Banking: Law-Now alerts, tools and latest news
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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: “ Liability of Credit Rating Agencies – UK Regulations come into force on 25 July 2013 ” (10/07/13)
Law-Now: “ Recent banking pay developments ” (25/06/13)
Law-Now: “ Parliamentary Commission on Banking Standards Final Report ” (25/06/13)
Law-Now: “ The European Financial Transaction Tax - a levy sans frontieres ” (9/04/13)
Law-Now: “ Disqualification may be on the horizon for former HBOS directors ” (9/04/13)
Law Now: “ Interest Rate Derivative Mis-selling: A new case ” (9/01/13)
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Topics covered:
Reforming the financial regulation of banks and credit rating agencies Payment systems and non-consumer banking Building societies and mutuals
Reforming the financial regulation of banks and credit rating agencies
HMT: A bank levy banding approach: consultation
This consultation considers the case for a revenue neutral reform of the bank levy which would move away from the existing system of headline rates and towards a banding approach for determining banks’ charges under the levy. Responses are required by 8 May 2014. If the Government decides to make changes to the bank levy’s design in response to this consultation, the intention is to introduce legislation at the Report Stage of Finance Bill 2014 (currently expected to be in early July) with changes taking effect for chargeable periods beginning on or after 1 January 2015. (27/03/14) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/298549/bank_levy_banding_approach_consul tation.pdf
HMT: Review of the Dormant Bank and Building Society Accounts Act 2008
The report considers how banks and building societies have transferred dormant account money to the Reclaim Fund Ltd, how much money has been transferred and how promptly as well as how effective financial institutions have been in providing a mechanism for making those entitled to dormant account money aware and how effective the arrangements have been for meeting any reclaims. It concludes that, although alternative schemes have been considered, it will not take any further action at this stage and will undertake a further review in there years’ time. With regard to the efforts of financial institutions, the Government considered that banks and building societies have been effective in providing a mechanism for making those entitled to dormant accounts aware and in meeting any reclaims. (27/03/14) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/298366/review_of_dormant_accounts_act_20 08.pdf
EBA: Guidelines on the applicable notional discount rate for variable remuneration
Further to a January 2013 consultation, EBA has published guidelines for the calculation of the discount rate for variable remuneration and clarifying how it should be applied. The variable component of remuneration for categories of staff whose professional activities have a material impact on the risk profile of the institution is capped at 100% of the fixed remuneration or at a maximum of 200%, subject to shareholders' approval. EU legislation foresees that when calculating the ratio between variable and fixed component, Member States may allow institutions to apply a discount rate of 25% (or less subject to national laws) of the variable remuneration, provided the latter is paid in instruments that are deferred over a period of not less than 5 years. (27/03/14) http://www.eba.europa.eu/documents/10180/638871/EBA-GL-2014- 01+%28Final+Guidelines+on+the+discount+rate+for+remuneration%29.pdf
BIS: Basel III monitoring
Revised documentation in respect of data collection exercises is available via the following link. (26/03/14) http://www.bis.org/bcbs/qis/index.htm
EBA: Consultation paper on XBRL taxonomy (v2.1) related to remittance of supervisory data under Regulation (EU) No 575/2013
EBA has published a consultation on a revised version of its XBRL taxonomy for supervisory reporting, which incorporates additional reporting requirements for asset encumbrance, non-performing exposures and forbearance. Responses are required by 14 April 2014. (24/03/14) http://www.eba.europa.eu/documents/10180/632822/EBA+CP+2014+03+%28XBRL+Taxonomy%29.pdf
EC/European Parliament: Parliament and Council agree on basic bank accounts for all
The European Parliament and Council have announced their agreement with regard to the above, stating that “anyone legally residing in the EU should have the right to open a basic payment account, and this right should not be denied on grounds of nationality or place of residence. …. Fees and rules for all payment accounts should be transparent and comparable and it should be easy to switch to another payment account that offers better terms, under the agreed new rules”. To take effect, the new rules must be approved by the European Parliament as a whole during the April II plenary session and endorsed by the member states. (20/03/14) http://europa.eu/rapid/press-release_STATEMENT-14- 75_en.htm?locale=en http://www.europarl.europa.eu/pdfs/news/expert/infopress/20140317IPR39141/20140317IPR39141_en.pdf
EC: Regulation (EU) No 248/2014 of the European Parliament and of the Council of 26 February 2014 amending Regulation (EU) No 260/2012 as regards the migration to Union-wide credit transfers and direct debits
This has now been published in the Official Journal. (20/03/14) http://new.eur-lex.europa.eu/legal- content/EN/TXT/PDF/?uri=OJ:JOL_2014_084_R_0001_01&from=EN
HMT: The Budget 2014 - Banking
The Budget report discusses competition and banking, announcing plans to “switch on” competition powers of the Payment Systems Regulator one year ahead of schedule; notes the recently announced agreement regarding standardised data for current account providers and announces a consultation on legislating to help match SMEs who are turned down for a loan
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with alternative lenders and plans by the British Business Bank to issue a request for proposals to implement an innovative wholesale guarantees programme alongside the Budget. The Budget report notes that PRA and FCA are to publish a review of their work on removing barriers to entry and expansion in retail banking later this year, including setting out publicly for the first time how they will treat the relationships between potential new banks and third party service providers of off-the-shelf banking solutions. It also notes that FCA will launch a review in September 2014 into the effectiveness of the current account switching service and will also begin a study of the costs and benefits of account number portability as a way of increasing competition in banking. Changes have been announced with regard to the bank levy, effective from January 2015, and the Government is to consult next week on the merits of a new charging mechanism for the bank levy. (19/03/14) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293759/37630_Budget_2014_Web_Accessibl e.pdf
HMT/DBIS: Current account data
The Government has announced an agreement from Barclays, HSBC, Lloyds, Nationwide, RBS, and Santander to give customers their account data in a simple, standardised format that can be used in comparison sites for the first time. It is noted that the Government expects all current account providers to publish such data in due course. (17/03/14) https://www.gov.uk/government/news/government-to-make-it-easier-to-check-that-youve-got-the-right-bank-deal
EC: Regulatory technical standards to implement the single rule book in banking
The EC has announced that it has adopted a package of standards needed to implement provisions of the Capital Requirements Regulation and Directive (CRR/CRD). The nine standards, developed by EBA, define the ways in which competent authorities and market participants must, inter alia, handle disclosures linked to securitisation instruments, measure potential losses from derivative positions and counterparty failure and specifying the types of instruments that can be used for paying bonuses. It is noted that the European Parliament and the Council have one month to exercise their right of objection, with the possibility to extend this period for a further two months at their initiative. Following the expiry of this objection period, the standards will be published in the Official Journal and will enter into force on the twentieth day following the date of their publication. Their provisions will be directly applicable from the date of entry into force. (13/03/14) http://europa.eu/rapid/press-release_IP-14-255_en.htm?locale=en http://europa.eu/rapid/press-release_MEMO-14- 181_en.htm?locale=en
ECB: Asset quality review manual
ECB has published this document, which was written for national competent authorities and their third party support to provide the information necessary to execute Phase 2 of the review. (12/03/14) http://www.ecb.europa.eu/pub/pdf/other/assetqualityreviewphase2manual201403en.pdf?e8cc41ce0e4ee40222cbe148574e 4af7
BIS: Banks and capital requirements: channels of adjustment
This working paper looks at bank capital ratios since the financial crisis and suggests: “the adjustment process to Basel III is not yet complete. The evidence presented here, however, suggests that most banks have achieved most of the adjustment to date through the accumulation of retained earnings”.(12/03/14) http://www.bis.org/publ/work443.pdf
OFT/FCA/CMA: SME banking market study
OFT has published an update on the above, including an announcement that CMA will complete the study as part of a wider examination of competition in retail banking. It is also noted that FCA has been working closely with OFT on the market study, and will continue to do so with the CMA. In its update, OFT states that although some actions have been taken, or are currently planned, to respond to competition concerns in retail banking, concerns remain that the provision of business current accounts and business loans remains concentrated among a small number of major banks; barriers to entry and expansion may be contributing to newer or smaller providers finding it difficult to enter and expand their business across the core business banking products and SMEs find it hard to differentiate between providers. OFT also notes concerns by alternative finance providers that banks may be hindering SMEs from accessing finance from them and that it is currently reviewing undertakings given by various banks following the Competition Commission's investigation in 2002. Results of a compliance review are expected in July and CMA will make decisions on any action that should be taken on any failure to comply in relation to any particular bank. It is noted that OFT has not reached any finding that the statutory test for making an market investigation reference has is in fact met and has reached no view on whether it would exercise its discretion to make such a reference if the statutory test was met, adding that CMA must make these decisions at the end of the study.
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(11/03/14) http://www.oft.gov.uk/news-and-updates/press/2014/13-14 http://www.fca.org.uk/news/market-studies/market- study-into-sme-banking https://www.gov.uk/government/news/cma-announces-programme-of-work-on-banking
EBA: Draft regulatory technical standards specifying conditions according to which competent authorities may permit institutions to use relevant data covering shorter time period (data waiver permission)
EBA has launched a consultation on draft standards on the conditions according to which competent authorities may grant institutions permission to use relevant data covering shorter time series (data waiver permission), when estimating risk parameters. EBA is proposing to introduce some conditions that would exclude from the waiver low-default portfolios. Responses are required by 7 June 2014. (7/03/14) http://www.eba.europa.eu/documents/10180/621404/EBA+CP+2014+02+%28CP+on+RTS+on+data+waiver%29.pdf
BIS: Results of the Basel III monitoring exercise as of 30 June 2013
This report. Involving the participation of 223 banks, assume that the final Basel III package has been fully implemented, based on data as of 31 December 2012. Data as of 31 December 2012 show that shortfalls in the risk-based capital of large internationally active banks continue to shrink. (6/03/14) http://www.bis.org/publ/bcbs262.pdf
EBA: Basel III monitoring exercise
EBA has published its fifth report of the Basel III monitoring exercise on the European banking system. The exercise was run in parallel with the one conducted by BIS at a global level, in order to gather aggregate results on capital, RWAs, liquidity and leverage ratios for banks in the EU. Results show that the Tier 1 capital ratio of the largest internationally- active European banks would be on average 9.1% compared to a ratio of 12% under the current regulation. (6/03/14) http://www.eba.europa.eu/documents/10180/534414/Basel+III+Monitoring+Exercise+Report+%28as+of+30+June+2013%29 .pdf
EBA: Report on impact of differences in leverage ratio definitions
This report provides a policy analysis and quantitative impact assessment of aligning the current CRR definition of the leverage ratio exposure measure to Basel III and uses data collected for the Basel III monitoring exercise as of 30 June 2013 through a sample consisting of 173 EU institutions from 18 Member States. Overall, the assessment indicates that the revised Basel III framework leads to leverage ratios that are broadly in line with, or possibly slightly higher than, leverage ratios calculated according to the current CRR. On this basis, and considering that the revised Basel III framework represents a more accurate measure of leverage, EBA recommends, in the interest of consistency between the leverage ratio calculation within the EU and the other jurisdictions that implement Basel III, aligning the CRR definition of the leverage ratio's exposure measure to the Basel III framework. With regard to the securities financing transactions, EBA notes that the current CRR text may allow for different interpretations, which is reflected in the report and suggests that, in the event the EU Commission delegated act does not align the treatment of these transaction with that of Basel III, the treatment in the current CRR be clarified in accordance with the interpretation closer to the Basel III treatment. (6/03/14) http://www.eba.europa.eu/documents/10180/534414/EBA+-+Leverage+ratio+analytical+report.pdf
FCA: CRD IV harmonised reporting
This webpage provides a summary of new EU-wide supervisory reporting framework for FINREP and CORP and includes guidelines and templates. (5/03/14) http://www.fca.org.uk/firms/markets/international-markets/eu/crd-iv/crd-iv-harmonised- reporting
BoE: Foreign exchange market review
In this press release, BoE notes that it has been conducting an internal review into allegations that its officials condoned or were informed of manipulation in the foreign exchange market or the sharing of confidential client information and that, although the review so far has found no evidence that BoE staff colluded in any way in manipulating the foreign exchange market or in sharing confidential client information, it has suspended a member of staff, pending an investigation by BoE. BoE further notes that it has reiterated its guidance to staff regarding management of records and escalation of important information and that the Oversight Committee of the Bank’s Court of Directors will lead an investigation to assess whether officials had involvement or knowledge in an attempted or actual manipulation in the forex market. (5/03/14) http://www.bankofengland.co.uk/publications/Pages/news/2014/044.aspx
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BIS: Speech by Stefan Ingves: Restoring confidence in banks (4 March 2014)
Text of this speech, given at the 15th Annual Convention of the Global Association of Risk Professionals, has been published, Topics include: Basel III: risk-weighted asset variability and banks’ disclosure of risks. (4/03/14) http://www.bis.org/speeches/sp140304.htm
