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.

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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