings indicate that overall, the weighted average minimum capital requirements (MCRs) of the banks in the sample increase by 24.4% with an aggregate capital shortfall of €135bn. But the EBA explains that this is ‘almost entirely driven by large globally active banks’ with the impact on medium-sized and small banks limited to increases of MCRs of 11.3% and 5.5% respectively. Further, for a quarter of the banks in the sample MCRs decrease. It also notes that the total capital shortfall would be reduced to €59bn if the banks retained their profits throughout the transition period.

The EBA stresses that the QIS results should be viewed in the context of the ‘very conservative assumptions applied’. It also indicates that this QIS is based on different methodological assumptions compared to those used for ‘regular Basel III monitoring’. So it says these findings are not comparable with previous monitoring exercises.

The EBA intends to publish its full report by end-July 2019. It also aims to provide its advice on the remaining elements of the call for advice in Q3/Q4 2019. This concerns the revised FRTB framework, changes to the credit valuation adjustment framework and the macroeconomic impact assessment.

Payments Access to cash debate – PSR weighs-in

The PSR published a call for views in CP19/6: Insights into cash access, use and acceptance

on 24 July 2019, seeking responses on

its access to cash research. The PSR wanted to understand more about the cash landscape, cash usage and options for the future.

It found that only a small proportion (1%) of consumers are wholly reliant upon cash, but the vast majority of respondents had used cash in the past week (83%). The PSR suggests this indicates there is still a widespread need to access cash, albeit at a reduced level. Going forward, it highlights the need to protect access for consumers who are reliant upon cash. For small businesses, the PSR observes that cash deposits are a frequent occurrence, but that cash is also used to pay suppliers and wages. Either way, it notes the need to maintain minimum services for cash depositing is significant.

This is part of a wider debate on access to cash, building upon the work already undertaken by the FCA, HMT and the BoE. The PSR signals that as their work in this area is ongoing, stakeholders will have further opportunities to engage on this issue. The response period closes on 6 September 2019.

Accounting

PwC publications Our video on Demystifying IFRS 9 for banks – business combinations and asset purchases explores the complexities and impacts of

applying IFRS 9 when banks do a business combination or acquire a book of loans.

Also this month

Basel Committee The Basel Committee updated its instructions for Basel III monitoring on 10 July 2019. The updates reflect changes to the guidelines for the collection of December 2018 data from the participating banks. They include changes to the instructions for the calculation of averaged leverage ratio exposures, the reporting of exposures to CCPs and the respective reporting templates.

BoE The BoE issued its six-monthly Financial Stability Report on 11 July 2019. It considers ‘the UK banking system remains strong enough to continue to lend through the wide range of UK economic and financial shocks that could be associated with Brexit’. It also judges that ‘the core UK banking system remains resilient’ to global risks despite those risks increasing during the first half of the year.

EBA The EBA published a progress report on its

roadmap to review the IRB approach on 9 July 2019. The report addresses the concerns about undue variability of own funds requirements with a view to restore trust in IRB models by ensuring comparability of the estimates of risk parameters. The report marks the finalisation of the IRB regulatory review and confirms that the EBA does not intend to

make any further revisions to the IRB approach

The EBA published its first report on the monitoring of LCR implementation in the EU on 12 July 2019. The report provides further guidance on the LCR for banks and supervisors to ensure harmonisation of the LCR across the EU. It also highlights a number of areas that may need further attention from supervisors in their ongoing supervision of liquidity risks.

The EBA published its updated ITS package for the 2020 benchmarking exercise on 16 July 2019. The updates do not change the portfolios for the market risk benchmarking but they reduce the number of the credit risk portfolios to ensure a more proportionate reporting burden. The updates also align the credit risk portfolios to the COREP.

The EBA amended its supervisory reporting with regard to financial information (FINREP) on 16 July 2019. The amendments concern the reporting requirements on NPE and forbearance, profit and loss items and the implementation of the IFRS 16. The first reporting reference date for the amendments will be 30 June 2020.

The EBA published an updated list of CET1 instruments issued in the EU on 22 July 2019. The report highlights how the EBA takes into consideration new developments in CET1 issuances and market practices. The EBA plans to update the report on a regular basis.

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The EBA published its Roadmap for IFRS 9 deliverables on 23 July 2019, setting out its planned post implementation review of accounting ECLs. It includes benchmarking modelling techniques which it intends to integrate with its existing prudential IRB modelling benchmark work. The ‘tentative’ timeline extends beyond 2021, albeit with shorter term deliverables in 2020.

The EBA reported on the regulatory perimeter and authorisation processes for FinTech activities on 18 July 2019. The EBA highlights the regulatory status of FinTech firms aiming for banking and payment services licences and approaches followed by local authorities for these across the EU. Developments on cryptoassets and crowdfunding are also noted.

