FS Risk and Regulation Monthly

Keeping up to date with FS regulation

Risk and Regulation Monthly provides a summary of the key International, European and UK regulatory developments and pertinent regulatory activity affecting the Financial Services industry.

August 21

The summer continued to be a busy time for financial regulators, with a number of important regulatory updates landing in August.

The ECB’s preliminary findings from its work on banks’ progress towards meeting its climate risk guidelines showed considerable variation in banks’ progress. The ECB has also set out more transparently how it will determine banks' Pillar 2 Guidance (P2G).

There was also plenty of activity on the insurance front. The PRA is gearing up for the eagerly awaited review of Solvency II and wrote a Dear CFO letter to PRA-regulated Solvency II firms to gather information as an input into the review. The FCA also had a lot to say about insurance from a conduct perspective.

With respect to investment management, the FCA published the third of its Investment Firms Prudential Regime (IFPR) consultations.

July 21

In July, sustainable finance (again) took centre stage. The EU Commission launched its new "Strategy for Financing the Transition to a Sustainable Economy", incorporating more than 80 policy actions that the EU plans to take over the next two and a half years. The Commission also published a proposal for a European Green Bonds Regulation, intended to boost the EU green bond market and address "greenwashing".

In the UK, the FCA sent a letter to the chairs of authorised fund managers, setting out guiding principles to ensure that funds that present themselves as sustainable provide enough information and evidence to end-investors to support this claim.

At the international level, the FSB published a roadmap intended to support the international co-ordination of a large and growing number of global initiatives underway to address financial risks from climate change.

Illicit finance also continued to be a key area of regulatory and supervisory focus. Finally, the focus on diversity continued to grow.

July 21

In July, sustainable finance (again) took centre stage. The EU Commission launched its new "Strategy for Financing the Transition to a Sustainable Economy", incorporating more than 80 policy actions that the EU plans to take over the next two and a half years. The Commission also published a proposal for a European Green Bonds Regulation, intended to boost the EU green bond market and address "greenwashing".

In the UK, the FCA sent a letter to the chairs of authorised fund managers, setting out guiding principles to ensure that funds that present themselves as sustainable provide enough information and evidence to end-investors to support this claim.

At the international level, the FSB published a roadmap intended to support the international co-ordination of a large and growing number of global initiatives underway to address financial risks from climate change.

Illicit finance also continued to be a key area of regulatory and supervisory focus. Finally, the focus on diversity continued to grow.

June 21

Regulatory activity has continued apace throughout the month of June, particularly in the area of stress testing. In the UK, the PRA published the key elements of its 2021 Biennial Exploratory Scenario for banks and insurers, looking at financial risks from climate change. Later in the month, the PRA published a discussion paper on supervisory stress testing for central counterparties.

Stress testing continues to be a regulatory priority at the European level as well. EIOPA published a discussion paper on the methodological framework for stress-testing for Institutions for Occupational Retirement Provision (IORPs). ESMA also published guidelines on stress test scenarios under the Money Market Fund regulation.

The EBA consulted on common procedures and methodologies for the supervisory review and evaluation process (SREP), covering a range of issues including proportionality, AML/CTF risks, Interest Rate Risk in the Banking Book, and stress testing.

Meanwhile, in the insurance industry, the UK and EU concurrent reviews of Solvency II continue. In the UK, the PRA announced the launch of a Quantitative Impact Study (QIS) through which the PRA will gather data to assess the impact of a number of different possible Solvency II designs, focusing on areas of potential policy change which are the easiest to quantify and have most obvious balance sheet effects.

May 21

Regulators and supervisors have begun to set out their forward-looking priorities, as the emphasis on managing the immediate impact of COVID-19 starts to reduce. Key areas of focus highlighted by European regulators are the implementation of all aspects of the Basel III framework, tackling the expected rise in NPLs and action to address climate change related risk. In the UK, the FCA is looking to set “clearer and higher expectations for firms’ standards of care towards consumers” through the introduction of a new Consumer Duty.

With the cessation dates for all panel bank LIBOR settings now confirmed, work on the transition from LIBOR to Risk Free Rates (RFR) also continues apace. The FCA is seeking views on how it proposes to use new powers (introduced as amendments to the BMR under the Financial Services Act 2021) to support the orderly winddown of critical benchmarks. The BoE and the FCA issued a joint statement encouraging market participants to switch to SONIA in the sterling exchange traded derivatives market from 17 June, following the recommendations of the Working Group on Sterling Risk-Free Reference Rate."

April 21

April saw the announcement of new initiatives, as financial services regulators in those parts of the world that are currently in a position to do so set out their priorities for the post COVID-19 period.

In the UK, the PRA published a Discussion Paper on its future approach to the prudential regulation of non-systemic UK firms. The FCA released a Consultation Paper on the listing rules for Special Purpose Acquisition Companies (SPACs). In the EU, the European Commission adopted a package of sustainable finance-related legislative measures. The BCBS published a pair of reports on climate risk – one on climate-related risk drivers and their transmission channels, and another on measurement methodologies for climate-related financial risks.

March 21

In March, the UK government confirmed that it had concluded technical negotiations with the EU on the UK–EU Memorandum of Understanding (MoU) for financial services regulatory cooperation. The UK also published the recommendations from Lord Hill’s UK Listings Review which examined how the UK can enhance its position as an international destination for IPOs and improve the capital-raising process for companies seeking to list in London. Additionally, The BoE, PRA and FCA released a series of Policy and Supervisory Statements outlining their final supervisory approach to operational resilience.

Elsewhere, the ESAs issued a consultation on draft regulatory technical standards for sustainable finance related product disclosures.

February 21

February marked a month of several important regulatory and wider government policy developments, both in the UK and internationally.

While the Bank of England’s (BoE) Monetary Policy Committee (MPC) voted unanimously to maintain the Bank Rate at 0.1%, Sam Woods, the CEO of the PRA, wrote to PRA-authorised firms early in the month to ask that they develop tactical solutions to implement a negative Bank Rate at any point after six months.

At the same time, the BoE and the FCA announced in February that they are launching an ambitious multi-year data collection transformation programme.

Regulatory work on various digitisation initiatives also continued throughout the month.

