Posts by: Stephen Hancock

Draft Electronic Commerce and Solvency 2 (Amendment etc.) (EU Exit) Regulations 2019 Laid Before Parliament

 

A draft version of the Electronic Commerce and Solvency 2 (Amendment etc.) (EU Exit) Regulations 2019 has been laid before Parliament, alongside a draft explanatory memorandum.

The draft Regulations revoke the exclusion that applies to EEA firms providing information society services (ISS) of a financial services nature in the UK, which reflects the UK’s implementation of the E-Commerce Directive (2000/31/EC) (ECD). The Regulations also make minor amendments to the UK-retained Solvency II Delegated Regulation ((EU) 2015/35). The Regulations also implement a run-off regime (the ECD run-off) for EEA ISS providers to service financial services contracts taken out before exit day under the ECD.

FCA Publishes Findings of Its Multi-Firm Review into MiFID II Costs and Charges Disclosures

 

The FCA has published a new webpage setting out the key findings of its multi-firm supervisory review of MiFID II costs and charges disclosure.

The review examined disclosures on firms’ websites and their communications to retail clients. The review involved a sample of 50 firms, identified from a number of MiFID investment firms operating in the retail investments sector, whose costs and charges disclosures did not appear to fully comply with the disclosure requirements introduced under the MiFID II Directive (2014/65/EU).

The review’s findings suggest that whilst improving over 2018, overall, the industry has been slow to comply with the updated costs and disclosure requirements.

The webpage includes sections on:

  • Information on the interaction between the costs and charges disclosure requirements in the MiFID II Directive, the PRIIPs Regulation ((EU) 1286/2014) and the UCITS Directive (2009/65/EC).
  • Areas of improvement, detailing examples of practices the FCA expects firms to address.
  • Examples of good practice, detailing examples of compliance that go beyond the requirements for transparency of costs and charges.
  • Suggested next steps for firms to take.

UK and US Authorities Release Statement on Post-Brexit Continuity of Derivatives Trading and Clearing

 

On February 25, the Bank of England (BoE), the Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC) published a joint statement detailing the measures that will be taken to ensure the continuity of UK-US derivatives trading and clearing activities after Brexit.

The measures address:

UK equivalence for the US: UK authorities have confirmed that US trading venues, firms and central counterparties (CCPs) will be able to continue providing services in the UK. The basis on which these trading venues, firms and CCPs currently provide services in the EU and to EU firms is as a result of various decisions taken by the European Commission in declaring the CFTC regulatory framework equivalent.

Continued supervisory co-operation: The FCA and CFTC will update their memorandums of understanding (MoUs) covering certain firms in the derivatives and the alternative investment fund industry. The BoE and CFTC will update their MoU covering clearing activity, in connection with the UK’s forthcoming recognition of CFTC-registered CCPs.

Extension of existing CFTC relief and comparability for the UK: The CFTC intends that existing regulatory relief granted by the CFTC to EU firms, including UK firms, will be extended to UK firms when the UK leaves the EU.

BCBS Publishes Report on Outcome of February 2019 Meeting

 

From the February 27 to 28 meeting, the Basel Committee on Banking Supervision (BCBS) has published this press release with the outcome.

At the meeting the Committee:

  • Agreed to publish high-level supervisory expectations related to crypto-assets considering the high degree of risks associated with such exposures. These expectations will be published in March.
  • Reiterated its support for reforms of interest rate benchmarks and approved a work plan to look at the interactions with supervisory requirements.
  • Agreed to publish, in March, a summary of the different practices used by jurisdictions to proportionately apply the global minimum prudential standards.
  • Announced it would publish, in March, a joint statement with the International Organization of Securities Commissions (IOSCO) clarifying certain implementation aspects of the margin requirements framework.

ESMA Announces Recognition of UK CSD in Event of No-Deal Brexit

 

On March 1, the European Securities and Markets Authority (ESMA) published a press release announcing that in the event of a no-deal Brexit, it will recognize Euroclear UK and Ireland Ltd, the UK central securities depository (UK CSD), as a third country CSD under the Central Securities Depositories Regulation (909/2014) (CSDR).

ESMA has adopted this recognition decision in order to allow the UK CSD to serve Irish securities and to avoid any negative impact on the Irish securities market. ESMA has previously communicated that its board of supervisors supports continued access to the UK CSD.

The UK CSD will be recognized to provide its services to the EU, having been assessed as meeting the recognition conditions under Article 25 of the CSDR.

The recognition decision would take effect on the date following Brexit date, under a no-deal Brexit scenario.

ECON Reports on Proposed Omnibus Directive and Proposed Regulation Amending ESRB Regulation

 

On January 14, the European Parliament’s Economic and Monetary Affairs Committee (“ECON“) published the following reports relating to the European Commission’s legislative proposals to reform the European System of Financial Supervision (“ESFS“):

  • Report on the amended text of the proposed Regulation amending the Regulation that established the European Systemic Risk Board (“ESRB“) (1092/2010) (ESRB Regulation) (2017/0232 (COD)).
  • Report on the amended text of the proposed Omnibus Directive (2017/0231 (COD)).

ECON voted to adopt these reports on January 10, 2018. It has not yet published the text of the adopted report on the proposed Omnibus Regulation (2017/0230 (COD)).

ECA Publishes a Communication on Access to ECB Banking Supervision Documents and Information

 

On January 14, the European Court of Auditors (“ECA“) published a communication to the European Parliament on the European Central Bank’s (“ECB“) position on the ECA’s access to audit documents and information relating to its banking supervision role under the single supervisory mechanism (“SSM“). READ MORE

EIOPA Publishes Call for Evidence on Integration of Sustainability Risks in Solvency II

 

On January 17, the European Insurance and Occupational Pensions Authority (“EIOPA“) published a call for evidence on the integration of sustainability risks and factors in the prudential assessment of assets and liabilities for insurers and (re)insurers under the Solvency II Directive (2009/138/EC). The Commission’s initiatives on sustainable finance form part of its broader initiative to establish the capital markets union (“CMU“).

The deadline for responses to the call for evidence is March 8, 2019. EIOPA plans to prepare a draft opinion for consultation during the second half of 2019 for submission to the European Commission in the third quarter of 2019.

The call for evidence relates to the European Commission’s call for advice from EIOPA and ESMA in July 2018, following which EIOPA launched a survey to help it build up a suitable evidence base on the sustainable finance legislative proposals.

EIOPA expects to collect market data to analyze how sustainability risks affect (re)insurers investments, with particular focus on climate change, as well as data on market practices on insurance underwriting. The Commission has asked EIOPA to assess whether Solvency II presents any inherent incentives or disincentives to sustainable investment, including but not limited to investments in unrated bonds and loans, unlisted equity and real estate. National competent authorities will collect information from individual undertakings within their jurisdiction to support EIOPA’s analysis.