Regulatory reform – the new UK regime: Law-Now alerts, tools and latest news
Law-Now alerts and other tools
Chart: International, European and UK institutions (the 2013 position) (3/07/13)
Law-Now: “ The Banking Standards Report: The new offence of reckless misconduct ” (18/07/13)
Law Now: “ The Government responds to the Parliamentary Commission on Banking Standards Report ” (12/07/13)
Law-Now: “ Parliamentary Commission on Banking Standards Final Report ” (25/06/13)
Click here to access archived Law-Now alerts and other tools
Latest news
Topics covered
UK FSCS reform
UK
The Financial Services (Banking Reform) Act 2013 (Commencement No. 4) Order 2014/823 (C.32)
This Order brings into force certain provisions of the Act relating to the competition functions given to the Payment Services Regulator (established under this Act) concurrently with CMA (established under the Enterprise and Regulatory Reform Act 2013). This is the fourth commencement order to be made under the Act. (Date in force: 1/04/14) (27/03/14) http://www.legislation.gov.uk/uksi/2014/823/pdfs/uksi_20140823_en.pdf
The Financial Services and Markets Act 2000 (Consumer Credit) (Transitional Provisions) (No. 2) Order 2014/835
This Order makes various supplemental and transitional provisions in consequence of provisions made by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013/1881) (“the RAO Amendment No. 2 Order”). Article 2 amends the RAO Amendment No. 2 Order. Part 20 FSMA provides an exemption from the need for authorisation for members of professional bodies who carry on regulated activity which is merely incidental to the provision of professional services; such regulated activity must be the only regulated activity the member firm undertakes. By virtue of the RAO Amendment No. 2 Order, various consumer credit-related activities become regulated activities for the purposes of FSMA on 1 April 2014; and that Order makes provision for persons with licences issued under CCA 1974 to obtain interim permission to carry on that activity. The amendments in article 2 preserve the effect of the exemption in Part 20 FSMA where a member firm has an interim permission. (Date in force: 1/04/14) (27/03/14) http://www.legislation.gov.uk/uksi/2014/835/pdfs/uksi_20140835_en.pdf
BoE: FPC meeting (19 March 2014)
BoE has published a short statement noting the above-mentioned FPC meeting. Among matters discussed: the 2014 bank stress testing exercise; FCA’s work which will allow FPC to give guidance on appropriate interest rate stress tests to be used by banks in their affordability tests. UK monetary policy and financial stability; review of the role of the leverage ratio
within the capital framework (see second link below for ToR); disclosure of capital ratios and work on cyber risks. The Record of the FPC meeting will be published on 1 April. (27/03/14) http://www.bankofengland.co.uk//publications/Pages/news/2014/025.aspx http://www.bankofengland.co.uk/publications/Pages/news/2014/062.aspx
NAO: The FCA and PRA: Regulating financial services
NAO’s report notes that the combined forecast cost of FCA and PRA is £664m in 2013-14, which equates to 24% higher than the cost of FCA and found “encouraging” signs that changing regulatory approaches are “bedding down” which encouraged earlier and more decisive regulatory intervention. However, concerns were raised over the following: staffing issues (current levels of staff turnover are high – 26% of those who have resigned from PRA were classed as ‘high- performers’ and more than a third of FCA’s staff had less than two years’ services at FCA/FSA); the regulators’ approach to data collection and the approach to coordination of action between the regulators. Among its recommendations, NAO urges PRA and FCA to establish a body of evidence from experience of managing potential conflicts between prudential and conduct regulation. The full report appears in the first link and an executive summary in the second. (25/03/14) http://www.nao.org.uk/wp-content/uploads/2015/03/Regulating-financial-services.pdf http://www.nao.org.uk/wp- content/uploads/2015/03/Regulating-financial-services-summary.pdf
The Financial Services (Banking Reform) Act 2013 (Commencement No. 2) Order 2014/772 (C.28)
This Order brings into force on 21/03/14 s139 and s 140(1) to (3) of the Financial Services (Banking Reform) Act 2013 (c. 33) (“the 2013 Act”). This is the second commencement order to be made under the 2013 Act. Section 139 amends the Compensation Act 2006 (c. 29) (“the 2006 Act”) to create a power for the Claims Management Regulator to impose penalties on persons providing claims management services. Section 140(1) to (3) amends the 2006 Act to allow the recovery of expenditure incurred by the Office for Legal Complaints in dealing with claims management complaints. (21/03/14) http://www.legislation.gov.uk/uksi/2014/772/pdfs/uksi_20140772_en.pd f
The Financial Services (Banking Reform) Act 2013 (Commencement No. 3) Order 2014/785 (C.29)
This Order brings into force on 21/04/14 s140(4) to (6) of the Financial Services (Banking Reform) Act 2013 (c. 33) (“the Act”). This is the third commencement order to be made under the Act. Section 140(4) to (6) amends the Legal Services Act 2007 (c. 29) to allow the recovery of expenditure incurred by the Office for Legal Complaints in dealing with claims management complaints. (21/03/14) http://www.legislation.gov.uk/uksi/2014/785/pdfs/uksi_20140785_en.pd f
TSC: Hearings with BoE’s new Deputy Governors and Chairman of Court
Further to announcements earlier in the week, TSC is to hold pre-appointment hearings with the newly appointed officials. It is expected that the hearings will take place prior to their taking up their posts. (20/03/14) http://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news/pre-appointment- hearing-bank-of-england-new-chairman/
HMT: The Budget 2014 – FPC: Remit and recommendations
The Budget announces that HMT has provided FPC with its remit and recommendations for the year ahead, as required by the Bank of England Act 1998 (as amended by the Financial Services Act 2012). (19/03/14) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293985/PU1650_Remit_and_Recommendatio ns_for_FPC__print_.pdf
HMT: Record of the meeting between the Governor of BoE and the Chancellor of the Exchequer to discuss the November 2013 financial stability report (30 January 2014)
HMT has published the minutes of this meeting. Topics include: FPC’s consideration of UK housing market developments and FPC’s medium-term priorities (stated as being: the medium-term capital framework for banks; ending “too big to fail”; and shadow banking and resilient market-based finance). (13/03/14) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288579/Minute_of_Gov- Chx_meeting_Jan_30_2014.pdf
2
The Financial Services and Markets Act 2000 (Consumer Credit) (Miscellaneous Provisions) (No. 2) Order 2014/506
This Order makes various supplemental, consequential and transitional provisions in consequence of provisions made by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013/1881) (“the RAO Amendment No. 2 Order”) and the Financial Services Act 2012 (Consumer Credit) Order 2013/1882) which bring the regulation of consumer credit under FSMA and the Financial Services and Markets Act 2000 (Consumer Credit) (Miscellaneous Provisions) Order 2014/208). Amendments include: exemptions from the need to be authorised under FSMA for charities that operate an electronic system for lending which facilitates loans under which the only amount paid to the lender is the amount lent, and for and persons who have rights under a regulated credit agreement or regulated consumer hire agreement (for example, special purpose vehicles who acquire such rights using the proceeds of a bond issue) provided that the agreement is administered by an authorised person; aligning the application of the restriction under FSMA on financial promotions with the requirement for authorisation and amending CCA 1974 to preserve the application of s126 of that Act (enforcement of land mortgages) to residential and buy-to-let mortgages. (Dates in force: 30/03/14/1/04/14) (7/03/14) http://www.legislation.gov.uk/uksi/2014/506/pdfs/uksi_20140506_en.pdf
FCA: Payments systems regulation
FCA has published a “call for inputs” which asks interested parties to provide input that will assist the future payment services regulator to understand the current concerns of the UK payments industry, develop its regulatory approach and design, and identify early priorities for action. HMT will conduct formal consultations on the regulatory framework and content later this year. Responses are required 15 April 2014. In addition, FCA has published a webpage which provides a timeline for the launch of the new regulator. (5/03/14) http://www.fca.org.uk/news/payment-systems-industry-new-regulator http://www.fca.org.uk/static/documents/psr-call-for-inputs.pdf http://www.fca.org.uk/firms/firm-types/payment- systems/timeline
FCA: Payment systems
FCA has published this webpage which provides information on FCA’s role in the creation of a new payment systems regulator in April 2014. The new regulator will launch in April 2015 when regulation will commence. It is noted that the regulator will be incorporated as a subsidiary of the FCA, but will be a separate legal entity with its own statutory objectives and board, including a managing director and chair whose appointments will be approved by HMT. However, Martin Wheatley and other FCA directors will sit on the board. The new regulator will be based at FCA's offices, and FCA will provide staff and services to it. (3/03/13) http://www.fca.org.uk/firms/firm-types/payment-systems
The Consumer Credit Act 1974 (Green Deal) (Amendment) Order 2014/436
This Order relates to the green deal energy efficiency scheme established by Chapter 1 of Part 1 of the Energy Act 2011 (the “2011 Act”). It makes amendments to CCA 1974 in consequence of the provisions of Chapter 1 of Part 1 of the 2011 Act. This Order makes provision as to the treatment of green deal plans under CCA and, in particular, the circumstances in which a green deal plan is a consumer credit agreement and the persons who are to be treated as being the creditor and the debtor in relation to a green deal plan. In the case of the debtor, the Order makes provision as to the sections of CCA in respect of which different categories of person are to be treated as the debtor. (Date in force: 28/02/14) (3/03/14) http://www.legislation.gov.uk/uksi/2014/436/pdfs/uksi_20140436_en.pdf
The Financial Services (Banking Reform) Act 2013 (Transitional Provision) Order 2014/377
This Order is made under s146 of the Financial Services (Banking Reform) Act 2013 (c. 33). It makes transitional provision in connection with the coming into force of s16 of that Act, which requires the approval of HMT to be given before a CEO may be appointed to the scheme manager of FSCS. The existing CEO is to be treated on 1/0414 as if appointed with HMT approval. (Date in force; 1/04/14) (25/02/14) http://www.legislation.gov.uk/uksi/2014/378/pdfs/uksi_20140378_en.pdf
The Financial Services (Banking Reform) Act 2013 (Commencement No. 1) Order 2014/377 (C14)
This Order brings into force certain provisions of the Financial Services (Banking Reform) Act 2013 (c. 33). This is the first commencement order to be made under the Act. The provisions listed in Part 1 of the Schedule to this Order are brought into force for all purposes on 1/03/14. The provisions listed in Part 2 of the Schedule are brought into force on 1/03/14 for the purpose of making rules, orders and regulations. (24/02/14) http://www.legislation.gov.uk/uksi/2014/377/pdfs/uksi_20140377_en.pdf
3
The Financial Services and Markets Act 2000 (Consumer Credit) (Designated Activities) Order 2014/334
The Order specifies debt-collecting and entering into, or exercising rights under, a regulated consumer credit agreement (in each case, as specified in the RAO, as amended by S.I. 2013/1881) for the purposes of s23(1B) FSMA, except where the activity relates to an agreement under which the obligation of the borrower is secured on land. The effect of that provision is that an authorised person (within the meaning of that Act) is guilty of an offence if that person caries on such a specified activity in the UK otherwise than in accordance with permission under the Act (Date in force 1/04/14) (17/02/14) http://www.legislation.gov.uk/uksi/2014/334/pdfs/uksi_20140334_en.pdf
HMT: Scotland analysis: assessment of a sterling currency union
HMT has published the text of a speech by George Osborne, in which he argues that “Scotland’s banking sector is far too big in relation to its national income, which means that there is a very real risk that the continuing UK would end up bearing most of the liquidity and solvency risk which it creates. ,,, What would be in it for the rest of the United Kingdom? Nothing but exposure, again, to the risk of a failing bank – this time not even in our own country, but in a foreign one”. The speech is accompanied by a paper prepared by HMT officials with a covering note. The paper notes that: “if the Bank of England were to act as a lender of last resort in response to a solvency crisis in both jurisdictions, this would involve an implicit commitment of public funds. This would require a set of negotiated terms between the continuing UK and an independent Scottish state regarding the conditions of interventions by the Bank of England, and any indemnifications for them. … Under European law, an independent Scottish state would be required to establish its own competent authority to regulate and supervise financial services. It might theoretically be possible for an independent Scottish state, with the agreement of the continuing UK, to appoint the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) as its regulators, but this would not allow the FCA and PRA to regulate Scottish firms on a UK wide basis”. (13/02/14) https://www.gov.uk/government/speeches/chancellor-on-the-prospect-of-a-currency-union-with-an-independent-scotland https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279455/Sir_Nicholas_Macpherson_- _Scotland_and_a_currency_union.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279454/CM8815_2901849_SA_SterlingUnion _acc.pdf
The Financial Services and Markets Act 2000 (Consumer Credit) (Miscellaneous Provisions) Order 2014/208
This Order makes provision in relation to the regulation of consumer credit under FSMA. Article 2, 4, 5, 6 and 7 make various supplemental, consequential and transitional provisions in consequence of provisions made by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013 and the Financial Services Act 2012 (Consumer Credit) Order 2013. Article 3 amends the Financial Services (Distance Marketing) Regulations 2004/2095) (DMD). Article 8 FCA to claim legal professional privilege where relevant in respect of information transferred to it by OFT in connection with the transfer of the regulation of consumer credit. (Dates in force: 26/2/2014 and 6/3/14) (5/02/14) http://www.legislation.gov.uk/uksi/2014/208/pdfs/uksi_20140208_en.pdf
The Financial Services and Markets Act 2000 (Appointed Representatives) (Amendment) Regulations 2014/206
These Regulations amend the Financial Services and Markets Act 2000 (Appointed Representatives) Regulations 2001/1217. The effect of the amendment made by regulation 2(2) is to permit a person with permission to carry on the regulated activity of operating an electronic system in relation to lending to appoint a representative without the representative requiring authorisation under FSMA to undertake that activity. The effect of the amendment made by regulation 2(3) is to specify circumstances in which a person is to be treated as representing other operators of electronic systems. Regulation 2(4) amends the Appointed Representatives Regulations so as to prescribe descriptions of business and kinds of regulated activities which are related to consumer credit for the purposes of s39(1C) to (1E) FSMA. Generally, an authorised person may not make use of the exemption from authorisation available to appointed representatives. The effect of the amendments in regulation 2(4) is that an authorised person who has permission under FSMA only in relation to certain consumer credit-related regulated activities may act as an appointed representative in respect of any of the activities which appointed representatives may undertake without permission. (Date in force: 1/04/14) (5/02/14) http://www.legislation.gov.uk/uksi/2014/206/pdfs/uksi_20140206_en.pdf
TSC: Remuneration and sales-based incentives
Andrew Tyrie has published the text of a letter he has written to Martin Wheatley of FCA with regard to the Final Notice issued against Lloyds in December 2013 for serious failings in its controls over sales incentive schemes. He suggests: “the Banking Commission … made clear that it wanted specific provisions empowering the regulator to limit the use and scale of sales-based incentives to prevent the kind of conduct failure outlined in this Final Notice. So far, the FCA has shown little enthusiasm for taking such action. Following the record fine levied against Lloyds, it should reconsider. Unless such issues are addressed now, the risk of conduct failure at some point in the future can only increase.” (5/02/14) http://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news/tyrie-writes-to-fca-
4
on-remuneration-and-sales-based-incentives / http://www.parliament.uk/documents/commons- committees/treasury/140130_Andrew_Tyrie_to_Martin%20Wheatley.pdf
BoE: Speech by Mark Carney (24 January 2014)
Text of the above, given at the Davos CBI British Business Leaders Lunch, follows. Topics include: financial reform and he notes: “for the system to operate with integrity, penalties for misconduct cannot be seen as a cost of doing business. Rather, banks must recognise that only exemplary behaviour can confer social licence to global financial capitalism. More fundamentally, integrity cannot be legislated, and it certainly cannot be bought. Only a perspective which takes into account the wider implications of actions can guide proper behaviour. And while regulators can promote competition, end the subsidy enjoyed by institutions that are too big to fail, and determine the appropriate split of remuneration between fixed and variable elements to limit risks to financial stability, only society, not regulators, can determine whether the absolute and relative levels of compensation are acceptable”. (24/01/14) http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech705.pdf
TSC: Independence of FPC
TSC has published the text of a letter sent to it in December 2013 from Sir Andrew Large in which he discusses the independence of FPC and perceived “tensions” between its financial stability and economic policy objectives. (23/01/14) http://www.parliament.uk/documents/commons-committees/treasury/131203%20-%20Sir%20Andrew%20Large%20- %20FPC%20remit.pdf
PRA: CP2/14: The PRA Rulebook
PRA published the first in a series of consultation papers "aimed at reshaping Handbook material inherited from the FSA to create a clear and concise PRA Rulebook"; although it is now, however, "proposing a material change to its rules". Changes include: the six Principles for Businesses (PRIN) will be replaced with nine Fundamental Rules (FRs) concerning prudential matters;; breaches of the FRs, or 'inadequate' compliance with them, may lead to PRA enforcement;; some guidance on information gathering, audits, skilled person reports, and waivers, will now become rules; all other guidance will be removed from the new Rulebook, which will contain only rules (although the PRA will still provide guidance, via 'supervisory statements'); and the Handbook/Rulebook will be restructured, including a split into 'banking' and 'insurance' sectors. The consultation is open until 14 March 2014. (22/01/14) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2014/rulebookcon214.pdf
TSC: Uncorrected evidence of Dr Mark Carney
The Treasury Select Committee has published an uncorrected transcript of the evidence given by the Governor of the Bank of England on the Financial Stability Report on 15 January. In response to a question from the Chairman, the Governor revealed that the PRA would begin consulting on the recommendations of the Parliamentary Commission on Banking Standards in April 2014. This consultation would be likely to last six months. (21/01/14) http://data.parliament.uk/writtenevidence/WrittenEvidence.svc/EvidencePdf/5365
HMT: A new approach to financial regulation: transferring consumer credit regulation to the FCA
Following last year’s consultation on the above, the Government laid two statutory instruments before Parliament on 14 January to supplement the previous instruments made July 2013. The new instruments include a clarification of the distinction between credit broking and the operation of an electronic platform in relation to peer-to-peer lending, and transitional measures regarding status disclosure requirements. (17/01/13) https://www.gov.uk/government/consultations/a-new-approach-to-financial-regulation-transferring-consumer-credit- regulation-to-the-financial-conduct-autho
BoE: FPC’s powers to supplement capital requirements
BoE has published a policy statement on when the FPC will use its powers to direct the FCA or PRA to adjust sectoral capital requirements (SCR) and to adjust the countercyclical capital buffer (CCB) itself. The former power allows the FPC to increase capital requirements above the usual levels for banks’ exposures to specific sectors judged to pose systemic risks. The latter power allows the FPC to increase capital requirements for all loans and exposures of banks to borrowers in the UK. (15/01/14) http://www.bankofengland.co.uk/financialstability/Documents/fpc/policystatement140113.pdf
5
HMT: Banking Reform Act 2013: final assessments
HMT has published various impact assessments related to the Financial Services (Banking Reform) Act 2013. There are separate assessments for ring-fencing and depositor preference; the new bail-in powers; the creation of a new Payment Systems Regulator; and changes to the Special Administration Regime. The Act received Royal Assent on 18 December. (14/01/14) https://www.gov.uk/government/publications/banking-reform-act-2013-final-assessments
HMT: Financial Services (Banking Reform) Bill
HMT has announced that the Bill has received Royal Assent. (18/12/13) https://www.gov.uk/government/news/banking- reform-act-becomes-law
HMT: Banking reform draft secondary legislation
Further to its July 2013 consultation concerning four pieces of legislation (Ring-fenced Bodies and Core Activities Order, Excluded Activities and Prohibitions Order. Banking Reform (Loss Absorbency Requirements) Order and Fees and Prescribed International Organisations Regulations), HMT has now published a summary of responses. It is stated that the Government will introduce final versions of the secondary legislation to Parliament at an “appropriate point” following the granting of Royal Assent to the Bill (which was 18 December 2013). (18/12/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/267359/PU1608_final.pdf
HoC/HoL: Financial Services (Banking Reform) Bill
Both Houses have agreed on the text of the Bill which now waits for the final stage of Royal Assent when the Bill will become an Act of Parliament. Royal Assent is scheduled for 18 December 2013. A link to the Hansard transcript of the final “ping pong” stage on 15 December 2013 follows. (17/12/13) http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131216-0002.htm#13121629000223
HoC: Financial Services (Banking Reform) Bill
The Bill has now reached “ping pong” stage and was debated on 11 December 2013 (Hansard transcript appears at second link below). A document setting out HoC disagreement with the new clause on the conduct of persons working in financial services has also been published. (13/12/13) http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0067/14067.pdf http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm131211/debtext/131211-0001.htm#13121177000002
PRA: Practitioner Panel
PRA has announced the establishment of a Practitioner Panel. The Panel has 13 members nominated by trade associations who represent PRA-regulated firms. Martin Gilbert (CEO of Aberdeen Asset Management) has been appointed as chairman and Brian McCrory (Director of Belfast Teachers Credit Union) appointed as deputy chairman. These appointments have been approved by HMT. A full list of other members is included in this press release. It is noted that the first meeting of the Panel was held on 29 November 2013 at which ToR were agreed. The Panel will meet at least quarterly and its members will serve a three year term renewable at PRA’s discretion. PRA will ask the relevant trade associations to nominate new members to fill any future vacancies. (12/12/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/183.aspx