In the insurance sector there were several important documents released by EIOPA and the IAIS outlining their focus areas and priorities for the year, including EIOPA’s Supervisory Convergence Plan for 2021, its Union-wide Strategic Supervisory Priorities report and IAIS’ Public Roadmap 2021-2022.

January 21

In January the ECB published the results of its annual SREP exercise. The results show that in 2020 credit, business model sustainability and internal governance risks all increased significantly.

Against this background, the EBA launched its 2021 EU-wide stress test exercise, following the postponement of the 2020 exercise due to the COVID-19 pandemic.

Following the end of the Brexit transition period, the PRA issued a consultation on its proposed approach to the supervision of branch and subsidiaries of international banks.

Digital innovation remained high on the agenda of regulators and policy makers.

December 20

As expected, December saw a concerted focus by UK and EU regulators on Brexit and the end of the transition period.

Amongst the volumes of Brexit-related regulation and guidance published in December, the BoE and PRA published a statement of policy detailing their approach to interpreting EU guidelines and recommendations following the UK’s withdrawal from the EU and the end of the transition period. The FCA published final on-shoring instruments, related guidance and Temporary Transitional Power (TTP) directions that became applicable at the end of the transition period.

Elsewhere, EIOPA released its Opinion on the 2020 Solvency II review. The EBA published its revised assessment of the industry-wide impact of implementing Basel 3.1 in the EU, setting out the EBA’s expectation of a reduced impact on Minimum Required Capital (MRC) compared to its estimations in its previous reports, owing to reduced impact from the Output Floor and revisions to the proposed CVA framework.

November 20

November was another busy month for regulators around the world as they continued to balance managing the challenges from the ongoing COVID-19 pandemic with priorities in other areas.

In the UK, following concerns raised by industry on the volume of regulatory reform in 2021, and responses to the Regulatory Initiatives Grid published in September 2020, HMT, the BoE and the FCA decided to defer implementation of CRR2 and IFPR to 1 January 2022. Rishi Sunak, Chancellor of the Exchequer, gave a statement to the House of Commons on the future of financial services and the post-Brexit regulatory environment. HMT published a guidance document setting out its detailed approach to the equivalence procedures.

At the EU-level, the EBA issued a significant discussion paper on incorporating ESG risks into the governance, risk management and supervision of credit institutions and investment firms.

On the international front, the FSB released a review of the market turmoil in March 2020.

October 20

October saw a number of important regulatory developments that cumulatively point to the first signs of the UK developing its own policy approach.

The UK’s PRA published a consultation on CRD V. HMT published a call for evidence on the Solvency 2 review. HMT also published the second part of its Financial Services Future Regulatory Framework Review, outlining government’s plans to revise the UK’s financial services regulatory framework following Brexit.

The European Commission published a consultation on AIFMD. This ask respondents whether fund delegation rules should be accompanied with quantitative criteria or a list of core functions that cannot be delegated.

September 20

Despite their continuing focus on responding to the pandemic, September saw regulators press ahead with the launch of several other significant regulatory and policy initiatives.

The EU launched its Digital Finance and Retail Payment strategies, which set out its blueprint to build a globally competitive and innovative EU FS sector, by removing unnecessary regulatory barriers, while addressing emerging risks.

In the UK, the FCA published its final report on its market study into the pricing of home and motor insurance. The headline measure is a proposal to ban differential pricing or ‘price walking’ in the motor and home insurance markets.

In relation to COVID-19, in a landmark ruling the UK High Court found in favour of the arguments advanced by the FCA in its business Interruption test case on the majority of key issues.

August 20

The COVID-19 pandemic has, unsurprisingly, continued to dominate the regulatory agenda throughout August, with regulators issuing further guidance on COVID-19 related relief for customers and firms as well as publishing research on the effects of the pandemic and related policy interventions.

In the UK, the FCA issued updated guidance in relation to insurance and premium finance customers and mortgage borrowers in financial difficulty amid the COVID-19 pandemic. The PRA issued further clarification around its approach to IFRS 9 and capital requirements in response to the FCA’s updated guidance.

In the EU, the EBA issued a report on the implementation of selected COVID-19 policies and EIOPA concluded in its Risk Dashboard that European insurers remain exposed to high risks, in particular macro-economic, market, credit, profitability and solvency risks, arising from the outbreak of COVID-19.

There have also been some significant regulatory developments not directly related to the COVID-19 pandemic. Notably, EIOPA issued its regulation of the pan-European Personal Pension Product (PEPP), publishing a set of draft regulatory and implementing technical standards and its technical advice on Delegated Acts to implement the framework for the design and delivery of the PEPP.

July 20

With the COVID-19 pandemic moving beyond the initial “respond” phase, policy-makers have begun to take stock of their initial response and identify areas where further intervention or support is necessary. The EBA, for example, issued its first COVID-19 implementation report providing clarifications on the application of the prudential framework; whilst the ECB, following its first assessment of the potential vulnerabilities of the euro area banking sector in the wake of the virus, decided to extend the period during which it recommends that banks should not pay dividends. In the UK, the FCA extended support for consumer credit customers still experiencing temporary financial difficulties.

Though COVID-19 understandably dominated the regulatory agenda throughout July, there was continued focus on other major regulatory initiatives, notably Brexit and IBOR reform. With less than six months remaining until the end of the transition period, the European Commission, EBA and EMSA issued a series of statements calling on banks, investment firms and other financial sector firms to consider how the end of the transition period will affect their businesses and take all the necessary steps to prepare. Meanwhile, on Libor reform, Andrew Bailey, Governor of the BoE, reiterated the importance of removing the financial system’s dependence on Libor and said that firms’ plans to transition to alternative reference rates must, with 18 months to go, “be acted upon in the time remaining”.

June 20

June was another busy month in financial services regulation. Understandably, regulators continued to prioritise addressing the prudential and conduct implications of the COVID-19 pandemic, whilst taking the opportunity, where practicable and proportionate, to take forward their pre-pandemic 2020 agendas.