HoC European Scrutiny Committee: Benchmarks
Further to section 5 of the 23rd Report of Session 2013–14 which, amongst other matters, considered concerns over the EC’s proposed regulation on indices used as benchmarks in financial instruments, the Committee has now published a response from Vice-President Maros Sefkovic. (4/03/13) http://www.parliament.uk/documents/commons- committees/european-scrutiny/Sefcovic%20-%20benchmarks%20in%20financial%20instrumentsf.pdf
ESRB: Handbook and flagship report on operationalising macro-prudential policy in the banking sector
ESRB has published these items, intended to assist macro-prudential authorities in the EU operationalise instruments set out in CRD/CRR2. The handbook is aimed at macro-prudential authorities and offers detailed instrument-specific advice on how to design and implement macro-prudential policy for the banking sector. The flagship report is targeted at high-level policy-makers and provides an overview of the new macro-prudential policy framework. (4/03/14) http://www.esrb.europa.eu/pub/pdf/other/140303_esrb_handbook.pdf?d2c5e7a6f89a9c4ffbf5d184fb30b000 http://www.esrb.europa.eu/pub/pdf/other/140303_flagship_report.pdf?b316a98baf69a471d65ccac85826a09e
ECB: Draft regulatory technical standards on the margin periods for risk used for the treatment of clearing members' exposures to clients under Article 304(5) of Regulation (EU) No 575/2013
ECB has published this consultation on draft regulatory technical standards aimed at specifying the minimum margin periods of risk that institutions acting as clearing members may use for the calculation of their capital requirements for exposures to clients. Responses are required by 9 May 2014. (3/03/14) http://www.eba.europa.eu/documents/10180/615469/EBA-CP- 2014-01+%28CP+on+RTS+on+Margin+Periods+of+Risk+CRR-304%29.pdf
ECB: Introductory statement at hearing at ECON (3 March 2014)
ECB has published the text of an introductory statement by Mario Draghi in which he discusses aspects of the banking union. (3/03/14) http://www.ecb.europa.eu/press/key/date/2014/html/sp140303.en.html
BoE: Funding for Lending scheme
BoE has published data on the scheme, covering Q4 2013 for lending and the amount borrowed to the end of January 2014, as well as more detailed data on earlier periods. It is stated that the scheme “has been successful in meeting its initial objective, to provide incentives to banks and building societies to boost their lending to the UK real economy”. (3/03/14) http://www.bankofengland.co.uk/publications/Pages/news/2014/040.aspx
EBA: Consumer trends report 2014
EBA has published its annual report on consumer trends, giving an overview of the analysis carried out in the area of consumer protection and financial innovation. It identifies the consumer issues that may arise, or have arisen, from these trends, and describes the approaches EBA will be taking in 2014 to address them. Specific areas highlighted include crowdfunding, mortgages, payment services; mis-selling, sales incentives, comparison websites and financial capability. (28/022/14) http://www.eba.europa.eu/documents/10180/534414/EBA+Consumer+Trends+Report+2014.pdf
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TSC: SME lending
TSC has published the ToR for a new inquiry and is inviting written responses, to be received by 28 March 2014. Among the areas highlighted: whether the remit of the regulators should be expanded to include more lending and selling of financial products to SMEs and whether banks’ existing appeals and complaints systems work effectively for SME customers, for example with regard to declined lending applications, sales of interest rate hedging products, changes to loan facilities and related allegations of mistreatment. (28/02/14) http://www.parliament.uk/business/committees/committees-a- z/commons-select/treasury-committee/news/sme-lending-tor /
BIS: Speech by Stefan Ingves: Banking on leverage
BIS has published the keynote address given at the 10th Asia-Pacific High-Level Meeting on Banking Supervision in New Zealand (25-27 February 2014) in which he discusses aspects of leverage and concludes: “even though the leverage ratio has been designed as a backstop, it must be a meaningful backstop if it is to serve its intended purpose. Getting the calibration right is therefore a critical part of the Committee's remaining work on the post-crisis reforms”. (27/02/14) http://www.bis.org/speeches/sp140226.htm
ECB: Third report on card fraud
ECB’s report has found that card fraud within the SEPA area increased in 2012 for the first time since 2008. It is suggested that this was driven mainly by higher internet fraud and that more efforts will be required to ensure the security of online card payments as internet purchases continue to grow. It is noted, however, that fraud as a share of the total value of transactions remained below the levels recorded between 2008 and 2010. (25/02/14) http://www.ecb.europa.eu/pub/pdf/other/cardfraudreport201402en.pdf?e50b929264594aabb07bba92a0a26b3f
ESMA: Credit rating agencies annual report 2013
In this report, ESMA considers supervision and policy work to be undertaken in 2014 and beyond; reviews 2012 annual report commitments and 2013 deliverables and provides an overview of the sector. However, ESMA notes a number of improvements needed, including: validation of rating methodologies, to ensure that a credit rating assessment is a comprehensive risk assessment leading to high quality ratings; internal governance, ensuring the full independence of the internal review function and thereby reducing the risk of potential conflict of interest; and robust IT systems to support the rating process, including information security controls and protection of confidential rating information. Following the entry into force of the amended CRA Regulation in June 2013, ESMA will also complete a specific assessment on agencies’ compliance with the new regulatory requirements. (21/02/14) http://www.esma.europa.eu/system/files/2014- 212_press_release_-_esma_sets_out_cra_supervision_focus_for_2014.pdf http://www.esma.europa.eu/system/files/2014-151_cra_annual_report_2013_and_work_plan.pdf
EBA/ESMA: Review of the Implementation of EBA-ESMA recommendations to EURIBOR-EBF
The joint review has found that EURIBOR-EBF has made significant progress in implementing the regulators’ recommendations addressing weaknesses and shortcomings in its governance and technical framework. (20/02/14) http://www.esma.europa.eu/system/files/2014-210_esma-eba_-_euribor_makes_significant_progress_with_reforms_0.pdf http://www.esma.europa.eu/system/files/2014-207_esma-eba_review_of_euribor_recommendations_0.pdf
EBA: Final draft regulatory technical standards on classes of instruments that are appropriate to be used for the purposes of variable remuneration under Article 94(2) of Directive 2013/36/EU
The aim of these draft RTS is to ensure that instruments for variable remuneration reflect the credit quality of an institution and incentivise prudent risk-taking. They specify the classes of instruments that can be used for variable remuneration and introduce specific requirements for additional Tier 1, Tier 2 and other instruments as well as defining the write-down, write- up and conversion mechanisms for Tier 2 and other instruments. The standards introduce for all instruments a uniform trigger event of 7% of the Common Equity Tier 1 capital and defines the respective mechanisms. Instruments must have a sufficient maturity to cater for deferral and retention arrangements and must be issued at market conditions. The draft RTS require that a significant portion of at least 60% be issued publicly or privately to other investors. If instruments are used for the sole purpose of variable remuneration a cap is set on the distributions paid out. EBA notes that the standards have been sent to the EC for their adoption and will enter into force after their publication in the Official Journal. (19/02/14) http://www.eba.europa.eu/documents/10180/589319/EBA+RTS+2014+02+%28RTS+on+instruments+for+variable+remuner ation%29.pdf/817b2110-43af-4e07-8fc2-4826a4354338
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EBA: Discussion paper on the impact on the volatility of own funds of the revised IAS 19 and the deduction of defined pension assets from own funds under Article 519 of the Capital Requirements Regulation (CRR)
EBA has published this discussion paper, which gives its preliminary views based on: a qualitative analysis of the accounting and prudential changes and their impact on the volatility of own funds, a quantitative analysis of this impact for a sample of EU institutions and a qualitative analysis of the factors that may impact the volatility of own funds in the future. Responses are required by 14 April 2014. (18/02/14) http://www.eba.europa.eu/documents/10180/583941/EBA+DP+2014+01+%28DP+on+Pensions%29.pdf
EBA: Risk dashboard
EBA has published the above for Q4 2013, summarising the main risks and vulnerabilities in the banking sector in the EU. It considers the evolution of key risk indicators from 55 banks across the EU in Q3 2013. (17/04/13) http://www.eba.europa.eu/documents/10180/580549/EBA+Dashboard+Q4+2013.pdf
FSB: Review of foreign exchange benchmarks
Following recent concerns over the integrity of foreign exchange rate benchmarks, FSB has decided to include an assessment of FX benchmarks into its ongoing programme of financial benchmark analysis and has established a new sub- group (to be co-chaired by Paul Fisher of BoE). The sub-group will undertake a review of FX benchmarks and will analyse market practices in relation to their use and the functioning of the FX market as relevant. Conclusions and recommendations will be announced by FSB to the G20 Brisbane summit in November 2014. (14/02/13) http://www.financialstabilityboard.org/press/pr_140213.pdf
TSC: Project Verde
TSC has published the transcript of the uncorrected evidence of the hearing held on 11 February 2014 | attended by Andrew Bailey of PRA (and formerly of FSA). (14/02/14) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/uc300-xi/uc300xi.pdf
Banking Standards Review: Consultation paper
This consultation has been published as a result of Sir Richard Lambert being asked by the chairmen of seven major UK financial institutions to set out for a new organisation to raise standards in banking, open to all banks and building societies in the UK. It sets out a number of questions covering the following: objectives; collective action; role and scope; credibility; membership; ethics; professional standards; standards of behaviour; standards of competence; benchmarking; discipline; banking as a profession and thought leadership . Responses are required by 7 March 2014. Final recommendations and a business plan are to be published at the end of the month and the aim is to have the new organisation operating by the end of 2014. (11/02/14) http://www.bankingstandardsreview.org.uk/assets/docs/consultation-paper.pdf
ESMA: Consultation on CR3 implementation
ESMA is seeking views on the draft regulatory technical standards set out in this consultation which cover disclosure requirements on structured finance instruments, the European Rating Platform and the periodic reporting on fees charged by credit rating agencies. Responses are required by 11 April 2014. (11/02/14) http://www.esma.europa.eu/system/files/2014-150_consultation_paper_on_cra3_implementation_0.pdf
IOSCO: Code of conduct fundamentals for credit rating agencies
IOSCO has published a consultation on the above which proposes significant revisions and updates to the current IOSCO code of conduct for credit rating agencies (last updated in 2008). The proposed revisions are designed to strengthen code by: enhancing provisions regarding protecting the integrity of the credit rating process, managing conflicts of interest, providing transparency, and safeguarding non-public information; adding measures regarding governance, training, and risk management; and seeking to improve the clarity of code. Responses are required by 28 March 2014. (11/02/14) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD437.pdf
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ECB: Decision of 4 February 2014 identifying the credit institutions that are subject to the comprehensive assessment
ECB has published this Decision. (7/02/14) http://www.ecb.europa.eu/pub/pdf/other/en_dec_2014_03_fen.pdf
FCA: Capital Requirements Regulations 2013
FCA has published a copy of the draft Regulations. (7/02/14) http://www.fca.org.uk/static/documents/capital-requirements- regulations-2013.pdf
TSC: Project Verde
TSC has published the corrected transcript from the hearing attended by Clive Adamson of FCA on 7 January 2014. (6/02/14) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/c300-viii/c300viii.pdf
EBA/EIOPA/ESMA: Final report on mechanistic references to credit ratings in the ESAs’ guidelines and recommendations
Further to a December 2013 consultation, the ESAs have published their final report on mechanistic references to credit ratings in the ESAs’ guidelines and recommendations and on the definition of “sole and mechanistic reliance” on such ratings. It also includes amendments to ESMA’s money market fund guidelines according to the definition of ‘sole and mechanistic reliance’ contained there. (6/02/14) https://eiopa.europa.eu/fileadmin/tx_dam/files/consultations/consultationpapers/JC-CP-2013- 02/JC_2014_004__Final_Report_Mechanistic_References_to_Credit_Ratings_.pdf
European Parliament: Winding up banks
This press release notes that the European Parliament’s negotiators on the proposed single resolution mechanism for ailing banks won support on 6 February 2014 on legislation needed to establish an EU banking union. The item notes criticism of the European Council’s stance, described as “leading to a waste of precious time”. (6/02/14) http://www.europarl.europa.eu/news/en/news-room/content/20140203IPR34504/html/Winding-up-banks-EP-reconfirms- mandate-and-criticises-Council-for-timewasting
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- on-remuneration-and-sales-based-incentives / http://www.parliament.uk/documents/commons- committees/treasury/140130_Andrew_Tyrie_to_Martin%20Wheatley.pdf
EC: DG Internal Market and Services management plan for 2014
The EC has published this document, which includes its priorities for work in financial services. Specific matters include: the banking union; the single supervisory mechanism; the single resolution mechanism; shadow banking and structural reform of the banking sector. (5/02/14) http://ec.europa.eu/dgs/internal_market/docs/management-plan_en.pdf
EBA/EIOPA/ESMA: Draft implementing technical standards on the mapping of ECAIs’ credit assessments under Article 136(1) and (3) of Regulation (EU) No 575/2013 (Capital Requirements Regulation—CRR)
The ESAs have published this consultation with regard to the above. Responses are required by 5 May 2014. (5/02/14) https://eiopa.europa.eu/consultations/consultation-papers/index.html
HMT: LIBOR
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HMT notes that ICE Benchmark Administration Ltd took responsibility for administrating LIBOR from 3 February 2014. This follows the completion of ICE Group’s acquisition of NYSE Euronext last November. Subsequently, NYSE Euronext Rate Administration Limited was renamed ICE Benchmark Administration Limited. (4/02/14) https://www.gov.uk/government/news/first-day-of-business-for-new-libor-administrator
ICAEW/Law Society/STEP: FATCA: UK trusts under the UK/US IGA The above mentioned bodies have published draft guidance with regard to FATCA, together with a flowchart, noting that the guidance is relevant for all UK trusts and trustees, whether or not they have any known US connections. (4/02/14) http://www.ion.icaew.com/ClientFiles/c1db2be4-7bd5-41f3-996a-764f237080bb/Guidance%20draft%20- %20UK%20Trusts%20under%20the%20Model%201%20IGA%20Final.pdf http://www.ion.icaew.com/ClientFiles/c1db2be4-7bd5-41f3-996a-764f237080bb/J3809%20-%20Flow%20Chart%20Final.pdf