The EBA published its report on the application of the guidelines for Product Oversight and Governance arrangements on 5 July 2019. The EBA found good consistency in approach and application of the guidelines across the EU. The report also contains examples of what the EBA considers good practice when adhering to the guidelines.

The EBA published its report on the impact FinTech has had upon the business models of payment and e-money institutions on 8 July 2019. The EBA outlines current trends in the market and is pleased to see firms are adapting their business models in line with PSD2.

The EBA published Draft guidelines on the determination of the weighted average maturity of the contractual payments due under the tranche of a securitisation transaction on 31 July 2019. The EBA wants to facilitate the use of the external rating based approach for calculating the risk weighted exposure amount of securitisation positions under CRR by less sophisticated firms. The consultation closes on 31 October 2019.

The EBA published its final report on recommendations on the equivalence of confidentiality regimes. The report assesses the confidentiality regimes of third countries with respect to CRD and makes recommendations. NCAs are required to report whether they comply with these recommendations two months after the publication of the translations in the official EU languages.

ECB The ECB published the final chapters of its guide to internal models on 8 July 2019. The chapters cover credit risk, market risk and counterparty credit risk and aim to ensure a consistent use of internal models by firms to calculate capital requirements.

European Court of Auditors The European Court of Auditors (ECA) published a special report, EU-wide stress tests for banks: unparalleled amount of information on banks but greater coordination and focus on risks needed on 10 July 2019. In a press release the EBA says it is ‘committed to considering the ECA’s recommendations in

its ongoing discussion on possible longer-term changes’. The EBA also says it’s already introducing greater transparency on pillar 2 capital requirements in its 2020 EU-wide stress test methodology in line with one of the recommendations.

European Forum of Deposit Insurers The European Forum of Deposit Insurers (EFDI) updated its cross-border cooperation Rulebook on 5 July 2019. The Rulebook supplements the EFDI’s model deposit guarantee scheme co-operation agreement by detailing the practices, formats, templates and specifications to be used by DGSs under the agreement. The updates will come into effect on 1 January 2020.

FCA The FCA published a Dear CEO letter,

which includes an attestation, for non-bank payment services firms on 4 July 2019. The FCA highlights a number of weaknesses in the way firms segregate funds, conduct reconciliations and govern their businesses. The letter includes an attestation, to confirm compliance, to be completed by 31 July 2019.

The FCA published the findings from its review of business continuity planning on 11 July 2019, covering a number of small and medium-sized retail banks, payments institutions and electronic money institutions. The report sets out both good practice and areas for enhancement across the dimensions of planning and preparation, response and recovery. It also acts as a reminder to firms to familiarise

themselves with the concepts outlined in the Discussion Paper on Operational Resilience as well as the relevant areas of the FCA Handbook.

The FCA published its Alternatives to high-cost credit report on 22 July 2019. The FCA explores the demand for alternatives to high-cost credit, their availability, actions it has taken since commitments in December 2018 and the roles of other organisations in supporting alternatives.

FRC The FRC published Practice Note 19 (Revised) – the audit of banks and building societies in the UK on 3 July 2019. The revisions include reflecting changes to UK Auditing Standard ISA (UK) 540 (Revised December 2018) – auditing accounting estimates and related disclosures together with related guidance concerning the audit of estimates for expected credit losses.

FSB The FSB published its Review of the technical implementation of the TLAC Standard on 2 July 2019. It concludes that ‘progress has been steady and significant’ concerning the setting of external TLAC by regulatory authorities and the issuance of TLAC by G-SIBs. The FSB sees no need to modify the TLAC standard at this time. But further implementation efforts are needed, including concerning the appropriate group-internal distribution of TLAC resources across home and host jurisdictions.

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FSI The FSI published an insights paper on Proportionality under Pillar 2 of the Basel framework on 5 July 2019 and which also complements the Basel Committee’s recent June 2019 report, Overview of Pillar 2 supervisory review practices and approaches. A key aim of the FSI’s study is to determine whether and how supervisory authorities apply proportionality in tailoring risk management expectations and supervisory practices.

PRA The PRA published CP 15/19: Large

exposures: Reciprocation of French measure on 15 July 2019. The paper sets out the PRA’s proposal to apply a tighter limit for large exposures to certain French non-financial corporations to reciprocate the same measure imposed by France. The consultation closes on 6 September 2019.

The PRA published Consultation Paper 17/19: Counterparty credit risk: treatment of model limitations in banks’ internal models on 23 July 2019. The paper sets out the PRA’s proposed changes to its counterparty credit risk framework, clarifying its expectations regarding the treatment of model limitations and assumptions. The consultation closes on 25 October 2019.

The PRA published Policy Statement 14/19: Credit risk mitigation: Eligibility of financial collateral on 23 July 2019. The statement clarifies the PRA’s expectations regarding credit risk mitigation with respect

to the eligibility of financial collateral as funded credit protection and the concept of material positive correlation in transactions with limited recourse. These rules took effect on 23 July 2019.