The Financial Services and Markets Act 2000 (Qualifying EU Provisions) (No. 2) Order 2013/3116
This Order specifies the following EU legislation as qualifying EU provisions for the purposes of various provisions of FSMA: (a) Articles 4(1), 5a, 8b, 8c, 8d and 25a of Regulation 1060/2009/EC of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ no L302, 17/11/2009, p.1); (b) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (OJ no L176, 27/6/2013, p.1, for corrigenda see OJ no L208, 2/8/2013 p.68 and OJ no L321, 30/11/2013 p. 6) (the “CRR”); (c) any directly applicable regulation made under the CRR or Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (OJ no L176, 27/6/2013, p. 338, for corrigenda see OJ no L208, 2/8/2013, p.73). The effect of the Order is
6
to apply certain provisions of FSMA for purposes connected with the qualifying EU provisions. Articles 2 and 3 specify provisions of EU law for general purposes including ss1A and 2A of FSMA (the functions FCA and PRA), s168 of FSMA (power of the regulators to appoint an investigator) and disciplinary measures imposed under Part 14 of FSMA. Article 4 specifies which of FCA or PRA is responsible for taking disciplinary action in relation to each specified provision of EU law. (Date in force: 1/1/14) (11/12/13) http://www.legislation.gov.uk/uksi/2013/3116/pdfs/uksi_20133116_en.pdf
HoL: Financial Services (Banking Reform) Bill
The third reading took place on 9 December 2013 and a document setting out HoL’s final amendments to the Bill together with an explanatory note have been published The Hansard transcript of the debate is the third link below. The Bill will now go HoC for consideration of these amendments. (10/12/13) http://www.publications.parliament.uk/pa/bills/cbill/2013- 2014/0142/14142.pdf http://www.publications.parliament.uk/pa/bills/cbill/2013-2014/0142/en/14142en.pdf http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131209-0003.htm#13120942000679
The Financial Services and Markets Act 2000 (Consumer Credit) (Transitional Provisions) Order 2013/3128
This Order is made under FSMA. Under the Enterprise and Regulatory Reform Act 2013 (c.24), OFT will cease to exist on 1/4/2014. The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013/1881 and the Financial Services Act 2012 (Consumer Credit) Order 2013/1882, transfer the regulatory framework for consumer credit in large part from the Consumer Credit Act 1974 (c.39) (the “CCA”) to the 2000 Act, and confer functions in relation to consumer credit on FSA from that date. Article 2 of this Order confers powers on FCA to make payments to persons who have paid OFT for a licence issued under CCA, except for certain lenders who received a compliance visit from OFT. Article 3 makes supplementary provision in connection with such payments. Section 137C of the 2000 Act confers power on FCA to make rules in relation to the cost of credit. Article 4 provides that FCA may use its powers under section 165 of the 2000 Act, before 1/4/2014, to obtain information from persons who undertake certain consumer credit-related activities for the purposes of FCA making such rules (Date in force: 31/12/13) (10/12/13) http://www.legislation.gov.uk/uksi/2013/3128/pdfs/uksi_20133128_en.pdf
HMT/HoL: Financial Services (Banking Reform) Bill
HMT has published a briefing note on amendments tabled by the Government, including with regard to the payday lending cap; the proposed licensing regime; FSCP; proprietary trading; ring-fencing; claims management companies; and application of foreign branches to the senior managers’ certification and banking standards regime. The third reading in HoL is scheduled to take place on 9 December 2013 and the second link below sets out the wording of these amendments. (5/12/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263561/House_of_Lords_Policy_brief_- _Third_Reading_amendments.pdf http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0062/amend/am062-a.htm
BoE: FPC (20 November 2013)
BoE has published a record of the above-mentioned meeting at which it was agreed that FCA should require mortgage lenders to have regard to any future FPC recommendation on appropriate interest rate stress tests to use in the assessment of affordability. (3/12/13) http://www.bankofengland.co.uk/publications/Documents/records/fpc/pdf/2013/record1312.pdf
TSC: Money Advice Service
TSC has published a report with regard to the above, together with an accompanying volume of written evidence. The purpose of the report was to assess the effectiveness of MAS. TSC says that it is “unconvinced that [MAS] has adopted the right strategy or that it currently performs the correct role”. TSC notes a planned review of MAS by HMT, but believes the timescale envisaged (2013-16) is too long and that an independent review should be established instead, which should report by the summer of 2014. Among the matters it suggests the independent review consider is whether FCA needs additional statutory powers to hold MAS account, eg. whether FCA should have powers to intervene on operational matters and whether it needs additional powers to scrutinise MAS’s budget. (3/12/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/457/457.pdf http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/457/457vw.pdf
HoL: Financial Services (Banking Reform) Bill
7
HoL has published a new version of the Bill, as amended on report, together with the Hansard transcripts of the debates which took place on 26 and 27 November 2013. The third reading is scheduled to take place on 8 December 2013. (28/11/13) http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0062/14062.pdf http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131126-0001.htm#13112646000939 http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131127-0001.htm#13112754000951
TSC: Help to Buy
Further to the announcements on the Funding for Lending scheme (see Banking ), TSC has published the text of a letter from Mark Carney to Andrew Tyrie in response to a letter sent earlier in the month which requested information on the role of the FPC in relation to the Help to Buy scheme, including details responses to the questions set out by TSC. (28/11/13) http://www.parliament.uk/documents/commons-committees/treasury/131122%20-%20M.pdf!docid=1633577!.pdf
The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) (No.4) Order 2013/2084
This Order makes consequential amendments to subordinate legislation and related transitional provision in connection with the Financial Services Act 2012 (c.21) (“the Act”). It makes consequential amendments to the Open-Ended Investment Companies (Amendment) Regulations 2011/3049 ( “the Amendment Regulations”) in connection with the introduction of the new regulatory regime provided for in the 2012 Act, updating various references in the Amendment Regulations so that they refer to FCA and its operational objectives in place of FSA and its regulatory objectives and transitional provisions in relation to the Amendment Regulations, which were made under FSMA and which came into force on 21/12/2011. Regulation 4 of the Amendment Regulations makes transitional provision in connection with the requirement in paragraph 2(ba) of Schedule 2 to the Open-Ended Investment Companies Regulations 2001/1228) that the instrument of incorporation of an open-ended investment company contain a statement that the assets of a sub-fund of the company belong exclusively to that sub-fund and shall not be used to discharge the liabilities of or claims against the company or any other person or body, or any other sub-fund, and shall not be available for any such purpose. In particular, regulation 4 of the Amendment Regulations provides for an open-ended investment company to notify “the Authority” within two years of the Amendment Regulations coming into force that it proposes to alter its instrument of incorporation (or within three years in the case of a micro-business); regulation 4 also provides that “the Authority” may extend the two year period on receipt of a request within twenty-three months of the Amendment Regulations coming into force.. (Date in force: 19/12/13) (27/11/13) http://www.legislation.gov.uk/uksi/2013/2984/pdfs/uksi_20132984_en.pdf
HoC: Financial Services (Banking Reform) Bill: Lords committee stage summary
This library note summarises HoL stage proceedings on the Financial Services (Banking Reform) Bill 2012/13 to 2013/14. (18/11/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN06756
HoC: Government bank rescues
This library note gives some basic numbers concerning the Government’s net expenditure on banks rescued during the financial crisis of 2008-9 and the debts owed to it by other organisations. (18/11/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN05748
HMT: Financial Services (Banking Reform) Bill
HMT has published further amendments tabled by the Government on 11 November 2013, described as “largely technical”, apart from those relating to the proposed Claims Management Regulator. (13/11/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/256841/House_of_Lords_Policy_brief_- _Report_amendments.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249175/HoL_Policy_Brief_- _Payments_Regulator.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249173/Annotated_Clauses_- _Payments_Regulator.pdf (NB: over 80 pages lnog)
TSC: Help to Buy
8
TSC has published a letter from Andrew Tyrie to Mark Carney which seeks clarification on the scope and limits of BoE’s role in the Government’s Help to Buy: mortgage guarantee scheme. (11/11/13) http://www.parliament.uk/documents/commons- committees/treasury/131108%20-%20A.pdf!docid=1609426!.pdf
BoE: Speech by Donald Kohn: The interactions of macroprudential and monetary policies: a view from the Bank of England's Financial Policy Committee (6 November 2013)
Text of the above, given at Oxford Institute for Economic Policy, follows. He discusses FPC/MPC interaction and challenges for FPC (such as the introduction of liquidity buffers and the Help to Buy scheme). (8/11/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech692.pdf
HoL: Financial Services (Banking Reform) Bill
A new draft of the Bill, as amended in Committee, has now been published (first link below). The Hansard transcript of the final day of the Committee stage, which took place on 23 October 2013, appears in the second link below. Amendments discussed covered clauses 17 & 21 of the Bill. The Report stage has yet to be scheduled. (24/10/13) http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0054/14054.pdf (NB: over 170 pages long) http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131023-0001.htm#13102355000391
FCA: Speech by Martin Wheatley: The fairness challenge (24 October 2013)
Text of the above, given by Martin Wheatley at the Mansion House, follows. He discusses “the culture of ethics over compliance” from the viewpoints of firms, the regulator and consumers. He concludes: “I do think the financial world is getting its act together … The future of the financial world is looking fairer”. (24/10/13) http://www.fca.org.uk/news/the- fairness-challenge
FMLC: Further discussion of legal uncertainty which could arise from ring-fencing proposals: an addendum to the FMLC paper entitled Banking Reform (Ring-fencing)
This addendum to FMLC’s paper on ringfencing published in February 2013 considers issues arising from the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order and the Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order. (22/10/13) http://www.fmlc.org/Documents/FMLC%20Issue%20175%20- %20Addendum%20to%20Ring-fencing%20Paper.pdf (NB: over 30 pages long)
HMT: Single market – financial services and the free movement of capital
This is a call for evidence regarding the EU’s competences in the field of financial services and the free movement of capital and is part of a wide ranging review intended to provide an analysis of what the UK’s membership of the EU means for the UK national interest. The review is not tasked with producing specific recommendations or looking at alternative models for Britain’s overall relationship with the EU. This part of the review will focus on competences and legislation that affect, among others, banks, insurance companies, pension companies, asset managers and market infrastructure providers operating either exclusively in the UK or across borders. It also considers the EU competences on the free movement of capital and the effect of developments in the use of these competences on the financial services sector and broader economy. Annexes A, B and C respectively summarise the EU Treaty provisions and key pieces of EU legislation that are relevant for this review, and set out “boundary” issues that other reports will be covering, to help clarify what is in and out of scope of this report. Responses are required by 17 January 2014. (21/10/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/251514/PU1568_BoC_FSFMC_CfE_proof4.p df (NB: over 70 pages long)
BoE: Speech by Martin Taylor (21 October 2013)
Text of the above, given at the joint Black Country Reinvestment Society and Black Country Diners Club networking lunch follows. Martin Taylor is an external member of FPC and discusses its role. He concludes: “In the end our legitimacy as a committee will rest both on our doing a good job and on people believing that the job needs to be done. Let’s not forget that the biggest mistakes in this area in the past have not come when the job was badly done. They have arisen when it was not done at all”. (21/10/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech688.pdf
9
HoL: Financial Services (Banking Reform) Bill
A link to the Hansard transcript of the second stage of the Committee stage appears below. New clauses are discussed, including competition and diversity, bail-in stabilisation option; various clauses on approvals and conduct of persons working in financial services; the meaning of “bank”; interpretation of terms used in offence; institution of proceedings and payment services regulation. A number of these propose amendments to FSMA, The next session is scheduled for 23 October 2013. (16/10/13) http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131015-0001.htm#13101586000399
HoL Delegated Powers and Regulatory Reform Committee: Financial Services (Banking Reform) Bill (clauses 1 to 5)
The report notes that the Committee had intended to consider the entire Bill as brought from HoL, but following the publication of amendments by HMT, the only deals with clauses 1 to 5 of the Bill as brought from HoC and any Government amendments to those provisions that significantly affect delegated powers conferred in them. (10/10/13) http://www.publications.parliament.uk/pa/ld201314/ldselect/lddelreg/53/53.pdf
HoC: The Independent Commission on Banking: the Vickers report & the Parliamentary Commission on Banking Standards
This is a HoC library standard note summarises ‘Vickers’ and outlines the new observations and recommendations of the Parliamentary Commission. (10/10/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN06171
HMT: Opening up UK payments/Amendments to Financial Services (Banking Reform) Bill
HMT has published its response to the March 2013 consultation. The Government has decided that FCA should be given the role of Payment Systems Regulator. The Payment Systems Regulator will be established as a separate body under FCA, with its own MD and board. It is emphasised that PSR “will adopt a utility-style approach, distinctive from the FCA’s existing remit and will require a different set of skills in order to fulfil that role” The Government has tabled amendments in the HoL stage of the Financial Services (Banking Reform) Bill to create the new regulatory regime for payment systems (see second link below for policy brief and annotated clause below) and envisages that, following Royal Assent, the Regulator’s powers will come into force in late 2014 and the Payment Systems Regulator will be fully operational by spring 2015. (9/10/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249085/PU1563_Opening_up_UK_payments _Government_response.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249175/HoL_Policy_Brief_- _Payments_Regulator.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249173/Annotated_Clauses_- _Payments_Regulator.pdf (NB: over 80 pages long)
HoL: Financial Services (Banking Reform) Bill
A link to the Hansard transcript of the first sitting of the Committee stage appears below. Clause 4 (ring-fencing of certain activities) was debated at length. The next session is scheduled for 15 October 2013. (9/10/13) http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/131008-0001.htm#13100819000471
HMT: Financial Services (Banking Reform) Bill – SRR
As part of materials recently published by HMT for consideration as the Bill passes through the HoL Committee stage, a new draft annex on the bail-in option has now been published. (9/10/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/248720/Draft_bail- in_annex_to_the_Banking_Act_Code_of_Practice.docx
FCA: Response to the final report of the Parliamentary Commission on Banking Standards
FCA has published the above, noting that the report makes over 100 recommendations, of which 58 relate specifically to FCA. FCA concentrates on the following topics: holding individuals to account, governance and culture, securing better outcomes for consumers and regulatory judgement. The annex, in tabular format, sets out FCA’s response to each of them, along with comments on recommendations for the Government and industry where appropriate. FCA intends to consult on
10
a series of proposals in 2014, including the introduction of a new Senior Persons Regime for deposit-taking institutions. (7/10/13) http://www.fca.org.uk/static/documents/pcbs-response.pdf (NB: over 40 pages long)
BoE: Response to the final report of the Parliamentary Commission on Banking Standards
BoE has published the above, specifically concentrating on the following issues: how BoE would implement the proposed new framework for individuals; competition governance and the enhanced responsibilities of regulators, noting a number of forthcoming consultations and actions to be undertaken by PRA.(7/10/13) http://www.bankofengland.co.uk/publications/Documents/news/2013/pcbsresponse.pdf
HoL: Financial Services (Banking Reform Bill)
Ahead of the commencement of the HoL Committee stage of the Bill, this link sets out amendments to be moved in Committee. (3/10/13) http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0038/amend/am038-b.htm
HMT: Financial Services (Banking Reform) Bill
The Government has tabled a number of amendments for consideration as the Bill passes through HoL Committee, many of which implement recommendations of the Parliamentary Commission on Banking Standards. These include. amendments to streamline the procedure for the regulator to require a banking group to separate under the “electrification” power introduced at HoC report stage; reforms to the FSMA approved persons regime including: giving the regulators the power to make approvals of senior managers in banks subject to conditions or time limits; reversing the burden of proof enabling the regulators to take enforcement action against a senior manager in a bank where regulatory breaches occur in the senior manager’s area of responsibility; extending the time limits for regulatory enforcement actions against individuals; giving the regulators the power to make banking standards rules applying to employees in banks as well as for approved persons; the introduction of criminal sanctions for reckless misconduct by senior managers in the management of a bank; the creation of a new payments systems regulator, the introduction of a bail-in tool; provision of competition powers to FCA which it will operate concurrently with CMA; the introduction of a limited rule making power for PRA over financial holding companies with respect to the operation of the bail-in regime and for group ring-fencing purposes; technical changes to the clause giving HMT power to make regulations requiring that ring-fenced banks, as far as possible, are not liable for the pension liabilities of other group members, to ensure all pension liabilities are in scope; a requirement for PRA to include in their annual review information as to the extent to which ring-fenced banks are carrying out activities that have been exempted from the excluded activities and prohibitions defined under the Bill, such as selling simple derivatives; the introduction of a special administration regime to deal with cases where a payment and settlement system operator or key service provider to the payment or settlement system fails, or is likely to fail; and minor and technical reforms to the regulation of building societies in order to allow the sector to compete on a more level playing-field with banks. HMT has published an annotated version of the Bill (as brought from HoC in July 2013), together with a number of separate briefing and draft clause notes for HoL Committee, all available to download via the following link. Line by line examination of the Bill by HoL Committee begins on 8 October 2013. (1/10/13) https://www.gov.uk/government/publications/banking-reform-bill-government-notes-on- amendments
BoE: FPC meeting (18 September 2013)
Further to its earlier statement, BoE has now published the formal record of the above-mentioned meeting. FPC will next meet on 20 November 2013. (1/10/13) http://www.bankofengland.co.uk/publications/Documents/records/fpc/pdf/2013/record1310.pdf
DBIS: Response to consultation on strategic priorities for the CMA// CMA: Vision, values and strategy for the CMA
DBIS has published a feedback statement in respect of its July 2013 consultation, noting that it is still consulting on further secondary legislation and will publish a performance management framework for CMA before it becomes fully operational next April 2014. The CMA consultation sets out the entity’s proposed vision, strategy and values and is seeking views from stakeholders. Responses are required by 12 November 2013. (1/10/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/245454/CMA_vision_strategy_values_FINAL_ GOV_UK.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/245607/bis-13-1210- competition-regime-response-to-consultation-on-statement-of-strategic-priorities-for-the-cma.pdf
BoE: FPC statement 11
At its meeting on 18 September 2013, FPC reviewed its assessment of the risks to financial stability and, in the light of that assessment, progress against the existing set of recommendations. FPC did not make any new recommendations. It is noted that, in June, FPC had recommended that FCA and PRA assess the vulnerability of borrowers and financial institutions to sharp upward movements in long-term interest rates and credit spreads. Preliminary work had suggested that a moderate rise in long-term interest rates did not pose an immediate threat to major banks and insurance companies – however, responses from firms took account of neither more significant stresses nor potential amplification channels through the financial system. PRA, with other BoE staff, would engage with firms on potential amplification channels that had not been sufficiently covered in firms' risk management exercises. The levels of leverage within, and therefore the vulnerability of, hedge funds needed to be looked at more closely. FCA, together with staff across BoE, will undertake further work to enrich the information available to the authorities on hedge funds in order that a more complete assessment of risks to financial stability can be made. Other matters discussed include cyber-attacks, the liquidity coverage ratio and a stress testing framework to assess the capital adequacy of the UK banking system, drafted by FPC and PRA. It is noted that a discussion paper on the stress testing framework will will be published, alongside the record of the FPC’s 18 September meeting, on 1 October 2013. (25/09/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/014.aspx
The Enterprise and Regulatory Reform Act 2013 (Commencement No. 3, Transitional Provisions and Savings) Order 2013/2227 (C.92)