ECB: Note on the comprehensive assessment
In this note, ECB states that it, together with the national competent authorities responsible for conducting banking supervision in the euro area, have made significant progress in the preparation for, and the implementation of, the comprehensive assessment since its launch in November 2013. The comprehensive assessment aims to enhance the transparency of the balance sheets of significant banks in the euro area. This note provides an overview of key aspects of the stress test, an outline of the progress made to date on the assets quality review more details of the AQR methodology and a high-level summary of the approach with respect to quality assurance for the comprehensive assessment. (3/02/14) http://www.ecb.europa.eu/pub/pdf/other/notecomprehensiveassessment201402en.pdf?120cf5522a79fe53cd30a54aaf34f55 d
BIS: Speech by Stefan Ingves: Finishing the job (31 January 2014)
BIS has published the text of this speech, given at the 9th BCBS-FSI High-Level Meeting on "Strengthening financial sector supervision and current regulatory priorities" in Cape Town, in which he discusses work undertaken by BIS over the past year and priorities for 2014/15. (31/01/14) http://www.bis.org/speeches/sp140131.pdf
EBA: 2014 EU-wide stress test
EBA has published details of the forthcoming 2014 EU-wide stress test that will be conducted on a sample of 124 EU banks (see second link below). The 2014 EU-wide stress test, designed in coordination with ECB, is designed to provide supervisors, market participants and institutions with consistent data to contrast and compare EU-banks' resilience under adverse market conditions. EBA will provide competent authorities with a consistent and comparable methodology, which is intended to allow them to undertake a rigorous assessment of banks' resilience under stress. The resilience of EU banks will be assessed under a period of three years (2014-2016). Banks will be required to stress a common set of risks including: credit risk, market risk, sovereign risk, securitisation and cost of funding. Both trading and banking book assets will be subject to stress, including off-balance sheet exposures. Competent authorities may include additional risks and country- specific sensitivities beyond this common set but the published results should allow understanding the impact of the common set of risks in isolation. The methodology and scenario are expected to be published in April 2014 and banks' individual results to be released at the end of October 2014. (31/01/14) http://www.eba.europa.eu/documents/10180/563711/Communication+on+the+2014+EU-wide+stress+test.pdf http://www.eba.europa.eu/documents/10180/563711/31012014+EU- wide+stress+Test+2014+%28List+of+sample+banks+%29.xlsx http://www.eba.europa.eu/documents/10180/563711/2014+EU-wide+Stress+Test+-+FAQs.pdf
TSC: Project Verde
TSC has published the uncorrected transcripts of the hearings held on 21 January 2014 (attended by Lord Levene and Gary Hoffman, formerly of NBNK) and on 28 January 2014 (attended by Rodney Baker-Bates and David Davies, formerly of the Co-Operative Bank). (31/01/14) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/uc300-ix/uc300ix.pdf http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/uc300-x/uc30001.htm
EBA: Final draft regulatory technical standards on own funds requirements for investment firms based on fixed overheads under Article 97(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR
EBA has published this document, noting that the standards harmonise the calculation of capital requirements for those investment firms that have limited authorisation to provide investment services, as well as the conditions under which competent authorities can make adjustments to such requirements. The standards also introduce a special treatment of tied agents, since a tied agent exposes an investment firm to the same risk it is exposed to when it carries out business on its own; introduce thresholds above which competent authorities can make adjustments to the capital requirements as well as minimum thresholds below which firms are exempted from the adjustments in capital requirements. (30/01/14) http://www.eba.europa.eu/documents/10180/561374/EBA-RTS-2014-01+%28Own+Funds+-+Fixed+Overheads%29.pdf
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EC: Regulation on structural measures improving the resilience of EU credit institutions Further to the Liikanen report, the EC has proposed new rules intended to stop the largest and most complex banks from engaging in proprietary trading. The new rules would also give supervisors the power to require those banks to separate certain potentially risky trading activities from their deposit-taking business if the pursuit of such activities compromises financial stability. Alongside this proposal, the EC has adopted accompanying measures aimed at increasing transparency of certain transactions in the shadow banking sector. FAQs appear below, along with the text of the proposed Regulation. (29/01/14) http://europa.eu/rapid/press-release_IP-14-85_en.htm?locale=en http://ec.europa.eu/internal_market/bank/docs/structural-reform/140129_proposal_en.pdf http://europa.eu/rapid/press-release_MEMO-14-64_en.htm?locale=en http://europa.eu/rapid/press-release_MEMO-14-63_en.htm?locale=en
European Commission: Commission Delegated Regulation (EU) No …/.. of 21.1.2014 supplementing Directive 2002/87/EC of the European Parliament and of the Council [FICOD] and Regulation (EU) No 575/2013 of the European Parliament and of the Council [CRR] with regard to regulatory technical standards for the application of the calculation methods of capital adequacy requirements for financial conglomerates
The European Commission adopted and published the Commission Delegated Regulation above. (22/01/14) http://ec.europa.eu/transparency/regdoc/rep/3/2014/EN/3-2014-139-EN-F1-1.Pdf
FCA: CRD IV (Reporting Guidance) Instrument 2014
FCA has published the aforementioned Instrument, which amends SUP to reflect the reporting provisions of CRD IV. (21/01/14) http://media.fshandbook.info/Legislation/2014/FCA_2014_1.pdf
IntercontinentalExchange Group: ICE Benchmark Administration to become new administrator of LIBOR on February 1, 2014
Following the FCA’s formal authorisation of ICE Benchmark Administration, ICE have now confirmed that they will take over the administration of LIBOR on 1 February 2014. (20/01/14) http://ir.theice.com/investors-and-media/press/press-releases/press-release-details/2014/ICE-Benchmark-Administration-to- Become-New-Administrator-of-LIBOR-on-February-1-2014/default.asp x
European Parliament: Conference of Presidents discussion on Single Resolution Mechanism
The Conference of Presidents (i.e. the President of the European Parliament plus the chairmen of the different political groups) decided to write to President Barroso emphasising the Parliament's readiness to negotiate with the Council of the EU on the basis of the ECON position on SRM (which, in turn, built on the original Commission proposal). On the other hand, “if the negotiations do not move forward in a constructive manner”, the Parliament threatens to put the ECON position directly to a plenary vote. The Parliament considers that “the current state of play in the negotiations is not promising”, and there is a “distinct possibility” that no agreement will be achieved on the SRM before the European elections in May 2014. In particular, the Conference of Presidents “firmly rejects” the Council’s proposed intra-governmental agreement on the SRM. (17/01/14) http://www.europarl.europa.eu/news/en/news-room/content/20140116IPR32905/html/Conference-of-Presidents- discussion-on-Single-Resolution-Mechanism
ECB: Opinion on the proposal for a regulation on indices used as benchmarks in financial instruments and financial contracts
The ECB has published an opinion on this draft Regulation, voicing its support for the proposals (which it describes as “very broad in scope”). It also adds that market participants should be actively involved in the design of any new reference rates. (16/01/14) http://www.ecb.europa.eu/ecb/legal/pdf/en_con_2014_02_f_sign.pdf
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
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EC: Commission Delegated Regulation supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council [Capital Requirements Regulation] with regard to regulatory technical standards for Own Funds requirements for institutions
The EC have adopted this Commission Delegated Regulation.(15/01/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%205231%202014%20INIT&r=http%3A% 2F%2Fregister.consilium.europa.eu%2Fpd%2Fen%2F14%2Fst05%2Fst05231.en14.pdf
BCBS: Important steps towards completion of post-crisis regulatory reforms endorsed by GHOS
The Basel Committee’s oversight body, the Group of Governors and Heads of Supervision (GHOS), has endorsed a number of proposals from the Committee, including a common definition of the leverage ratio, proposed changes to the Net Stable Funding Ratio, and minimum requirements for liquidity-related disclosures. (13/01/13) http://www.bis.org/press/p140112.htm
ESAs: Board of Appeal dismisses refused CRA-applicant’s appeal against ESMA
Global Private Rating Company ‘Standard Rating’ Ltd had been criticised by ESMA in 2012 for undertaking credit rating activities without being registered to do so. ESMA requested the firm register as a Credit Rating Agency under the CRA Regulation, but later rejected its application. The applicant firm then appealed. This was the first appeal ever made against a refusal to register as a CRA. It was dismissed. (13/01/14) http://www.esma.europa.eu/news/Board-Appeal-European- Supervisory-Authorities-dismisses-appeal-made-refused-CRA-applicant-again?t=326&o=home
HMT: Financial Secretary's London Stock Exchange speech
Sajid Javid, Financial Secretary to the Treasury, gave a speech on the occasion of the first Chinese ETFs being listed on the London Stock Exchange. This will allow investors to access Chinese stock markets in Renminbi for the first time. (13/01/14) https://www.gov.uk/government/speeches/financial-secretarys-london-stock-exchange-speech
TSC: Project Verde
TSC has published the uncorrected transcript of the hearing held on 7 January 2014 attended by Clive Adamson of FCA. In addition to discussing the details of the appointment of Paul Flowers as chairman of the Co-operative Bank, Clive Adamson is questioned on the approved persons regime in general and stated that FCA “would have preferred the new regime to apply to all financial services firms” (ie. not just to banks).. (10/01/14) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/uc300-viii/uc30001.pdf
EC: Draft Implementing Technical Standards with regard to supervisory reporting of institutions according to regulation (EU) No 575/2013
This DG MARKT draft lays down uniform requirements in relation to supervisory reporting to competent authorities for own funds requirements and financial information according to Article 99 of Regulation (EU) No 575/2013; losses stemming from lending collateralised by immovable property according to Article 101(4)(a) of Regulation (EU) No 575/2013; large exposures and other largest exposures according to Article 394(1) of Regulation (EU) No 575/2013; leverage ratio according to Article 430 of Regulation (EU) No 575/2013; liquidity coverage requirements and net stable funding requirements according to Article 415 of Regulation (EU) No 575/2013. (10/01/14) http://ec.europa.eu/internal_market/bank/docs/regcapital/implementing/140108_act_en.pdf
EC: Commission Delegated Regulation (EU) No …/.. of 20.12.2013 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms, with regard to regulatory technical standards for specifying the calculation of specific and general credit risk adjustments
This draft, which includes an explanatory note, is marked as “final”. (2/01/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%2018159%202013%20INIT&r=http%3A %2F%2Fregister.consilium.europa.eu%2Fpd%2Fen%2F13%2Fst18%2Fst18159.en13.pdf
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PRA: SS20/13: Third country equivalence aspects of the credit risk provisions in the CRR, and recognised exchanges
The SS sets out PRA’s approach in respect of certain credit risk treatments under CRR which may apply to exposures to third country entities until 1 January 2015 where those third countries have been approved as eligible for those treatments by the PRA prior to 1 January 2014 and where relevant third country equivalence determinations have not been made by the EC; and the identification of recognised exchanges prior to the adoption by the ESMA Implementing technical standard specifying the individual markets and exchanges that qualify as recognised exchanges under the CRR. This SS supplements SS10/13,SS11/13 and SS 17/13 and is aimed at firms to which CRD IV applies. (20/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/thirdcountry2013.pdf
ECB: Mario Draghi interview with Der Spiegel
ECB has published this Q&A. Topics include: the banking union and the banking resolution mechanism; (30/12/13) http://www.ecb.europa.eu/press/key/date/2013/html/sp131230.en.html
HMT: Competition in banking: improving access to SME credit data
The Government is consulting on proposals to require banks to share information on their SME customers with other lenders through credit reference agencies and intends to legislate in the next session of Parliament. The proposals are intended to improve the ability of challenger banks and alternative finance providers to conduct accurate SME credit scoring and, by levelling the playing field between providers, make it easier for SMEs to seek a loan from a lender other than their bank. Responses are required by 21 February 2013. (27/12/13) https://www.gov.uk/government/consultations/competition-in- banking-improving-access-to-sme-credit-data/competition-in-banking-improving-access-to-sme-credit-data
BBA LIBOR/Interim LIBOR Oversight Committee – Responses to consultation on LIBOR re-fixing
Further to the October 2013 consultation paper, this sets out responses from stakeholders. It is noted that a majority or respondents supported the introduction of intraday re-fixing and that the initial fixing continue to be presented as the “final” rate; there be no re-fixing for de minimis errors; and the proposal be restricted to a single re-fixing, only when necessary, at a cut-off within a few hours of the initial fixing. There was general agreement that the introduction of intraday re-fixing should not present significant problems for either existing or future contracts, provided that the transition is an orderly one with an adequate implementation period of anything up to a year. (24/12/13) http://www.bbalibor.com/download/9565
EBA: Risk assessment of the European banking system
The report describes the main developments and trends that affected the EU banking sector in the second half of 2013 and provides EBA’s outlook on the main micro-prudential risks and vulnerabilities looking ahead. (24/12/13) http://www.eba.europa.eu/documents/10180/534414/EBA+January+2014+Risk+Assessment+Report.pdf
EC: Bank recovery and resolution:
Further to recent reports, COREPER, on behalf of the European Council, has agreed provisionally with the European Parliament on a draft directive aimed at harmonising national rules on bank recovery and resolution. (23/12/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140277.pdf
EBA: Liquidity reports
EBA has published reports on the impact assessment for liquidity coverage requirements and on appropriate uniform definitions of extremely high quality liquid assets (extremely HQLA) and high quality liquid assets (HQLA) and on operational requirements for liquid assets. These two reports, which may be downloaded via the following link, are intended to provide the EC with specific recommendations for the purpose of its forthcoming delegated act. (23/12/13) http://www.eba.europa.eu/-/eba-publishes-reports-on-liquidity