PSR The PSR consulted on 11 July 2019 on its

profitability analysis as part of its market review into card acquiring services. Comments were invited until 1 August 2019.

The PSR published CP19/7: Powers and Procedures Guidance on 25 July 2019. The PSR seeks views on a range of topics including its expanded remit, factors for considering an enforcement case and its future challenges. The consultation is open until 17 October 2019.

Single Resolution Board The Single Resolution Board (SRB) published a paper on the Public Interest Assessment (PIA) on 3 July 2019. The paper sets out the factors that the SRB takes into account when conducting a PIA to ensure a common understanding across the Banking Union. It also explains how the SRB applies the criteria as set out in EU law.

UK Parliament The UK Parliament published an Amendment to the RAO and associated Impact Assessment, on 2 July 2019. Parliament introduces an exemption from Article 36A (credit broking activity) for registered social landlords and housing associations who refer

individuals to social and community lenders (e.g. credit unions).

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Asset management

In this section:

Regulation 20 Conduct 20 Distribution 20 Fee structures 21 Also this month 21 A brief roundup of other regulatory developments

Regulation

Conduct Flagging wealth management and stockbroking risks

The FCA published a Dear CEO letter on 23 July 2019, related to key risks across the wealth management and stockbroking sectors. This forms part of the regulator’s supervision strategy for firms in these sectors, which began in April 2019. The FCA believes firms in these sectors can harm clients in the following four ways:

reduced levels of savings and investments due to fraud, investment scams and inadequate client money, or assets controls

a loss of confidence in the industry’s ability to deliver their financial objectives due to mismanagement of conflicts of interest and market abuse

reduced levels of savings and investments due to order handling procedures and execution processes that do not deliver best outcomes

an inability to understand the costs of services provided by firms, due to insufficient or inaccurate disclosure of costs and charges.

The FCA says it intends to focus on financial crime (including market abuse), practices and controls related to best execution as well as

SM&CR implementation. The regulator also plans to continue its ongoing supervisory work on how wealth managers have embedded costs and charges disclosures under MiFID II, following up on its February 2019 review. The FCA expects firms to review their disclosures to ensure compliance with relevant requirements. It also warns that firms should be particularly alert to the need to disclose all transaction and incidental costs and charges to consumers, including implicit costs and performance fees.

Distribution Final EU rules to facilitate cross-border distribution of funds

The EC published a Directive and Regulation to facilitate the cross-border distribution of investment funds on 12 July 2019.

The Directive, which amends AIFMD and the UCITS directive, aims to enable asset managers to engage in pre-marketing activities to gauge the interest of potential investors. The Regulation, which amends EuVECA, EuSEF and PRIIPs regulations, aims to align national requirements for marketing funds and regulatory fees, and harmonise the process and requirements for the verification of marketing material by NCAs.

Both pieces of legislation enter into force on 1 August 2019. The Regulation will take effect on that date, with the exception of a limited number of provisions. The Directive must be

Andrew Strange FS Regulatory Insights

andrew.p.strange@pwc.com

Andrew Strange FS Regulatory Insights

andrew.p.strange@pwc.com

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transposed by Member States by 2 August 2021.

Fee structures ESMA proposes plans to harmonise performance fees

ESMA proposed Guidelines for performance fees in UCITS on 16 July 2019, to improve harmonisation in the way that performance fees can be charged to UCITS.

Current practices related to performance fee structures, as well as the circumstances on which such fees can be paid, vary among EU Member States and ESMA is concerned that this creates risks of regulatory arbitrage and inconsistent levels of investor protection. As such, it proposes new guidelines setting out common criteria for NCAs on a number of issues, including fee calculation methods, consistency of fee models with fund objectives, disclosure of the fee model, and the period over which a fee is charged. ESMA has regard to IOSCO’s Good Practice for Fees and Expenses of Collective Investment Schemes when developing its proposals.

The consultation closes on 31 October 2019. ESMA will consider feedback in Q4 2019 and publish final guidelines shortly afterwards.

Also this month

ESMA ESMA published the final version of its guidelines on stress testing scenarios under the EU MMF Regulation. The guidelines establish common reference parameters of the stress scenarios that MMFs should include in

their stress tests. ESMA expects the MMFs to submit their first quarterly reports to the relevant NCAs in Q1 2020.

IOSCO IOSCO published a statement on 18 July 2019 defending its 2018 recommendations on liquidity management in investment funds. This follows recent comments from the BoE, which suggested that IOSCO’s recommendations were not sufficiently prescriptive in how funds’ investment strategies should align with redemption terms. IOSCO considers that its recommendations should provide domestic regulators with flexibility to apply measures appropriately to deal with liquidity risks specific to their markets, but notes that it intends to review its approach in early 2020.