The EU expedited an agreement on emergency amendments to the Capital Requirements Regulation (CRR ‘Quick Fix’) to help banks manage the capital implications of an economic downturn triggered by COVID-19. The European Commission’s High Level Forum on the future of the Capital Markets Union (CMU) delivered its report and recommendations to the Commission, outlining how it considers the EU should take forward the CMU project to deepen Europe’s cross-border capital markets and assist in the economic recovery from COVID-19.

In the UK, we saw a number of important publications from regulators, most notably the Financial Conduct Authority (FCA), on the treatment of customers who may become indebted or default due to COVID-19 circumstances. The UK Treasury (HMT) and UK financial regulators published a series of papers and consultations on their approach to prudential policy following the end of the Brexit transitional period.

May 20

May was dominated by COVID-19 with regulators continuing to take steps to both ease non critical regulatory burdens on firms and protect customers during the pandemic.

In terms of easing operational burdens on firms, the PRA announced that it would postpone the launch of the Climate Biennial Exploratory Scenario until at least mid-2021 and the next insurance stress test to 2022. And on Libor transition, the PRA confirmed a suspension in data reporting, albeit this is to be resumed at the end of Q2. The Financial Services Regulatory Initiatives Forum (FSRIF) also brought forward publication of its regulatory initiatives grid.

Meanwhile, the BoE and PRA also set out changes to the Resolvability Assessment Framework, Variation in Resolution, Resolution Plan Reporting, and Minimum Requirement for Own Funds and Eligible Liabilities (MREL).

In terms of consumer protection, the FCA announced a range of measures covering different sectors. In the context of insurance, it announced that it is seeking a High Court declaration aimed at resolving contractual uncertainty in selected business interruption insurance policies. The FCA also published guidance for insurance and premium finance firms, on customers in temporary difficultly due to COVID-19.

Finally, the ECB has pushed ahead with its climate/environmental agenda.

April 20

COVID-19 and its economic impact continued to dominate the news agenda throughout April. The UK government announced that it was extending its Coronavirus Business Interruption Loan Scheme (CBILS) so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, would now be eligible. The UK’s PRA published a series of Dear CEO letters to UK banks and insurers outlining their expectations that in response to the crisis, banks should cancel the distribution of their outstanding 2019 dividends, insurers should carefully consider the distribution of profits in relation to policyholder protection considerations, and all firms should take other measures to enhance their financial position. Both the PRA and FCA released their business plans for 2020/21. At the European level, the ECB announced that it was changing its rules so that it will accept bonds that lose their investment-grade credit rating as collateral in exchange for cheap liquidity funding available to banks.

March 20

March was a month marked by the rapid global spread of COVID-19, resulting in an international economic crisis as governments around the world implemented work and travel restrictions aimed at slowing the spread of the virus. We have therefore added “COVID-19” regulatory developments as an exceptional category this month, and will continue reporting it until the crisis eases.

In the UK, the Bank of England’s Monetary Policy Committee (MPC) reduced the Bank Rate, initially to 0.25% and then further to an unprecedented low of 0.10%, and introduced a new Term Funding scheme. UK conduct and prudential regulators have also issued new supervisory guidance to regulated firms, including, for example, expectations around board consideration and, where appropriate, suspension of dividends and other distributions, and providing temporary debt servicing relief for customers across all borrowing products.

At the European level, and consistent with action taken by national supervisors, all ESAs have announced a range of measures to lessen the burden of routine supervision on firms in these difficult times.

February 20

February was another eventful month which saw the launch of several major policy and regulatory initiatives. In Europe, the Commission launched its new EU digital strategy.The digital strategy is also designed to support other flagship EU initiatives such as sustainable finance and the Capital Markets Union. In this context the Commission also launched a review of the MiFID II/MiFIR legislative framework. In the UK, the Information Commissioner’s Office published its cross-sectoral draft guidance outlining how it will interpret the General Data Protection Regulation as it applies to AI, as well as its expectations in relation to the measures firms should put in place to mitigate AI-driven data protection risks. Finally, the UK and EU have set out their official negotiating guidelines for the trade negotiations which began on 2 March, including their opening positions around equivalence and market access for financial services firms.

January 20

January was an opportunity for supervisory and regulatory bodies to set out their future priorities, as well as a time for reflection on achievements. The IOSCO Board agreed to continue its focus, in 2020, on crypto-assets; artificial intelligence and machine learning; market fragmentation; passive investing and index providers; and retail distribution and digitalization. In Europe, the Commission’s 2020 work programme is focused on the delivery of six headline ambitions including a European Green Deal; ensuring that Europe is fit for the digital age; and a developing an “economy that works for people”. In the UK, the FCA issued several Dear CEO letters outlining the key risks of harm in a number of sectors and its supervisory strategy in relation to these. Finally, as he prepares to leave his post as Chief Executive, Andrew Bailey took part in a final podcast reflecting on his time at the FCA and calling on large technology companies to work with the regulator to help protect consumers.

December 19

As at the end of any year, regulators were keen to progress or finalise a number of important initiatives. UK regulators published parallel consultation papers on their cross-sectoral approach to operational resilience in FS firms. Also in the UK, the BoE and FCA published a statement on their joint review of open-ended funds. At the EU level, following the new Von der Leyen Commission’s taking-office, European Council Finance Ministers set out their priorities for further work on the CMU. The EBA published its second report on the potential impact of Basel III implementation in the EU.

November 19

With the expiry of the UK CCPs equivalence decision fast approaching, industry welcomed confirmation by Vice-President Dombrovskis that the European Commission intends to extend this beyond 30th March 2020, “to prepare for any eventuality”. Ahead of an expected increase in scrutiny by the FCA of firms’ Libor transition progress, the FCA has set out its core conduct expectations for firms. In the general insurance sector, the PRA has issued a Dear CEO letter outlining its current priority areas.In the EU, ESMA Chair, Steven Maijoor confirmed in a recent speech that ESMA has proposed a “staggered” timeline to the upcoming review of MiFID II in the light of the impacts of Brexit. A report on the cost of market data and the establishment of a consolidated tape (CT) for equity instruments will be submitted to the European Commission next month. ESMA has also started working on a reports assessing the MiFID II transparency regime, and the quoting behaviour of Systematic Internalisers (SIs) in non-equity instruments. Finally, the EBA published its roadmap for CRD 5/CRR2/BBRD level 2 mandates.