EBA: Regulatory technical standards on definition of market and CVA risk
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EBA has published final regulatory technical Standards on the definition of market and Credit Valuation Adjustment risk (CVA risk). In addition, EBA has published an opinion on CVA risk. These may be downloaded via the following link. (23/12/13) http://www.eba.europa.eu/-/eba-publishes-final-draft-technical-standards-on-market-risk-and-cva-risk
EBA: Guidelines on capital measures for foreign currency lending to unhedged borrowers under the supervisory review and evaluation process (SREP)
EBA has published its final guidelines on capital measures for FX lending to unhedged borrowers under the Supervisory Review and Evaluation Process (SREP). (23/12/13) http://www.eba.europa.eu/documents/10180/535130/EBA-GL-2013- 02+%28Guidelines+on+capital+measures+for+FX+lending%29.pdf
EBA: Draft regulatory technical standards on the minimum monetary amount of the professional indemnity insurance or comparable guarantee for mortgage credit intermediaries under Article 29(2)(a) of the draft Directive on credit agreements relating to residential immovable property
This consultation on the minimum monetary amount of the professional indemnity insurance or comparable guarantee for mortgage credit intermediaries closes on 18 March 2014. (20/12/13) http://www.eba.europa.eu/documents/10180/532207/EBA-CP-2013-46+%28CP+on+RTS+on+PII%29.pdf
EBA: Draft methodology for assessment of liquidity and funding risk under SREP
This discussion paper contains a preliminary version of the common methodology for assessing liquidity and funding risk, aimed at helping competent authorities and colleges of supervisors assess liquidity and funding risk and reach joint decisions on liquidity. This methodology will be part of the final SREP guidelines, which will be published for consultation in mid 2014. (20/12/13) http://www.eba.europa.eu/documents/10180/532313/EBA-DP-2013- 04+%28%20DP+on+the+draft+methodology+for+assessment+of+liquidity+and+funding+risk%29.pdf
BoE: Quarterly Bulletin Q4 2012
The latest edition includes items on banks’ disclosures and financial stability, CHAPS and what company data can reveal about investment decisions. The entire Bulletin is available to download in sections via the following link. (20/12/13) http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2013/n13.aspx
EBA: Technical standards on supervisory disclosure
EBA has published draft implementing technical standards which specify the format, structure, contents list and annual publication date of the supervisory information to be disclosed by competent authorities in the banking sector. Documents may be downloaded via the following link. (20/12/13) http://www.eba.europa.eu/-/eba-publishes-final-draft-technical- standards-on-supervisory-disclosure
EBA: Technical advice to the EC on possible treatments of unrealised gains measured at fair value under Article 80 of the Capital Requirements Regulation (CRR)
The advice provides specific recommendations that will inform the ECs to whether changes to legislation should be introduced in order to sterilise the effect of unrealised gains on regulatory capital. (20/12/13) http://www.eba.europa.eu/documents/10180/16160/EBA-Op-2013- 03+Technical+advice+on+treatment+of+unrealised+gains.pdf
PRA: PS7/13: Strengthening capital standards: implementing CRD IV, feedback and final rules
This PS publishes the final statement of policy, rules and supervisory statements required to implement CRD IV in the UK for banks, building societies, and PRA designated investment firms. It includes a number of supervisory statements which are, for convenience, published individually below. It is emphasised that the proposals in the PS do not apply to investment firms supervised by FCA. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/strengtheningcapitalps713.pdf
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PRA: SS5/13: The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)
This SS outlines the expectations that PRA has of firms required to undertake ICAAP) in accordance with the requirements set out in the PRA Rulebook. It also explains how the PRA will subsequently undertake SREP. It points out some of the factors that PRA will take into consideration when reviewing an ICAAP as part of the SREP and setting Individual Capital Guidance and the Capital Planning Buffer. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/icaapss513.pdf
PRA: SS6/13: Stress testing, scenario analysis and capital planning
This SS clarifies how PRA expects firms to undertake stress testing, scenario analysis and capital planning in accordance with Chapter 12 of the Internal Capital Adequacy Assessment rules in the PRA Rulebook. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/stresstestingss613.pdf
PRA: SS7/13: CRD IV and capital
In this SS, PRA explains how it expects firms to which CRD IV applies to comply with the relevant provisions on the quality of capital in CRD IV, which should also be read in conjunction with the Definition of Capital part of the PRA Handbook. Areas covered include: the quality and composition of capital;; additional Tier 1 triggers; preference; subordination, remedies, events of default and set-off; regulatory capital and subordinated swaps; significant insurance holdings; and Connected Funding of a Capital Nature. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/crdcapital713.pdf
PRA: SS8/13: The Basel I floor
This SS sets out PRA’s expectations regarding the application of the Basel 1 capital requirements floor, covering calculation of capital requirements; permission to apply floor based on non-modelled CRR approaches and permission to disapply the floor. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/baselfloor813.pdf
PRA: SS9/13: Securitisation
This SS sets out PRA’s expectations regarding firms’ use of securitisation, particularly with regard to the claiming of significant risk transfer (SRT) through securitisation under Article 243 or 244 of the CRR. PRA reviews transactions where firms claim SRT and the statement sets out expectations of firms notifying it of relevant transactions in accordance with Credit Risk Rule in the PRA rulebook. It also outlines a number of issues relevant to the determination of whether the capital relief achieved through securitisation is matched by a commensurate transfer of risk to third parties. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/securitisation913.pdf
PRA: SS10/13: Standardised approach
This SS sets out PRA’s expectations in respect of certain aspects of a firm's application of the standardised approach to credit risk, including exposures to institutions; third country equivalence; the monetary threshold for retail exposures; Ijara mortgages; buy-to-let mortgages; exposures in default; items associated with particularly high risk; and the interim mapping of external credit assessments to credit quality steps. (19/12’13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/standardappr1013.pdf
PRA: SS/11/13: Credit risk - Internal ratings based (IRB) approaches
This SS sets out PRA’s regarding firms’ use of internal ratings based approaches. Topics include: corporate governance; permanent partial use and sequential implementation; overall requirements for estimation; definition of default; probability of default (PD); loss given default (LGD); exposure at default (EAD); validation; income-producing real estate portfolios; and notification and approval of changes to approved models. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/internalratings1113.pdf
PRA: SS12/13: Counterparty credit risk
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In this SS, PRA explains its expectations on the following topics for firms subject to CRD IV: use of ‘Internal CVA model’ for the calculation of the maturity factor; permission to set the maturity factor ‘M’ to 1 for the counterparty credit risk default charge; inclusion of securities financing transactions in the scope of the CVA capital charge; calculating own fund requirements for exposures to central counterparties: identifying qualifying central counterparties; and counterparty credit risk advanced model approaches: process for post approval changes. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/counterparty1213.pdf
PRA: SS13/13: Market risk
This supervisory statement sets out PRA’ expectations of firms in relation to market risk and should be considered in addition to requirements set out in CRD IV Articles 325–377, the market risk rules of the PRA Rulebook and the high-level expectations outlined in PRA’s approach to banking supervision. Specific areas covered include: material deficiencies in risk capture by an institution’s internal approach; standardised approach for options; netting a convertible with its underlying instrument; offsetting derivative instruments. exclusion of backtesting exceptions when determining multiplication factor addends; derivation of notional positions for standardised approaches; qualifying debt instruments; expectations relating to internal models; VaR and stressed VaR calculation; requirement to have an internal incremental risk charge model; and annual SIF attestation of market risk internal models. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/marketrisk1313.pdf
PRA: SS14/13: Operational risk
This SS explains PRA’s expectations concerning: the extent to which an AMA should capture the firms’ operational risks where the firm has implemented or is about to implement AMA and is relevant where the AMA is applied across only part of a firm’s operations; and SIF attestation of firms' compliance with AMA standards as well as the action firms should take in the case of non-compliance. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/operationalrisk1413.pdf
PRA: SS15/13: Groups
This SS is aimed at firms to which CRD IV applies at a consolidated level and sets out PRA’s expectations about applications relating to :its approach to consolidation, in particular individual consolidation (CRR Article 9) and the method of consolidation for entities falling within CRR Article 18(5); and excluding certain entities from consolidation (CRR Article 19(2)). It should be read in conjunction with the CRR articles listed, the requirements in the Groups Part of the PRA Rulebook and the high-level expectations outlined in PRA’s approach to banking supervision. (19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/groups1513.pdf
PRA: SS16/13: Large exposures
This SS is aimed at firms to which CRD IV applies. It outlines PRA’s expectations in relation to large exposures requirements within the CRR. It covers: applications to include undertakings within a core UK group (CRR Article 113(6)) and non-core large exposure group (CRR 400(2)(c)) and sovereign large exposures exemptions (CRR Article 400(2)(g or h)) and exposures to trustees. It should be read in conjunction with the specified CRR articles, the requirements in the Large Exposures Part of the PRA Rulebook and the high-level expectations outlined in PRA’s approach to banking supervision. (19/12/13() http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/largeexpos1613.pdf
PRA: SS17/13: Credit risk mitigation
This SS sets out PRA’s expectations in respect of the recognition of credit risk mitigation in the calculation of certain risk- weighted exposure amounts.(19/12/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/mitigation1713.pdf
BIS: Progress in adopting the principles for effective risk data aggregation and risk reporting
Further to the principles, originally published in January 2013, this progress report provides a snapshot of G-SIBs' overall preparedness to comply with the principles and sets out related challenges they face. BIS notes that, of the 30 banks that were identified as G-SIBs during 2011 and 2012, 10 reported that they will not be able to fully comply with the principles by the 2016 deadline. The main reason reported is large, ongoing, multi-year IT and data-related projects. BIS suggests that national supervisors apply the principles to institutions identified as domestic systemically important banks three years after
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their designation as such, adding that the principles can be applied proportionately to a wider range of banks. (19/12/13) http://www.bis.org/publ/bcbs268.pdf
BIS: Revisions to the securitisation framework
This is the second consultative paper on revisions to the Basel securitisation framework from BIS and comprises a detailed set of proposals, including draft standards text, for a comprehensive revision of the treatment of securitisation. Relative to the first consultation, the major changes in this consultative document apply to the hierarchy of approaches and the calibration of capital requirements. For the hierarchy, a simple framework akin to that used for credit risk has been proposed. With regard to the latter, BIS has revised some of the modelling assumptions behind the original calibration proposed in the first consultation which it states will significantly reduce capital requirements. BIS also proposes to set a 15% risk-weight floor for all approaches, instead of the 20% floor originally proposed. Responses are required by 21 March 2014. (19/12/13) http://www.bis.org/publ/bcbs269.pdf
NAO: The first sale of shares in Lloyds Banking Group
The report examines the value for money of the Lloyds share sale, particularly whether: the most appropriate sale method was chosen; the sale was timed and structured appropriately; the price obtained was reasonable; and whether there was a gain or shortfall for the taxpayer. Noting a shortfall of at least £230m to the taxpayer, the report says that this “should be seen as part of the cost of securing the benefits of financial stability during the financial crisis, rather than any reflection on the sale process, which UKFI managed very effectively”. (19/12/13) http://www.nao.org.uk/wp- content/uploads/2013/12/10315-001-Lloyds-Book-.pdf
EBA: Draft guidelines on significant credit risk transfer relating to Article 243 and Article 244 of Regulation 575/2013
EBA has published a consultation on draft guidelines providing guidance to both originator institutions and competent authorities when assessing significant risk transfer for securitisation transactions. Responses are required by 17 March 2013. EBA intends to hold a public meeting to discuss the paper on 28 January 2014. (18/12/13) http://www.eba.europa.eu/documents/10180/529039/EBA-CP-2013- 45+%28CP+on+draft+Guidelines+on+SRT+for+securitised+assets%29.pdf
EBA: Regulatory and implementing technical standards on market risk
EBA has published regulatory technical standards on the definition of materiality thresholds for specific risk in the trading book; implementing technical standards on closely correlated currencies’ regulatory technical standards on non-delta risk of options in the standardised market risk approach; and implementing technical standards on appropriately diversified indices. Reports may be downloaded via the following link. (18/12/13) http://www.eba.europa.eu/-/eba-publishes-final-draft- technical-standards-on-market-risk
EBA; Final draft regulatory technical standards on the retention of net economic interest and other requirements relating to exposures to transferred credit risk (Articles 405, 406, 408 and 409) of Regulation (EU) No 575/2013 and draft implementing technical standards rlating to the convergence of supervisory practices with regard to the implementation of additional risk weights (Article 407) of Regulation (EU) No 575/2013
EBA has published its draft regulatory technical standards on securitisation retention rules and related requirements, as well as its final draft Implementing technical standards on the convergence of supervisory practices related to the implementation of additional risk weights in the case of non-compliance with the retention rules. (18/12/13) http://www.eba.europa.eu/-/eba- publishes-final-draft-technical-standards-on-securitisation-retention-rules