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Insurance

In this section:

Regulation 22 Consumer issues 22 Disclosure and distribution 22 Operational resilience 23 Remuneration 23 Retail products 23 Solvency II 23 Stress testing 24 Also this month 24 A brief roundup of other regulatory developments

Regulation

Consumer issues FCA seeks improved access to travel insurance

The FCA published CP19/23 – Signposting to travel insurance for consumers with medical conditions on 15 July 2019. Following on from Feedback Statement 18/1: Call for input on access to insurance (June 2018), the FCA is consulting on proposals to help consumers with pre-existing medical conditions (PEMCs) access suitable travel insurance.

The FCA plans to introduce a new ‘signposting’ rule, applying when cover:

is declined or cancelled mid-term due to a PEMC

is offered with an exclusion for a PEMC that cannot be removed

is offered with an additional loading to their base premium due to their PEMC.

In these cases, insurers must provide consumers with details of a directory of travel insurance firms with the appetite and capability to cover consumers with more serious PEMCs.

In addition, the FCA is working to improve consumer understanding of the travel insurance market. It plans to produce material on PEMCs to help consumers understand the implications of travelling with exclusions, and

how factors such as country of travel can impact medical costs and therefore travel insurance premiums.

The comment period ends on 15 September 2019.

Disclosure and distribution EIOPA examines national general good rules

EIOPA published an IDD-related Report analysing national general good rules on 22 July 2019. It compares the use, by Member States, of ‘general good’ rules and the consequences for the market and intermediaries. These are rules applied in Member States that are additional to the requirements of the IDD and lead to national differences in approach.

EIOPA's main findings include identifying that collectively, the quantity and level of diversity of information requirements contained in ‘general good’ rules, lead to significant additional entry costs for entities seeking to carry out cross-border business.

To help passporting insurance distributors, EIOPA plans to continue to work towards better visibility and accessibility of the ‘general good’ rules applied by Member States. It also intends to consult on consumer protection related provisions considered disproportionate and having an adverse impact on cross-border business. EIOPA also proposes further work on the general good rules imposed on

Jim BichardUK Solvency II Leader

jim.bichard@pwc.com

Kareline Daguer FS Regulatory Insights

kareline.daguer@pwc.com

Kareline Daguer FS Regulatory Insights

kareline.daguer@pwc.com

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incoming insurance distributors in areas of home Member State competence such as registration and organisational requirements.

The comment period ends on 22 September 2019.

Operational resilience EIOPA proposes guidelines on outsourcing to cloud providers

EIOPA launched a consultation paper on proposed guidelines on outsourcing to cloud service providers on 1 July 2019. It is intended to help insurance and reinsurance undertakings understand how the outsourcing provisions in the Solvency II Directive and the Delegated Regulation need to be applied in the case of outsourcing to cloud service providers. The guidance draws upon parallel EBA documents on cloud outsourcing (in force since 2017) and general outsourcing (coming into force in September 2019).

Undertakings and competent authorities will be expected to take into account the principle of proportionality, and the materiality of the service outsourced in applying the guidelines. The deadline for responses is 30 September 2019. The guidelines will apply from 1 July 2020 for new or amended arrangements, while existing arrangements must be compliant by 1 July 2022.

Remuneration Remuneration requirements – PRA flags inconsistencies

The PRA wrote to insurers’ Remuneration Committee (RemCo) Chairs about Remuneration requirements – PRA findings and expectations on 12 July 2019. It

emphasises the importance of firms’ remuneration policies and practices as they define incentives and drive underwriting decisions, individuals’ behaviour and organisational culture.

The PRA reports that it has found a wide range of interpretations of the Solvency II remuneration requirements and although firms’ implementation of the rules has improved over time, inconsistencies remain. Its main concerns include: the identification of material risk takers; poorly designed variable remuneration structures; demonstration of consideration; and use of ex-post risk adjustments and differences in the design, roles, and responsibilities of RemCos.

Retail products MoJ increases personal injury discount rate

On 15 July 2019, the Lord Chancellor announced that following his review of the personal injury discount rate, also known as the Ogden rate, he has increased the rate from minus 0.75% to minus 0.25% with effect from 5 August 2019.

Compensation awards for victims of life-changing injuries are intended to put the claimants in the same financial position as if they had not been injured, including loss of future earnings and care costs. The personal injury discount rate is used to adjust these lump sum awards for future losses, costs and expenses to account for the amount victims expect to earn by investing their awards. The rate was last set in 2017 when it was lowered from plus 2.5% to minus 0.75%. This led to concerns that claimants were being

substantially over-compensated, increasing financial pressure on public services that have large personal injury liabilities, such as the NHS, with knock-on effects to the taxpayer.