This is the third Commencement Order made under the Enterprise and Regulatory Reform Act 2013 (c. 24) (“the Act”). This Order commences certain provisions of the Act. Article 2(a), (j), (k) and (l) commences s25 of the Act and provisions in Schedule 4 to the Act to allow the creation of CMA. Among these, Article 2(b) brings into force s27 of the Act which allows the Secretary of State to make transfer schemes in connection with the establishment of CMA, the transfer of functions under or by virtue of the Act from the CC or OFT to CMA. (Date in force: 1/10/13) (11/09/13) http://www.legislation.gov.uk/uksi/2013/2227/pdfs/uksi_20132227_en.pdf
FSB: Peer review of the UK
FSB has published the above, which looked at macro-prudential policy framework; micro-prudential supervisory approach; and supervision and oversight of CCPs. The review focused on the steps taken to date by the UK authorities to implement reforms in these areas, including by following up on relevant recommendations in the 2011 FSAP undertaken by IMF. The review finds that good progress has been made in addressing the FSAP recommendations across all three topics, although many of these reforms are still ongoing. The review recommends the further development of FPC’s relationship with FCA and enhancing FCA’s capacity to undertake systemic risk analysis work; and clarifying the level of detail in FPC’s comply-or- explain recommendations. It also recommended that PRA should ensure that supervised firms are aware of any heightened concerns and accompanying intervention activities, and that it should explore options to disclose the supervisory rating to such firms without triggering public disclosure. With regard to the integration of the micro- and macro-prudential perspectives on CCPs, the review suggests that BoE should promote the flow of information and alignment of objectives across relevant authorities by systematically elevating relevant issues on FPC’s agenda and to the attention of PRA and FCA. (10/09/13) http://www.financialstabilityboard.org/press/pr_130910.pdf http://www.financialstabilityboard.org/publications/r_130910.pdf (NB: over 50 pages long)
BoE: Proposed statutory statements of procedure in respect of the Bank of England’s supervision of financial market infrastructures
This consultation invites comments on a proposed statement of procedure on the decision-making framework for giving warning notices and decision notices to RCHs and qualifying parent undertakings; together with a proposed procedure on the publication of such statutory notice decisions. Responses are required by 30 September 2013. (4/09/13) http://www.bankofengland.co.uk/financialstability/Documents/fmi/cps.PDF
FCA: The FCA approach to advancing its objectives’
The above-mentioned document was originally published on 24 July 2013. FCA notes that two bullets were missed from the section “The principles of good regulation” starting on page 46. FCA has now uploaded a corrected version. (9/08/13) http://www.fca.org.uk/static/documents/fca-approach-advancing-objectives.pdf (NB: over 50 pages long)
FCA: Corporate governance of the Financial Conduct Authority
FCA has published this document (which was adopted by resolution of the FCA board on 1 April 2013). It summarises the corporate governance framework within FCA, setting out how FCA is constituted, the role of the execs and of the board, including which decisions are reserved specifically to it and the process by which the board delegates some other responsibilities to committees or individuals. It includes ToR for FCA’s committees, including RDC. (6/08/13) http://www.fca.org.uk/static/documents/fca-corporate-governance.pdf (NB: 70 pages long)
12
FCA: FS13/1: Transparency - feedback on DP13/1/FCA transparency framework
The FS summarises the feedback FCA received to the ideas in DP13/1 on transparency and sets out FCA’s response to that feedback; summarises new ideas proposed by respondents, and sets out FCA’s timescales for carrying out more work/implementing the ideas. Specific topics covered include: whistleblowing; publishing more on FCA’s approaches to supervision and enforcement; transparency of FCA’s authorisations process; transparency of thematic reviews and early intervention; transparency of the redress process; improved transparency of the annuity market; publication of claims data on insurance products and complaints data. A separate document sets out FCA’s framework to support ongoing work and the main legal requirements FCA needs to take into account when considering the disclosure of information. (5/08/13) http://www.fca.org.uk/static/fca/documents/feedback-statements/fs13-1-transparency-discussion-paper.pdf (NB: over 30 pages long) http://www.fca.org.uk/static/fca/documents/feedback-statements/fca-transparency-framework.pdf
FCA: A response to Journey to the FCA – your questions answered
FCA has published a feedback document in relation to its October 2012 document, including responses clarifying its position on various topics. FCA notes that these main themes emerged: respondents were keen to learn more about FCA’s new approach and powers (but industry respondents wanted to see safeguards and careful use of the new powers), wanted FCA to demonstrate greater accountability and transparency and consumer representatives thought that the increased focus on consumers was “just the first step for the FCA to ensure better consumer outcome”. (5/08/13) http://www.fca.org.uk/static/documents/a-response-to-journey-to-the-fca.pdf (NB: over 30 pages long)
NAO: FCA and PRA – regulating financial services
NAO has announced plans for a study which will examine the new regulatory framework and approach, providing an early assessment on whether regulation is likely to be delivered in a targeted, proportionate, consistent and transparent way, and whether the bodies are effectively working together where this is necessary or beneficial; consider the impact of the changes, in terms of the additional costs of the regulators and, where possible, through estimates of the additional costs and benefits to regulated firms and consumers and review the regulators’ performance measurement systems. This is scheduled for early 2014. (2/08/13) http://www.nao.org.uk/press-releases/financial-conduct-authority-and-prudential- regulation-authority-regulating-financial-services-2/
HoC: Financial Services (Banking Reform) Bill
A link to the Hansard transcript of the second reading debate on 24 July 2013 appears below. The Committee stage - line by line examination of the Bill - begins on 8 October 2013. (31/07/13) http://www.publications.parliament.uk/pa/ld201314/ldhansrd/text/130724-0001.htm#13072444001048
The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) (No. 3) Order 2013/1765
This Order makes transitional provision and amendments to subordinate legislation in connection with the Financial Services Act 2012 (c.21), Article 2 makes transitional provision in connection with the Act. Articles 3 to 10 and article 12 make consequential amendments to subordinate legislation in connection with the Act. Article 11 amends subordinate legislation which makes transitional provision in connection with the Act. (Date in force: 1/09/13) (29/07/13) http://www.legislation.gov.uk/uksi/2013/1765/pdfs/uksi_20131765_en.pdf
The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013/1881 (previously reported on when in draft)
This Order specifies additional activities which are to be treated as “regulated activities” for the purposes of FSMA. Part 2 of the Order specifies the new regulated activities. These are credit broking, operating an electronic system in relation to lending, debt adjusting, debt-counselling, debt-collecting, debt administration, entering into etc. a regulated credit agreement, entering into etc. a regulated consumer hire agreement, providing credit information services and providing credit references. Part 3 of the Order amends the Act in connection with the new regulated activities provided for in Part 2. Part 3 also contains transitional provisions relating to those amendments. Part 3 also sets out requirements relating to information which certain persons who are not authorised persons who carry on credit broking must comply with. Part 4 of the Order amends secondary legislation made under the Act. Part 5 of the Order amends the Consumer Credit Act 1974 (c.39), repealing the provisions of CCA 1974 which relate to the licensing of consumer credit activities. (Dates in force: 26/07/13/04/14) (29/07/13) http://www.legislation.gov.uk/uksi/2013/1881/introduction/made
13
The Financial Services Act 2012 (Consumer Credit) Order 2013/1882 (previously reported on when in draft)
This Order makes provision in connection with the transfer of responsibility for the regulation of consumer credit from OFT to FCA from 1 April 2014. Article 2 provides that references in FSMA to FCA’s functions under FSMA are to be treated as including references to FCA’s functions under the Consumer Credit Act 1974. Article 3 applies certain provisions of FSMA to failure to comply with requirements of CCA. Article 4 provides for FCA to issue a statement of policy setting out its policies in relation to the exercise of its powers under ss66, 205, 206 and 206A FSMA (covering disciplinary powers, public censure, financial penalties and suspending permission to carry on regulated activities) to contraventions of CCA 1974. Article 5 sets out the procedure relevant to FCA statements of policy prepared further to article 4. Article 6 provides that a person may not be convicted of an offence under CCA in relation to an act or omission in cases where FCA has already exercised its powers under ss66, 205, 206 or 206A FSM A in relation to that act or omission. Article 7 makes a number of amendments to the 1974 Act to reflect the fact that FCA will be responsible for regulating consumer credit (rather than OFT). (Dates in force: 26/07/13, 1/04/14) (29/07/13) http://www.legislation.gov.uk/uksi/2013/1882/pdfs/uksi_20131882_en.pdf
FCA: The FCA’s approach to advancing its objectives
This document is intended to show how FSA intends to meet its three operational objectives – securing an appropriate degree of protection for consumers; protecting and enhancing the integrity of the UK financial system; and promoting effective competition in the interests of consumers in the markets – and to explain what can be expected from the regulator. Comments are invited from stakeholders, to be received by 27 September 2013. FCA will publish a summary of the feedback received and intends to issue final guidance by early 2014. (24/07/13) http://www.fca.org.uk/static/documents/fca-approach-advancing-objectives.pdf (NB: over 50 pages long)
HMT: Banking reform: draft secondary legislation
This consultation sets out details, in the form of four draft SIs, on the ring-fence, including the scope of the ring-fence, the de minimis exemption from ring-fencing and the prohibitions on ring-fenced banks’ activities, and on the framework for applying loss absorbency requirements to systemic banks. The Sis are as follows: - The Ring-fenced Bodies and Core Activities Order, which defines the proposed threshold below which banks will be exempted from having to ring-fence, and the thresholds above which large organisations and high net worth individuals will have the option to deposit outside the ring-fence, if they so choose. - The Excluded Activities and Prohibitions Order, which defines a range of activities that will not be permitted inside the ring-fence, including a prohibition on ring-fenced banks having exposures to certain financial institutions. It also creates a number of exemptions to the excluded activities and prohibitions defined under the Bill, including exemptions to permit ring-fenced banks to sell simple derivatives and to enable them to manage their own risks. - The Banking Reform (Loss Absorbency Requirements) Order, which regulates the way in which PRA will exercise its powers to set “bail-inable” debt requirements on systemic UK banks and building societies (including a requirement to set minimum standards). - The Fees and Prescribed International Organisations Regulations, which enable expenses incurred by HMT as a result of UK participation in international organisations concerned with financial stability or financial services to be reclaimed from the financial services industry. Responses to the consultation are required by 9 October 2013. It is noted that the Government remains committed to putting all necessary legislation in place by the end of this Parliament and will seek to introduce final versions of these draft statutory instruments to Parliament as soon as time allows, following the granting of Royal Assent to the Banking Reform Bill (which will have its second reading in HoL next week). (17/07/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/223566/PU1488_Banking_reform_consultatio n_-_online-1.pdf (NB: over 100 pages long)
CMA/BIS-BERR/OFT/CC: CMA guidance and consultation
In advance of the launch of the CMA in shadow form in October 2013, the Government has published a consultation on the draft steer for CMA which outlines the long-term goals of the government in relation to competition and growth (comprising six separate documents – see first link below); details of the non-execs who are being appointed to the CMA board (see second link below)and a BIS/BERR consultation on government proposals for the initial CMA powers and strategic priorities setting out how it will carry out its functions (including draft secondary legislation). Responses to the consultations are required by 6 September 2013. (15/07/13) https://www.gov.uk/government/consultations/competition-and-markets- authority-guidance-part-1 https://www.gov.uk/government/news/plans-for-stronger-competition-regime-announced https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/212271/Tranche_1_consultation_document_F INAL.pdf (NB: over 50 pages long)
Financial Services (Banking Reform) Bill
14
On 10 July 2013, the Bill was brought from HoC, read a first time in HoL and ordered to be printed (link below). The second reading in HoL - the general debate on all aspects of the Bill - is scheduled to take place on 24 July 2013. (11/07/13) http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0038/14038.pdf (NB: 40 pages long)
The Crime and Courts Act 2013 (Commencement No. 2 and Saving Provision) Order 2013/1682 (C.67)
Article 3 of this Order brings into force Part 1 of the Act, together with the related Schedules, except for paragraph 11 of Schedule 8 and those provisions that are already in force. Part 1 of the Act abolishes the Serious Organised Crime Agency and the National Policing Improvement Agency and establishes the National Crime Agency. (Date in force: 7/10/13) (11/07/13) http://www.legislation.gov.uk/uksi/2013/1682/contents/made
HoC/HMT: Financial Services (Banking Reform) Bill
The Bill has now reached report stage (first link) and has been highlighted by an HMT press release (second link), particularly with regard to ringfencing. (9/07/13) http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm130708/debtext/130708-0002.htm#13070810000001 https://www.gov.uk/government/policies/creating-stronger-and-safer-banks
HMT: The Government’s response to the Parliamentary Commission on Banking Standards
In the response, the Government has announced that it is planning to implement the following major recommendations of the report: - introducing a tough new Senior Persons regime governing the behaviour of senior bank staff; - introducing new banking standards rules to promote higher standards for all bank staff; - introducing a new criminal offence for reckless misconduct for senior bankers; - reversing the burden of proof so that bank bosses are held accountable for breaches within their areas of responsibility; and - working with the regulators to implement the proposals on pay which will allow bonuses to be deferred for up to 10 years and enable 100 per cent clawback of bonuses where banks receive state aid - asking the regulators to implement the key recommendations on corporate governance to ensure that firms have the correct systems in place to identify risks and maintain standards on ethics and culture. - providing PRA with a secondary competition objective to strengthen its role in ensuring banking markets are effective and deliver good outcomes for consumers - asking the new payments regulator, once established, to urgently examine account portability and payments system ownership. The report also sets out the Government’s initial response to the Parliamentary Commission on Banking’s overall conclusions and its response to all of its key detailed recommendations. It is noted that BoE, PRA and FCA will be issuing their own responses in the autumn. Annexes in the report respond to earlier reports from the omission and set out a summary of responses to the Government’s 2012 consultation on sanctions for the directors of failed banks. The Government also welcomes the Committee’s HBOS report and states that themes on which the regulators were requested to expand on will be addressed by PRA and FCA as part of a report on the failure of HBOS, which they expect to publish later this year. (8/07/13) https://www.gov.uk/government/news/government-responds-to-parliamentary-commission-on- banking-standards https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/211047/gov_response_to_the_parliamentary_ commission_on_banking_standards.pdf (NB: over 90 pages long)
The Financial Services Act 2012 (Consumer Credit) Order 2013 (Draft)
This Order makes provision in connection with the transfer of responsibility for the regulation of consumer credit from OFT to FCA) from 1 April 2014. Article 2 provides that references in FSMA to FCA’s functions under FSMA are to be treated as including references to FCA’s functions under the Consumer Credit Act 1974 (the 1974 Act). Article 3 applies certain provisions of FSMA to failure to comply with requirements of the 1974 Act. These provisions ensure that FCA is able to use its FSMA powers to investigate and take appropriate action in relation to contraventions of the 1974 Act. Article 4 provides for FCA to issue a statement of policy setting out its policies in relation to the exercise of its powers under ss 66, 205, 206 and 206A FSMA (covering disciplinary powers, public censure, financial penalties and suspending permission to carry on regulated activities) to contraventions of the 1974 Act. Article 5 sets out the procedure relevant to FCA statements of policy prepared further to article 4. Article 6 provides that a person may not be convicted of an offence under the 1974 Act in relation to an act or omission in cases where FCA has already exercised its powers under ss66, 205, 206 or 206A of FSMA in relation to that act or omission. Article 7 makes a number of amendments to the 1974 Act to reflect the fact that FCA will be responsible for regulating consumer credit (rather than OFT). Article 8 applies certain provisions of the 1974 Act to contraventions of certain provisions of FSMA. These provisions ensure that where a duly appointed officer of a local weights and measures authority (commonly known as trading standards) or the Department of Enterprise, Trade and Investment in Northern Ireland (both an “enforcement authority” under the 1974 Act) considers that a relevant offence under FSMA (as defined by s107(4)(b) Financial Services Act 2012) may have been committed in relation to consumer credit, that officer may
15
use certain 1974 Act powers to investigate. Article 9 provides for trading standards bodies to institute proceedings in England and Wales for a relevant offence. (4/07/13) http://www.legislation.gov.uk/ukdsi/2013/9780111100516/introduction
The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order (Draft)
This Order specifies additional activities which are to be treated as “regulated activities” for the purposes of FSMA. Part 2 of the Order specifies the new regulated activities. These are credit broking, operating an electronic system in relation to lending, debt adjusting, debt-counselling, debt-collecting, debt administration, entering into etc. a regulated credit agreement, entering into etc. a regulated consumer hire agreement, providing credit information services and providing credit references. Part 3 of the Order amends the Act in connection with the new regulated activities provided for in Part 2. Part 3 also contains transitional provisions relating to those amendments. Part 3 also sets out requirements relating to information which certain persons who are not authorised persons who carry on credit broking must comply with. Part 5 of the Order amends the Consumer Credit Act 1974 (c.39) (“the 1974 Act”). In particular, Part 5 of the Order repeals the provisions of the 1974 Act which relate to the licensing of consumer credit activities under the 1974 Act. (3/07/13) http://www.legislation.gov.uk/ukdsi/2013/9780111100493
TSC: Appointments of Dr Donald Kohn and Andrew Haldane to the Financial Policy Committee
TSC has published a volume of oral and written evidence with regard to the above. (2/07/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/259/259ii.pdf (NB: over 30 pages long)
BoE: Record of FPC meeting (18 June 2013)
BoE has published the above, which sets out a number of recommendations agreed by FPC at the meeting. This includes the following. FCA and PRA, with other BoE staff, are asked to provide an assessment to FPC of the vulnerability of borrowers and financial institutions to sharp upward movements in long-term interest rates and credit spreads in the current low interest rate environment and to report back in September 2013. FPC sets out details of how PRA should assess the liquidity of banks and building societies, how it should work to ensure consistency and comparability of Pillar 3 disclosures, 5. PRA should assess the feasibility of the major UK banks and building societies calculating their regulatory capital ratios under end-point Basel III definitions using the standardised approach to credit risk and report back to FPC for its Q4 2013 meeting. HMT, in conjunction with various other agencies, are asked to work , with the core UK financial system and its infrastructure to put in place a programme of work to improve and test resilience to cyber attack. (1/07/13) http://www.bankofengland.co.uk/publications/Documents/records/fpc/pdf/2013/record1307.pdf
HMT: A new approach to financial regulation: transferring consumer credit regulation to the Financial Conduct Authority
Further to its March 2013 consultation, HMT has now published a document which summarises the responses and highlights policy and legislative adjustments which have been made to take respondents’ views into account. It is noted that the key secondary legislation to enable the transfer to FCA was laid in draft before Parliament on 25 June 2013, along with a final impact assessment. Both the secondary legislation and the impact assessment have been changed and improved in light of views from stakeholders gathered during the consultation period from March to May. The two SIs which have been laid before Parliament are subject to the affirmative procedure and will be debated in HoC/HoL. The Government intends, subject to the Parliamentary timetable, that the legislative framework for the transfer will be made before the summer. In addition, one further SI, subject to the negative procedure, will be published shortly. The SIs, once made, will enable firms, from 2 September 2013, to register for interim permissions, based on their existing consumer credit licences: this will allow firms to continue to carry on consumer credit activities from April 2013. It is noted that FCA will consult in the autumn on its detailed rulebook for consumer credit, as well as providing a feedback statement on the responses received to its March consultation paper. (27/06/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/209491/PU1528_summary_of_responses_to_ consumer_credit_consultation.pdf
Financial Services (Banking Reform) Bill
The Bill is scheduled to have its report stage and third reading on 8 July 2013. (27/06/13) http://services.parliament.uk/bills/2013-14/financialservicesbankingreform.html
BoE: Financial stability report
16