EBA: Risk weighted assets reports
EBA has published reports which may all be downloaded via the following link. There is an interim report on the consistency of RWAs in SMEs and residential mortgages portfolios; a report on the comparability of supervisory rules and practices; and a report on variability of RWAs for market risk portfolios. In addition, EBA has released its report on the pro-cyclicality of banks' capital requirements, which supplements the work on comparability, together with a summary report that compiles all the work on comparability of RWAs for IRB models. (18/12/13) http://www.eba.europa.eu/-/eba-publishes-reports-on- comparability-of-risk-weighted-assets-rwas-and-pro-cyclicality
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EBA: Final draft implementing technical standards on additional liquidity monitoring metrics under Article 415(3)(b) of Regulation (EU) No 575/2013
EBA has published this document (along with a number of annexes which may all be downloaded via the following link) which are intended to provide supervisors with an adequate toolkit to assess the liquidity risk profile of institutions. (18/12/13) http://www.eba.europa.eu/-/eba-publishes-final-draft-technical-standards-on-metrics-for-monitoring-additional- liquidity
EBA: Transparency exercise
EBA has published updated information on 64 European banks from 21 EEA countries covering the first half of 2013. The exercise was intended to promote greater understanding of capital positions and exposures of EU banks. Among the findings: data showed a continued positive trend in EU banks' capital position and total net sovereign exposures towards EEA countries declined by about 9% during 2011, but increased afterwards by 9.3% - in addition, the share of bonds issued by sovereigns under stress held by domestic banks increased markedly between December 2010 and June 2013. (17/12/13) http://www.eba.europa.eu/-/eba-publishes-outcome-of-2013-eu-wide-transparency-exerci-1 http://www.eba.europa.eu/risk-analysis-and-data/eu-wide-transparency-exercise
ESMA: Implementation of the Regulation (EU) No 462/2013 on Credit Rating Agencies
The purpose of this Q&A document is to provide clarity on the requirements and practice in the application of the CRA and provides responses to questions posed by credit rating agencies and market participants in relation to the practical application of the CRA Regulation. ESMA intends to update the document as and when new questions are received. (17/12/13) http://www.esma.europa.eu/system/files/2013-1935.pdf
BIS: Regulatory Consistency Assessment Programme (RCAP) - second report on risk-weighted assets for market risk in the trading book
The report, which follows a January 2013 study, has extended that earlier analysis to more representative and complex trading positions. The results show significant variation in the outputs of market risk internal models used to calculate regulatory capital and show that variability typically increases for more complex trading positions. (17/12/13) http://www.bis.org/publ/bcbs267.pdf
The Capital Requirements Regulations 2013/3115
These Regulations implement, in part, the recast Capital Requirements Directive (CRD IV). Part 1 contains the commencement provisions. Part 2 revokes some provisions of the Capital Requirements Regulations 2006. Part 3 designates the competent authorities under CRD IV: most of the provisions will be shared by the FCA and PRA, except for macroprudential measures, which will be split between HM Treasury and the Bank of England. Part 4 obliges the FCA and PRA to collaborate with the ESAs and with their European counterparts. Part 5 imposes obligations on the FCA and PRA regarding notifications and information disclosure. Part 6 contains the provisions on how the FCA and PRA must act when exercising the role of a ‘consolidating supervisor’. Part 7 concerns the regulators’ exercise of supervision, especially with regard to own funds, specific liquidity requirements, employee remuneration and diversity practices. Part 8 concerns the regulators’ powers to grant firms permissions for activities under the Capital Requirements Regulations (CRR). Part 9 extends the scope of the criminal offence of misleading the FCA or PRA to cover matters relating to CRD IV/CRR. Part 10 makes consequent amendments to other legislation. (Date in force: 1/1/14) http://www.legislation.gov.uk/uksi/2013/3115/pdfs/uksi_20133115_en.pdf
EBA: Final draft Technical Standards on information exchange between home and host competent authorities under the Capital Requirements Directive (CRD)
The above RTS and ITS were published by the EBA. (16/12/13) http://www.eba.europa.eu/-/eba-publishes-final-draft- technical-standards-on-information-exchange-between-home-and-host-competent-authorities
EBA: final draft Regulatory Technical Standards on own funds [Part 3] as per Articles 36(2), 73(7) and 84(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation (CRR))
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The above RTS were published by the EBA. (16/12/13) http://www.eba.europa.eu/documents/10180/523116/EBA-RTS- 2013-09+%28Final+draft+RTS+on+own+funds+part+three%29.pdf
EBA: draft Implementing Technical Standards on joint decisions on institution-specific prudential requirements under Article 113 of Directive 2013/36/EU (Capital Requirements Directive (CRD IV))
The above ITS were published by the EBA. (16/12/13) http://www.eba.europa.eu/documents/10180/522837/EBA-ITS-2013- 06+%28JDs+on+institution-specific+prudential+requirements%29.pdf
ESMA: Credit Rating Agencies’ (CRAs) market share calculation according to Article 8d of the CRA Regulation
ESMA published its annual figures for the market share of different CRAs. (16/12/13) http://www.esma.europa.eu/system/files/esma_cra_market_share_calculation.pdf
FCA: PS13/10: CRD IV for investment firms - feedback and final rules for CP13/6, CP13/9 (Chapter 16) and CP13/12
FCA has published detailed feedback on the above-mentioned CPs and final rules, which will come into force on 1 January 2014. However, with regard to capital buffers (CP13/6), it is noted that since some elements of the framework will be set by HMT in secondary legislation, the PS does not include final rules on that area. FCA will make the final rules on capital buffers once HMT has made the relevant legal provisions, expected in Q1 2014. (13/12/13) http://www.fca.org.uk/static/documents/policy-statements/ps13-10.pdf
BIS: Capital requirements for banks’ equity investments in funds
BIS has revised its policy framework for the prudential treatment of banks' investments in the equity of funds that are held in the banking book. The revised policy framework will take effect from 1 January 2017 and will apply to investments in all types of funds (eg hedge funds, managed funds, investment funds). The framework will be applicable to all banks, irrespective of whether they apply the Basel framework's Standardised Approach or an IRB approach for credit risk. (13/12/13) http://www.bis.org/publ/bcbs266.pdf
EBA: Final draft regulatory technical standards on passport notifications under Articles 35, 36 and 39 of Directive 2013/36/EU/Final draft implementing technical standards on passport notifications under Articles 35, 36 and 39 of Directive 2013/36/EU
EBA has published final draft regulatory and implementing technical standards on passport notifications, which aim to specify the information that needs to be notified to competent authorities, as well as forms, templates and procedures underlying the submission of passport notifications. The draft final regulatory standards specify the information that a credit institution shall provide to competent authorities of its home Member State for the purpose of notifying the exercise of the right of establishment or of the freedom to provide services within the territory of another Member State as well as specifying the information needed in relation to changes in the branch notification, including termination of a branch operation. The implementing standards set common and harmonised templates and procedures and include provisions for improving the content of the passport notifications and ensuring clarity on the date of receipt of submitted (or forwarded) notifications. The final standards have been sent to the EC for their adoption as EU Regulations that will be directly applicable throughout the EU. (13/12/13) http://www.eba.europa.eu/documents/10180/522312/EBA-RTS-2013- 08+%28RTS+on+Passport+Notifications%29.pdf http://www.eba.europa.eu/documents/10180/522312/EBA+ITS+2013+05+%28ITS+on+Passport+Notifications%29.pdf
EBA: Warning to consumers on virtual currencies
EBA has issued a warning on a series of risks deriving from buying, holding or trading virtual currencies. It specifically warns that consumers are not protected through regulation when using virtual currencies as a means of payment; there is no guarantee that currency values remain stable and the “digital wallet”' containing consumers' virtual currency stored on computers, laptops or smart phones are at risk from hackers. In addition, they raise concerns as to money laundering.. (13/12/13) http://www.eba.europa.eu/documents/10180/15971/EBA+Warning+on+Virtual+Currencies.pdf
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HMT: Capital Requirements Directive 4: country-by-country reporting draft legislation and draft guidance/ Capital Requirements (Country-by-Country Reporting) Regulations 2013/3118
Further to the November 2013, HMT reports that the responses to the final consultation were broadly positive. However, there were specific points raised requesting further clarification on a few issues which the Government took into consideration when finalising the guidance. The guidance is only available in html format. In addition, the finalised SI has been published, which comes into force on 1 January 2014. Amongst other matters, this imposes obligations on institutions in the UK to annually publish information on a consolidated basis relating to their activities in the UK and those of their establishments in other countries and it is noted that a breach of these Regulations will be enforced by the PRA/FCA. (11/12/13) https://www.gov.uk/government/consultations/capital-requirements-directive-4-country-by-country-reporting- draft-legislation-and-draft-guidance https://www.gov.uk/government/publications/capital-requirements-country-by-country- reporting-regulations-2013-guidance http://www.legislation.gov.uk/uksi/2013/3118/pdfs/uksi_20133118_en.pdf
EBA: Follow-up review of banks’ transparency in their 2012 Pillar 3 reports
EBA has published this report which is aimed at assessing the disclosures made by 19 European institutions in response to Pillar 3 requirements, as set out in the Capital Requirements Directive. EBA notes that, despite improvements in some specific areas, credit institutions' compliance with disclosure requirements remains unchanged compared to last year's assessment where no bank had fully met all the requirements. The report also highlights that disclosures between the different institutions could be improved. (9/12/13) http://www.eba.europa.eu/documents/10180/16145/Follow- up+report+on+Pillar+3+disclosures.pdf
HMRC: Bank levy review 2013
Further to the July 2013 consultation, HMRC has now published feedback which indicated that the bank levy is generally operating as intended. It notes changes to be legislated in Finance Bill 2014, including the removal of the link between the excluded amount of protected deposits and any premium paid in respect of the deposit protection scheme; deemed short term treatment of all derivative contract liabilities and HQLA deduction to be given effect at the rate applicable to long term liabilities only. As noted in the Autumn Statement, the rate of the levy will also be increased to 0.156% in January 2014. (11/12/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/264718/Bank_Levy_Review_Summary_of_Re sponses_FINAL.PDF
EBA: Guidelines on retail deposits subject to different outflows for purposes of liquidity reporting under Regulation (EU) No 575/2013, on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Capital Requirements Regulation – CRR)
These guidelines are aimed at institutions and competent authorities and set out the criteria for identifying retail deposits subject to different outflows during the following 30 days for the purpose of liquidity reporting under the Capital Requirements Regulation. The guidelines allocate retail deposits subject to different outflows to three different categories, depending on their underlying risk. However, the they do not prescribe outflow rates for the three categories; instead stipulating that should report the amounts of retail deposits allocated to each of the three categories together with their own estimates of expected outflows under stress conditions. Competent authorities must notify EBA, whether they comply or intend to comply with these guidelines, or otherwise provide reasons for non-compliance by 6 February 2014. (6/12/13) http://www.eba.europa.eu/documents/10180/515704/EBA-GL-2013-01+%28Retail+deposits%29.pdf
EBA: Final draft regulatory technical standards on the conditions for assessing the materiality of extensions and changes of internal approaches when calculating own funds requirements for credit and operational risk in accordance with Articles 143(5) and 312(4)(b) and (c) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR)
This document specifies the conditions for assessing the materiality of extensions and changes of internal approaches for credit and operational risk. In particular, the standards specify the conditions for assessing the materiality of extensions and changes to the internal rating based approach for credit risk and the advanced measurement approach for operational risk. The standards will be part of the Single Rulebook. (6/12/13) http://www.eba.europa.eu/documents/10180/512948/EBA- RTS-2013-06+%28Materiality+of+model+extensions+and+changes%29.pdf
EBA: Final draft regulatory technical standards on the determination of the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets under Article 390(8) of Regulation (EU) No 575/2013
The document sets out standards which define the conditions and methodologies used to determine the overall exposure to a client or group of connected clients resulting from an exposure to a transaction with underlying assets and the risks
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inherent in the structure of the transaction itself. These include: the methodology for the calculation of the value of exposures to transactions with underlying assets, the procedure used to determine the contribution of underlying exposures to overall exposures to clients and groups of connected clients and the conditions under which the structure of the transaction does not constitute an additional exposure. EBA highlights th e introduction of a materiality threshold below which institutions would not need to apply the look-through approach and identify the obligors of the underlying assets. EBA considers this treatment appropriate when the value of the exposure is sufficiently small as to only immaterially contribute to the overall exposure to a certain client or group of connected clients. As such, in cases where the value of the institution's exposure to each underlying asset is smaller than 0.25% of the institution's eligible capital, the immateriality condition would be fulfilled. The standards will be part of the Single Rulebook. (6/12/13) http://www.eba.europa.eu/documents/10180/513001/EBA-RTS-2013-07+%28Determination+of+exposures+%29.pdf
HMT: Autumn Statement 2013
Policy decisions relevant include the following:
Banking
