Posts by: Kevin Wong

Autumn 2017 Budget: Key Financial Services Announcements

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The UK Chancellor of the Exchequer, delivered the November 2017 Budget on November 22, 2017.

The UK government re-iterated its commitment to supporting competition in banking in its Budget, setting out initiatives designed to enable innovation in banking services, strengthen challenger banks, and improve access to affordable credit for consumers. These include:

  • Credit Unions. The government will increase the number of potential members that a credit union serving a local area is able to have from 2 to 3 million to improve access to reputable sources of credit.
  • Open banking. Starting in early 2018, the open banking project will make it easier for customers to access innovative products and services that better suit their needs. The largest banks have committed to extend open banking to more payment products, including credit cards.
  • Challenger banks. Following an agreement with the European Commission in September 2017, RBS will deliver a £775 million package of measures designed to improve competition in the UK business banking market. The Prudential Regulation Authority will also make capital requirements more proportionate for eligible smaller banks, aimed at assisting them to compete more effectively in the market.

The UK government will publish a new long-term strategy to ensure that the UK asset management industry continues to deliver the best possible outcomes for investors. The strategy includes action on skills, harnessing financial technology solutions, mainstreaming innovative investment strategies, and continuing a coordinated program of international engagement. The government states that it will be working closely with the asset management industry in this area.

ESMA has Published a Further Version of its Q&As on the MAR

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The European Securities and Markets Authority (“ESMA“) published a further version of its Q&As on the Market Abuse Regulation (“MAR“) on November 21, 2017.

The two new questions and answers are on the following topics:

  • ESMA states that the insider dealing prohibition in Article 14 of MAR applies during closed periods referred to in Article 19(11) of MAR in the same way as it does at any other time. Therefore a person discharging managerial responsibilities (“PDMR“) must also comply with Article 14. When an issuer allows a PDMR to trade under Article 19(12) of MAR, the PDMR must always give consideration as to whether or not the relevant transaction would constitute insider dealing.

ESMA states that the types of transaction by a PDMR prohibited during a closed period under Article 19(11) of MAR are the same as those types of transaction subject to the notification requirements set out under Article 19(1) of MAR, although Article 19(11) of MAR only applies to a PDMR when conducting transactions on its own account or for the account of a third party, whereas the notification of transactions required under Article 19(1) of MAR also applies to persons closely associated to a PDMR.

ECB Speech on Eurosystem Cyber Resilience Strategy for FMIs

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The Director General Market Infrastructure and Payments of the European Central Bank (“ECB“), Marc Bayle de Jessé, gave a speech on the ECB’s views on the regulation of cyber security on November 21, 2017.

In his speech, Mr. Bayle de Jessé provided an overview of the Eurosystem cyber resilience strategy for financial market infrastructures (“FMIs“). The strategy was approved by the ECB’s governing council in March 2017 and is intended to implement the June 2016 joint guidance (Guidance) of the Committee on Payments and Market Infrastructures (“CPMI“) and the International Organization of Securities Commissions (“IOSCO“) on cyber resilience for FMIs.

The strategy is based on three pillars:

  • Pillar 1. Working with financial firms and FMIs to ensure that they build defenses and enhance their level of cyber maturity. The Eurosystem is developing a harmonized approach to assessing payment systems in use in the Eurozone against the CPMI-IOSCO guidance. It is also developing tools for use by FMI operators to enhance their cyber resilience maturity. These tools include a cyber survey, which has been sent by the ECB to all payment systems in the Eurosystem, and a “European Red Team Testing Framework”, which involves testing FMIs’ cyber resilience without prior warning by mimicking the tactics of real cyber attackers.
  • Pillar 2. Strengthening the resilience of the sector. The ECB is working on cross-regulatory collaboration, information sharing, improved threat intelligence, close collaboration with European law enforcement agencies, market-wide exercises based on cyberattack scenarios, and a deeper understanding of third parties and the supply chain.In particular, the ECB is developing an analytical framework and methodology for sector mapping with the aim of producing sector and network maps that will be used to understand key risk areas and improved crisis communication procedures. The ECB also calls for cross-authority collaboration to be enhanced to ensure that authorities have a similar approach and focus on cyber resilience and for the efficient sharing of information on threats by market participants and regulators.

Pillar 3. Establishing strategic dialogue between the industry and regulators. The ECB is in the process of establishing the Euro Cyber Resilience Board. The aim of this board is to provide a forum that brings together market participants, competent authorities and cyber-security service providers. The aim of the Forum is to raise awareness and catalyze joint initiatives for developing effective solutions for the market, as well as sharing best practices and fostering trust and collaboration.

Capital Markets Union: Council Formally Adopts Securitization Regulation and CRR Amendment Regulation

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The General Affairs Council formally adopted at first reading the European Commission proposal for a Regulation of the European Parliament (“EP“) and of the Council amending Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms (CRR Amendment Regulation) and a proposal by the Commission for a Regulation of the EP and of the Council laying down common rules on securitization and creating a European framework for simple, transparent and standardized securitization (Securitization Regulation) on November 20, 2017.

Both Regulations were adopted as an A item, meaning that they could be formally adopted without requiring a debate. This was expected, taking into consideration the undertaking given by the Council representative by letter of June 28, 2017 to approve the EP’s first reading position on both draft Regulations without further amendments. The EP formally adopted the two Regulations on October 26, 2017.

The new rules laid down in these two Regulations are part of the EU’s plan to develop a fully functioning Capital Markets Union by the end of 2019. The EU believes developing a securitization market will help create new investment possibilities and provide an additional source of finance, particularly for SMEs and start-ups.

The Commission adopted its proposals for these two Regulations on September 30, 2015.