October 19

October saw the PRA publish a Dear CEO letter on reliability of regulatory returns, reiterating its expectations that firms submit complete, timely and accurate regulatory returns. The FCA published the Interim Report of its General Insurance Pricing Market Study. The ESAs published a joint consultation paper on reforming the PRIIP’s key information document (KID). At the international level, the G7 working group on stablecoins published a report investigating the impact of global stablecoins.

September 19

With the 31 October Brexit deadline fast approaching, regulators stepped up efforts to prepare for a possible no-deal, with the FCA “urging all firms to consider the implications of a no-deal exit and finalise their preparations”, and the European Commission issuing a communication calling on “all actors” to make the “necessary final adjustments to their plans in relation to a withdrawal without an agreement”. In the UK, the FCA published the findings from its multi-firm review of research unbundling reforms under MiFID II; these included that most firms have chosen to absorb research costs themselves, resulting in around £70 million of savings for investors in UK-managed equity portfolios. In Europe, ESMA published the second of its trends, risks and vulnerabilities reports for 2019, which identified a deteriorating outlook for the asset management industry and continued very high market risk due to potentially inflated asset valuations, subdued economic growth prospects, and flattening yield curves. Senior EU figures also set out their regulatory, supervisory and policy priorities.

August 19

Welcome to the latest edition of Risk and Regulation Monthly. August, as always, is a relatively quiet month on the regulatory front, but we nevertheless saw a number of interesting developments across EMEA.

In the UK, the government updated its Guidance on banking, insurance and other financial services if there is a no-deal Brexit. The EBA published the first part of its impact assessment and recommendations on the EU implementation of the final Basel III framework. The FCA published the results of its review into the embedding of SM&CR in the banking sector.

July 19

July saw a number of important regulatory changes and announcements. The Bank of England (BoE) published its final rules on resolution assessment and public disclosure by firms. These rules will see UK banks with more than £50bn in retail deposits having to publish “living wills” from 2021, alongside an assessment from the BoE. These assessments will be published every two years and will set out how the BoE thinks these banks can be safely wound down in the event of crisis, without recourse to a taxpayer bailout. The FCA published a consultation on its Guidance on vulnerable customers aimed at providing greater clarity for firms on its expectations as to the fair treatment of vulnerable customers and practical guidance on translating those expectations into action. The EBA published its final progress report on the implementation of its IRB roadmap. This progress report saw the EBA extend the deadline for introducing changes in the ratings systems by one year to the end-2021, and the deadline for implementation of changes in the loss given default (LGD) and conversion factors models for low default portfolios to end-2023 at the latest. The Basel Committee and IOSCO also agreed to a one year extension of the final implementation phase of the margin requirements for non-centrally cleared derivatives, which will mean the final implementation phase will now take place on 1st September 2021.

June 19

June was a month for regulatory reflection - on the progress that has been made in transforming the financial sector since the financial crisis - and on the challenges and opportunities that lie ahead. In the run up to the G20 summit in Osaka, the FSB issued a summary progress report on financial regulatory reforms stating that framework the G20 called for ten years ago is now largely in place and implementation well underway. However, despite this progress, the report emphasised that G20 Leaders’ continued support in implementing the agreed reforms is needed, and the FSB called on members to lead by example in promoting the timely, full and consistent implementation of remaining reforms. In the UK, the Bank of England (BoE) published a report on the findings of a year-long review led by Huw van Steenis on the future of the UK’s financial system, and set out how it plans to respond. Across technological innovation, climate change, cyber resilience, demographic change and the growth of international capital markets, the BoE committed to developing its policy, broadening access to its operations and supporting national and international policy developments. The transition from LIBOR also received considerable focus in June, particularly from the Bank of England, with speeches from Dave Ramsden, Deputy Governor, and Andrew Hauser, Executive Director of Markets, and a discussion paper on the Bank’s risk management approach to collateral referencing LIBOR for use in the Sterling Monetary Framework. The FCA and PRA also identified key themes, good practice and next steps following the feedback they received regarding firms’ preparations to manage the transition.

May 19

In the UK, the FCA called for input on the potential development of a cross-Sector Sandbox involving a number of regulators, and published a paper on possible regulatory responses to issues in intergenerational finance. Sam Woods, Deputy Governor for Prudential Regulation and CEO of the PRA, gave a speech on “scanning the horizon” to identify problems in the financial system. The EBA provided an update on its work in response to the Commission‘s call for advice on Basel III implementation, noting that it will publish its impact assessment at the end of July. Sustainable finance was again a strong theme throughout May at a UK, European and international level, demonstrating that this topic continues to move up the regulatory agenda.

April 19

April was a significant month for financial services regulation. In relation to Brexit, the FCA extended of the notification deadline for the temporary permissions regime, Andrew Bailey (Chief Executive of the FCA) set out his vision for the future of regulation and the FCA and PRA entered into a series of Memoranda of Understanding with other regulators.

More broadly, the FCA and PRA published their business plans for 2019/2020, setting out their key priorities for the next year. The BIS published a consultative document on the consolidated Basel framework and the EU Risk Reduction Measures package was approved. Climate change and sustainability were also strong themes throughout April, demonstrating how far these topics have moved up the regulatory agenda.

March 19

March was another busy month for regulators, supervisors and politicians. On Brexit, ESMA said that it would recognise the UK’s CSD, Euroclear UK and Ireland, so that it could continue to provide its services in the EU. However, ESMA also published a statement on the trading obligation for shares, where it said that European banks and asset managers would have to trade some of the UK’s biggest stocks on EU trading venues in the event of a no deal Brexit, despite the greater liquidity available on UK trading venues. In the UK, the Bank of England published details of its forthcoming stress test for banks, while the FCA published the final report of its Mortgages Market Study. In the EU, provisional political agreement was reached on a revision to EMIR, known as EMIR 2.2. This provides powers, should the EU choose to exercise them, which could lead to the relocation of some euro-clearing to the EU.

February 19

February was another busy month for financial authorities, maintaining the momentum in regulatory activity since the start of the year. In the UK and EU, much of this was driven by preparations for Brexit, with regulators publishing a number of agreements and plans intended to manage the risk and uncertainty in the event of a no-deal outcome. In Brussels, we saw the European Council and European Parliament finally reach a political agreement on a Regulation setting out tailored prudential rules for investment firms. At the international level, the Financial Stability Board published its work programme, setting out the key initiatives it will pursue in 2019.