The report notes that, at its June 2013 meeting, FPC agreed the following new recommendations: FCA and PRA, with other Bank staff, should provide an assessment to FPC of the vulnerability of borrowers and financial institutions to sharp upward movements in long-term interest rates and credit spreads in the current low interest rate environment. They should each report back to FPC in September 2013. In assessing the liquidity of banks and building societies, PRA should employ a set of specified measures and consider whether any additional requirements are needed. PRA should continue to work with the banking industry to ensure greater consistency and comparability of the Pillar 3 disclosures of the major UK banks and building societies, including reconciliation of accounting and regulatory measures of capital. PRA should ensure that all major UK banks and building societies comply fully with the October 2012 recommendations of the Enhanced Disclosure Task Force upon publication of their 2013 annual reports. PRA should assess the feasibility of the major UK banks and building societies calculating their regulatory capital ratios under end-point Basel III definitions using the standardised approach to credit and report back to FPC its Q4 2013 meeting. HMT, PRA, BoE’s financial market infrastructure supervisors and FCA should work with the core UK financial system and its infrastructure to put in place a programme of work to improve and test resilience to cyber attack. The report may be downloaded in sections via the first link. The third link sets out FPC’s responses to HMT’s “remit and recommendations for FPC” in April 2013. (26/06/13) http://www.bankofengland.co.uk/publications/Pages/fsr/2013/fsr33.aspx http://www.bankofengland.co.uk/publications/Documents/fsr/2013/fsrfull1306.pdf (main report - NB: over 80 pages long) http://www.bankofengland.co.uk/financialstability/Documents/fpc/letters/chancellorletter130626.pdf
HoC: Financial Services (Banking Reform) Bill
The paper sets out the Bill’s progress through Committee stag (noting that the stage of this Bill “was very different to ‘normal’ committee stages”), highlighting opposition new clauses and including a short note on the conclusions of final report of the Parliamentary Commission on Banking Standards. (26/06/13) http://www.parliament.uk/briefing-papers/RP13-40.pdf (NB: 30 pages long)
TSC: FPC appointments
TSC has published a transcript of uncorrected evidence with respect to the hearing held on 12 June 2013 attended by Dr Donald Kohn and Andrew Haldane. (26/06/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/c259/c259.pdf
Parliamentary Commission on Banking Standards: Changing banking for good
The final report has now been published. Key recommendations are cited as: - A new Senior Persons Regime, replacing the Approved Persons Regime, to ensure that the most important responsibilities within banks are assigned to specific, senior individuals so they can be held fully accountable for their decisions and the standards of their banks in these areas. The report comments: “The Approved Persons Regime has created a largely illusory impression of regulatory control over individuals, while meaningful responsibilities were not in practice attributed to anyone. As a result, there was little realistic prospect of effective enforcement action, even in many of the most flagrant cases of failure” - A new licensing regime underpinned by Banking Standards Rules to ensure those who can do serious harm are subject to the full range of enforcement powers - these would apply to both Senior Persons and licensed bank staff and a breach would constitute grounds for enforcement action by the regulators. - A new criminal offence for Senior Persons of reckless misconduct in the management of a bank, carrying a custodial sentence - following a conviction, the remuneration received by an individual during the period of reckless behaviour should be recoverable through separate civil proceedings. - A new remuneration code better to align risks taken and rewards received in remuneration. This would include longer deferrals; more of that deferred remuneration to be in forms which favour the long term performance and soundness of the firm; the avoidance of reliance on narrow measures of bank profitability in calculating remuneration; individual claims on outstanding deferred remuneration to be subject to cancellation in the light of individual or wider misconduct or a downturn in the performance of the bank or a business area; and powers to enable deferred remuneration to Senior Persons and licensed individuals, as well as any unvested pension rights and entitlements associated with loss of office, to be cancelled in any case in which a bank requires direct taxpayer support. - Regulatory and supervisory approach. The report sets out a large number of recommendations with regard to this. Among these, it recommends that TSC undertake an inquiry in three years’ time into the supervisory and regulatory approach of FCA and PRA. TSC has asked FCA and PRA to examine how they will minimise the risk of appearing to act as shadow directors under their new approach to regulation, and to publish their findings – the report suggests that “something more substantial than the assurances given to date is required”. The report recommends that TSC, when undertaking its inquiry into the supervisory approach of both regulators, assesses whether FCA’s approach to data collection has been appropriate and that it considers FCA’s use of its product intervention tools in its inquiry into the supervisory approach. The report considers that FCA should provide clear reasons when it does not consider that initiation of a collective consumer redress scheme is appropriate. The report raises concerns over the relationship between BoE/PRA and its execs It is recommended that FPC should be given the duty of setting the leverage ratio, adding “if the regulators’ and supervisors’ independence is to be meaningful, the setting of the leverage ratio must form part of their discretionary armoury”. (19/06/13) http://www.parliament.uk/documents/banking-commission/Banking- final-report-volume-i.pdf (summary and recommendations - NB: over 60 pages long)
17
http://www.parliament.uk/documents/banking-commission/Banking-final-report-vol-ii.pdf (main report and written evidence – NB: over 500 pages long) Additional volumes of written and oral evidence (all lengthy): http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27iii.pdf http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27iv.pdf http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27v.pdf http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27vi.pdf http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27vii.pdf http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27viii.pdf http://www.publications.parliament.uk/pa/jt201314/jtselect/jtpcbs/27/27ix.pdf
TSC: Report: Appointments of Dame Clara Furse, Richard Sharp, and Martin Taylor to the Financial Policy Committee
Further to the recently published report, TSC has now published a volume of written evidence. (18/06/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/224/224ii.pdf (NB: over 30 pages long)
TSC: Appointments of Dr Donald Kohn and Andrew Haldane to the Financial Policy Committee
TSC has published its report with regard to the above-mentioned appointments, which confirms TSC’s satisfaction with them, together with a transcript of the uncorrected evidence from the hearing held on 12 June 2013 in which both were questioned by TSC. A press release notes Andrew Tyrie’s comments on the hearing: “both Donald Kohn and Andy Haldane today made clear that they think the FPC should be given the power to set the leverage ratio without much further delay. It is also clear that they feel it should be higher than 3% in the future. Their positions are consistent with previous, specific recommendations of the Banking Commission on the leverage ratio. … The Treasury’s rearguard action to cling to control of the leverage ratio needs to end. The Government should accept the Banking Commission’s recommendations without further delay and grant the FPC this power”. (13/06/13) http://www.parliament.uk/business/committees/committees- a-z/commons-select/treasury-committee/news/fpc-appointment-hearing-comments/ http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/259/259i.pdf http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/uc259/uc259.pdf
HoL Economic Affairs Committee: The economic implications for the UK of Scottish independence
The Committee has published the Government’s response to its inquiry in the form of a letter from the Chief Secretary of HMT. It agrees with the Committee’s findings in respect of anticipated risks with regard to the financial services sector. (11/06/13) http://www.parliament.uk/documents/lords-committees/economic- affairs/ScottishIndependence/EA44Letterfrom%20theChiefSecretaryofHMTreasurytotheChairman.pdf
TSC: FPC/MPC inquiry
TSC has announced that it will conduct an inquiry both into the rules governing the appointment and conduct of members of BoE’s FPC, MPC and Court and also into the independence of FPC. TSC will examine the scope for safeguarding independence, and the appearance of independence, through codes, with the intention of bringing clarity, consistency and effectiveness to this aspect of BoE governance. It will also examine the independence of FPC as it is affected by its working relationship with other committees. (10/06/13) http://www.parliament.uk/business/committees/committees-a-z/commons- select/treasury-committee/news/treasury-committee-to-conduct-inquiry-into-appointment-processes-for-bank-of-england- bodies-and-the-independence-of-the-fpc/
FCA: Speech by Martin Wheatley: Regulation as a spur to growth (5 June 2013)
Text of the above, given to IMA, follows. Topics include: FCA’s responsibilities and the “3 C’s” for asset managers (cooperation, competition and client focus). He concludes: “good regulation should complement the trust and respect you earn through professional conduct, by providing a measure of confidence in our economic structures”. (6/06/13) http://www.fca.org.uk/news/speeches/regulation-as-a-spur-to-growth
TSC: Report: Appointments of Dame Clara Furse, Richard Sharp, and Martin Taylor to the Financial Policy Committee
TSC has published a report concluding that the individuals have the professional competence and personal independence to be external members of FPC, but notes concerns about the appointment of Dame Clara Furse, relating to: her awareness of the importance of asserting the independence of the FPC and her explanation of her role on the board of Fortis in relation to the purchase of part of ABN AMRO and Fortis’s subsequent bailout, and the lessons she said that she had learnt from
18
that experience. TSC notes the importance of FPC’s independence from government influence; the role of external members in challenging views of BoE members and states it will expect to see evidence that the concerns raised in this report have been taken on board. TSC has also published the individuals' CVs and responses to a questionnaire. (5/06/13) http://www.parliament.uk/documents/commons-committees/treasury/CRC%20-%20FPC%20Appointment%20Hearings%20- %20FINAL%20-%20HC%20224-I.pdf http://www.parliament.uk/business/committees/committees-a-z/commons- select/treasury-committee/news/fpc-appointment-hearings-/
FCA: Corporate governance of the Financial Conduct Authority
This document, which was adopted by resolution of FCA’s board on 1 April 2013, sets out the corporate governance framework within FCA. It specifies the distribution of rights and responsibilities from the Board to its committees, to various other committees carrying out particular regulatory functions and to executive level. In order to do this the document outlines how FCA is constituted, the role of the board, the chairman, CEO, execs and secretary and details which decisions are reserved specifically to the board and the process by which the board delegates some other responsibilities to committees or individuals. It is noted that the board will present a corporate governance statement within FCA’s annual report each year that will provide an explanation of how FCA is governed in line with the principles of the UK Corporate Governance Code. (29/05/13) http://www.fca.org.uk/static/documents/fca-corporate-governance.pdf (NB: over 60 pages long)
PRA: Speech by Paul Tucker: A new regulatory relationship: the Bank, the financial system, and the wider economy (28 May 2013)
Text of the speaking notes for this speech, given at the Institute for Government, follows. Topics include: the supervision of the safety and soundness of banks, and the place of rules and discretion in that and expectations of what the central bank can and should achieve as a macro policymaker. (28/05/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech661.pdf
FSCS: FSCS/HMT framework document
This framework document sets out the broad framework within which FSCS operates and was signed by the parties in November 2012. (28/05/13) http://www.fscs.org.uk/uploaded_files/fscs_hmt_signed_framework_document.pdf
FCA: FCA/HMT/MAS framework document
This framework document sets out the broad framework within which MAS operates and takes effect from 1 April 2013. Specific topics discussed include: the purpose of MAS; its governance and accountability and relationships with HMT, FCA and OFT. (24/05/13) http://www.fca.org.uk/static/documents/mou/mas-fca-hmt-framework-document.pdf
HMT: Scotland analysis: financial services and banking
This paper considers the implications of a new legal and regulatory framework which would have to be created should Scotland become independent. It raises concerns over how an independent Scotland would be able to stabilise its banking system in the event of a future financial crisis (it is noted that Scottish banks have assets totalling around 1254% of an independent Scotland’s GDP – Iceland had assets equivalent to 880% GDP at the end of 2007). It suggests that arrangements that protect UK savers from financial shocks could be difficult and expensive to maintain in an independent Scotland; notes that under EU law an independent Scotland would be required to establish its own deposit guarantee scheme rather than share such schemes with the UK and states that the re-creation of regulatory bodies in an Independent Scotland would be costly, and that such costs would likely be borne by taxpayers or customers. (20/05/13) https://www.gov.uk/government/news/consumer-of-finanical-products-well-protected-in-the-uk (press release) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/200174/scotland_analysis_financial_services _and_banking.pdf (NB: over 100 pages long)
OFT: Alex Chisholm: Delivering choice and growth through the Competition and Markets Authority (CMA) (16 May 2013)
This speech, given at the Competition Section Law Society Annual Conference by the CEO designate of CMA, includes an “early take” on CMA’s remit as well as opportunities and challenges it faces.(16/05/13) http://www.oft.gov.uk/shared_oft/speeches/2013/06-13.pdf
19
HoC: Financial Services (Banking Reform) Bill
HoC has published the latest version of the Bill, which has been carried over to the 2013-14 session. It is due to have its report stage and third reading on a date to be announced. (9/05/13) http://www.publications.parliament.uk/pa/bills/cbill/2013-2014/0002/14002.pdf http://www.publications.parliament.uk/pa/bills/cbill/2013-2014/0002/en/14002en.pdf
PRA: Speech by Andrew Bailey: The new approach to financial regulation (1 May 2013)
This speech was given at the Chartered Banker Dinner in Edinburgh. He discusses regulation, particularly in respect of banking and insurance; resolution planning (he notes: “if failure is orderly, and does not compromise our public policy objectives, the responsibility should rest with the board and management for failing to serve the private interest of their shareholders and creditors”); funding for lending and FPC’s objectives and recommendations. (2/05/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech654.pdf
HMT: FPC remit and recommendations
The document specifies the government’s economic policy and provides guidance to the FPC on its objectives and functions. FPC is asked to agree and publish, in its end of year financial stability report, a list of risks it intends to focus on as a priority and how it proposes to address them. (30/04/13) https://www.gov.uk/government/news/government-provides- financial-policy-committee-with-first-remit http://www.hm-treasury.gov.uk/d/remit_fpc_290413.pdf
FCA: Statement of Policy on the use of the power to direct qualifying parent undertakings
In this press release, FCA highlights that an appendix in FSA’s PS13/5 (on aspects of the new FCA Handbook) which was published last month, sets out FCA’s policy on the use of its power to direct a qualifying parent undertaking. The powers relate to all FCA-authorised investment firms and recognised UK investment exchanges. (24/04/13) http://www.fca.org.uk/news/firms/fca-statement-of-policy-on-the-use-of-the-power-to-direct-qualifying-parent-undertakings
BoE/HMT: Funding for lending scheme
An extension to the scheme has been announced. Three specific changes are being made: the scheme will be extended to the end of January 2015; the incentives to boost net lending will be heavily skewed towards SMEs and the scheme will be expanded to count lending by banking groups involving financial leasing corporations and factoring corporations. All participating banks and building societies will be required to report net lending related to these non-bank credit providers for the purpose of calculating their borrowing allowances during the extension period. In addition, banks and building societies will have the option of reporting this lending for the purpose of calculating their borrowing allowance for the remainder of 2013. The fee structure and operation of the scheme will be unchanged during the extension period, other than as outlined above. Documentation pertaining to the scheme can be accessed via the link below. (24/04/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/061.aspx
TSC: Appointment of Dr Mark Carney as Governor of the Bank of England
In this report, which also provides a full transcript of evidence received during this inquiry, TSC raises concern over PRA’s competition powers: “with only a ‘have regard’ duty given to the PRA, the risk will remain high that, in time, it may merely pay lip service to competition considerations … The concentration of the banking system, in particular, acts against the interests of both business and personal bank customers. For these reasons we do not agree with Dr Carney that the current legislation strikes an adequate balance in this area” TSC also raises concerns with regard to bank account portability and welcomes Mark Carney’s statement that he is “open minded” on the question of whether the UK should introduce this. (19/04/13) http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/944/944.pdf
FCA: How the Financial Conduct Authority will investigate and report on regulatory failure
This document sets out FCA’s thinking on how it will meet the new statutory requirement to investigate possible instances of regulatory failure and provide reports to HMT. The statement of policy, which has been approved by the FCA Transitional Board and which HMT has given its consent for FCA to publish, is included as Annex 1 to this document. Chapter 6 of the document sets out hypothetical examples to illustrate whether FCA thinks the statutory test would or would not have been met and Chapter 7 details the investigation process. The statement of policy applies from 1 April 2013 for events arising on
20
or after that date. FSA states that it expects to learn whether it has set the threshold for events with a significant adverse effect on its objectives at the right level, and whether it has placed the right emphasis on the related qualitative factors, through the experience of applying the policy. It notes that. given the changing regulatory landscape, including the change in the scope of FCA to regulate consumer credit from April 2014, and the continuing development of its strategy to meet the competition objective and duty, FCA expects to review the policy after a year in operation. FCA welcomes comment on the document, which it will feed into its review (although it is emphasised that any changes in the statement of policy will have to be approved by HMT). (18/04/13) http://www.fca.org.uk/news/fca-publishes-its-approach-to-regulatory-failure http://www.fca.org.uk/static/fca/documents/how-fca-will-investigate-and-report-regulatory-failure.pdf (NB: over 30 pages long)
PRA: Conducting statutory investigations
This short policy statement sets out how PRA will identify whether the conditions for an investigation into regulatory failure are met, and how it will carry out investigations both into regulatory failure and matters of public interest. The statement has been approved by the PRA Board and HMT. (18/04/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/conductstatinvestigations.pdf
HoC: Financial Services (Banking Reform) Bill 2012-13
Links to the Hansard transcript of the Public Bill Committee debate on 16 March 2013 appear below together with a copy of the Bill as amended in the Committee. New clauses proposed include: FSCS review of company savings schemes; professional standards; ringfencing; duty of care; remuneration consultants; financial crime unit (as part of SFO); protection for whistleblowers; review into competitiveness; bank account portability; publication of trends in bank lending; promotion of mutual societies and annual assessment of developments in respect of risk-weighting. (17/04/13) http://www.publications.parliament.uk/pa/cm201213/cmpublic/financialservices/130416/am/130416s01.htm http://www.publications.parliament.uk/pa/cm201213/cmpublic/financialservices/130416/pm/130416s01.htm http://www.publications.parliament.uk/pa/bills/cbill/2012-2013/0159/20130159.pdf
FCA: Speech by Martin Wheatley: Building on experience (17 April 2013)
Text of the above, given at the Lansons “'The future of financial services' event, follows. He discusses FCA’s identity, structure and powers. He also notes: “from 1 April next year, we will be taking on our regulation of the consumer credit industry. This is as much a new responsibility as it is a new power. Easily trebling the number of firms we are responsible for overnight. But I think everybody would agree that parts of this industry – payday loans spring to mind – are in dire need of a new regulatory approach”. He concludes “we should remember that good regulation should never be caricatured as a simple choice between consumer interest and business self-interest”. (17/04/13) http://www.fca.org.uk/news/speeches/building-on-experience
HoL Select Committee on Economic Affairs: The economic implications for the United Kingdom of Scottish independence
The report is intended to provide evidence-based assessment of the likely economic consequences of Scottish independence, including an analysis of the economic implications for the whole of the UK, but does not make a case either for or against independence. Chapters 3 and 4 discuss the role of BoE if Scottish financial institutions needed emergency support and arrangements for the regulation in Scotland of Scottish financial institutions. (12/04/13) http://www.publications.parliament.uk/pa/ld201213/ldselect/ldeconaf/152/152.pdf (NB: over 60 pages long)
BoE: FPC meeting (19 March 2013)
BoE has now published a record of the above mentioned meeting. FPC voted unanimously for a number of policy recommendations. PRA should assess current capital adequacy using the Basel III definition of equity capital but after: (i) making deductions from currently-stated capital to reflect an assessment of expected future losses and a realistic assessment of future costs of conduct redress; and (ii) adjusting for a more prudent calculation of risk weights. PRA should take steps to ensure that, by the end of 2013, major UK banks and building societies hold capital resources equivalent to at least 7% of their risk-weighted assets. PRA should consider applying higher capital requirements to any major UK bank or building society with concentrated exposures to vulnerable assets, where there are uncertainties about assets not covered in FSA’s assessment of future expected losses or risk weights analysis, or where banks are highly leveraged relating to trading activities. PRA should ensure that major UK banks and building societies meet the requirements by issuing new capital or restructuring balance sheets in a way that does not hinder lending to the economy. PRA should ensure that major UK banks and building societies have credible plans to transition to meet the significantly higher targets for capital and the leverage ratio that will come into effect in 2019 after full implementation of Basel III, the trading book review and surcharge for systemically important banks, and after HMT’s implementation of the Independent Commission on Banking Proposals, in
21
ways consistent with sustainable expansion of the UK economy. Looking to 2014 and beyond, BoE and PRA should develop proposals for regular stress testing of the UK banking system in order to assess the system’s capital adequacy. (9/04/13) http://www.bankofengland.co.uk/publications/Documents/records/fpc/pdf/2013/record1304.pdf .