Legislation for the full rate of the bank levy is to be introduced which will set this at 0.156% from 1 January 2014. In addition, the Government will introduce legislation to: limit the protected deposit exclusion to amounts insured under a deposit protection scheme; treat all derivative contracts as short-term; restrict relief for a bank’s High Quality Liquid Assets to the rate applicable to long term liabilities; align the bank levy definition of Tier One capital with the Capital Requirements Directive from January 2014; exclude liabilities in respect of collateral that has been passed on to a central counterparty from January 2014 and widen legislation-making powers within the bank levy from Royal Assent to ensure it can be kept in line with regulation Further details are to be published next week. Separately, the Autumn Statement highlights OFT’s investigation on whether banks are requiring SMEs to open or maintain a business current account in order to qualify for a loan. (5/12/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263575/Autumn_Statement_2013.pdf
EC: Fines with regard to interest rate derivatives cartels
The EC has fined Barclays, Citgroup, Deutsche Bank, JPMorgan, RBS, RP Martin, SocGen and UBS a total of €1 712 468 000 for participating in illegal cartels in markets for financial derivatives covering the EEA. Four of these institutions were found to have participated in a cartel relating to interest rate derivatives denominated in the euro currency. Six of them were found to have participated in one or more bilateral cartels relating to interest rate derivatives denominated in yen. The euro cartel operated between September 2005 and May 2008. The settling parties are Barclays, Deutsche Bank, RBS and SocGen. It is noted that Barclays was not fined as it benefited from immunity under the EC’s 2006 Leniency Notice for revealing the existence of the cartel to the EC. The other banks received a reduction of their fines for their cooperation in the investigation under the EC’s leniency programme as well as a . further fine reduction of 10% for agreeing to settle the case with the EC. The press release notes that proceedings were opened against Crédit Agricole, HSBC and JPMorgan and the investigation will continue under the standard (non-settlement) cartel procedure. With regard to the yen cartel, collusion lasted between one and 10 months from 2007 to 2010. The entities involved in one or more of the infringements are Citigroup, Deutsche Bank, JPMorgan, RBS, RP Martin and UBS. UBS received full immunity under the EC’s 2006 Leniency Notice for revealing to the EC the existence of the infringements. Citigroup also benefited from full immunity for its participation in one bilateral infringement. For their cooperation with the investigation, the EC granted fine reductions to Citigroup, Deutsche Bank, RBS and RP Martin, under the EC’s leniency programme as well as a fine reduction of 10% for agreeing to settle the case. It is noted that the EC is currently investigating ICAP under the standard (non-settlement) cartel procedure. A statement by Joaquin Almunia describes the actions and concludes “antitrust enforcement therefore comes in complement to the action of financial regulators and authorities worldwide, including those that have sanctioned market abuses. Indeed, what is shocking about the LIBOR and EURIBOR scandals is not just the manipulation of benchmarks, but also the setting up of genuine cartels between a number of financial players …. Enforcing competition rules can help ensure that financial markets truly work at the service of the real economy, not the interests of a few”. (4/12/13) http://europa.eu/rapid/press-release_IP-13-1208_en.htm?locale=en http://europa.eu/rapid/press-release_SPEECH-13- 1020_en.htm?locale=en
EBA: Transparency exercise
EBA has announced that it will disclose updated information on the European banks that were already part of the recapitalisation exercise in 2012 on 16 December 2013. The information will provide data on banks' composition of capital, composition of RWAs, exposures to sovereigns, credit risk, market risk and securitisation as well as and LTV across portfolios. It is noted that the reference dates of the disclosed information will be December 2012 and June 2013 and that the information will not include any stress test component. (3/12/13) http://www.eba.europa.eu/-/eba-transparency-exercise
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ESMA: Sovereign ratings investigation – assessment of governance, conflicts of interest, resourcing adequacy and confidentiality controls
This report summarises the findings of ESMA’s general investigation into sovereign credit ratings issued by Fitch Ratings, Moody’s Investors Service and Standard & Poor’s which took place between February and October 2013. Specific areas considered include: the role of senior management and other non-rating functions in the rating process and the actual or potential conflicts of interest which could arise; the actual or potential conflicts of interests generated by the involvement of sovereign analysts in research and publication activities; confidentiality of sovereign rating information and controls in place prior to publication of ratings; and timing of publication of sovereign ratings. ESMA states that although its investigation revealed shortcomings in the sovereign ratings process which could pose risks to the quality, independence and integrity of the ratings and of the rating process, as of the date of this document, it has not determined whether any of the observations made in this report constitute serious indications of the possible existence of facts liable to constitute one or more infringements of the Credit Ratings Agencies Regulation. (2/12/13) http://www.esma.europa.eu/system/files/2013- 1780_esma_identifies_deficiencies_in_cras_sovereign_ratings_processes.pdf
ECB: Speech by Vítor Constâncio: Banking union and the future of banking (2 December 2013)
Text of the above, given at the IIEA Conference on “The Future of Banking in Europe”, follows. He discusses the SSM and how it will affect the supervision and the practice of banking in the euro area and how the process of structural change in euro area banking sector will affect intermediation, and what this will mean for Europe’s traditional universal banking model. (2/12/13) http://www.ecb.europa.eu/press/key/date/2013/html/sp131202.en.html
EBA: XBRL taxonomy for remittance of data under the implementing technical standards on supervisory reporting
EBA’s taxonomy defines a representation for data collection under the reporting requirements related to own funds, financial information, losses stemming from lending collateralised by immovable property, large exposures, leverage ratio and liquidity ratios. It presents the data items, business concepts, relations, visualisations and validation rules Documentation may be downloaded via the following link. EBA is expected to publish an update to this taxonomy incorporating additional reporting requirements regarding asset encumbrance, non-performing loans and forbearance in the first half of 2014. (2/12/13) http://www.eba.europa.eu/-/eba-publishes-xbrl-taxonomy-for-remittance-of-supervisory-reporting-by-competent- regulatory-authorities
FCA: Statement on RBS/Treatment of SME customers
Further to the allegations over RBS and its lending practices and treatment of customers in financial difficulty, FCA has announced a number of steps. It has agreed with RBS that an independent skilled person will be appointed in accordance with FCA’s power under s166 FSMA to review the allegations in the reports against RBS’ practices and will report back to FCA within an agreed timescale. If the findings from the review reveal issues which come within FCA’s remit, it will consider further regulatory measures. FCA is writing to all other relevant banks seeking confirmation that they are satisfied they do not engage in any of the poor practices alleged in the reports and has published the text of this (second link below). (29/11/13) http://www.fca.org.uk/news/press-releases/statement-regarding-royal-bank-of-scotland http://www.fca.org.uk/static/fca/documents/letter-ceo-tomlinson-report.pdf
PRA: SS3/13: Capital and leverage ratios for major UK banks and building societies/Statement on CP 5/13 - Strengthening capital standards: Implementing CRD IV
PRA has published a statement on capital standards ahead of the implementation of CRD IV and has published a supervisory statement setting out its capital and leverage expectations for the major UK banks and building societies that were included in the 2013 capital exercise, from 2014 onwards. PRA has confirmed the minimum Pillar 1 capital requirements for firms and the dates from which they apply. It will require firms to meet a 4% Pillar 1 CET1 requirement in 2014, rising to 4.5% from 1 January 2015. Similarly, during the same period the required Pillar 1 Tier 1 capital ratio will be 5.5%, rising to 6% from 1 January 2015 onwards. Total Pillar 1 capital remains at 8%. PRA will introduce the final definition of CET1 as quickly as possible. Firms will accordingly be required to make all necessary deductions to bring CET1 in line with the end-point definition from 1 January 2014 PRA has decided that firms should meet all Pillar 2A risks, including pension risk, with at least 56% CET1 capital from 1 January 2015 onwards. This matches the proportion of CET1 capital required for Pillar 1. In its consultation PRA asked for views on whether Pillar 2A should be met in full with CET1 capital from 1 January 2016. In light of consultation responses, the PRA has decided that it will not require firms to meet Pillar 2A in full with CET1. PRA has decided to change the existing capital regime for the major UK banks and building societies to bring it into line with the capital and leverage requirements set out following the capital review undertaken earlier this year. From 1 January 2014, PRA will no longer monitor the capital position of major UK banks and building societies using the 4/6/8 capital framework which was introduced in 2008 and used the definition of capital developed at that time by FSA. It will expect the major UK banks and building societies to meet a 7% CET1 capital ratio and a 3% Tier 1 leverage ratio – after taking into account adjustments to risk-weighted assets (RWAs) and CET1 capital deemed necessary by PRA – from 1
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January 2014. These firms will be expected to maintain a 3% Tier 1 leverage ratio under the definition set out in the CRR. This standard will be reviewed in 2014 once Basel and CRR leverage ratio definitions are finalised. The adjustments to CET1 capital and RWAs will generally continue at the same level, after any double counting has been removed, as those communicated on 20 June until the firms meet the 7% and 3% targets. (29/11/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/capitalleveragess3-13.pdf http://www.bankofengland.co.uk/publications/Documents/news/2013/crdivtechnical.pdf
EBA: High earners
EBA has published this report on the remuneration of EU bank staff who received €1m or more in total in 2012. The highest values were reported for the UK (2,714 high earners), Germany (212), France (177), Italy (109) and Spain (100). The figures include staff paid by institutions, including subsidiaries or branches of any EU-parent institution based in another Member State other than the one where the parent company is located, as well as staff in branches of third country institutions. The report also provides a preliminary analysis of remuneration structures across the EU. Most high earners were found to belong to categories that include functions with responsibilities throughout the whole institution, from the executive board, to risk management, internal audit, information technology, communication, auditing, corporate finance, legal and HR. It is noted that data in the report will feed into EBA’s overall work on remuneration in the EU banking sector. (29/11/13) http://www.eba.europa.eu/documents/10180/16145/EBA+Report+High+Earners+2012.pdf
HMT/BoE: Funding for Lending scheme
Changes to the terms of the scheme have been announced in order to re-focus the incentives in the scheme towards supporting business lending in 2014 (although it is noted that the first phase of the scheme, which ends on 31 January 2014, is unaffected by this). It is stated that, as the housing market is picking up and house price inflation appears to be gaining momentum, there is no longer a need for the scheme to provide further broad support to household lending (however, it is stated that the changes will not affect the Help to Buy scheme). Correspondence between George Osborne and Mark Carney has been published, along with the market notice. (28/11/13) http://www.bankofengland.co.uk/markets/Documents/marketnotice131128.pdf http://www.bankofengland.co.uk/publications/Documents/news/2013/governorletter281113.pdf http://www.bankofengland.co.uk/publications/Documents/news/2013/chancellorletter281113.pdf
PRA: Adjustments to PRA’s capital regime for UK banks and building societies
Further to the announcement on the Funding for Lending scheme, PRA has announced that it will extend the capital offset for corporate lending which accompanies the scheme, but will not extend the capital offset for household lending, which will end on 31 December 2013. PRA has decided to extend the capital offset for corporate lending, in line with the scheme extension, until 30 January 2015. Participating firms will be able to claim additional capital relief for net new lending to private non-financial corporations until 30 January 2015. The total amount of capital relief available to firms will be determined on a case-by-case basis. (28/11/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/178.aspx
BoE: Financial stability report
BoE’s latest edition of the report expands on the reasons behind the announcements on the Funding for Lending Scheme and adjustments to PRA’s capital regime for banks and building societies as well as discussing recent decisions by FPC. (28/11/13) http://www.bankofengland.co.uk/publications/Documents/fsr/2013/fsrfull1311.pdf
IOSCO: Supervisory colleges for credit rating agencies
IOSCO reports that the supervisory colleges for Standard & Poor’s, Moody’s and Fitch held their inaugural meetings on 5 – 6 November in New York, noting that the colleges for S&P and Moody’s are chaired by SEC and the college for Fitch is chaired by ESMA. The establishment of the colleges follows recommendations that made in IOSCO’s July 2013 report. (28/11/13) http://www.iosco.org/news/pdf/IOSCONEWS307.pdf
EBA: Draft regulatory technical standards on own funds – multiple dividends and differentiated distributions (part four) under Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR)
EBA has published this consultation aimed at setting harmonised criteria for instruments with multiple distributions that would create a disproportionate drag on capital, as well as clarifying the meaning of preferential distributions. These
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standards will be part of the Single Rulebook in banking. Responses are required by 24 January 2014. (27/11/13) http://www.eba.europa.eu/documents/10180/498162/EBA-CP-2013-43+%28Consultation+on+Own+Funds+Part+IV%29.pdf
BoE: FPC leverage review
BoE has announced that HMT has requested that FPC conducts a review into the role for the leverage ratio within the capital framework for UK banks and has published correspondence between George Osborne and Mark Carney on the matter. (26/11/13) http://www.bankofengland.co.uk/publications/Documents/news/2013/chancellorletter261113.pdf http://www.bankofengland.co.uk/publications/Documents/news/2013/governorletter261113.pdf
ECB: Speech by Yves Mersch: Economic and legal limits of central banking (26 November 2013)