January 19

January saw a swathe of new publications. On Brexit, the FCA’s notification window to enter the Temporary Permissions Regime opened. In Fintech, cryptoassets were very much under the spotlight. Value for money and the performance of retail products continued to be a top priority for regulators in the UK and Europe. We also got a glimpse of some of the key areas of focus for the FCA and BCBS going forward, as the FCA published its sector views and the BCBS a work programme for the year ahead.

December 18

Happy New Year and welcome to the new look Risk and Regulation Monthly. For 2019, we have revised the format of this monthly publication to provide you with a list, with hyperlinks for each item, of key developments, publications and statements from UK, EU and International regulators and supervisors. We have organised the entries by sector, to allow you to find the information of greatest relevance to you. We hope you find this new format helpful.

November 18

November, just like October, proved to be another busy month with significant preparatory Brexit activities undertaken by UK policy makers and EU regulators. This resulted in the publication of a significant number of consultations and draft legislative documents.

November has also been a busy month on the stress-test side. The Bank of England’s (BoE) stress test results show that all banks remain above their risk-weighted capital and leverage hurdle rates. However, some banks will need to undertake work on their model governance and infrastructure as part of their model risk management frameworks. The European Banking Authority (EBA) and the European Central Bank (ECB) stress test results show that the aggregate capital ratio at the starting point of the 2018 stress test is notably above the aggregate capital ratio reported by banks at the beginning of previous EU-wide exercises. Although there is no “pass/fail” test, the results will feed into the Supervisory Review and Evaluation Process (SREP).

October 18

In October, with less than five months before the UK’s departure from the EU next March, there was a significant increase in preparatory activities by UK policy makers and EU regulators, resulting in the publication of a significant number of consultations and draft legislative documents.

Cryptoassets continued to be an area of focus for both international and UK authorities. The Financial Stability Board (FSB) concluded that, while crypto-assets currently do not pose a material risk to global financial stability, vigilance is needed given the speed of market developments and the difficulty in monitoring potential risks. The UK Cryptoassets Taskforce announced that over the coming months participating authorities will consult on ways to mitigate the risks that cryptoassets pose to consumers and market integrity, and to prevent their use for illicit activity.

September 18

Consumer protection was a big theme for September: the European Securities and Markets Authority (ESMA) renewed for a further three months its restriction on the marketing, distribution and sale of contracts for differences (CFDs) to retail clients; and the International Organisation of Securities Commissions (IOSCO) issued measures for securities regulators to consider when addressing the risks arising from the marketing and sale of OTC leveraged products to retail investors. In the UK, Citizen’s Advice submitted a super-complaint to the Competition and Markets Authority (CMA) over existing customers paying what it describes as a “loyalty penalty”. The Financial Conduct Authority (FCA) response included a commitment saying it would examine this issue in its upcoming market study on pricing in the general insurance market.

July 18

July saw a series of important developments. In particular, the UK government published its White Paper on the Future Relationship between the UK and the EU. The BoE and the FCA released a discussion paper on operational resilience and there were a series of developments on interest rate benchmark reform. Finally, there was an increased focus on cost disclosure and fair pricing, particularly from the FCA which published a market study on investment platforms, papers on price discrimination, and a call for input on PRIIPs.

June 18

June saw a number of announcements on resolution. The BoE’s Independent Evaluation Office issued a report saying more work needed to be done to make banks resolvable by 2022, while Sir John Cunliffe gave a speech were he announced that the BoE would be consulting later in the year on a reporting and assurance framework for banks. A number of consumer protection measures were also announced, with ESMA banning the marketing and sale of CFDs and Binary Options to retail investors and the FCA challenging the insurance industry to improve access to insurance for people with pre-existing medical conditions. Finally, a number of supervisory bodies, including the PRA, the EBA and EIOPA, released their annual reports. These highlighted the work that UK and EU supervisory authorities have been undertaking on stress testing, resolvability, non-performing loans and financial stability.

May 18

May saw the sustainable finance agenda moving up the list of priorities of the European Union (EU), with the European Commission (EC) publishing its first set of legislative proposals on sustainable finance, including the development of an EU taxonomy for climate change, environmentally and socially sustainable activities. In the UK, consumer vulnerability continued to be at the forefront of the FCA’s work, with the conduct regulator publishing two consultations as part of its high-cost credit review, containing proposals aimed at protecting financially vulnerable consumers.

April 18

April saw a number of significant regulatory developments: Asset Management was an area of some focus, particularly in relation to charges; non performing and forborne loans were the subject of new proposed guidelines, following the high level of focus on this issue in recent months; and crypto‑assets and crypto‑currencies were the subject of a number of speeches and comments by senior regulators in the UK and the EU.

March 18

March saw a number of important regulatory developments. Brexit negotiations saw the UK and EU agree a transition period in principle as part of a newly published draft withdrawal agreement. The UK’s Chancellor of the Exchequer, Phillip Hammond, gave a speech on Brexit and financial services in which he argued for a future EU-UK trade deal to include a mutual recognition agreement for financial services. Non-performing loans (NPLs) remained high on the European agenda. Daniele Nouy, Chair of the Supervisory Board of the ECB, mentioned them as a continuing challenge in her speech on European banking, while the EC published a proposal for statutory prudential provisioning backstops for newly non-performing loans. The EC also published its Action Plan on sustainable finance. It is proposing to incorporate sustainability into prudential requirements, put in place a unified EU classification system to define sustainability, and create an EU “green label” for financial products deemed sustainable.

February 18

February saw a number of important regulatory developments. Brexit negotiations between the UK and the EU continued, with the European Commission publishing a draft withdrawal agreement. The European Supervisory Authorities issued a warning to EU consumers regarding the risks of buying virtual currencies, citing the lack of a regulatory framework and consumer protection as reasons for virtual currencies being unsuitable as investment or savings products. Finally, the Financial Conduct Authority called for greater cross-border regulatory cooperation in encouraging the development of FinTech innovation by creating a ‘global sandbox’ that would support firms operating in different jurisdictions.