BoE: Consultations on rules and statements of policy in respect of the Bank of England’s supervision of financial market infrastructure: responses to representations received/Policy statement
BoE: published the following documents in draft in February 2013: rules for RCHs and rules for operators; a statement of policy on the giving of directions to qualifying parent undertaking of UK RCHs; and a statement of policy on financial penalties imposed by BoE under FSMA or under Part 5 of the Banking Act 2009. The first document summarises the representations received and BoE’s response to them. One change was made to the rule on notification to BoE of the appointment and resignation of individuals in response to a representation – link to the PS in respect of this appears in the second link below. (4/04/13) http://www.bankofengland.co.uk/financialstability/Documents/fmi/consultations0413.pdf http://www.bankofengland.co.uk/financialstability/Documents/fmi/Penalties.pdf
BoE: The Bank of England’s approach to the supervision of financial market infrastructures
The document sets out BoE’s approach to the supervision of securities settlement systems, central counterparties and recognised payment systems. (4/04/13). http://www.bankofengland.co.uk/financialstability/Documents/fmi/fmisupervision.pdf
FCA: Addendum to Business Plan
FCA notes that there has been one significant change to Appendix 9 of the Business Plan. The date of completion of the review into financial incentives has been moved to Q1 2014. The previous date was included in error/ (9/04/13) http://www.fca.org.uk/static/documents/business-plan/bp-2013-14-addendum.pdf
Parliamentary Commission on Banking Standards: ‘An accident waiting to happen’: The failure of HBOS
The report discusses the failure of HBOS and the regulatory response to the failure. PCBS concluded that the primary responsibility for these failures should lie with the former Chairman of HBOS, Lord Stevenson, and its former CEOs, Sir James Crosby and Andy Hornby. The report expresses surprise that only Peter Cummings has faced regulatory sanction for HBOS’ failures; suggests that it is unsatisfactory that FSA appeared to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the Approved Persons status elsewhere in the UK financial sector and has asked the regulator to consider whether these individuals should be barred from undertaking any future role in the sector. It will return to the issue of responsibility for bank failures in its final report. Among its comments: “from 2004 until the latter part of 2007 the FSA was not so much the dog that did not bark as a dog barking up the wrong tree. The requirements of the Basel II framework not only weakened controls on capital adequacy by allowing banks to calculate their own risk-weightings, but they also distracted supervisors from concerns about liquidity and credit; they may also have contributed to the appalling supervisory neglect of asset quality. The FSA’s attempts to raise concerns on these other fronts from late 2007 onwards proved to be a case of too little, too late … too much supervision was undertaken at too low a level - without sufficient engagement of the senior leadership within the FSA … Regulatory failings meant that a number of opportunities were missed to prevent HBOS from pursuing the path that led to its own downfall. The priorities of the supervisor also reinforced the senior management of HBOS in their own misplaced priorities. Ultimate responsibility for the bank’s chosen path lies, however, not with the regulator but with the Board of HBOS itself … The corporate governance of HBOS at board level … represents a model of self-delusion, of the triumph of process over purpose”. PCBS has set out a number of themes on which it expects FSA/FCA to shed light on the extent of losses in each division at HBOS; the decision- making processes within FSA which led to the effective retreat from a position of warranted close supervision up to the start of 2004; the reasons for the reliance placed on reports commissioned from third parties as to the adequacy of controls within HBOS; the reasons why FSA closed the issue of the prudence of HBOS’s corporate credit provisions; the reasons why FSA did not undertake serious analysis of the quality of the HBOS loan book in the period from 2005 to 2007; the extent to which regulatory decision-making at all levels was influenced by the protests of HBOS senior management, including claims about disadvantage to its competitive position; the nature and extent of FSA senior management involvement with HBOS; whether, rather than having their Approved Persons status simply lapse, Lord Stevenson, Sir James Crosby and Andy Hornby (and anyone else presiding over a similar failure in the future) should be prohibited from holding a position at any regulated entity in the financial sector and the extent to which the judgements in the FSA Final Notices in respect of HBOS reflect judgements that either were, or should have been, reached by FSA during the course of their supervision of HBOS. PCBS expects TSC Treasury Committee to monitor how far and how effectively these issues are pursued by the regulator. (5/04/13) http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking- industry/news/an-accident-waiting-to-happen-the-failure-of-hbos/ http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/144.pdf (NB: over 90 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/144vw.pdf (written evidence - NB: over 600 pages long)
22
PRA: The power of direction over qualifying parent undertakings
Further to a December 2012 consultation, this PRA policy statement publishes the final statement of policy on the regulator’s use of the power to direct qualifying parent undertakings and includes the statement of policy on the use of the power to direct qualifying parent undertakings; a non-exhaustive list of possible scenarios in which the PRA may consider exercising the power of direction; and a non-exhaustive list of possible directions which the PRA may consider taking. (1/04/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/powerdirection.pdf
PRA: CP 4/13: Credit risk: internal ratings based approaches
The CP sets out proposals on the consolidation of legacy FSA material relating to internal ratings based approaches into a Supervisory Statement. In addition to material previously communicated by FSA the consultation proposes that firms should maintain a 10% exposure weighted average residential mortgage LGD floor. Responses are required by 29 April 2013. (1/04/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/creditriskirbapproachcp4-13.pdf
HoC: Financial Services (Banking Reform) Bill
Transcripts of the Committee debates on the Bill which took place on 21 and 26 March 2013 can be downloaded via the following link. (28/03/13) http://services.parliament.uk/bills/2012-13/financialservicesbankingreform/stages.html
FSA: FCA Business Plan and Financial Risk Outlook 2013/14
FSA has published these two documents. The business plan sets out how FCA will manage conduct risks in the first year and how it will use its resources effectively to meet its objectives, which are: to secure an appropriate degree of protection for consumers. to protect and enhance the integrity of the UK financial system and to promote effective competition in the interests of consumers. The key areas of focus for the year ahead include: a renewed focus on consumers; continuing to tackle market abuse, by taking strong enforcement action to deter future misconduct. ensuring a competitive financial services industry. continuing to address ongoing misconduct and carrying forward major policy initiatives such as MMR, RDR and extensive engagement with Europe on Directives under consideration. The financial risk outlook sets out FCA’s current thinking on conduct in financial markets by analysing the root causes and emergence of conduct risk. It emphasises wholesale conduct, suggesting “we recognise that wholesale conduct in some respects sets the tone for the conduct of the wider financial industry; the risks in transactions where conflicts of interest are poorly managed or counterparts do not act with integrity can undermine overall market integrity, and may eventually feed through to the retail consumer”. The main risks identified for the coming year are: firms not designing products and services that respond to real consumer needs or are in consumers’ long-term interests; distribution channels not promoting transparency for consumers on financial products and services; over-reliance on, and inadequate oversight of, payment and product technologies; shift towards more innovative, complex or risky funding strategies or structures that lack oversight, posing risks to market integrity and consumer protection; and poor understanding of risk and return, combined with the search for yield or income, leads consumers to take on more risk than is appropriate. (25/03/13) http://www.fsa.gov.uk/library/communication/pr/2013/027.shtml http://www.fsa.gov.uk/static/pubs/plan/bp2013-14.pdf (NB: 80 pages long) http://www.fsa.gov.uk/static/pubs/other/fcarco.pd f (NB: over 60 pages long)
BoE : Designation of investment firms for prudential supervision by the PRA
Under the PRA-regulated Activities Order, PRA is able to designate certain persons for prudential supervision by PRA. This note sets out PRA’s designation policy and procedural arrangements for designation decisions. (25/03/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/designationofinvestmentfirms.pdf
HMT: Scope provisions of the Consumer Credit Act regime – where are they to be found in the FSMA regime?
HMT has published a table which lists all the key provisions of CCA 1974 and relevant secondary legislation under that Act which relate to the scope of regulation and specifies where the analogous provision is to be found FSMA or secondary legislation made under it. The last column notes any significant modifications which have been made to the provision. (22/03/13) http://www.hm-treasury.gov.uk/d/consumer_credit_scope_chart.pdf
The Financial Services Act 2012 (Commencement No. 3) Order 2013/651 (C.26)
23
This Order brings into force ss17, 18 and 39 of the Financial Services Act 2012 (c.21) (“the Act”) on 19/03/13 for the purposes specified in this Order. This is the third commencement order to be made under the Act. (21/03/13) http://www.legislation.gov.uk/uksi/2013/651/pdfs/uksi_20130651_en.pdf
The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2013/655
This Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (“the Principal Order”) so as to specify new regulated activities. The Principal Order specifies kinds of activities and investments for the purposes of FSMA. The regulated activities which may be specified include activities relating to the setting of benchmarks (paragraphs 24E to 24H of Schedule 2 FSMA inserted by s7 of the Financial Services Act 2012 (c.21)). This Order specifies the activities of providing information in relation to and administering a specified benchmark. Article 3 of the Order makes consequential amendments to ss1G, 1H and 425A FSMA to adjust the definition of a consumer in order that the consumer protection objective applies with regard to the new regulated activities and so that those affected by the carrying on of the new regulated activities may benefit from the provisions in FSMA to protect consumers. Articles 4 to 6 of the Order insert a new article and a new schedule into the Principal Order to specify the new regulated activities and to set out the specified benchmarks. Article 7 of the Order provides for a Part 4A permission to be deemed to be extended to those firms which immediately before commencement of this Order were already carrying on the activity of providing information to the administrator of a benchmark listed in Schedule 5 to the Principal Order that was required for the determination of that benchmark and who already had a Part 4 permission. Article 8 provides for an interim permission to be granted to persons wishing to undertake administering, analysing or determining activities. This permission is granted automatically to those already undertaking these activities on commencement of this Order. An interim permission lapses either on a notice of cancellation given by FSA after an application for Part 4A permission to undertake these activities has been granted or, if earlier, on either cancellation of permission under s55H FSMA or the exercise by FCA of its power to cancel permission under s55J FSMA. Article 9 enables FCA to modify amongst other things, its rules in their application to persons with an interim permission. Article 10 sets out the application of FSMA to persons with interim permission. (21/03/13) (Date in force: 2/04/13) http://www.legislation.gov.uk/uksi/2013/655/pdfs/uksi_20130655_en.pdf
HoC: Financial Services (Banking Reform) Bill 2012-13
Links to the Hansard transcript of the Public Bill Committee debate on 19 March 2013 appear below. It is noted that there will be further sittings on 21 and 26 March 2013. The Committee is now accepting written evidence, but will cease to do so at the end of the Committee stage on 18 April 2013 (altough it can report earlier than then). (21/03/13) http://www.publications.parliament.uk/pa/cm201213/cmpublic/financialservices/130319/am/130319s01.htm http://www.publications.parliament.uk/pa/cm201213/cmpublic/financialservices/130319/pm/130319s01.htm http://services.parliament.uk/bills/2012-13/financialservicesbankingreform.html
TSC: Appointment of Andrew Bailey as Deputy Governor of BoE
The uncorrected evidence of the hearing held on 13 March 2013 has been published. Topics include: insurance regulation’ PRA/FSA staff figures and credit rating agencies. (21/03/13) http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/uc1057/uc1057.pdf
The Bank of England Act 1998 (Macro-prudential Measures) Order 2013/644
This Order prescribes macro-prudential measures for the purposes of s 9H of the Bank of England Act 1998 (c.11) (“the 1998 Act”) (power of the Financial Policy Committee of the Bank of England to direct the Financial Conduct Authority and the Prudential Regulation Authority). The Order specifies the imposition of requirements by PRA on UK banks and UK investment firms to maintain additional own funds (in other words, capital requirements) by reference to residential property exposures, commercial property exposures or financial sector exposures. The Order also specifies the imposition of requirements by reference to the failure to maintain such own funds. Such requirements might for example include an obligation not to make certain discretionary payments. The Order also specifies the imposition of requirements by PRA on UK banks and UK investment firms to treat such exposures as if they gave rise to an increased level of risk. FPC may give directions that any such requirements are to be imposed either on a solo basis (by reference to the position of the undertakings which are the subject of the direction) or on a consolidated basis (by reference to the position of the undertakings which are the subject of the direction, taken together with relevant members of that undertaking’s group). FPC will, under s9H of the 1998 Act, be able to direct PRA to implement the measures prescribed by the Order in relation to UK banks and UK investment firms which are PRA-authorised persons (as defined by s 2B FSMA). Article 3 provides that where FPC gives a direction which specifies a particular increase (for example an increase in the risk weighting to be applied to residential property exposures) and subsequently gives another direction which is identical in substance to the first direction except in relation to the level of the increase, PRA need not comply with the obligation under s138J FSMA to include a cost benefit analysis when consulting on rules that PRA proposes to make to implement the subsequent direction. (Date in force: 1/04/13) (20/04/13) http://www.legislation.gov.uk/uksi/2013/644/pdfs/uksi_20130644_en.pdf
24
The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) (No. 2) Order 2013/642
This Order makes amendments to subordinate legislation in consequence of the Financial Services Act 2012 (c.21). Article 2 makes consequential amendment to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)). Article 3 makes consequential amendments to the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001/2511. Article 4 makes transitional provision in connection with the amendments made by article 3, treating certain things done by or in relation to FSA before 1/04/13 having been done by or in relation to PRA. Article 5 makes consequential amendments to the Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2009/2615 (S.I. 2009/2615). Article 6 makes consequential amendments to the Recognised Auction Platforms Regulations 2011/2699. (Date in force: 1/04/13) (20/03/13) http://www.legislation.gov.uk/uksi/2013/642/pdfs/uksi_20130642_en.pdf
The Financial Services Act 2012 (Misleading Statements and Impressions) Order 2013/637
This Order specifies relevant activities, relevant investments and relevant benchmarks for the purposes of Part 7 of the Financial Services Act 2012 (“the Act”). Part 7 of the Act creates criminal offences which relate to the making of false or misleading statements, or the creation of a false or misleading impression, in connection with a relevant agreement, relevant investment or relevant benchmark. Sections 89 and 90 in part replicate the effect of s397 FSMA, which is repealed by s95 of the Act. Article 2 specifies activities which are relevant for the purposes of the definition of “relevant agreement” which is used in s89 of the Act (misleading statements). Article 3 specifies the benchmarks which are “relevant benchmarks” for the purposes of s91 of the Act (misleading statements etc in relation to benchmarks). The only benchmarks which are specified for this purpose are the benchmarks known as LIBOR. Article 4 specifies investments which are “relevant investments”. This concept is relevant for the purposes of s89 (misleading statements) and 90 (misleading impressions) of the Act.. (Date in force: 1/04/13) (20/03/13) http://www.legislation.gov.uk/uksi/2013/637/pdfs/uksi_20130637_en.pdf
FSA: Code of Practice for the relationship between the external auditor and the supervisor
FSA has published this guidance consultation which updates the Code to reflect the changes in the statutory objectives of FCA under the Financial Services Act 2012. A separate Code of Practice will be published by PRA. Responses are required by 16 April 2013. (19/03/13) http://www.fsa.gov.uk/library/policy/guidance_consultations/2013/13-03.shtml http://www.fsa.gov.uk/static/pubs/guidance/gc13_3.pdf
Parliamentary Commission on Banking Standards: Proprietary trading
In the course of its work, PCBS had received evidence about risks that could be posed to attempts to improve the culture and standards of banks through banks being able to undertake proprietary trading. The report looks at this issue, including a consideration of the meaning of prop trading, the extent of prop trading and methods to control it. It reports he main UK- headquartered banks have told PCBS that they do not engage in proprietary trading at the present time and do not wish to do so. PCBS recommends that PRA, with immediate effect, ensures that its regular scrutiny of banks monitors this assertion and, should a bank be unable to demonstrate satisfactorily that certain trading activities relate to their core business of serving customers, argues that PRA should use its existing tools such as capital add-ons or variations of permission to bear down on such activity and incentivise the firm to exercise tighter control. PCBS recommends that banks agree a published statement of risk exposures in their trading book and of control issues in their trading operations raised by PRA during the last year. Parliament will expect PRA to report on these statements. PCBS suggests that the Government consult the regulators on whether the current legislation needs amendment to give regulators the authority to carry out such activities. It suggests that regulators produce a detailed report within three years to include a full assessment of the case for and against a ban on proprietary trading. This report would be expected to be presented to HMT and Parliament and serve as the basis of full and independent review of the case for action in relation to proprietary trading by banks. Finally, PCBS recommends that legislation be introduced to provide for such a review and to provide assurances about its independence, including a role for TSC in the appointment of the persons to carry out the review. (15/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/138/138.pdf (NB: over 50 pages long)http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/138/138vw.pdf (written evidence - NB: over 30 pages long)
FSA: Speech by Clive Adamson: Journey towards a conduct regulator (5 March 2013)
Text of the above, given at the Westminster Forum, follows. Topics include: FCA’s supervision categories; changes to supervising wholesale conduct; product banning powers; FCA’s risk-based approach to approving controlled functions. (13/03/13) http://www.fsa.gov.uk/library/communication/speeches/2013/0305-ca.shtml
25
The Financial Services and Markets Act 2000 (Threshold Conditions) Order 2013/555 (previously reported on when in draft)
This Order amends the threshold conditions set out in Schedule 6 FSMA.. In giving or varying permission under Part 4A or imposing or varying a requirement or giving consent under that Part, FCA or PRA must ensure that the person concerned will satisfy, and continue to satisfy the relevant threshold conditions for which that regulator is responsible. Part 4A FSMA was inserted by the Financial Services Act 2012 (c.21) and replaces Part 4 FSMA. The functions of FCA and PRA are set out in FSMA, as amended by the Financial Services Act 2012. Part 1B of Schedule 6, as inserted by this Order, sets out the conditions for which FCA is responsible where the person concerned carries on, or is seeking to carry on, regulated activities which do not consist of or include a PRA-regulated activity. Part 1C of Schedule 6, as inserted by this Order, sets out the conditions for which FCA is responsible where the person concerned carries on, or is seeking to carry on, a PRA- regulated activity. Part 1D of Schedule 6, as inserted by this Order, sets out the conditions for which PRA is responsible where the person concerned carries on, or is seeking to carry on, a PRA-regulated activity relating to the effecting or carrying out of contracts of insurance or in connection with Lloyd’s. Part 1E of Schedule 6, as inserted by this Order, sets out the conditions for which PRA is responsible where the person concerned carries on any other PRA-regulated activity. Part 1F of Schedule 6, as inserted by this Order, sets out the conditions for which FCA and PRA are responsible where the person concerned qualifies for authorisation under Schedule 3 FSMA (EEA passporting rights). Part 1G of Schedule 6, as inserted by this Order, sets out the conditions for which FCA and PRA are responsible where the person concerned qualifies for authorisation under Schedule 4 FSMA (Treaty rights). (Date in force: 1/04/13) http://www.legislation.gov.uk/uksi/2013/555/pdfs/uksi_20130555_en.pdf
The Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013/556 (previously reported on when in draft)
This Order specifies, for the purposes of FSMA, which regulated activities are “PRA-regulated activities” and so are the regulated activities which are subject to prudential regulation by PRA rather than FCA. Article 2 provides that the activities of accepting deposits and effecting or carrying out contracts of insurance are specified as PRA-regulated activities. Acting as a managing agent at Lloyd’s and the arranging by the Society of Lloyd’s of contracts of insurance written at Lloyd’s are also PRA-regulated activities. The activity of dealing in investments as principal is a PRA-regulated activity only to the extent designated by PRA under article 3. Designations relate to particular persons (rather than a class of person). Article 3 sets out the criteria which must be applied by PRA in designating persons. Article 4 sets out the procedure PRA must follow when designating a person under article 3. Article 5 requires the PRA to keep under review designations under article 3. Article 6 enables PRA to withdraw a designation and sets out the procedure for withdrawal. Article 7 provides that a designation ceases to have effect if the person concerned ceases to have permission to carry on the activity of dealing in investment as principal. Article 8 requires PRA to prepare and issue a statement of its policy in relation to designation under article 3, the review of designations under article 5 and the withdrawal of designations under article 6. Article 9 sets out the procedure that PRA must follow in preparing a statement of policy. Article 10 makes transitional provision to deal with cases where, after 1 April 2013, an authorised person becomes a PRA-authorised person by virtue of a designation under article 3. Article 11 makes transitional provision to deal with cases where a PRA-authorised person ceases to be a PRA-authorised person by virtue of a rescission or withdrawal of authorisation. (Dates in force: articles 1, 2, 8 and 9 come into force on 8/03/13; articles 3 and 4 come into force on 8/03/13 for the purpose of making designations under article 3 which are to take effect on or after 1/04/13; otherwise, this Order comes into force on 1/04/13. (13/03/13) http://www.legislation.gov.uk/uksi/2013/556/pdfs/uksi_20130556_en.pdf
HoC: Financial Services (Banking Reform) Bill
The Bill received its second reading on 11 March 2013 – the Hansard transcript follows. HoC voted for the Bill to be sent to a Public Bill Committee that will scrutinise the Bill line by line. Details of the programme motion, carry-over motion and ways and means resolution follow in the second link. (12/03/13) http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm130311/debtext/130311-0001.htm#13031112000001 http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm130311/debtext/130311-0004.htm#13031156000004
Parliamentary Commission on Banking Reform: Banking reform: towards the right structure