The Civil Liability Act 2018 requires that the rate is regularly reviewed by an independent expert panel and each subsequent review is started within five years of the last review.

Solvency II EIOPA consults on Solvency II reporting

Following the EC’s Call for Advice in February 2019, EIOPA published a consultation package on supervisory reporting and public disclosure on 12 July 2019. It considers: general issues on supervisory reporting and public disclosure; individual quantitative reporting templates (QRTs) and annexes; SFCR and narrative supervisory reporting; and financial stability reporting.

Among other things, EIOPA proposes:

to extend the deadline for annual reporting by two weeks

to divide templates into two categories, core and non-core, with risk-based thresholds different for annual or quarterly submissions

deletion and simplification of a number of QRTs both for quarterly and annual reporting

harmonisation of templates on cross-border information

creation of new templates to incorporate new information such as on cyber risks and

product-by-product information for non-life business

revision of templates such as the look through approach for collective investment funds and the variation analysis

simplifications of annual reporting and partial exemption from the SFCR for pure captives' undertakings.

EIOPA is planning to improve the structure of the SFCR by introducing separate dedicated sections for policyholders and the professional public. For the professional public, it proposes a more quantitative focus, in a machine readable and processable format, with a streamlined structure to improve readability and comparability. For insurers with external policyholders, EIOPA proposes including a simple, clear policyholders section covering solo information only. In addition, EIOPA is proposing to require that the Solvency II balance sheet is subject to external auditing. The comment period ends on 18 October 2019.

Later in 2019, EIOPA plans to launch a second consultation addressing group quantitative reporting templates, regular supervisory reporting, technical aspects of the reporting and disclosure processes, data quality and reporting and disclosure linked to other areas of the 2020 Solvency II Review, including the Long-Term Guarantee templates.

EIOPA consults on guarantee scheme harmonisation

EIOPA consulted on Proposals for Solvency II 2020 Review – Harmonisation of National

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Insurance Guarantee Schemes (NIGSs) on 12 July 2019. It outlines its draft views on the need for minimum harmonising rules for NIGSs in response to the EC’s Call for Advice (February 2019). EIOPA recommends the establishment of a European network of NIGSs, which are sufficiently harmonised and adequately funded. But, it also wants to avoid excessive burdens on insurers and Member States, so it recommends that a flexible approach is taken to the legal structure and set-up of the schemes.

In its proposals, EIOPA considers the role and functioning of a NIGS, the geographical coverage, eligible policies, eligible claimants, coverage level, funding, disclosure and cross-border cooperation and coordination. EIOPA also advises that the harmonised framework is reviewed at least every five years after it becomes effective.

The comment period ends on 18 October 2019.

EIOPA revises reporting requirements

EIOPA published its Insurance Data Point Model and Taxonomy 2.4.0 Public Working Draft (PWD) for review and Release notes on 15 July 2019. It expects insurers to use the updated Insurance Data Point Model and Taxonomy from the 31 December 2019 year end. EIOPA encourages stakeholders to report any issues and it plans to publish the 2.4.0 Hotfix on 1 November 2019 in line with its Governance of Taxonomy Releases, schedule for 2019-2021.

On 17 July 2019, EIOPA also published:

Draft amendment to Commission Implementing Regulation (EU) 2015/2450 of 2 December 2015 laying down ITS with regard to the templates for the submission of information to the supervisory authorities

Draft amendment to Commission Implementing Regulation (EU) 2015/2452 of 2 December 2015 laying down ITS with regard to the procedures, formats and templates of the SFCR.

These draft amendments update the Solvency II reporting requirements in line with changes to the delegated acts. They cover, among other things, changes relating to securitisations and simplifications in the SCR calculation. The majority of the changes enter into force 20 days after the date of publication in the Official Journal, with the exception of changes in respect of loss absorbing capacity of deferred tax which take effect from 1 January 2020 (these are voluntary until 31 December 2019).

Seeking consistent remuneration principles application

EIOPA consulted on its draft Opinion on the supervision of remuneration principles in the insurance and reinsurance sector on 25 July 2019. It aims to develop guidance to encourage both supervisors and insurers across the EU to take a more consistent approach to the application of the remuneration principles in Solvency II related delegated regulation.

EIOPA outlines its expectations for supervisors and encourages them to take a proportionate approach to supervision by focusing on firms' staff identified as ‘potential higher profile risk-

takers’. It also proposes a benchmark approach to trigger supervisory dialogue. In its approach, EIOPA expects supervisors to take into account both an undertaking’s overall risk profile and the design of its remuneration policy and to adopt a proportionate and more flexible approach for low risk insurers.

The consultation closes on 30 September 2019.

PRA clarifies group own funds requirements

The PRA published CP16/19 Solvency II: Group availability of subordinated liabilities and preference shares on 22 July 2019. It amends SS 9/15 Solvency II: Group supervision to clarify its approach regarding determining the availability of subordinated liabilities and preference shares in group own funds. It sets out its expectations in relation to firms demonstrating that these own funds items are available to meet losses elsewhere in the group and so eligible to cover the group SCR.