January 18

The New Year brought a number of significant regulatory developments. In the UK, David Davis, Mark Carney and Sam Woods provided remarks or evidence on Brexit. Further afield, Andrea Enria, European Banking Authority, and Stefan Ingves, Basel Committee on Banking Supervision, spoke on the finalisation of Basel III. Furthermore, following the introduction of Packaged Retail and Insurance-based Investment Products Regulation and the Markets in Financial Instruments Directive II on 1 and 3 January 2018, respectively, the Financial Conduct Authority and the European Securities and Markets Authority provided a series of updates and statements.

December 17

December’s biggest news on the banking side was the release of the Basel Committee’s final rules for Basel 3, the culmination of a decade of effort to revise banking regulation in response to the Financial Crisis. Elsewhere, the European Council confirmed that discussions on the future relationship between the EU and the UK could commence, and the PRA issued consultations on its approach to authorising third country banks and insurers.

November 17

November proved to be a busy month for regulatory and supervisory activity. There was a particular focus on the issue of non-performing loans (NPLs) in the European banking sector, with Danièle Nouy highlighting this issue as part of her opening remarks at a public hearing, and Sabine Lautenschläger saying that NPLs are probably the single biggest challenge and a drag on the entire European economy. The European Banking Authority (EBA) published guidelines on the prudential supervision of significant branches within the EU, while the European Central Bank (ECB) published a paper on developing macroprudential tools for alternative investment funds. On the conduct front, the Financial Conduct Authority (FCA) published a paper exploring FCA’s approach to regulating for retail consumers, while also launching a market study to assess how competition is working in the wholesale insurance broker sector.

October 17

October saw the Basel Committee on Banking Supervision discuss the net stable funding ratio standard. The Bank of England released a record of its Financial Policy Committee Meeting of September, while the House of Commons Treasury Committee published a report on Solvency II and its impact on the UK insurance industry. Consumer vulnerability was in focus as the Financial Conduct Authority published results of its Financial Lives Survey. Furthermore, cyber risk continued to be in the spotlight with the Financial Stability Board releasing a stocktake of cybersecurity regulatory and supervisory practices.

September 17

After the summer break, September saw the European Commission publishing a major legislative package intended to reform and increase substantially the powers of the three European Supervisory Authorities (ESAs). The Commission encouraged the European institutions to treat the proposals “as a matter of priority” as it would like to ensure their entry into force before the end of the current legislative term of the Parliament in 2019, although this may be challenging. On the Brexit front, Theresa May delivered a speech in Florence ahead of the next round of Brexit negotiations with the European Union (EU), while at home the EU Withdrawal Bill passed its second reading in Parliament and progressed to committee stage.

August 17

As expected, August was a quiet month as many took time off over the summer period. Even so, there were pockets of noteworthy activity in the regulatory arena. The UK Government released a number of position papers on Brexit, while the European Commission set out the process for deciding which country will be the next host of the European Banking Authority (EBA). The EBA and BCBS published documents on FinTech developments and the BIS published a paper on regulatory approaches to enhancing banks’ cyber-security networks.

July 2017

July was a busy month, as is often the case ahead of the holiday peak in August. Rules and guidelines on setting up new or expanded operations in the EU were the subject of papers from ESMA, EIOPA and BaFin, while a number of areas around MiFID implementation and finalisation – particularly the need for firms that want MiFID permissions to have their applications submitted – were the subject of papers from the FCA, ESMA and the European Commission. The FSB was particularly busy, giving its views on a range of topics from finalising the post-crisis reforms to shadow banking, TLAC and derivatives reform.

July 2017

July was a busy month, as is often the case ahead of the holiday peak in August. Rules and guidelines on setting up new or expanded operations in the EU were the subject of papers from ESMA, EIOPA and BaFin, while a number of areas around MiFID implementation and finalisation – particularly the need for firms that want MiFID permissions to have their applications submitted – were the subject of papers from the FCA, ESMA and the European Commission. The FSB was particularly busy, giving its views on a range of topics from finalising the post-crisis reforms to shadow banking, TLAC and derivatives reform.

June 2017

June saw the publication of some significant EU proposals on the treatment of central counterparties (CCPs) as part of the review of the European Markets Infrastructure Regulation (EMIR). The regulatory implications of IFRS 9 were also in focus, with both the Bank of England and the European Banking Authority (EBA) publishing materials on the incorporation of the new accounting standard into stress testing, and the European Council agreeing to fast-track legislation to introduce a transitional phase-in of the impact of IFRS 9 on capital requirements. The UK’s Financial Conduct Authority (FCA) published a long-awaited study into the asset management industry, along with a consultation on remedies to what it described as “weak” price competition in the sector. The European Commission published a set of proposals which would create a pan-European Personal Pension Product, or “PEPP”. The Single Resolution Board (SRB) undertook its first resolution in the Eurozone with the resolution of Spain’s Banco Popular.

May 2017

May saw a number of developments around Brexit, including the publication of several papers outlining the negotiating position of the European Commission. The outcome of the UK general election on 8 June has led to some suggesting that the British government’s approach to the Brexit talks may be altered, but it is currently too early to say what the effect might be.

April 2017

April saw the Financial Stability Board (FSB) consult on a framework for the post-implementation evaluation of the G20 financial regulatory reforms to help identify “material unintended consequences”. Mark Carney stressed the need for their implementation to be both “full, timely and consistent” as well as dynamic enough to allow authorities to make adjustments as necessary to optimise results.

March 2017

March saw several important regulatory discussions and updates. Issues related to levelling the playing field between banks using the Standardised and Internal Rating Based (IRB) approaches were highlighted in the Bank of England’s (BoE) work, while both the BoE and the European Central Bank (ECB) unveiled details of their upcoming stress tests. The Asset Management sector was again at the centre of the Financial Conduct Authority’s (FCA’s) attention, as it reviewed their dealing commission expenditure and best execution.

February 2017

February saw several noteworthy regulatory developments. A possible red flag in the MiFID II implementation was pointed out by ESMA as it wrote to the European Commission warning about firms trying to circumvent certain MIFID II rules around the trading obligation and the systematic internaliser regime. ESMA also unveiled a framework for 2017 CCP stress test indicating a more expansive approach to the exercise that will now also incorporate a liquidity risk assessment.