This report considers the Government’s response to the first PCBS report in relation to its most significant recommendations; provides a summary of each recommendation/the Government response/relevant legislative changes and also provides amendments for debate in Parliament on legislative recommendations in our First Report not yet reflected in the Bill. PCBS notes George Osborne’s “implied acknowledgement that Royal Assent in 2013 is no longer appropriate” and recommends that the report and third reading stages in Hoc do not take place before the summer. (11/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/126/126.pdf (NB: over 70 pages long)
The Financial Services Act 2012 (Consequential Amendments and Transitional Provisions) Order 2013/472
26
This Order makes consequential amendments to subordinate legislation in connection with the Financial Services Act 2012 (c.21) (“the Act”) and provision made under the Act. The Order also makes transitional provision in connection with those amendments. Article 2 gives effect to the Schedule 1 to this Order. Schedule 1 provides for the subordinate legislation specified in column 1 of the table to the Schedule to be revoked to the extent indicated in the second column of the table. Article 3 gives effect to Schedule 2 to this Order. Schedule 2 amends subordinate legislation in consequence of the Act. The amendments include amendments to references to provisions of FSMA which have been amended or repealed by the Act or to FSA Instruments that are amended in connection with Act. The amendments also amend references to rules made by FSA under FSMA 2000. Article 4 makes provision for amendments to references to Part IV FSMA to reflect the new numbering, “Part 4A” of the 2000 Act, in consequence of the Act. The Act substitutes a new Part 9A FSMA in place of Part 10. Article 5 makes provision for amendments to references to Part X FSMA to reflect the new numbering. Article 6 makes provision for amendments to references to “UK Listing Authority” or “Competent Authority for Listing in the UK” in consequence of FCA taking on this function under the Act. (Coming into force: 1/04/13) (11/03/13) http://www.legislation.gov.uk/uksi/2013/472/pdfs/uksi_20130472_en.pdf (NB: over 120 pages long)
The Enterprise Act 2002 (Part 8) (Designation of the Financial Conduct Authority as a Designated Enforcer) Order 2013/478
Section 1A FSMA renames the “Financial Services Authority” the “Financial Conduct Authority” with effect from 1 April 2013. This Order therefore revokes the Enterprise Act 2002 (Part 8) (Designation of the Financial Services Authority as a Designated Enforcer) Order 2004 and designates FCA as a designated enforcer under Part 8 of the Enterprise Act 2002. As a result, FCA will be able to obtain enforcement orders under Part 8, to protect the collective interests of consumers. (11/03/13) http://www.legislation.gov.uk/uksi/2013/478/pdfs/uksi_20130478_en.pdf
Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 201* (Draft)
This Order specifies classes of institution which are exempted from the definition of “ring-fenced body in s142A FSMA. The classes of institution which are exempted are banks which hold deposits below a specified size threshold of £25bn of “core deposits”, insurance companies, credit unions and industrial and provident societies. Article 3 defines core deposit and provides that if a deposit is not core, then the activity of accepting it is not a core activity. A deposit is core if it is placed in an EEA account for which none of the account holders have certified that they are high net worth individuals, or for which the account holder is deemed to be a SME because it has not certified otherwise and is not a financial institution. Article 4 defines SME for the purposes of the Order. Article 5 defines financial institution for the purposes of the Order. Article 5(2) lists the classes of financial institution and article 5(3) sets out exceptions which are not within the definition of financial institution. Article 6 identifies those classes of institution that are not ring-fenced bodies, namely: UK institutions (other than members of groups) which in total hold core deposits the average value of which over three financial years is less than £25bn, insurance companies, credit unions and industrial and provident societies. Article 7 makes provision for UK institutions which are members of groups. All UK institutions in the group which hold core deposits will be ring-fenced bodies unless the total core deposits held by all the UK institutions added together is less than £25 bn. Article 8 specifies the steps a non ring-fenced body must take if it is holding non core deposits which must be considered to be core deposits because the account-holder has certified that they are a high net worth individual (or that they are not a SME) but has not renewed that certificate within twelve months. Such deposits may only be held in a ring-fenced body. Article 9 specifies the steps a non ring-fenced body must take if it is holding non core deposits which become core because the account holder has notified the non-ring-fenced body that they are no longer a high net worth individual (or that they are not a SME). (11/03/13) http://www.hm-treasury.gov.uk/d/draft_ring_fenced_bodies_and_core_activities_order_070313.pdf
Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 201* (Draft)
This Order defines the circumstances in which ring-fenced bodies will be able to deal with investments as principal by providing for exceptions to the excluded activity set out in s142D FSMA in relation to the management by the ring-fenced body of its own risks or of its liquid assets buffer or the provision of derivatives to its clients for limited purposes. The Order also imposes prohibitions on ring-fenced bodies under s142E, which (with the exceptions provided for) limit the way in which a ring-fenced body may have access to clearing and settlement services provided by a recognised interbank payment system, restrict the exposures a ring-fenced body may have to relevant financial institutions, and ensure that a ring-fenced body may only have a branch or a subsidiary in a country outside the EEA with the approval of PRA. Article 1 defines the terms used in the Order. Article 2 defines relevant financial institution for the purposes of the Order. Article 3 provides for exceptions to the excluded activity of dealing with an investment as principal where the ring-fenced body is managing interest rate risk, exchange rate risk, default risk or liquidity risk, or is dealing in assets included in its liquid assets buffer. Article 4 sets out the conditions which must be satisfied by a ring-fenced body which wishes to deal in derivative instruments with its account holders. (11/03/13) http://www.hm- treasury.gov.uk/d/draft_excluded_activities_and_prohibitions_order_070313.pdf
Financial Services and Markets Act 2000 (Fees and Prescribed International Organisations) Regulations 2013 (Draft)
These Regulations make provision in relation to the charging of certain expenses HMT to relevant persons, namely specified PRA-authorised persons, authorised persons who are not PRA-authorised persons, recognised investment
27
exchanges and recognised clearing houses. The expenses are those incurred in connection with UK membership of, or HMT participation in, FSB. Regulation 2 gives HMT power to issue directions to a regulator requiring them to levy fees against relevant persons for the purpose of meeting relevant expenses. Regulation 3 requires HMT, before giving a direction to a regulator, to consider the affordability of the total amount intended to be raised by the fees charged by the regulator pursuant to the direction. Regulation 4 requires a regulator, which is required to determine the class of relevant persons who will be required to pay fees specified in a direction given to it by HMT, to consider the affordability of the total amount intended to be recovered from that class of relevant persons. Regulation 5 requires a regulator to whom a direction is given to pay any fees collected to HMT by the date or dates specified in the direction, and makes provision about how PRA and FCA are to comply with directions given to them. Regulation 6 prescribes FSB as an international organisation, in relation to which a fees direction can be given. Regulation 7 specifies the kinds of expenses that can be included in a direction. (11/03/13) http://www.hm- treasury.gov.uk/d/draft_fees_and_prescribed_international_organisations_regulations_070313.pdf
HMT: A new approach to financial regulation: transferring consumer credit regulation to the Financial Conduct Authority/Government takes action to tackle payday lending concerns
HMT has launched a consultation confirming the Government’s intention to move regulation of consumer credit to FCA from April 2014, and provided further details of how the new regime will work, including information on scope of regulation, authorisation, enforcement and redress and interim permissions. Draft Sis are included in the document. Responses to the consultation are required by 1 May 2013. In addition, HMT has announced that payday lenders could face new restrictions on how they advertise and a new code of practice. As well as OFT’s enforcement action, the Government is to work closely with Advertising Standards Agency, Committees of Advertising Practice, and industry to consider aspects of advertising and highlights an independent research report from the University of Bristol on the impact of a cap on the total cost of credit cap in the high cost credit market (third link below). The Government is calling in strong terms for the industry to improve compliance with payday lending codes; and to consider whether independent monitoring can be put in place; to tackle the growing problem of people taking out multiple loans in one day, Government will call on industry to make sure that it improves how it shares and records data; the Government will also press for further commitments on continuous payment authority to be set out in industry code and the Consumer Minister will talk to key members of the industry in person and call them to account. Ministers have confirmed that they will not impose a cap on credit; however a cap might be appropriate at some point in future, which is why FCA has been provided with specific powers to cap should they deem it appropriate once they take over responsibility for consumer credit in April 2014. (6/03/13) http://www.hm- treasury.gov.uk/press_19_13.htm http://www.hm- treasury.gov.uk/d/consult_transferring_consumer_credit_regulation_to_fca.pdf (NB: 160 pages long) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/136548/13-702-the-impact-on-business-and- consumers-of-a-cap-on-the-total-cost-of-credit.pd f (NB : over 130 pages long)
FSA: CP13/7***: High-level proposals for an FCA regime for consumer credit
FSA has published its consultation in the light of a Government announcement that it is to transfer responsibility for regulating consumer credit from OFT to FCA by 1 April 2014 (see above). The Government has also published a consultation on the legislative changes needed to transfer responsibility to the FCA. FSA’s consultation sets out the overall approach and framework for the regime that will be administered by its successor body the FCA. Key proposals include: an interim permission for OFT licence holders to continue to carry on regulated consumer credit activities; the authorisation process; the supervision of credit advertising being subject to the FSMA financial promotions regime; prudential requirements for debt management firms; a number of CCA provisions being kept as part of the new FCA credit regime (e.g. S75 CCA); the supervision of – and reporting by – firms and how the regime will be funded. The accompanying press release emphasises that the new regime will be designed to focus resource on higher risk firms, such as pay day lenders, pawnbrokers, credit reference agencies and debt collection. Lower risk firms will not have to meet such onerous standards and will pay lower fees. These firms include not-for-profit debt counselling, businesses providing lending as a side activity (e.g. a sports club that allows its members to pay by instalment). It also includes credit broking, such as where retailers and motor dealers introduce customers to lenders. There will be a phased approach to the transfer, with an interim period starting in April 2014 and moving to full implementation by April 2016. From autumn 2013, existing OFT licence holders can apply for interim permission so that they can continue to operate - they will have to provide limited information and pay a one off fee; existing OFT licences will lapse on 31 March 2014 and FCA interim permissions will begin from 1 April 2014; the interim permission regime will end in 2016 and firms need to be fully authorised by that time. Responses are required by 1 May 2012. FSA has also published an independent technical report on consumer credit licence-holders, intended to assist it with understanding the size and segmentation of the consumer credit market better, so that it could design a proportionate and tailored FCA regime. make decisions on which features of FCA’s regime it would want to apply and to which organisations and plan operationally for the transfer of consumer credit regulation from OFT to FCA (third link below) (6/03/13) http://www.fsa.gov.uk/library/communication/pr/2013/021.shtml http://www.fsa.gov.uk/static/pubs/cp/cp13-07.pdf (NB: over 200 pages long) http://www.fsa.gov.uk/static/pubs/cp/consumer-credit-technical-report.pdf (NB: over 90 pages long)
FSA: Internal audit report – a review of the extent of awareness within the FSA of inappropriate LIBOR submissions
28
Further to FSA’s enforcement action against banks for failures in respect of LIBOR submissions (particularly disclosure by Barclays to TSC of 13 instances of communication between Barclays and FSA which raised the question of whether the authorities ought to have been aware that firms might be making inappropriate LIBOR submissions in order to avoid negative media comment), FSA has now published this report from FSA’s internal audit team. Adair Turner had asked it to identify any such communications from any firm or from media reports or other information sources which might have provided relevant information, to make a judgement on the appropriateness of FSA’s response at the time, and to recommend, if necessary, changes to future approaches and working arrangements. The report covers the period January 2007 to May 2009 and identifies areas where FSA says it should have performed better, and makes recommendations for the future, but notes that the report does not suggest major regulatory failure on the scale identified in the Northern Rock (March 2008) or RBS (December 2011) reports. The report concludes that FSA’s focus on dealing with the financial crisis, together with the fact that contributing to and administering LIBOR were not regulated activities, led to it being too narrowly focused in its handling of LIBOR related information; that the likelihood that lowballing was occurring should have been considered and that the information received should have been better managed. The report also notes that there was no evidence of any information, direct or indirect, available to FSA which indicated that traders were manipulating LIBOR for profit. The report draws out six lessons to be learned for FCA and PRA to consider, covering activities outside the regulatory perimeter and their implications; the division of roles and responsibilities between the new regulators; the culture of regulatory authorities; how they should use, record, circulate and estimate information and intelligence and record keeping. The accompanying management response document notes: “There remains the wider question as to whether the FSA could have adopted a supervisory approach that would have identified the issue earlier. But it is not clear that such an approach would have been feasible; identifying attempted such activities in real time would have required a very large and perhaps disproportionate amount of resource (e.g. FSA supervisors sitting real time in multiple dealing rooms). This may illustrate that regulators cannot spot all potential problems in advance, but have to rely on: firms policing themselves on a day to day basis; with effective processes for the supervisory review of firm’s systems and controls; supported by whistleblowing and other procedures to bring problems to light; and punished by exemplary post facto penalties when offences do occur”. (5/03/13) http://www.fsa.gov.uk/library/communication/pr/2013/020.shtml http://www.fsa.gov.uk/static/pubs/other/ia-libor.pdf (NB: over 100 pages long) http://www.fsa.gov.uk/static/pubs/other/ia- libor-management-response.pdf (management response)
FSA: DP13/1**: Transparency
FSA has published a DP looking at how transparency and more effective disclosure could improve the accountability of the regulator and the financial services industry, and help consumers make more informed decisions. It suggests ideas, which have been produced in consultation with trade bodies, consumer groups and the independent Panels, for more effective disclosure of information in the future, from both FCA and from firms. These ideas have been grouped into three areas. These are: information that FCA could release about its own operations; information that FCA could release about firms, individuals and markets; and information that FCA could require firms to publish. Ideas to increase the transparency of the work that FCA will undertake include: giving more detail to whistle-blowers about the action that has been taken after they have contacted the regulator; publishing data in an aggregate form about the number of whistleblowing incidents and any action taken with the information that has been received; expanding the amount of information that is published in the enforcement annual performance account, which could include average length and cost of investigations; publishing aggregated information about supervisory activity, which could include the number of planned and unplanned supervisory visits that have taken place across different sectors. FCA could release information about firms, individuals and markets in more detail, or earlier, to explain areas of concern or highlight particular issues, including: publishing aggregated information about authorisations, including broad reasons why applications are refused or withdrawn; disclosing more details about redress schemes; publishing the amount of redress paid by firms; improving the content, clarity and accessibility of information published about thematic work. In addition, FCA could require firms to publish information. Ideas in this area include: improving transparency in the annuity market to make it easier for consumers to compare products and get the best deal; publishing claims data on insurance products to help consumers understand the value of particular insurance products and providing more context around published complaints data to improve understanding of what the data show. Responses to the paper are required by 26 April 2013. FSA also notes that it has already started work, which will be taken forward by FCA, on the new accountability measures required under the Financial Services Act 2012, particularly with regard to developing a statement of policy on regulatory failure and on developing a “value for money” strategy. (4/03/13) FSA publishes discussion paper on transparency http://www.fsa.gov.uk/static/pubs/discussion/dp13-01.pdf (NB: over 30 pages long)
The Financial Services and Markets Act 2000 (EEA Passport Rights) (Amendment) Regulations 2013/439
These Regulations amend the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001. Regulation 2 prescribes the cases in which FCA must give PRA copies of notices relating to the exercise of rights by EEA firms under single market directives to establish a branch in the UK, and requires FCA and PRA to notify each other when an EEA firm or a non-UK firm exercising other Treaty rights qualifies for authorisation under FSMA. (Date in force: 1/04/13) (4/03/13) http://www.legislation.gov.uk/uksi/2013/439/pdfs/uksi_20130439_en.pdf
The Financial Services Act 2012 (Transitional Provisions) (Permission and Approval) Order 2013/440
29
This Order is made under the Financial Services Act 2012 (c.21) (“the 2012 Act”) and makes transitional provision in relation to the coming into force of various provisions of FSMA. Article 1 provides that the Order comes into force on 1/04/13; that date is defined as the “commencement date” for the purpose of the Order. Articles 2 to 12 make transitional provision in relation to permission under FSMA to carry on regulated activity, including: provision for things done by or in relation to FSA before the commencement date to be treated as if done by or in relation to PRA or PRA and FCA,; and provision in respect of applications for permission, requirements on permission, variation of permission and cancellation of permission. Article 13 makes similar provision in respect of the approval for a person to perform functions which are specified in rules made by a regulator. Article 14 makes provision in respect of the authorisation of Lloyd’s to undertake certain regulated activities. Articles 15 to 23 make transitional provision in relation to the authorisation of EEA firms exercising rights to establish a branch or provide services in the United Kingdom under certain single market directives relating to financial services or under other EU Treaty rights. (4/03/13) http://www.legislation.gov.uk/uksi/2013/440/pdfs/uksi_20130440_en.pdf
The Financial Services Act 2012 (Transitional Provisions) (Enforcement) Order 2013/441
This Order is made under the Financial Services Act 2012 (c.21) (“the 2012 Act”) and makes transitional provision in relation to the coming into force of various provisions of that Act which amend FSMA. Article 1 provides that the Order comes into force on 1/04/13; that date is defined as the “commencement date” for the purpose of the Order. Articles 2 and 3 make provision for the imposition of penalties and disciplinary measures under FSMA in relation to the performance of controlled functions before the commencement date. Article 4 disapplies certain disciplinary powers under FSMA in relation to the contravention of listing rules before the commencement date. Articles 5 to 10 make transitional provision in relation to the exercise of powers under FSMA over EEA firms exercising passporting rights under various single market directives. Article 11 makes transitional provision in relation to the exercise of disciplinary powers under FSMA in relation to contravention of requirements occurring before the commencement date. Article 12 disapplies certain disciplinary powers under FSMA in relation to failures by auditors to comply with trust scheme rules before the commencement date. Article 13 disapplies certain disciplinary powers under FSMA 2000 in relation to contraventions by recognised clearing houses and recognised investment exchanges before the commencement date. Article 14 makes transitional provision in relation to persons disqualified before the commencement date from being the auditor of, or acting as the actuary for, an authorised person or class of authorised person. Articles 15 to 18 make transitional provision in relation to injunctions and restitution. Articles 19 to 32 make provision for various notices and other matters given or imposed by FSA before the ommencement date to be treated as if given or imposed by PRA, or by PRA and FCA. Article 33 disapplies provisions relating to the publication of warning notices in relation to warning notices given before the commencement date. Article 34 makes transitional provision in relation to the prosecution of offences which occurred before the commencement date. (4/03/13) http://www.legislation.gov.uk/uksi/2013/441/pdfs/uksi_20130441_en.pdf
The Financial Services Act 2012 (Transitional Provisions) (Miscellaneous Provisions) Order 2013/442
Article 1 provides for that article and article 70 to come into force on 25/313. The rest of the Order to comes into force on 1/4/13; that date is defined as the “commencement date” for the purpose of the Order. Articles 2 to 7 make transitional provision in respect of FCA and PRA. Article 2 makes provision in respect of the FSA Board (which is renamed as FCA by FSMA (as amended by the 2012 Act)). Article 3 makes provision in respect of FCA’s first annual report, and article 4 makes provision in respect of PRA’s first annual report. Articles 5 and 6 make provision in respect of the Consumer and Practitioner Panels. Article 7 makes provision in respect of references to “consumers” in certain provisions of FSMA 2000 (as amended by the 2012 Act). Articles 8 to 11 make transitional provision in respect of control of business transfers under Part 7 FSMA. Articles 12 to 14 make transitional provision in respect of appeals to the Upper Tribunal. Articles 15 to 22 make transitional provision in respect of the information gathering and investigation powers in Part 11 of FSMA, and in respect of legally privileged information. Articles 23 to 30 make transitional provision in respect of control over authorised persons. Article 31 makes transitional provision in respect of the scheme manager of FSCS. Articles 32 to 43 make transitional provision in respect of recognised clearing houses and recognised investment exchanges. Article 44 makes transitional provision in respect of Lloyd’s of London. Articles 45 to 60 make transitional provision in respect of Part 24 FSMA (insolvency). Articles 61 to 63 make transitional provision in respect of complaints. Articles 64 to 68 make transitional provision in respect of amendments to the Companies Act 1989 relating to recognised clearing houses. Article 69 makes transitory provision in relation to a reference in FSMA (as amended by the 2012 Act) to Solvency II. Article 70 makes transitory provision in relation to the making of rules by BoE under FSMA (as amended by the 2012 Act). (4/03/13) http://www.legislation.gov.uk/uksi/2013/442/pdfs/uksi_20130442_en.pdf
Financial Services Act 2012 (Commencement No. 2) Order 2013/423 (C.17)
The Order brings into force certain provisions of the Financial Services Act 2012 (c.21) (“the Act”) into force. This is the second commencement order to be made under the Act. This Order brings into force Schedule 4 to the Act on 27/02/13 for the purpose of making regulations. The provisions listed in the Schedule to this Order are brought into force for all purposes on 1/04/13. Those provisions relate to the regulation of financial services and markets. (1/03/13) http://www.legislation.gov.uk/uksi/2013/423/pdfs/uksi_20130423_en.pdf
Financial Services (Banking Reform) Bill 2012-13
30