The PRA proposes to implement these amendments from the date of publication of its final policy. But it intends the changes won’t apply retrospectively to determinations made prior to the date these revisions become effective. The consultation closes on 21 October 2019.

Stress testing EIOPA plans enhanced stress testing approach

EIOPA published a Discussion Paper on Methodological principles of insurance stress testing on 22 July 2019. It has developed a toolbox of methodological principles and

guidelines to enhance its regular EU-wide stress testing exercises.

EIOPA focuses on the ‘bottom-up’ approach to stress testing, which requires participating institutions to perform calculations following its methodology. It expects participants to calculate the impact of the prescribed shocks on their balance sheet and capital requirements in accordance with its guidance using their own models. In this paper, EIOPA seeks feedback on the process and its objectives, scope, scenario design, shocks and their application together with data collection and validation.

As part of its broader process to enhance its stress testing framework, EIOPA also intends to work on other stress testing related issues such as the assessment of liquidity positions under adverse scenarios, assessment of the vulnerabilities towards climate-related risks and potential approaches to multi-period stress tests.

The comment period ends on 18 October 2019.

Also this month

EIOPA In July 2019, EIOPA published further

answers to questions on: (EU) No 2009-138 Solvency II Directive, (EU) No 2015-35 supplementing Directive 2009-138, (EU) No 2015-2450 templates for the submission of information to the supervisory authorities, guidelines on health catastrophe risk sub-module,

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guidelines on basis risk and other questions. EIOPA publishes Q&A on Regulation to ensure consistent and effective application of EU regulation and to aid supervisory convergence.

EIOPA published its latest Risk Dashboard on 26 July 2019. Overall, based on the first quarter 2019 Solvency II data, it finds that the risk exposure of the insurance sector in the EU continues to remain stable with macro and market risks now at a high level. It reports that this is due to a further decline in swap rates and lower returns on investments in 2018, which put strain on those life insurers offering guaranteed rates.

IAIS Following the 2018 Global Reinsurance Market Survey, the IAIS published a Global Insurance Market Report on 10 July 2019. Overall, it finds the insurance market stable, showing growth potential albeit operating in a challenging macroeconomic environment characterised by rising global debt levels, rising inflation and low interest rates. It notes that non-life insurers continue to operate in soft market conditions, while life insurers remain exposed to vulnerabilities stemming from prolonged low interest rates and potential disruption caused by an abrupt rate rise.

PRA The PRA published Version 1.1.0 BoE

Insurance XBRL taxonomy feedback request on 17 July 2019. It updates the Solvency II taxonomy for changes to the NSTs, internal model output, market risk

sensitivities and standard formula reporting set out in CP13/19: Occasional Consultation Paper. The comment period ended on 7 August 2019 and the PRA aims to publish the final version by the end of October 2019.

The PRA published Insurance special purpose vehicles (ISPVs) – Frequently Asked Questions (FAQs) on 22 July 2019. It aims to help parties seeking authorisation for an ISPV understand the application process and the PRA’s supervisory approach. The PRA also updated its ISPV webpage to include amended application forms.

RFRWG Tushar Morzaria, Chair of the RFRWG, sent a letter to EIOPA Chair Gabriel Bernandino on 9 July 2019 asking for the removal of recognised Solvency II barriers to IBOR transition and the establishment of a pan-European Taskforce. Morzaria points out that: any resulting changes in the interest rate benchmarks used by EIOPA to derive risk free discount rates will impact the value of insurers’ liabilities, thus requiring recalibrations of associated investments (including hedges); and if risk free discount rates are derived from alternative RFRs, then the credit risk adjustment required under Solvency II will no longer be appropriate and will need to be rethought.

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Monthly calendar

Open consultations

Closing date for responses

Paper Institution

21/08/19 CP11/19 - Solvency II: Maintenance of the transitional measure on technical provisions PRA

06/09/19 FMSB issues new Statement of Good Practice on Conflicts of Interest FMSB

06/09/19 MiFID II/MiFIR review report on the development in prices for pre- and posttrade data and on the consolidated tape for equity instruments ESMA

06/09/19 CP15/19: Large exposures: Reciprocation of French measure PRA

06/09/19 CP19/6: PSR’s research into cash access, use and acceptance PSR

13/09/19 CP19/20: Our framework: assessing adequate financial resources FCA

13/09/19 TEG report on EU taxonomy - Call for feedback EC

15/09/19 CP19/23: Signposting to travel insurance for consumers with medical conditions FCA

18/09/10 CP18/19: UK Withdrawal from the EU: Changes following extension of Article 50 BoE