Read our cover note.

January 2017

In January the UK Supreme Court ruled that the UK Government could only give notice of its intention to leave the European Union (EU) if it was given the power to do so by an Act of Parliament. The Government set out its priorities for the exit negotiations, confirming that the UK would not seek membership of the Single Market. Meanwhile, the FCA opened its doors to applications for authorisation or variation of permission from firms under the Markets in Financial Instruments Directive (MiFID) II.

Read our cover note.

December 2016

December saw a number of regulatory developments, as authorities sought to finalise a range of deliverables before the year’s end. At the international level, the Financial Stability Board (FSB) issued consultations on setting internal Total Loss-Absorbing Capacity (TLAC) in banks; and on maintaining access to Financial Market Infrastructures (FMIs) during resolution. At the European level, both the Council and the Parliament of the EU adopted legislation to delay the application of rules on packaged retail and insurance-based investment products (PRIIPs) until 1 January 2018. In the UK, both firms and authorities continued to assess the potential practical implications of Brexit, including the role that a transitional exit arrangement could play in that process.

Read our cover note.

November 2016

November’s highlights included publication of proposed revisions to the Capital Requirements Directive (CRD IV) and Regulation (CRR) (the CRD V / CRR II package) and the results of the UK 2016 bank stress test. The European Banking Authority (EBA) commented on implementation of the new Standardised Approach for Counterparty Credit Risk (SA-CCR) and the fundamental review of the trading book (FRTB), suggesting these would have significant impact on capital requirements. The EBA also outlined options for the design and calibration of new prudential rules for investment firms. As expected, the European Commission proposed extending the compliance deadline for the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) till 2018. Other important updates included the UK High Court ruling on Brexit, a political agreement on the EU Money Market Funds (MMFs) Regulation and the European Commission’s report on the review of the European Market Infrastructure Regulation (EMIR).

Read our cover note.

October 2016

Last month the Financial Conduct Authority (FCA) launched a long-awaited consultation on its new “Mission Statement”, and also published the outputs of several thematic reviews. Elsewhere, senior figures from the European Central Bank (ECB) expressed concerns about the sustainability of the business models of European banks, while the European Banking Authority (EBA) consulted on the incorporation of information technology risk into the Supervisory Review and Evaluation Process (SREP). On Brexit, the most significant development came after the end of the month, with the UK High Court’s ruling that Parliament should have a role to play in relation to Article 50.

Read our cover note.

September 2016

The summer period has ended and our focus is back to the dual tasks of implementing rules that have already been agreed and assessing how the regulatory framework still needs to change. G20 Leaders meeting in Hangzhou, China received an update on the progress of global regulatory efforts from the Financial Stability Board (FSB), and the Basel Committee on Banking Supervision (BCBS) held an important meeting later in the month on finalising the post-crisis bank capital framework. In Brussels, the European Commission re-affirmed its commitment to pressing forward with the Capital Markets Union (CMU) agenda and gave further detail on its legislative plans in this area. In Britain, Prime Minister Theresa May used the Conservative Party conference to indicate the Government’s intent to trigger Article 50 and launch exit negotiations by March 2017.

Read our cover note.

August 2016

August is usually a quieter month, as many in the financial sectors take time off over the summer period.

Read our cover note.

July 2016

July was busy with the publication of the EBA’s bank stress test results, a swathe of technical publications relating to MiFID II, and a variety of documents relating to UK bank ring-fencing. New Chief Executives also took up their posts at the UK regulators.

Read our cover note.

June 2016

The UK’s referendum decision to leave the EU in June sent shockwaves around the financial sector and raised a number of fundamental regulatory questions for UK, European and foreign firms. Regulators, however, continued to have a busy month and June saw the first clearing obligations for interest rate derivatives begin to be implemented on a staggered basis and the final text delaying the implementation date of Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR) by one year being published in the Official Journal of the EU.

Read our cover note.

May 2016

In May the European Commission consulted on application and implementation of the revised framework for market risk and on the Net Stable Funding Ratio (NSFR) under the Capital Requirements Directive (CRD) IV. Political agreement was reached to delay the application and transposition dates of the Markets in Financial Instruments Directive and Regulation (MiFID II and MiFIR) and the Commission adopted a number of Delegated Regulations under MiFID II/MiFIR.

Read our cover note.

April 2016

In April the Basel Committee on Banking Supervision (BCBS) published its long-awaited final proposals on interest rate risk in the banking book (IRRBB). A formal delay to the MiFID II/MiFIR package was brought one step closer as EU institutions agreed their negotiating positions. Elsewhere, the Single Resolution Board (SRB) held its first public conference at its new permanent premises in Brussels.

Read our cover note.

March 2016

March saw publication of the Financial Advice Market Review in the UK, a continued retreat from models at Basel, the Financial Policy Committee’s (FPC) decision to enact the Counter-cyclical Capital Buffer in the UK, and a promise from the Financial Stability Board (FSB) to consult by mid-2016 on proposals to address structural vulnerabilities in the asset management sector. 

Read our cover note

February 2016

The news headlines in February were dominated by the announcement of the date for the UK referendum on membership of the EU. This has led to a substantial pick-up in planning activity, as the industry works to understand and make early preparations for the possible impact of any vote to leave.

Read our cover note

January 2016

January saw a number of important milestones. The Solvency II Directive came into effect, introducing the new capital regime for insurers in the EU. The Single Resolution Board (SRB), overseeing bank resolvability in the Banking Union, assumed its full powers. The Basel Committee on Banking Supervision (BCBS) published the final rules for the Fundamental Review of the Trading Book (FRTB). Finally, Andrew Bailey was appointed Chief Executive of the Financial Conduct Authority (FCA).

December 2015

As always, December was a busy month. The Financial Conduct Authority (FCA) published its first consultation on MiFID II implementation. The clearing obligation timeline was triggered by the publication of technical standards for the European Market Infrastructure Regulation (EMIR) in the Official Journal. The Single Resolution Board (SRB) published its work plan for 2016, while the European Central Bank (ECB) reflected on the first year of the Single Supervisory Mechanism (SSM). And the European Bank Authority (EBA) published its long-awaited report on the prudential regime for investment firms.