This Bill is now expected to have its second reading debate on 11 (earlier announced as 4 March 2013). (1/03/13) http://services.parliament.uk/bills/2012-13/financialservicesbankingreform.html
The Payment to Treasury of Penalties (Enforcement Costs) Order 2013/418
This Order relates to provisions of FSMA and the Financial Services Act 2012 (c.21) (“the 2012 Act”) which require the regulator of financial services (FSA for the period up to 31 March 2013 and, for the period after that date, FCA PRA and BoE) to pay to HMT the amounts received by the regulator by way of penalties imposed under FSMA or (in the case of BoE) under the Banking Act 2009 (c.1). The regulator must make the payment after deducting its enforcement costs. This Order supplements the definitions of enforcement costs in FSMA and the 2012 Act in two ways. The effect of article 2 is that the expenses incurred in connection with the exercise or consideration of the possible exercise of any of the powers specified in article 2(1) is to be regarded as an enforcement cost by FSA (for the purposes of s109 of the 2012 Act) or FCA (for the purposes of paragraph of Schedule 1ZA to FSMA). The enactments specified are powers to initiate insolvency proceedings in relation to a person who is carrying on a regulated activity in breach of the general prohibition in s19 FSMA and powers to take enforcement action under various regulatory regimes other than the regime provided for by FSMA itself. Article 2 also specifies the enforcement powers of BoE under the Uncertificated Securities Regulations 2001 for the purposes of s110(4)(b) of the 2012 Act. The effect of article 3 is that the expenses incurred in connection with the exercise or consideration of the possible exercise of powers in relation to the investigation of, or (in England and Wales or Northern Ireland) prosecution of the offences specified in article 3 is to be regarded as an enforcement cost by FSA (for the purposes of s109 of the2012 Act), FCA(for the purposes of paragraph 20 of Schedule 1ZA to FSMA), PRA (for the purposes of paragraph 28 of Schedule 1ZB to FSMA) and BoE (for the purposes of s110 of the 2012 Act). All offences under the law of a part of the UK, other than those already specified by the 2012 Act or FSMA or those offences which only certain regulators may prosecute are specified for this purpose. (Date in force: 1/04/13) (28/02/13) http://www.legislation.gov.uk/uksi/2013/418/pdfs/uksi_20130418_en.pdf
BoE: Proposed statutory statements of policy in respect of the Bank of England’s supervision of financial market infrastructures
BoE is required by FSMA to publish statements of policy relating to its powers over ‘qualifying parent undertakings’ of UK RCHs, and its use of penalties. This consultation paper sets out the Bank’s intended approach to these matters. Responses are required by 21 March 2013. (1/03/13) http://www.bankofengland.co.uk/financialstability/Documents/role/risk_reduction/payment_systems_oversight/pdf/finalcpsup ervisionoffmis.pdf
BoE: Proposed rules for recognised clearing houses and approved operators
This consultation paper seeks comments on five rules that BoE proposes to make for RCHs under FSMA and persons approved to operate a system for dematerialised settlement under the Uncertificated Securities Regulations (The proposed RCH rules set out here would be made using BoE’s new powers under FSMA. As a result, the relevant procedural requirements are those set out in s138J FSMA. Responses are required by 21 March 2013. (1/03/13) http://www.bankofengland.co.uk/financialstability/Documents/role/risk_reduction/payment_systems_oversight/pdf/cpforcleari ngandoperatorsweb.PDF
The Financial Services and Markets Act 2000 (Qualifying EU Provisions) Order 2013/419
This Order identifies the directly applicable provisions of EU law which are specified as qualifying EU provisions and directly applicable EU provisions for the purposes of various provisions in FSMA (as amended).. The effect of the Order is to apply certain provisions of FSMA for purposes connected with the specified EU provisions. Article 2 specifies provisions of EU law for general purposes including sections 1A and 2A (the functions of FCA and PRA) and s168 (power of the regulators to appoint an investigator). Article 3 specifies provisions of EU law for the purposes of disciplinary measures imposed under Part 14. Article 3 also specifies which of the FCA or PRA is responsible for taking disciplinary action in relation to each specified provision of EU law. Article 4 specifies provisions of EU law for purposes connected with the regulation of clearing houses and investment exchanges under Part 18. Article 5 specifies provisions of EU law for the purposes of the powers under Part 25 (including that Part as applied by Schedule 17A in connection with recognised clearing houses) to obtain injunctions or provide for restitution. Article 6 specifies provisions of EU law for the purposes of the fee-raising powers of FCA, PRA and BoE. (Date in force: 1/04/13) (28/02/13) http://www.legislation.gov.uk/uksi/2013/419/pdfs/uksi_20130419_en.pdf
The Payment to Treasury of Penalties Regulations 2013/429
31
These Regulations amend the following regulations to provide that the amounts received by the regulator by way of penalties imposed under the regulations is to be paid by the regulator to HMT: The Money Laundering Regulations 2007;The Transfer of Funds (Information on the Payer) Regulations 2007; The Regulated Covered Bonds Regulations 2008; The Payment Services Regulations 2009; The Electronic Money Regulations 2011; The Recognised Auction Platforms Regulations 2011; The Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012. These provisions reflect the provisions made by the Financial Services Act 2012 (c. 21) (see in particular s109) in relation to the payment to HMT of penalties received by the regulators under FSMA. HMT will pay the sums received into the Consolidated Fund. The amendments made to the Money Laundering Regulations 2007 relate to amounts received by FSA in the financial year beginning 1/04/12. In the case of all other amendments, the amendments relate only to amounts received after 1/04/13. This reflects the fact that no amount by way of penalties has been received or is expected to be received under the other regulations in the financial year beginning 1/04/2012. (Date in force: 1/04/13) (28/02/13) http://www.legislation.gov.uk/uksi/2013/429/pdfs/uksi_20130429_en.pdf
Financial Services and Markets Act 2000 (Exercise of Powers under Part 4A) (Consultation with Home State Regulators) Regulations 2013/431
Section 55R(2) FSMA requires the FCA or PRA (“appropriate regulator”), when it is giving permission under Part 4A of the Act in response to an application made by a person who is connected with certain EEA firms to consult with the home state regulator of the EEA firm in prescribed circumstances. The appropriate regulator must also consult the home state regulator when cancelling or varying such a permission, in prescribed circumstances. These regulations prescribe two circumstances in which consultation with the home state regulator must take place. First, the appropriate regulator must consult the home state regulator when giving permission unless the permission relates only to a “relevant activity” (as defined by regulation 2(4)). Second, the appropriate regulator must consult the home state regulator when varying permission unless the permission relates only to a “relevant activity” or where the effect of the variation is to give permission for the purposes of a single market directive other than the one for the purposes of which the existing permission was granted. (Date in force: 1/04/13) (28/02/13) http://www.legislation.gov.uk/uksi/2013/431/pdfs/uksi_20130431_en.pdf
FSA: Latest update as we transition to PRA
FSA has published the text of this letter to firms from Andrew Bailey. It includes a note on changes in policy on guidance and threshold conditions as well as a revised Q&A. (27/02/13) http://www.fsa.gov.uk/static/pubs/other/pra-transition- update.pdf
TSC: Fixing LIBOR: some preliminary findings: Financial Services Authority response to the Committee’s second report of session 2012–13
TSC has published FSA’s response to its LIBOR report. FSA discusses its penalty policy both generally and in respect to the Barclays LIBOR fine; incentives to whistle blowing; the FCA/PRA approach to supervision, including stance on senior exec appointments; its work with CFTC on the LIBOR investigation; powers on fraudulent conduct. FSA notes that it is undertaking an internal review on LIBOR which will focus on the period between 1 January 2007-31 May 2009. It expects to finalise this review in the current quarter. (21/02/13) http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/901/901.pdf
Financial Services (Banking Reform) Bill 2012-13
This Bill is expected to have its second reading debate on 4 March 2013. (14/02/13) http://services.parliament.uk/bills/2012- 13/financialservicesbankingreform.html
FMLC: Banking reform
FMLC’s paper addresses areas of legal uncertainty arising from the proposed ring-fencing provisions in the draft Financial Services (Banking Reform) Bill, including the compatibility of the draft Bill with EU law; uncertainties within the text of the draft Bill; and (iii) the location and “height” of the ring-fence. (7/02/13) http://www.fmlc.org/Documents/Issue%20175%20- %20Banking%20Reform%20(Ring-Fencing).pdf
HoC: Financial Services (Banking Reform) Bill
32
A Bill to make further provision about banking and other financial services, including provision about FSCS to make provision for the amounts owed in respect of certain deposits to be treated as a preferential debt on insolvency; to make provision about the accounts of BoE and its wholly owned subsidiaries; and for connected purposes. The first reading of the Bill took place on 4 February 2013 and is expected to have its second reading debate on a date to be announced. (5/02/13) http://www.publications.parliament.uk/pa/bills/cbill/2012-2013/0130/2013130.pdf
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published uncorrected oral evidence from the following hearings which took place on 29 January 2013 (attended by Tracey McDermott of FSA and Graham Nicholson of BoE) and 30 January 2013 (sessions attended by Carol Arrowsmith, David Bolchover, Alison Carnwath, Dr Alexander Pepper, Paul Sharma, Sir John Sunderland and John Thornton; Clive Maxwell Gary Hocking and Adrian Kamellard Professor Bloomfield, Fiona Brownsell and Ben Wilson; Martin Taylor Giles Andrews, Theresa Burton, Tony Greenham and Andrew Robinson) (5/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxviii/uc606xxviii.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxx/uc606xxx.pdf (NB: over 40 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxix/uc606xxix.pdf (NB: over 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxvii/uc606xxvii.pdf (NB: over 30 pages long)
HMT/BIS-BERR: Banking reform: a new structure for stability and growth /Speech by George Osborne; Reform of banking (4 February 3013)/Parliamentary Commission on Banking Standards: Response from Andrew Tyrie
HMT/BIS-BERR has published a document which responds to the Parliamentary Commission on Banking Standards’ recommendations. The response explains where the Government has amended the Bill in response to recommendations, or will do so during the Financial Services (Banking Reform) Bill’s passage through Parliament. Specific topics covered include: principles of ring-fencing (“the Government will … amend the Bill to include provisions giving the regulator the power to enforce full separation between retail and wholesale banking in a specified group”) principles-based regulation; ensuring compliance with the ring-fence; location of the ring-fence; directors;’ duties and loss-absorbency. It is noted that the Government will by the Bill’s Commons Committee stage publish drafts of the principal statutory instruments, including those establishing the scope of the ring-fence, the de minimis exemption from ring-fencing, the specific prohibitions on ring- fenced banks, and the precise conditions for exemptions (more details in para 2.18-19 of this document). In addition to this, George Osborne has given a speech, at JPMorgan in Bournemouth, follows in which he discusses the financial crisis, regulatory reform in the financial system, efforts to change the banking culture, competition in the retail banking sector and announces the Government’s intention to bring forward detailed proposals to open up payment systems. He states: “I can announce that your high street bank will have different bosses from its investment bank. Your high street bank will manage its own risks, but not the risks of the investment bank. And the investment bank won’t be able to use your savings to fund their inherently risky investments. My message to the banks is clear: if a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether – full separation, not just a ring fence”. With regard to banking culture he notes: “I believe we need proper professional standards in the banking sector … And I want to see how we can strengthen the sanctions regime for senior bankers – for example, should there be a presumption that the directors of failed banks do not work in the sector again?” In his response to the speech, Andrew Tyrie comments: “The Commission now needs carefully to examine the detail of the Government’s proposals on electrification and on our other recommendations. We will report to Parliament on them”. (4/02/13) http://www.official-documents.gov.uk/document/cm85/8545/8545.pd f (NB; over 50 pages long) http://www.hm-treasury.gov.uk/speech_chx_040213.htm http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking- industry/news/comments-from-andrew-tyrie-mp/
The Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (Draft – revised from an earlier reported draft Order published in May 2012)
This Order specifies, for the purposes of FSMA, which regulated activities are “PRA-regulated activities” and so are the regulated activities which are subject to prudential regulation by PRA rather than FCA. Article 2 provides that the activities of accepting deposits and effecting or carrying out contracts of insurance are specified as PRA-regulated activities. Acting as a managing agent at Lloyd’s and the arranging by the Society of Lloyd’s of contracts of insurance written at Lloyd’s are also PRA-regulated activities. The activity of dealing in investments as principal is a PRA-regulated activity only to the extent designated by PRA under article 3. Designations relate to particular persons (rather than a class of person). Article 3 sets out the criteria which must be applied by PRA in designating persons. Article 4 sets out the procedure PRA must follow when designating a person under article 3. Article 5 requires PRA to keep under review designations under article 3. Article 6 enables PRA to withdraw a designation and sets out the procedure for withdrawal. Article 7 provides that a designation ceases to have effect if the person concerned ceases to have permission to carry on the activity of dealing in investment as principal. Article 8 requires PRA to prepare and issue a statement of its policy in relation to designation under article 3, the review of designations under article 5 and the withdrawal of designations under article 6. Article 9 sets out the procedure that PRA must follow in preparing a statement of policy. Article 10 makes transitional provision to deal with cases where, after 1 April 2013, an authorised person becomes a PRA-authorised person by virtue of a designation under article 3. Article 11 makes transitional provision to deal with cases where a PRA-authorised person ceases to be a PRA-authorised person by virtue of a rescission or withdrawal of authorisation. (1/02/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533642/pdfs/ukdsi_9780111533642_en.pdf
33
The Financial Services Act 2012 (Transitional Provisions) (Rules and Miscellaneous Provisions) Order 2013/161
This Order is made under the Financial Services Act 2012 (c.21) (“the 2012 Act”). Article 1 provides that the Order comes into force on 20th February 2013, and sets out the interpretation of terms used in the purposes of the Order. Article 1(3) excludes the effect of paragraph 2 of Schedule 20, so that in the period up to 1 April 2013 references to FCA are not treated as meaning FSA and vice versa. Article 2 provides that the FCA, PRA and BoE may designate various instruments made by FSA, for example rules; designated instruments are to be treated as if they had been made by the designating body. Article 3 sets out procedural requirements for the designation of an instrument. Article 4 provides that instruments that are not designated before the commencement date cease to have effect. Article 5 provides for FSA to appoint persons to discharge, before 1 April 2013, certain functions of FCA. Article 6(1) specifies the functions that may be discharged by appointed persons; article 6(2) provides that certain functions currently exercisable by FSA are to be treated as exercisable by FCA. Article 7 provides for: things done by appointed persons to be treated as if they had been done by FCA acting through its governing body; certain duties on FCA to consult various persons to be satisfied by consultation undertaken by FSA; and for certain provisions relating to members of the governing body of FCA also to apply to appointed persons. Article 8 sets aside procedural requirements for consultation in respect of rules made by FCA where the rules replicate threshold conditions in Schedule 6 FSMA. Article 9 makes transitional provision in respect of waivers and modifications of rules made under FSMA 2000; article 10 makes transitional provision in respect of applications for a waiver or modification or rules; and article 12 sets out definitions relevant for those purposes. Article 12 makes transitional provision in respect of the Bank of England Act 1998 (c.11) as amended by the 2012 Act. (Date in force: 20/02/13) (31/01/13) http://www.legislation.gov.uk/uksi/2013/161/pdfs/uksi_20130161_en.pdf
The Financial Services and Markets Act 2000 (Prescribed Financial Institutions) Order 2013/165
This Order prescribes kinds of financial institution for the purposes of Part 12A FSMA (powers exercisable in relation to parent undertakings) (“Part 12A”). The powers conferred by that Part may only be exercised in relation to parent undertakings of certain authorised persons, recognised investment exchanges or recognised clearing houses if the parent undertaking is a financial institution of a prescribed kind. In relation to the parent undertakings of authorised persons, the Order prescribes those financial institutions which are within the scope of consolidated (or supplementary) supervision by virtue of EU law and which are primarily financial in nature: insurance holding companies; financial holding companies; and mixed financial holding companies. These terms, and related definitions, are defined in article 1. The definition of “financial institution” in article 1 applies only for the purposes of the definition of “financial holding company”; it does not apply for the purposes of Part 12A. This Order also prescribes all financial institutions for the purposes of Part 12A in so far as that Part applies to the parent undertakings of recognised investment exchanges or to BoE in the exercise of its functions in relation to recognised clearing houses. (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/uksi/2013/165/pdfs/uksi_20130165_en.pdf
The Bank of England Act 1998 (Macro-prudential Measures) Order 2013 (Draft)
This Order prescribes macro-prudential measures for the purposes of s9H of the Bank of England Act 1998 (c.11) (“the 1998 Act”) (power of FPC of BoE to direct FCA and PRA). The Order specifies the imposition of requirements by PRA on UK banks and UK investment firms to maintain additional own funds (in other words, capital requirements) by reference to residential property exposures, commercial property exposures or financial sector exposures. The Order also specifies the imposition of requirements by reference to the failure to maintain such own funds. Such requirements might for example include an obligation not to make certain discretionary payments. The Order also specifies the imposition of requirements by the Prudential Regulation Authority on UK banks and UK investment firms to treat such exposures as if they gave rise to an increased level of risk. FPC may give directions that any such requirements are to be imposed either on a solo basis (by reference to the position of the undertakings which are the subject of the direction) or on a consolidated basis (by reference to the position of the undertakings which are the subject of the direction, taken together with relevant members of that undertaking’s group). FPC will, under s9H of the 1998 Act, be able to direct PRA to implement the measures prescribed by the Order in relation to UK banks and UK investment firms which are PRA-authorised persons (as defined by section 2B FSMA. Article 3 provides that where FPC gives a direction which specifies a particular increase (for example an increase in the risk weighting to be applied to residential property exposures) and subsequently gives another direction which is identical in substance to the first direction except in relation to the level of the increase, PRA need not comply with the obligation under section 138J FSMA to include a cost benefit analysis when consulting on rules that PRA proposes to make to implement the subsequent direction. (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533673/pdfs/ukdsi_9780111533673_en.pdf
The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2013 (Draft)
This Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (“the Principal Order”) so as to specify new regulated activities. The Principal Order specifies kinds of activities and investments for the purposes of FSMA). The regulated activities which may be specified include activities relating to the setting of benchmarks (paragraphs 24E to 24H of Schedule 2 FSMA, inserted by s7 of the Financial Services Act 2012 (c.21)). This Order specifies the activities of providing information in relation to and administering a specified benchmark. Article 3 of the Order makes
34
consequential amendments to ss1G, 1H and 425A FSMA to adjust the definition of a consumer in order that the consumer protection objective applies with regard to the new regulated activities and so that those affected by the carrying on of the new regulated activities may benefit from the provisions in FSMA to protect consumers. Articles 4 to 6 of the Order insert a new article and a new schedule into the Principal Order to specify the new regulated activities and to set out the specified benchmarks. Article 7 of the Order provides for a Part 4A permission to be deemed to be extended to those firms which immediately before commencement of this Order were already carrying on the activity of providing information to the administrator of a benchmark listed in Schedule 5 to the Principal Order that was required for the determination of that benchmark and who already had a Part 4 permission. Article 8 provides for an interim permission to be granted to persons wishing to undertake administering, analysing or determining activities. This permission is granted automatically to those already undertaking these activities on commencement of this Order. An interim permission lapses either on a notice of cancellation given by FCA after an application for Part 4A permission to undertake these activities has been granted or, if earlier, on either cancellation of permission under s55H FSMA or the exercise by FCA of its power to cancel permission under s55J FSMA. Article 9 enables FCA to modify amongst other things, its rules in their application to persons with an interim permission. Article 10 sets out the application of FSMA to persons with interim permission. (Date in force: 2/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533826/pdfs/ukdsi_9780111533826_en.pdf
The Financial Services and Markets Act 2000 (Threshold Conditions) Order 2013 (Draft)
This Order amends the threshold conditions set out in Schedule 6 FSMA. In giving or varying permission under Part 4A FSMA or imposing or varying a requirement or giving consent under that Part, FCA or PRA must ensure that the person concerned will satisfy, and continue to satisfy the relevant threshold conditions for which that regulator is responsible. Part 4A of the 2000 Act was inserted by the Financial Services Act 2012 (c.21) and replaces Part 4 of the 2000 Act. The functions of FCA and PRA are set out in the 2000 Act, as amended by the Financial Services Act 2012. Part 1B of Schedule 6, as inserted by this Order, sets out the conditions for which FCA is responsible where the person concerned carries on, or is seeking to carry on, regulated activities which do not consist of or include a PRA-regulated activity. Part 1C of Schedule 6, as inserted by this Order, sets out the conditions for which FCA is responsible where the person concerned carries on, or is seeking to carry on, a PRA-regulated activity. Part 1D of Schedule 6, as inserted by this Order, sets out the conditions for which PRA is responsible where the person concerned carries on, or is seeking to carry on, a PRA-regulated activity relating to the effecting or carrying out of contracts of insurance or in connection with Lloyd’s. Part 1E of Schedule 6, as inserted by this Order, sets out the conditions for which PRA is responsible where the person concerned carries on any other PRA- regulated activity. Part 1F of Schedule 6, as inserted by this Order, sets out the conditions for which FCA and PRA are responsible where the person concerned qualifies for authorisation under Schedule 3 FSMA (EEA passporting rights). Part 1G of Schedule 6, as inserted by this Order, sets out the conditions for which FCA and PRA are responsible where the person concerned qualifies for authorisation under Schedule 4 FSMA (Treaty rights). (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533802/pdfs/ukdsi_9780111533802_en.pdf
The Financial Services and Markets Act 2000 (Financial Services Compensation Scheme) Order 2013 (Draft)