27/09/19 CP14/19: Pillar 2 liquidity: PRA110 reporting frequency threshold PRA

30/09/19 Draft Guidelines on loan origination and monitoring EBA

30/09/19 Consultation on draft opinion on the supervision of remuneration principles in the insurance and re-insurance sector EIOPA

30/09/19 Consultation paper on the proposal for guidelines on outsourcing to cloud service providers EIOPA

03/10/19 CP19/22: Prohibiting the sale to retail clients of investment products that reference cryptoassets FCA

04/10/19 Draft RTS on liquidity horizons for the Internal Model Approach under points (a) to (d) of Article 325bd(7) of Regulation (EU) No 575/2013 (CRR II) EBA

04/10/19 Draft RTS on back-testing requirements under Article 325bf(9) and profit and loss attribution requirements under Article 325bg(4) of Regulation (EU) No 575/2013 (CRR II)

EBA

04/10/19 Draft RTS on criteria for assessing the modellability of risk factors under the Internal Model Approach under Article 325be(3) of Regulation (EU) No 575/2013 (CRR II)

EBA

04/10/19 Consultation on Draft Guidelines on disclosure requirements under the Prospectus Regulation ESMA

18/10/19 Consultation Paper on Proposals for Solvency II 2020 Review Harmonisation of National Insurance Guarantee Schemes EIOPA

18/10/19 Consultation Paper on proposals for Solvency II 2020 Review Cover Note - Package on Supervisory Reporting and Public Disclosure EIOPA

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Closing date for responses

Paper Institution

30/10/19 CP19/25: Pension transfer advice: contingent charging and other proposed changes FCA

31/10/19 ESMA consults on MiFID II compliance function requirements ESMA

31/10/19 Consultation Paper - Guidelines on performance fees in UCITS ESMA

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Forthcoming publications Date Topic Type Institution

Asset management

Q3 2019 Proposed amendment of permitted links rules Policy statement FCA

Q3 2019 Amendments to bond market liquidity and size specific to the instrument thresholds under MiFIR

Amendment to RTS ESMA

Q3 2019 Illiquid assets and open-ended funds – feedback to CP18/27 and final rules Policy statement FCA

Q4 2019 Functioning of the consolidated tape equity under MiFID II Report ESMA

Q4 2019 Prices for pre and post-trade data under MiFIR Report/technical advice ESMA

Q4 2019 EU investment firm prudential regime implementation Consultation paper FCA

Banking

Q3 2019 Review of the disclosure requirements for the LCR Review EBA

Q3 2019 ITS on MREL disclosure and reporting Consultation EBA

Q3 2019 Guidelines on credit risk mitigation Guidelines EBA

Q3 2019 Feedback on cash savings market discussion Feedback statement/consultation paper FCA

Q4 2019 Draft ITS on Pillar 3 disclosures Draft ITS EBA

Q1 2020 Mortgage market study Final report FCA

Cross-sector conduct

Q1 2020 Treating customers fairly and data Discussion paper FCA

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Date Topic Type Institution

Insurance

Q2-Q4 2019 Solvency II outstanding issues (Inc. ongoing assessment of the effective value test)

Consultation paper PRA

Q4 2019 General insurance value measures reporting Policy statement FCA

December 2019 General insurance pricing practices market study Final report FCA

Operational resilience

Q4 2019 Building the financial sector’s operational resilience Consultation paper PRA/FCA

Q1 2020 Cyber multi-firm review findings Review findings FCA

Pensions

Q4 2019 Independent governance committees remit extension Policy statement FCA

Securities and markets

Q3 2019 Data use and access to data in wholesale markets Call for input FCA

Supervision

Q1 2020 FCA principles review Discussion paper FCA

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

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Glossary

ABI Association of British Insurers

ABS Asset Backed Security

AI Artificial intelligence

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)

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

BRRD II Bank Recovery and Resolution Directive (EU) 2019/879 amending BRRD

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

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

ComFrame The Common Framework

CONC FCA consumer credit sourcebook

COREP Standardised European common reporting

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

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

31 PwC | FS regulatory, accounting and audit bulletin | August 2019

CPMI Committee on Payments and Market Infrastructures

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

CRD V Capital Requirements Directive (EU) 2019/878 amending CRD IV

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

CRR II Capital Requirements Regulation (EU) 2019/876 amending CRR

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

DLT Distributed ledger technology

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECL Expected credit loss

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

EFTA European Free Trade Association

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

ESG Environmental, social and governance

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

32 PwC | FS regulatory, accounting and audit bulletin | August 2019

ESEF European Single Electronic Format

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

€STR Euro short-term rate

ETC Exchange-traded commodity

ETN Exchange-traded note

EU European Union

EU Securitisation Regulation

Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific 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