Text of the keynote speech given at the IMFS Conference on Monetary and Financial Stability follows in which Yves Mersch discusses banking supervision and the banking union. He concludes: “the legal foundations of the EMU and in particular the independence of monetary policy enshrined in the Treaty served as crucial guideposts for the ECB’s monetary policy also during the course of the crisis. Other parts of the EMU institutional framework, however, proved to be porous. Those foundations should also guide our work on the design of the banking union. The aim is to create a level playing field for all banks with no uncertainties or loopholes distorting competition in the Single Market”. (26/11/13) http://www.ecb.europa.eu/press/key/date/2013/html/sp131126.en.html
HMT/PRA/FCA: The Co-Operative Bank
Under new powers set out in s77 Financial Services Act 2012, HMT has announced an independent investigation into events at the Co-op Bank and the circumstances surrounding them. The investigation has been jointly agreed with PRA and FCA, who have agreed there is a public interest in a statutory investigation. PRA and FCA have stated that they are both considering whether they should also launch formal enforcement investigations. The independent investigation under the Financial Services Act will therefore not start until it is clear it will not prejudice any actions the relevant authorities may take, including the potential FCA and PRA enforcement investigations. The detailed direction that will order the independent investigation and set out its terms will take into account any issues arising, including from this potential FCA and PRA enforcement investigations and be determined in consultation with the independent person appointed to lead it. It will cover the actions of relevant authorities (regulators and government) and the institution itself, including prudential issues, governance (including the appointment of senior staff) and acquisitions. The period that the investigation will review will start from at least 2008. (25/11/13) https://www.gov.uk/government/news/chancellor-confirms-independent-inquiry-into-events- at-co-op-bank http://www.bankofengland.co.uk/publications/Pages/news/2013/154.asp x http://www.fca.org.uk/news/statements/fca-statement-regarding-cooperative-bank
European Parliament: Draft report on the proposal for a regulation of the European Parliament and of the Council on indices used as benchmarks in financial instruments and financial contracts
This report sets out proposed amendments to the EC’s Regulation on benchmarks. (21/11/13) http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2f%2fEP%2f%2fNONSGML%2bCOMPARL%2bPE- 523.055%2b01%2bDOC%2bPDF%2bV0%2f%2fEN
European Parliament: Report on the proposal for a directive of the European Parliament and of the Council on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features
This report sets out proposed amendments to the EC’s Directive on payment accounts. (21/11/13) http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2f%2fEP%2f%2fNONSGML%2bREPORT%2bA7-2013- 0398%2b0%2bDOC%2bPDF%2bV0%2f%2fEN
ESMA: Technical advice on the feasibility of a network of small and medium-sized CRAs
ESMA has finalised this technical advice to the EC on the feasibility of a network of small and medium sized credit rating agencies in order to increase competition in the market. The advice provides quantitative and qualitative information on small and medium-sized credit rating agencies in the EU and covers some information regarding possible barriers to entry for companies that wish to conduct rating activity in the EU. It notes that none of the small and medium-sized agencies cover the whole range of the five rating classes considered (corporates (non-financial), financials, insurance, sovereign and
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public finance, and structured finance). (21/11/13) http://www.esma.europa.eu/system/files/2013- 1703_technical_advice_on_the_feasibility_of_a_network_of_small_and_medium-sized_cras_0.pdf
HMT: Capital Requirements (country-by-country reporting) Regulations 2013
Further to its September 2013 consultation on the above, HMT has published draft guidance (first link below) intended to give, in layperson’s language, a broad summary of the Capital Requirements Directive Reporting Regulations 2013 and aid interpretation and application of the Regulations. It explains the ongoing reporting obligation and provides guidance on how to interpret the key terms; describes the interim reporting obligation; and, describes the provision relating to prior disclosure. It is emphasised that the guidance is not a legally binding document. HMT intends to update the guidance as necessary. The draft Regulations, due to come into force on 14 January 2013, appear in the second link below. A summary of responses to the consultation appears in the third link below. (19/11/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/259730/PU1599_final__web_.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/259661/CBCR_Regs_Draft_181113.doc https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/259729/PU1598_final__web_.pdf
EBA: Speech by Andrea Enria: The single market after the banking union (18 November 2013)
Text of this speech, given at the AFME and EBF conference, follows. Topics include: supervision and resolution of cross- border groups; the Single Rulebook and the potential for a rift in the Single Market. (19/11/13) http://www.eba.europa.eu/documents/10180/490003/2013+11+18+-+AFME+-+EBF+-+Brussels+-+A+Enria
BIS: Speech by Stefan Ingves: Strengthening bank capital - Basel III and beyond (18 November 2013)
The keynote address to the Ninth High Level Meeting for the Middle East & North Africa Region has been published. Topics include: quality and quantity of bank capital; comparability of bank capital ratios; consistency of bank capital regulation and comparability of bank capital ratios. (18/11/13) http://www.bis.org/speeches/sp131118.pdf
EC: Council statement on EU banks' asset quality reviews and stress tests, including on backstop arrangements
The statement includes information on the framework in relation to backstop arrangements. (18/11/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139613.pdf
FSB: Global shadow banking monitoring report 2013
This is the third annual FSB report, containing data from 25 jurisdictions and the euro area as a whole. Main findings include: he assets of non-bank financial intermediaries (excluding those of insurance companies, pension funds and public financial institutions) grew by $5tnn in 2012 to reach $71tn; non-bank financial intermediaries represent on average about 24% of total financial assets, and are equivalent to about half of banking system assets and 117% of GDP; non-bank financial intermediaries grew by +8.1% in 2012 (compared with 0.6% in 2011). It is noted that risks to financial systems arising from the links with foreign shadow banking systems (and in particular shadow banking entities in off-shore centres) are currently not captured in the FSB global monitoring, which creates a potentially large gap. (14/11/13) http://www.financialstabilityboard.org/press/pr_131114.pdf (NB: over 40 pages long)
EBA: Report on the peer review of the EBA stress testing guidelines (GL 32)
EBA has published this report, noting that the aim of the peer review was to assess and compare the effectiveness of the supervisory activities related to the review of credit institutions' own stress testing frameworks across the EU, as well as the implementation of related provisions by competent authorities. The report shows that national competent authorities largely comply with the three assessed guidelines required of such authorities. (13/11/13) http://www.eba.europa.eu/documents/10180/482428/EBA+2013+Report+%28Report+on+the+Peer+Review+of+the+Stress +Testing+Guidelines%29.pdf
FSB/BIS: Global systemically important banks:
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FSB has published its annual update of the list of GSIBs, using end-2012 data. One bank – Industrial and Commercial Bank of China Limited – has been added to the list of banking groups identified as G-SIBs in 2012, increasing the overall number from 28 to 29. G-SIBs are banks that have been identified as globally systemically important financial institutions (G-SIFIs). BIS has published additional information regarding the methodology (second link below). (12/11/13) http://www.financialstabilityboard.org/publications/r_131111.pdf http://www.bis.org/bcbs/gsib/index.htm
EBA/EIOPA/ ESMA: Joint consultation paper on mechanistic references to credit ratings in the ESAs’ guidelines and recommendations
New Art. 5b(1) of the Credit Ratings Regulation as amended states that the ESAs shall not refer to credit ratings in their guidelines, recommendations and draft technical standards where such references have the potential to trigger sole or mechanistic reliance on credit ratings by the competent authorities, the sectoral competent authorities, the entities referred to in the first subparagraph of Article 4(1) or other financial market participants. By 31 December 2013, the ESAs shall review and remove, where appropriate, all such references to credit ratings in existing guidelines and recommendations. This consultation has been published in order to obtain external views on prospective modifications of current guidelines, recommendations and technical standards that contain relevant references to ratings. Responses are required by 5 December 2013. (7/11/13) https://eiopa.europa.eu/consultations/consultation- papers/index.html?no_cache=1&cid=6046&did=36339&sechash=7b1edff7 (NB: over 30 pages long)
EBA/EIOPA/ESMA: Consultation paper on draft guidelines for complaints-handling for the securities (ESMA) and banking (EBA) sectors
This consultation concerns guidelines for complaints handling in the securities and banking sectors which will build on the existing guidelines on complaints handling by insurance undertakings published EIOPA in June 2012.. The objective is to provide EU consumers with a single set of complaints handling arrangements, irrespective of the type of product or service and of the geographical location of the firm in question. This will also allow firms to streamline and standardise their complaints handling arrangements and national regulators to supervise the same requirements across all sectors of financial services. Responses are required by 7 February 2014 and final guidelines are expected to be produced in Q1 2014. (6/11/13) (6/11/13) http://www.eba.europa.eu/documents/10180/475982/JC-CP-2013- 03+Joint+Committee+CP+complaints-handling+guidelines.pdf
ECB: Banking structures report
This report which analyses the main structural developments in the euro area banking sector: the capacity, consolidation and concentration of banks and related changes over time. It covers the period from 2008 to 2012 and includes indicators for the first half of 2013. (4/11/13) http://www.ecb.europa.eu/pub/pdf/other/bankingstructuresreport201311en.pdf?5656762fc7710c2ad62b381f432eff9f
ESRB: Recommendation on lending in foreign currencies
ESRB has published this follow-up report on work undertaken on this topic. (4/11/13) http://www.esrb.europa.eu/pub/pdf/recommendations/2013/ESRB_2013_2.en.pdf?80414f0f1a41b1e77107a95c6085ad48
EBA: Final draft implementing technical standards on asset encumbrance reporting under Article 100 of Capital Requirements Regulation
EBA has published the above, which will be part of the EU Single Rulebook in banking, provide reporting templates and instructions with the ultimate aim of ensuring harmonised reporting of asset encumbrance across institutions. The standards on asset encumbrance complement the existing reporting framework (COREP and FINREP) submitted for endorsement to the EC in July 2013. Reporting of asset encumbrance shall be implemented on 30 June 2014 by large institutions with assets above €30bn and on 31 December 2014 by all other institutions. It is noted that EBA will publish a consultation on asset encumbrance disclosure in the coming months. All documentation can be downloaded via the following link. (30/10/13) http://www.eba.europa.eu/-/eba-publishes-final-draft-technical-standards-on-asset-encumbrance
BIS: Fundamental review of the trading book: A revised market risk framework
This is the second consultation on the fundamental review of capital requirements for the trading book and. comprises a detailed set of proposals for a comprehensive revision of the market risk framework. It includes a draft text for a revised
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market risk framework. It has been informed by comments received on the first consultative paper, and lessons learnt from BIS’s recent investigations into the variability of market risk-weighted assets. Responses are required by 31 January 2014. (31/10/13) http://www.bis.org/publ/bcbs265.pdf (NB: over 100 pages long)
FCA: EEA banks operating in the UK as a branch
This is a list of banks incorporated in the EEA, as at 31 October 2013. Eligible depositors in these banks are protected by the deposit guarantee scheme provided by the bank’s home state, up to a limit of €100,000. These banks operate in the UK as a branch and are able to accept deposits, but are authorised by the bank’s home state. (31/10/13) http://www.fca.org.uk/static/fca/documents/list-of-banks-eea.pdf
BoE: A framework for stress testing the UK banking system
This DP sets out proposals for annual, concurrent stress tests of the UK banking system These include the expected coverage of institutions, considerations around scenario design and the approach to modelling the impact of scenarios on bank profitability and capital ratios. It discusses how the outputs of stress tests could be used to inform policy decisions by the FPC and PRA Board, and options around disclosure of stress test results. Responses are required by 10 January 2014. (31/10/13) http://www.bankofengland.co.uk/financialstability/fsc/Documents/discussionpaper1013.pdf
BIS: Fundamental review of the trading book: A revised market risk framework
Further to its May 2012 consultation on this topic, and further to comments received, BIS has now published more detailed proposals for reforming the trading book regime, including draft text for the Basel Accor. Responses are required by 31 January 2014. I31/10/13) http://www.bis.org/publ/bcbs265.pdf
EBA: Risk dashboard
EBA has published its first risk board, summarising the main risks and vulnerabilities in the EU banking sector. It looks at the evolution of key risk indicators from 56 banks across the EU and points to significant improvements, particularly with regard to strengthened capital base. (29/10/13) http://www.eba.europa.eu/documents/10180/15959/EBA+Risk+Dashboard+-+Q3+2013.pdf
EC: Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions
This was published in the Official Journal on 29 October 2013. (29/10/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:287:0063:0089:EN:PDF
TSC: Project Verde
TSC has published a consolidated volume of written evidence on this inquiry. (25/10/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/writev/verde/verde.pdf
TSC: Stress testing the UK banking system
TSC has published a transcript of the uncorrected evidence with respect to the hearing held on 8 October 2013 attended by Paul Tucker, outgoing deputy governor of BoE in which he discusses, amongst other matters, UK banking regulation and the shadow banking sector. (24/10/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/c690/c690.pdf
EBA: Draft guidelines on the applicable notional discount rate for variable remuneration under Article 94(1)(g)(iii) of Directive 2013/36/EU
EBA has published this consultation paper on draft guidelines which sets out the calculation of the discount rate for variable remuneration and clarifies how it should be applied. Responses are required by 18 January 2014. (24/10/12)
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http://www.eba.europa.eu/documents/10180/456620/EBA+CP+2013+40+%28CP+on+draft+Guidelines+on+the+discount+fa ctor+for+variable+remuneration%29.pdf (NB: over 30 pages long)
EBA: Draft implementing technical standards on disclosure for the leverage ratio under Article 451(2) of Regulation (EU) No 575/2013 (Capital Requirements Regulation - CRR)