November 2015

The G20 Summit resulted in an agreement on a number of issues, including the final standards on total loss absorbing capacity (TLAC) for global systemically important banks ("G-SIB's") as part of the program to end "Too Big To Fail". In the EU, there was talk of a potential delay in the implementation of the revised Markets in Financial Instruments Directive and Regulation (MiFID II and MiFIR).

October 2015

October saw important announcements from the Basel Committee on Banking Supervision (BCBS) on the progress of its work on risk-weighted assets, the publication of the Bank of England's consultations on ring-fencing rules and operational continuity in resolution, and the extension of the UK Senior Management and Certification Regime to all firms in the financial services sector.

September 2015

September saw the publication of the final technical standards under the Markets In Financial Instruments Directive II/ Regulation (MIFID II) and the long awaited Capital Markets Union (CMU) action plan, including a call for evidence on the cumulative impact of the regulation, 

August 2015

August saw the adoption of the first Regulation to impose clearing obligations under the European Market Infrastructure Regulation (EMIR). Two relatively young UK regulatory institutions - the Competition and Markets Authority (CMA) and the Payments Systems Regulator (PSR) - were also active. In the courts, Tom Hayes became the first person to be convicted in relation to LIBOR manipulation.

July 2015

July was marked by the announcement of Martin Wheatley’s resignation as Chief Executive of the Financial Conduct Authority (FCA). Elsewhere, there were a series of reports on benchmark remediation and reform, and the UK regulators finalised rules on the Senior Managers and Certification Regimes. In Europe the European Banking Authority (EBA) released another batch of technical standards under the Bank Recovery and Resolution Directive (BRRD) and the European Insurance and Occupational Pensions Authority (EIOPA) issued the second set of technical standards and guidelines on Solvency II.

June 2015

June saw the publication in the UK of the Fair and Effective Markets Review (FEMR), and more rules on remuneration of bank staff, agreement in the EU on a Regulation on securities financing transactions (SFTs), and work by the European Banking Authority (EBA) on securitisation.

May 2015

There were yet more fines for FX conduct failures this month, while the Prudential Regulation Authority (PRA) outlined its recommendations on board responsibilities. Elsewhere, national and international supervisors continued work on Solvency II, while the European Banking Authority (EBA) released a slew of technical documents on the Bank Recovery and Resolution Directive (BRRD) and the Capital Requirements Regulation (CRR).

April 2015

This month a number of large fines were imposed by the Financial Conduct Authority (FCA), for benchmark manipulation, PPI complaints-handling and breaches of custody rules. Elsewhere the resilience of central counterparties (CCPs) continues to move up the regulatory agenda, and the European Central Bank (ECB) reported on the first six months of the Single Supervisory Mechanism (SSM).

March 2015

Solvency II and MiFID II spawned multiple consultation in March, while work on the Bank Recovery and Resolution Directive (BRRD) continued, and the Single Revolution Board (SRB) held its first plenary meeting. On stress testing the Bank of England published details of its 2015 framework, though there will be no EU-wide test this year. Asset management and market liquidity issues also received regulatory attention.

February 2015

Plans for the Capital Markets Union (CMU) were unveiled this month, and the Financial Conduct Authority (FCA) announced a competition study into investment and corporate banking. There was also further detail on the Senior Managers’ Regime (SMR) and the Senior Insurance Managers’ Regime (SIMR).

January 2015

Following a busy December, the new year started with the continued implementation of post-crisis reforms, such as the final rules implementing the Bank Recovery and Resolution Directive (BRRD) from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), and some new policy initiatives, such as the Capital Markets Union (CMU).  

December 2014

December was a busy month on several fronts, with the publication of the UK stress testing results, and a large number of technical standards on Solvency II, the Capital Requirements Directive IV and Regulation (CRD IV/CRR), and the Bank Recovery and Resolution Directive (BRRD). The Basel Committee on Banking Supervision (BCBS) also published proposals for a revised standardised approach to credit risk 

November 2014

A number of important announcements related to bail-in and recovery and resolution planning, and banking capital standards, were made in November, driven by the G20 summit in Brisbane.

Additionally, regulatory action on FX trading operations, the UK liquidity regime and the senior managers’ regime were of note.

October 2014

In October the European Central Bank (ECB) published the Comprehensive Assessment results, and regulators continued their work on remuneration, the leverage ratio, structural reform and resolution regimes.

The Fair and Effective Markets Review also consulted on changes to fixed income, currency and commodities markets.

September 2014

September was notable for a flurry of pre-G20 publications from international regulators, including the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS), the International Association of Insurance Supervisors (IAIS), and the International Organisation of Securities Commissions (IOSCO), on topics such as insurance loss absorbency, bank resolution, risk-weighted-asset consistency, and non-bank finance. Meanwhile the Prudential Regulation Authority (PRA) finalised its policy on the supervision of foreign bank branches in the UK, and there was no shortage of material on the Single Supervisory Mechanism.

August 2014

August was busier than expected. Highlights included the ECB’s manual on its Comprehensive Assessment, the PRA’s third consultation on Solvency II transposition, and the FCA’s statement that 2.5 million PPI claims needed to be reassessed.

Key regulatory themes

Risk and Regulation Monthly focuses on the following ten major regulatory developments. 

  1. Capital, including stress tests
  2. Conduct of business
  3. Crisis Management
  4. Disclosure
  5. Financial Crime
  6. Governance
  7. Information Security and Data privacy
  8. Liquidity
  9. Regulatory perimeter
  10. Rethinking the domestic and international architecture for regulation

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About the EMEA Centre for Regulatory Strategy
The EMEA Centre for Regulatory Strategy monitors regulatory developments and provides an expert, objective perspective on opportunities and challenges for clients. It utilises Deloitte’s Risk and Regulation, Strategy Consulting and other relevant areas of expertise to understand, influence and advise on regulatory change, with a particular focus on the strategic business model and aggregate impacts.

The Centre is headquartered in London with local representation across Europe. Our core team of dedicated professionals has extensive experience in regulation, through a combination of former regulators and risk and regulation strategy advisors and consultants.

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