EURIBOR Euro Interbank Offered Rate

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

EuSEF The European social Entrepreneurship Funds Regulation

EuVECA European Venture Capital Funds Regulation (EU) 345/2013

FAMR Financial Advice Market Review

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

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

FICC Fixed income, currencies and commodities

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

FiCOD Financial Conglomerates Directive 2002/87/EC

FMI Financial Market Infrastructure

FMLC Financial Markets Law Committee

FMSB FICC Markets Standard Board

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FRTB Basel Committee fundamental review of the trading book market risk capital requirements

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

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

HCSTC High Cost Short Term Credit

HMRC Her Majesty’s Revenue and Customs

HMT Her Majesty’s Treasury

IA Investment Association

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

33 PwC | FS regulatory, accounting and audit bulletin | August 2019

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

ICO Initial coin offering

ICOBS Insurance: Conduct of Business Sourcebook

ICPs Insurance Core Principles

ICT Information and Communication Technology

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 Organisation of Securities Commissions

IRB Internal Ratings Based

IRRBB Interest rate risk in the banking book

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

KIID Key Investor Information Document

KYC Know your customer

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

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

34 PwC | FS regulatory, accounting and audit bulletin | August 2019

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

NPE Non-performing exposure

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

PERG Perimeter Guidance Manual

PIFs Personal investment firms

PPI Payment Protection Insurance

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

P2P Peer to Peer

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

RFRs Risk-free rates

RFRWG The Risk-free Rate Working Group of the BoE

RONIA Repurchase Overnight Index Average

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

35 PwC | FS regulatory, accounting and audit bulletin | August 2019

RWA Risk-weighted assets

SARON Swiss Average Rate Overnight

SCR Solvency Capital Requirement (under Solvency II)

SCV Single customer view

SEC Securities and Exchange Commission (US)

SEPA Single Euro Payments Area

SFP Structured finance product

SFT Securities financing transaction

SFTR Securities Financing Transactions Regulation (EU) 2015/2365

SFO Serious Fraud Office

SI Systematic internaliser

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

SOFR Secured Overnight Financing Rate

Solvency II Directive 2009/138/EC

SONIA Sterling Overnight Index Average

SPV Special purpose vehicle

SREP Supervisory Review and Evaluation Process

SRF Single Resolution Fund

SRM Single Resolution Mechanism

SRMR Single Resolution Mechanism Regulation (EU) No 806/2014

SRMR II Single Resolution Mechanism Regulation (EU) 2019/877 amending SRMR

SSM Single Supervisory Mechanism

SSR Short Selling Regulation (EU) 236/2012

STS Simple Transparent and Standardised (concerning securitisations)

SUP FCA supervision manual

SYSC The part of the FCA handbook titled senior management arrangements, systems and controls

T2S TARGET2-Securities

TC Treasury Committee

TLAC Total Loss Absorbing Capacity

TMTP Transitional Measure on Technical Provisions

TONA Tokyo Overnight Average Rate

TPR The Pensions Regulator

TR Trade Repository

UCITS Undertakings for Collective Investments in Transferable Securities

UCITS V UCITS V Directive 2014/91/EU

UKLA UK Listing Authority

UK Finance Trade body representing the banking and finance industry, formed by a merger of a number of associations including the British Bankers' Association

UTI Unique Trade Identifier

XBRL extensible Business Reporting Language

Executive summary The changing face of

retail banking Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

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Contacts

Hannah Swain +44 (0) 7803 590553 swain.hannah@pwc.com Operational resilience and financial crime

Adam Stage +44 (0) 7483 422845 adam.stage@pwc.com Operational resilience

Andrew Strange +44 (0) 7730 146626 andrew.p.strange@pwc.com Retail distribution, SM&CR, upcoming regulatory change

Lucas Penfold +44 (0)7483 407581 lucas.penfold@pwc.com Wholesale markets and asset management conduct regulation

Kareline Daguer +44 (0) 7739 874106 kareline.daguer@pwc.com Insurance, conduct and prudential

Hortense Huez +44 (0) 7738 844840 hortense.huez@pwc.com Prudential regulation, Basel III, liquidity and funding

Tom Boydell +44 (0) 7483 399332 tom.boydell@pwc.com Retail banking, consumer credit and non-bank lending

David Brewin +44 (0) 7809 755848 david.r.brewin@pwc.com Client assets and prudential regulation

Tania Lee +44 (0) 7976 687457 tania.a.lee@pwc.com Insurance, Solvency II

Mete Feridun +44 (0) 7483 362070 mete.feridun@pwc.com Prudential regulation, banks and asset managers

Tessa Norman +44 (0) 7826 927070 tessa.norman@pwc.com Publications and retail distribution

Conor MacManus +44 (0) 7718 979428 conor.macmanus@pwc.com Prudential regulation

Daniela Bunea +44 (0) 7561 789058 daniela.bunea@pwc.com Central clearing, FMIs, benchmarks, IBOR reform