This Order specifies what PRA may make rules for, and what FCA may make rules for. Article 2 enables PRA to make rules to compensate persons in cases where relevant persons or successors are unable, or likely to be unable, to satisfy claims against them: (a) for a deposit within the meaning of article 5 of the RAO including: (i) a deposit that would otherwise be excluded by article 6 of that Order; and (ii) a repayment claim as defined in s5 of the Dormant Bank and Building Society Accounts Act 2008; (b) under a contract of insurance; (c) in respect of the activity of managing the underwriting capacity of a Lloyd’s syndicate as a managing agent at Lloyd’s; or (d) in respect of the activity of arranging by Lloyd’s deals in contracts of insurance written at Lloyd’s. Article 3 enables FCA to make rules to compensate persons in cases where relevant persons or successors are unable, or likely to be unable, to satisfy claims against them except those claims referred to in article 2. Although PRA and FCA are required to make rules to establish a scheme for compensating persons where relevant persons or successors are unable, or likely to be unable to satisfy claims against them, neither PRA nor FCA is obliged by this Order to make rules for all the types of claim set out in Articles 2 and 3. (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533659/pdfs/ukdsi_9780111533659_en.pdf
The Financial Services Act 2012 (Consequential Amendments) Order 2013 (Draft)
This Order provides for consequential amendments of enactments in connection with the Financial Services Act 2012. Article 2 gives effect to the Schedule to this Order. The Schedule makes provision for amendments of references to FSA Instruments in various enactments and for amendments of references to provisions of FSMA which have been amended by the Financial Services Act 2012. (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533819/pdfs/ukdsi_9780111533819_en.pdf
The Financial Services Act 2012 (Misleading Statements and Impressions) Order 2013 (Draft)
This Order specifies relevant activities, relevant investments and relevant benchmarks for the purposes of Part 7 of the Financial Services Act 2012 (“the Act”). Part 7 of the Act creates criminal offences which relate to the making of false or misleading statements, or the creation of a false or misleading impression, in connection with a relevant agreement, relevant
35
investment or relevant benchmark. Sections 89 and 90 in part replicate the effect of s397 FSMA, which is repealed by s95 of the Act. Article 2 specifies activities which are relevant for the purposes of the definition of “relevant agreement” which is used in s 89 of the Act (misleading statements). Article 3 specifies the benchmarks which are “relevant benchmarks” for the purposes of s91 of the Act (misleading statements etc in relation to benchmarks). The only benchmarks which are specified for this purpose are the benchmarks known as LIBOR. Article 4 specifies investments which are “relevant investments”. This concept is relevant for the purposes of ss 89 (misleading statements) and 90 (misleading impressions) of the Act. (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533796/pdfs/ukdsi_9780111533796_en.pdf
HMT: Financial Services Act 2012: summary of consultation responses on draft secondary legislation and Government response
HMT has published a summary of responses in respect to three consultations (Implementing the Wheatley Review/Financial Services Bill: the FPC’s macro-prudential tools on the levers that the Bank of England’s new Financial Policy Committee will have to address risks it identifies to financial stability/A new approach to financial regulation: draft secondary legislation on the remaining secondary legislation related to the Act) which include HMT’s responses to specific issues raised in the responses. (29/01/13) http://www.hm-treasury.gov.uk/d/financial_services_act_2012_summary_of_responses_290113.pdf (NB: 30 pages long)
Parliamentary Commission on Banking Standards: Banking standards/Competition
PCBS has published the corrected evidence from hearings held on 10 January (attended by Dr Diane Coyle, Enlightenment Economics, John Fingleton, former CEO of OFT and Clare Spottiswoode of the Independent Commission on Banking); 21 January 2013 (attended by economists) and 14 January 2013 (attended by economists and, separately, by Andrew Browne of BBA). (28/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxi/c60601.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxv/c60601.pdf (NB: 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxii/c60601.pdf (NB: over 30 pages long)
FSA: CP13/3*: Regulatory reform: Handbook transitional arrangements, the appointment of with-profits committee members and certain other Handbook amendments
The latest of FSA’s series of CPs on regulatory reform includes the introduction of general Handbook transitional provisions, which cover all parts of the Handbooks not covered by other specific transitional arrangements; transitional arrangements for the approved persons regime; .the treatment of members of an insurer’s with-profits committee under the approved person regime and the proposed deletion of a number of miscellaneous existing Handbook provisions and some other minor amendments. Responses are required by 25 February 2013. .(25/01/13) http://www.fsa.gov.uk/static/pubs/cp/cp13-03.pdf (NB: 50 pages long)
The Financial Services Act 2012 (Commencement No. 1) Order 2013/113 (c.6)
This Order brings into force certain provisions of the Financial Services Act 2012 (c.21) (“the Act”) into force. This is the first commencement order to be made under the Act. The provisions listed in Part 1 of the Schedule to this Order are brought into force for all purposes on 24 January 2013. Those provisions confer powers on HMT to make subordinate legislation or contain definitions of expressions used in the Act. The provisions listed in Part 2 of the Schedule are brought into force on 24 January 2013 for the purpose of HMT making orders and regulations. The provisions in Part 3 of the Schedule are brought into force on 24 January 2013 for the specific purposes indicated in this Part of the Schedule. The provisions commenced by this Part of the Schedule include powers for FCA and PRA (“the new regulators”) to make rules and give guidance, to make codes of practice and to issue statements of policy. In particular, s24 of the Act is commenced on 2 January 2013 for the purpose of making rules. Such rules may not come into force until the date on which s24 is brought into force for all purposes. This does not necessarily mean that the new regulators will exercise all powers conferred by s24 prior to the date on which s24 and the other the provisions of Part 2 of the Act which relate to the new regulators come into force for all purposes. In particular, some of the powers conferred by s24 cannot be exercised until other legislation is enacted. For example, rules cannot be made under s137C FSMA as inserted by s24 of the Act until certain activities in relation to credit are specified by HMT as a “regulated activity” for the purposes of FSMA. The provisions in Part 4 of the Schedule are brought into force on 19 February 2013 for the purposes of making appointments. (Made: 24/01/13) (24/01/13) http://www.legislation.gov.uk/uksi/2013/113/pdfs/uksi_20130113_en.pdf
Parliamentary Commission on Banking Standards: Competition
PCBS has published the uncorrected evidence for the hearing held on 14 January 2013 attended by Gavin Shreeve (IFS School of Finance) and Simon Thompson (CBI). (23/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxii/uc606xxii.pdf (NB: over 30 pages long)
36
FSCP: A new approach to financial regulation: draft secondary legislation
FSCP has published its response to HMT with regard to the draft secondary legislation to the Financial Services Bill. It argues that threshold conditions be further enhanced to protect the interests of consumers by requiring firms to treat their customers fairly; suggests that the Government should undertake a fundamental review of the registered firm regime and raises concerns over the separation of responsibility for FSCS between PRA and FCA. (22/01/13) http://www.fs- cp.org.uk/publications/pdf/secondary-legislation-FS-Act-2012.pdf
Financial Services Act 2012
The explanatory notes to the Act have now been published. (21/01/13) http://www.legislation.gov.uk/ukpga/2012/21/pdfs/ukpgaen_20120021_en.pdf (NB: over 100 pages long)
TSC: Appointment of John Griffith-Jones as Chair-designate of the Financial Conduct Authority
TSC’s report considers on the appointment of John Griffith-Jones as chairman of FCA, saying “what is needed from him is to make the FCA radically different from its predecessor in at least four respects”. These concern the restoration of the regulator’s credibility; ensuring that the new board will demonstrate stronger strategic leadership than FSA’s has done; the management of FCA’s objectives (with an emphasis on the competition objective (“we will expect the FCA to demonstrate that it is doing everything it can to make the authorisation of would-be new entrants to the banking sector as fast and straightforward as possible”) and governance. TSC notes that it will engage in a more demanding oversight role of governance at FCA. (18/01/13) http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/721/721.pdf
BoE: FPC’s powers to supplement capital requirements
BoE has published a draft policy statement which explains the planned powers for FPC to give directions setting extra capital requirements for the purposes of financial stability. The government is planning two such powers: the countercyclical capital buffer and sectoral capital requirements. The CCB supplements headline capital requirements. The policy statement describes the circumstances in which FPC might use the powers, together with a description of some of the indicators it will routinely review to help inform its decisions. It is noted that, in addition to these powers of direction, FPC will also have powers to make recommendations. Where the recommendation is to PRA or FCA, the relevant regulator may be required by FPC to comply or else explain publicly its reasons for not doing so, but the statement is not about these wider powers. (14/01/13) http://www.bankofengland.co.uk/financialstability/Documents/fpc/policystatement130114.pdf (NB: over 40 pages long
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published the uncorrected evidence from the separate hearings held on 10 January 2013 attended by Diane Coyle, John Fingleton and Clare Spottiswoode (first link) and former UBS execs, Hector Sants and Thomas Huertas (formerly of FSA) and Tracey McDermott (FSA) (second link). (14/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxi/uc606xxi.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xx/uc606xx.pd f (NB; over 60 pages long)
Parliamentary Commission on Banking Standards: Mis-selling and cross-selling
The uncorrected evidence from the hearings held on 6 January 2013 follows. Separate hearings were attended by (a) execs from Which? and CAB; (b) Angela Knight, formerly of BBA; (c) Clive Briault, formerly of FSA; (d) Jon Pain, formerly of FSA; (e) Peter Davis, formerly of CC . Specific topics include PPI; LIBOR; TCF and competition in the retail banking sector. (11/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc860-i/uc860i.pdf (NB: over 70 pages long)
Parliamentary Commission on Banking Standards: Banking standards/Letter from Marcel Rohner
PCBS has published the uncorrected evidence from the hearing held on 9 January 2013 attended by former UBS execs together with a letter to PCBS from Marcel Rohner (who attended the session held on 10 January 2013, the transcript of which has not yet been published). (11/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-
37
xix/uc606xix.pdf (NB: over 30 pages long) http://www.parliament.uk/documents/joint- committees/Banking_Standards/Letter%20Dr%20Marcel%20Rohner.pdf
Parliamentary Commission on Banking Standards: Regulatory approach//Retail competition
PCBS has published corrected evidence in respect of hearings held on 17 December 2012 attended by Carol Sergeant (formerly of FSA and Lloyds Banking Group) and, separately, Christine Downton (Pareto Partners) and on 4 December 2012 attended by given by Andrea Leadsom MP and execs from VocaLink. (7/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c821-ii/c821.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c710-ii/c71001.htm
HoC: The Independent Commission on Banking
This HoC library document considers the background to the Vickers report and outlines the new observations and recommendations of the Parliamentary Commission on Banking Standards. (7/01/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN06171
FSCS reform
FSCS: Interim levy
FSCS has announced that it no longer expects to raise an interim levy on investment intermediaries for 2013/14. The move follows a review of the number of claims coming in and the timing of compensation payments. (27/02/14) http://www.fscs.org.uk/industry/news/2014/february/fscs-announce-no-interim-levy-yypyvjc1g /
FSCS: Plan and Budget: 2014/15
FSCS has published its 2014/15 budget, along with its five-year plan. This is based around seven ‘imperatives’, including the achievement of excellence. (22/01/14) http://www.fscs.org.uk/uploaded_files/Publications/fscs_plan_and_budget_2014- 15_final.pdf
FCA/PRA: CP14/1: Financial Services Compensation Scheme – management expenses levy limit 2014/15
The regulators have begun consultation on the size of the FSCS budget for the next fiscal year. It is proposed to set this figure at £80m, including contingency funds. Responses are required by 17 February 2014. (17/01/14) http://www.fca.org.uk/static/documents/consultation-papers/cp14-01.pdf
FSCS: Outlook
Topics include: levy update (including funding indicators for the six months to 2013); compensation update. financial summary for six months to 30 September 2013 and recoveries. (19/11/13) http://www.fscs.org.uk/uploaded_files/outlook- 2013-11.pdf
FCA: CP13/11**: Financial Services Compensation Scheme – unincorporated associations and partnerships
This CP proposes that all unincorporated associations and certain large partnerships will become eligible to claim on FSCS if an investment firm fails. FCA notes that it is consulting on these changes to ensure its rules properly implement the Investor Compensation Schemes Directive (ICSD). An accompanying press release says that karge unincorporated associations such as charities, clubs or societies, that were not considered eligible for help over lost deposits following the collapse of Kaupthing Singer and Friedlander Bank and Landsbanki Islands hf in 2008, may now be entitled to compensation from FCA to compensate for losses up to £50,000. FSCS will begin contacting the organisations concerned who could be eligible for help. It is suggested that some unincorporated associations and large partnerships may also be entitled to compensation payments for investments following the past failure of investment firms. FCA also said it would be consulting on proposals to extend eligibility for FSCS compensation to all unincorporated associations and to certain large partnerships if an investment firm fails. The size cut-off for partnerships being eligible to claim will change from net assets
38
not exceeding £1.4m to the higher size limit that applies to companies. Broadly, partnerships will be able to claim on FSCS if they do not exceed two of the three criteria: turnover £6.5m, balance sheet total £3.26m and 50 employees. Alongside the FCA consultation, PRA is consulting on proposals to clarify the compensation rules for deposits so that in the future all unincorporated associations, regardless of size, are within the scope of FSCS cover for deposits. Responses to the FCA consultation are required by 30 October 2013. (3/10/13) http://www.fca.org.uk/news/fca-to-consult-on-extending-fscs- protection-on-investments http://www.fca.org.uk/static/documents/consultation-papers/cp13-11.pdf
FSCS: Funding policy and approach to calculating the 36 month compensation costs
FSCS has published policy statements which setting out its levying, borrowing and recoveries policy and its approach to calculating the 36 month expected compensation costs. The ability to raise levies based on 36 month compensation costs will be available to FSCS from 2014/15. Both had previously been published in draft as consultations. The first paper has now been finalised without revision. In response to a number of issues raised, FSCS has published comments on the second paper in the accompanying press release clarifying certain points and summarising the process FSCS will use when setting the levy in future. (5/09/13) http://www.fscs.org.uk/industry/news/2013/september/fscs-publishes-paper-confirmin- dtkpt191x/index.html http://www.fscs.org.uk/uploaded_files/fscs_funding_policy_sept13.pdf http://www.fscs.org.uk/uploaded_files/Industry/industry_paper_on_36_month_levying_sept_13.pdf
FSCS: Outlook
Topics include: claims and compensation update; prospects for additional levies in 2013/14 and an update on recoveries and funding. (15/08/13) http://www.fscs.org.uk/uploaded_files/Outlook/outlook_aug_2013_4.pdf
FCA: FSCS levies for specified deposit-taker defaults
This note sets out in one place information relevant to the estimates concerning the 2008/09 banking defaults, including an explanation on how the levy is calculated and an overview of the levies for each year (to July 2013). (31/07/13) http://www.fca.org.uk/static/fca/documents/fscs_levies.pdf
FSCS: Funding policy and approach to calculating the 36 month compensation costs
In response to feedback received during the consultation on the recent review of the FSCS’ funding, carried out by FSA, FSCS has drafted two papers. The first outlines FSCS’ approach to raising levies, borrowing and its funding more generally and the second is the approach FSCS is intending to take to calculate expected 36 month compensation costs. FSCS is seeking feedback on the latter, to be received by 31 July 2013. (5/07/13) http://www.fscs.org.uk/industry/news/2013/june/fscs-funding-policy-update/index.html
FSCS: Annual Report & Accounts 2012/2013
The R&A notes that FSCS paid out £326m in compensation to consumers in 2012/13 and received 62,030 new claims in 2012/13, 36% less than the number of claims received during 2011/12. (5/07/13) http://www.fscs.org.uk/uploaded_files/fscs_annual_report_2012-13_final.pdf (NB: over 150 pages long)
FSCS: Estimates of levy for interest on legacy loans
FSCS has set out details on how it calculates and estimates the potential future charges for interest payable to HMT in respect of loans taken out to fund compensation for the failures of Bradford & Bingley, Landsbanki (Icesave), Kaupthing Singer & Friedlander, Heritable and London Scottish. (13/05/13) http://www.fscs.org.uk/industry/news/2013/may/estimates- of-levy-for-interest-62tgym61d/index.html
FSCS: 2013/14 levy
FSCS has confirmed its proposed levy for 2013/14 at £285m. The levy has reduced by £26m since FSCS published its initial assumptions in its Plan and Budget 2013/14 in early February. It follows an up-to-date analysis of claims paid in the previous year and claims assumptions for 2013/14. Firms will be invoiced in July. (19/04/13) http://www.fscs.org.uk/industry/news/2013/april/fscs-sets-2013-14-levy-at-16-gv9s6761q/index.html
39
FSA: PS13/4: FSCS funding model review
In January 2013, FSA confirmed most of the FSCS funding rules proposed in CP12/16 but, in response to feedback from industry, it re-consulted on one element (in CP13/1): the funding arrangements for the FCA retail pool. It was proposed that, as well as the five FCA FSCS funding classes already included in the FCA retail pool by CP12/16, all FCA-regulated deposit takers, general insurers, life insurers and home finance providers should also contribute to the pool when it is triggered by costs arising from the intermediation classes. This PS confirms that FSA will proceed as outlined in CP13/1; and publishes the final rules for the FCA retail pool. (25/03/13) http://www.fsa.gov.uk/static/pubs/policy/ps13-04.pdf (NB: over 40 pages long)
FSCS: 2012/13 interim levy to firms in the investment intermediation and/or GI Intermediation sub-classes/Investment Intermediation sub-class: £20m to firms for the costs of major investment failures
The text of this letter notes that FSCS had warned that the investment intermediation sub-class faced the potential of an additional levy in 2012/13. The final amount to be levied has now been set at £20m, and is a reduction from the amount announced in the Plan and Budget 2013/14 in February of £25m. The additional levy is to meet the costs of the claims for the failures of Pritchard Stockbrokers Limited and Worldspreads Limited as well as the on-going costs of MF Global and Arch-cru. (20/03/13) http://www.fsa.gov.uk/static/pubs/other/fscs-interim-levy-letter2.pdf
The Financial Services and Markets Act 2000 (Financial Services Compensation Scheme) Order 2013/598
This Order specifies what PRA may make rules for, and what FCA may make rules for in respect of FSCS. .Article 2 enables PRA to make rules to compensate persons in cases where relevant persons or successors are unable, or likely to be unable, to satisfy claims against them: (a) for a deposit within the meaning of article 5 of the Regulated Activities Order including: (i) a deposit that would otherwise be excluded by article 6 of that Order; and (ii) a repayment claim as defined in s5 of the Dormant Bank and Building Society Accounts Act 2008; (b) under a contract of insurance; (c) in respect of the activity of managing the underwriting capacity of a Lloyd’s syndicate as a managing agent at Lloyd’s; or (d) in respect of the activity of arranging by Lloyd’s deals in contracts of insurance written at Lloyd’s. Article 3 enables FCA to make rules to compensate persons in cases where relevant persons or successors are unable, or likely to be unable, to satisfy claims against them except those claims referred to in article 2. Although PRA and FCA are required to make rules to establish a scheme for compensating persons where relevant persons or successors are unable, or likely to be unable to satisfy claims against them, neither PRA nor FCA is obliged by this Order to make rules for all the types of claim set out in Articles 2 and 3. (Date in force: 1/04/13) (14/03/13) http://www.legislation.gov.uk/uksi/2013/598/pdfs/uksi_20130598_en.pdf
FSCS: Plan and Budget 2013/14
FSCS notes that, in 2013/14, financial services firms are likely to pay a total levy bill of £311m to cover costs, which excludes the costs of the major bank defaults of 2008. That compares with total levies so far in 2012/13 of £265m. It expects the overall volume of new claims it receives to be considerably lower than 2012/13, but claims volumes from PPI claims will continue to be significant. FSCS notes that its main priority areas for 2013/14 are: re-engineering claims processes to enhance the responsiveness of its service and to improve efficiency; raising the awareness of FSCS protection, particularly deposit protection; and sharpening its strategies and processes for managing external suppliers. FSCS will review its claims and funding assumptions and announce the 2013/14 levy at the end of March 2013. (1/02/13) http://www.fscs.org.uk/uploaded_files/201219_fscs_plan_and_budget_2013_final_acc.pdf (NB: over 30 pages long)
FSA: CP13/4**: Financial Services Compensation Scheme – management expenses levy limit 2013/14
In this CP, FSA consults on behalf of PRA and FCA on the FSCS management expenses levy limit. Unlike previous years, FSA will consult on its fees and FOS levies separately in March, noting that it needs to consult on the MELL earlier than this so it is made by 1 April 2013. The CP sets out FSA’s consultation proposal on the FSCS MELL for 2013/14 of £94.4m. This consists of: FSCS management expenses of £74.4m: this is the minimum amount that will actually be levied for 2013-14; and a contingency reserve of £20m that allows FSCS to levy additional funds without formal consultation by FSA or its successor regulatory authorities to meet contingencies that were not foreseen when the annual levy was raised. Responses are required by 21 February 2013. In the light of consultation responses, and subject to approval in March 2013 by the relevant Boards, FSA intends to finalise the proposal to take effect on 1 April 2013 and will send out invoices from July. (25/01/13) http://www.fsa.gov.uk/static/pubs/cp/cp13-04.pdf (NB: over 30 pages long)
FSA: CP13/1***: FSCS Funding Model Review - feedback on CP12/16 and further consultation
40
In July 2012, FSA proposed maintaining existing funding classes but using new annual thresholds based on affordability. Both these proposals will be adopted and will come into force when FSA is replaced by FSA and PRA on 1 April 2013. FSA also proposed setting up a “retail pool”, a collective resource funded by intermediaries and the investment providers which would be triggered if one or more of those classes reached their threshold. In light of industry concerns about this approach, FSA is today publishing a consultation on a proposal that all providers should make contributions when the pool is triggered by the failure of an intermediary. This would include contributions from banks, insurers and home finance providers. FSA highlights that there will be no changes to the current funding classes; the proposals for thresholds based on assessments of affordability will be taken forward; it will consult on a proposal for FCA regulated providers to make contributions to the FCA retail pool, when an intermediation class breaches its threshold, rather than just those providers that participate in the FCA FSCS funding classes and that from 1 April 2014, FSCS will be able to smooth the impact of levies by looking further ahead at potential compensation costs expected in the 36 months following the levy instead of twelve months as is currently the case (except for the deposits classes). Responses to the consultation are required by 18 February 2013 (in order to ensure that, depending on the outcome of this revised consultation, the new funding model can be implemented from 1 April 2013). (18/01/13) http://www.fsa.gov.uk/library/communication/pr/2013/005.shtml http://www.fsa.gov.uk/static/pubs/cp/cp13-01.pdf (NB: over 100 pages long)
Archived material on the sector is available via the following links: January-June 2009 , July-December 2009 , January- December 2010 , January-December 2011 and January-December 2012 .
Updated 27/03/14
Regzone materials are intended for clients and professional contacts of CMS Cameron McKenna LLP. They are intended to simplify and summarise the issues covered and must not be relied upon as giving definitive advice.
Further information, including a list of our offices, can be found at www.cms-cmck.com
© CMS Cameron McKenna LLP 2014. All rights reserved.
41