EBA has published this consultation, noting that standards will be part of the EU Single Rulebook in the banking sector and aim at harmonising disclosure of the leverage ratio across the EU by providing institutions with uniform templates and instructions. Responses are required by 24 January 2014. (24/10/13) http://www.eba.europa.eu/documents/10180/459196/EBA+CP+2013+41+%28Draft+CP+on+draft+ITS+on+disclosure+of+le verage+ratio%29.pdf (NB: over 30 pages long)
BIS: Liquidity stress testing: a survey of theory, empirics and current industry and supervisory practices
This sets out the findings and recommendations of a BIS work group, focusing on the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). It goes on to explore the potential usefulness and construction of more generalised measures of liquidity adequacy produced using stress-testing techniques. (24/10/13) http://www.bis.org/publ/bcbs_wp24.pdf (NB: over 70 pages long)
EBA: Draft implementing technical standards on currencies with an extremely narrow definition of central bank eligibility under Article 416(5) of Regulation (EU) 575/2013 (Capital Requirements Regulation – CRR)/ Draft implementing technical standards on currencies for which the justified demand for liquid assets exceeds the availability of those assets under Article 419(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR)/ Draft regulatory technical standards on derogations for currencies with constraints on the availability of liquid assets under Article 419(5) of Regulation (EU) 575/2013 (Capital Requirements Regulation –- CRR
EBA has published these consultations on draft technical standards related to liquidity requirements which will run until 22 December 2013. (24/10/13) http://www.eba.europa.eu/documents/10180/455100/EBA+CP+2013+37+%28Draft+CP+on+ITS+on+currencies+with+extre mely+narrow+central+bank+eligibility%29.pdf http://www.eba.europa.eu/documents/10180/455301/EBA+CP+2013+38+%28Draft+CP+on+ITS+on+list+of+currencies+wit h+liquid+asset+shortage%29.pdf http://www.eba.europa.eu/documents/10180/455312/EBA+CP+2013+39+%28Draft+CP+on+RTS+for+the+use+of+derogati ons%29.pdf
TSC: Project Verde
TSC has published a transcript of the uncorrected evidence with respect to the hearing held on 22 October 2013 attended by Peter Marks, former CEO of the Co-Operative Group, in which he discusses governance issues surrounding the failed Co-Operative/Lloyds Banking Group deal. (23/10/2013) http://www.parliament.uk/documents/commons- committees/treasury/TC%2022.10.2013.pd f (NB: over 30 pages long)
ECB: Comprehensive assessment of banks
The ECB has announced details of the comprehensive assessment to be conducted in preparation of assuming full responsibility for supervision as part of the single supervisory mechanism. The assessment will commence in November 2013 and will take 12 months to complete. It will be carried out in collaboration with the national competent authorities of the Member States that participate in the single supervisory mechanism. There are three elements to the assessment: a supervisory risk assessment to review, quantitatively and qualitatively, key risks; n asset quality review and a stress test. o examine the resilience of banks’ balance sheet to stress scenarios. ECB intends to publish an aggregate disclosure of the outcomes, at country and bank level, together with any recommendations for supervisory measures. . (23/10/13) http://www.ecb.europa.eu/press/pr/date/2013/html/pr131023.en.html http://www.ecb.europa.eu/pub/pdf/other/notecomprehensiveassessment201310en.pdf?8182552bd827286902c7ced012c9c5 3a
FMLC: Further discussion of legal uncertainty which could arise from ring-fencing proposals: an addendum to the FMLC paper entitled Banking Reform (Ring-fencing)
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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)
EBA: Final draft implementing technical standards on supervisory reporting on forbearance and non-performing exposures under article 99(4) of Regulation (EU) No 575/2013/ Recommendations on asset quality reviews
EBA has published the above documents. The proposed definitions of non-performing and forbearance exposures rely on the existing concepts of default and impairment but provide for specific harmonisation features. In particular, the definition of non performing exposures focuses on a 90-day past due threshold, while the definition of forbearance focuses on concessions extended to debtors who face, or may face, difficulties in meeting payments. Forborne exposures can be identified in both the non-performing and the performing portfolios. These definitions apply to all loans and debt securities that are on balance sheets, except for those held for trading, as well as to some off-balance sheet exposures. The final standards will be sent to the EC for their adoption as EU Regulations. The recommendations on asset quality reviews are intended to contribute to a coordinated approach in the way competent authorities evaluate banks' credit portfolios. EBA recommends competent authorities to apply, to the extent possible, the common definitions on "non-performing exposures" and "debt forbearance" as in the draft standards. EBA notes that competent authorities should complete their respective asset quality reviews by 31 October 2014 and report to EBA, in due time, the preliminary outcomes. (21/10/13) http://www.eba.europa.eu/documents/10180/449824/EBA-ITS-2013-03+Final+draft+ITS+on+Forbearance+and+Non- performing+exposures.pdf (NB: over 60 pages long) http://www.eba.europa.eu/documents/10180/449802/EBA-Rec-2013- 04+Recommendations+on+asset+quality+reviews.pdf
ESMA: Annual statistical data on the performance of credit ratings
ESMA has published statistical data on the performance of credit ratings, including transition matrices and default rates for the period 1 January-30 June 2013. (21/10/13) http://www.esma.europa.eu/news/ESMA-publishes-updated-data- performance-credit-ratings?t=326&o=home
PRA: Speech by Andrew Bailey: Regulating international banks (17 October 2013)
Text of the above, given at BBA’s annual banking conference, follows. Topics include: bank resolution and PRA’s policy with regard to non-EEA bank branches. (17/10/2013) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech687.pdf
BBA: Speech by Sir Richard Lambert: Banking standards professional body (17 October 2013)
Text of the above, given at BBA’s annual banking conference, follows. He discusses the banking standards professional body, which he is in the process of setting up. He suggests that the model for the new body may be the Takeover Panel and argues that “it’s for the new professional body to encourage an all round lifting in the standards of behaviour and competence .. It’s going to be in the excellence business, much more than the discipline business … this new outfit shouldn’t turn into a large and unwieldy bunch of bureaucrats, and it shouldn’t attempt to reinvent the wheel”. He intends to publish some proposals at the beginning of 2014. (18/10/13) http://annualconference.bba.org.uk/annualconference/downloads/Richard_Lambert_speech.pdf
FCA: Speech by Martin Wheatley: Laying myths to rest (17 October 2013)
Text of the above, given at BBA’s annual banking conference, follows. Topics include: mis-selling and the approaches FCA is making in response; reward incentives and European regulation. He concludes: “to get back on its feet, London must reclaim this moral high ground. It is the FCA’s job to provide the footholds to this success. To be a net GDP contributor. Not a handbrake”. (17/10/13) http://www.fca.org.uk/news/laying-myths-to-rest
EC: Speech by Michel Barnier: UK banks and the EU single market: What now? (17 October 2013)
Text of the above, given at BBA’s annual banking conference, follows. Topics include: key elements of regulatory reform; bankers’ bonuses; the banking union; asset quality review and resolution. With regard to the last of these, he notes: “despite all the progress made as regards more stringent capital rules and new resolution tools, there may still be banks that are too big to save and too complex to resolve. That is why we are working on a common framework on the structural reform
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of banks and plan to come forward with a proposal in the coming weeks”. (17/10/13) http://europa.eu/rapid/press- release_SPEECH-13-827_en.htm?locale=en
FCA: CRD IV communication to firms about remaining on BIPRU (CRD III)
FCA has published the text of a letter it has sent to relevant firms which reminds them that they are currently subject to BIPRU, but that from 1 January 2014, a new set of prudential requirements will replace BIPRU for investment firms subject to CRD IV. Some investment firms can stay on the existing CRD III rules, rather than moving to the CRD IV rules and FCA is asking firms to clarify their new status under the rules. An FAQ (second link below) has also been provided. (16/10/13) http://www.fca.org.uk/static/documents/crd-iv-letter.pdf http://www.fca.org.uk/static/documents/faqs-firms-remaining-on- bipru.pdf
EC/European Presidency: Single supervisory mechanism
The Council has adopted regulations creating a single supervisory mechanism for the oversight of banks and other credit institutions, ECB will have direct oversight of eurozone banks, although in a differentiated manner and in close cooperation with national supervisory authorities. It will be responsible for the overall functioning of the SSM. ECB will assume its supervisory tasks twelve months after entry into force of the legislation (expected to be 4 November 2013), subject to operational arrangements. It is noted that ECB's monetary tasks will be strictly separated from its new supervisory tasks and a supervisory board responsible for the preparation of supervisory tasks will be set up within ECB. The board's draft decisions will be deemed adopted unless rejected by the ECB's governing council. Non-eurozone member states wishing to participate in the SSM will be able to do so by entering into close cooperation arrangements – it is stated that they will have full and equal voting rights on the supervisory board. National supervisors will remain in charge of tasks not conferred on ECB (e.g. consumer protection, money laundering, payment services, branches of third country banks). The EBA will retain its competence for further developing the single rulebook. It is noted that the EBA regulation is amended to ensure that the countries participating in the SSM will not unduly dominate EBA's board of supervisors. (15/10/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139012.pdf http://www.eu2013.lt/en/news/pressreleases/ecofin-ministers-approve-bank-supervision-discuss-steps-towards-banking- union http://europa.eu/rapid/press-release_MEMO-13-899_en.htm?locale=en
HMT: UK-Chinese economic and financial dialogue
This press release notes that PRA will begin discussions with Chinese banks in London to enable them, for the first time, to apply to establish wholesale branches in the UK, allowing them to scale-up their business activities in the UK. (15/10/13) https://www.gov.uk/government/news/groundbreaking-deal-set-to-make-london-global-currency-centre-for-investment-in- china
EC: Crisis rules for banks
Further to its July announcement, EC has published an FAQ in respect of this. (15/10/13) http://europa.eu/rapid/press- release_MEMO-13-886_en.htm?locale=en
TSC: Stress testing the UK banking system
TSC has published an uncorrected transcript of the hearing held on 8 October 2013 attended by Paul Tucker. (15/10/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/690/uc69001.htm
BIS: Basel III regulatory consistency assessment programme (RCAP)
In 2012, BIS adopted the RCAP which consisted of two distinct but complementary work streams to monitor the timely adoption of Basel III standards, and to assess the consistency and completeness of the adopted standards including the significance of any deviations in the regulatory framework. Currently, the focus of the RCAP is on risk-based capital - this will expand from 2015 to cover Basel III standards on liquidity, leverage and systemically important banks. The procedures and process for conducting jurisdictional assessments under the RCAP have now been revised and updated. The RCAP methodology describes the complete assessment programme and also introduces the RCAP questionnaire, which member jurisdictions complete ahead of the assessment and update it regularly. Both the assessment methodology document and the RCAP questionnaire are intended to help all regulators, supervisors and financial stability authorities to evaluate their
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own progress with implementation of Basel III framework and identify areas for improvement. The document will be kept under review and updated as the scope of the RCAP expands to include all aspects of the Basel III framework. (15/10/13) http://www.bis.org/publ/bcbs264.pdf http://www.bis.org/bcbs/rcapq.pd f (NB: over 100 pages long)
HMT: Code of practice on taxation for banks
Following a recent consultation, HMT has announced that several changes will be legislated for in Finance Bill 2014. The three key changes are: more regular reporting from HMRC on banks’ compliance with the code; a new independent reviewer will be asked to consider potential breaches of the Code and. HMRC commissioners will have to take account of their views before deciding whether there is a breach. Banks that do breach the code could be named; any transaction that falls within the scope of GAAR will be considered an automatic breach of the Code – resulting in the possible naming of the bank,. A list of those banks that have newly adopted or re-adopted the strengthened Code will be published in the autumn and from 2015, HMRC will publish an annual report on how the Code is operating. This will include the names of any bank not complying with the Code, as well as an updated list of who has signed up to the Code and who has not. (11/10/13) https://www.gov.uk/government/news/plans-to-strengthen-banking-code-of-practice-confirmed-by-government
BIS: Liquidity regulation and the implementation of monetary policy
In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. This working paper looks at how this regulation may impact the efficacy of central banks’ current operational frameworks. Results suggest that central banks may want to adjust their operational frameworks as the new regulation is implemented. (11/10/13) http://www.bis.org/publ/work432.pdf (NB: over 40 pages long)
FCA: CP13/12**: CRD IV for investment firms 2 – implementation
This paper sets out proposed changes to the FCA Handbook as a result of the transposition of CRD IV and covers the following policy areas: CRD IV remuneration (i.e. limits on bonuses) a change to the transitional provision on the countercyclical capital buffer; reporting; interaction AIFMD, UCITS and CRD IV; further CRD IV consequential changes to the FCA Handbook and process requirements for new permissions under the Capital Requirements Regulation. It should be read in conjunction with CP13/8. The proposals in this CP apply principally to the following FCA authorised investment firms that are currently subject to the CRD, including firms that benefit from the current exemptions on capital requirements and large exposures for specialist commodities derivatives firms, and management companies – as defined under the UCITS Directive – and AIFMs – they do not apply to credit institutions (banks and building societies) or investment firms supervised by PRA. Responses are required by 10 November 2013 and FCA intends to publish a PS later in 2013 so firms have the final rules available before 1 January 2014. (10/10/13) http://www.fca.org.uk/static/documents/consultation-papers/cp13- 12.pdf (NB: over 100 pages long)
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: 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
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BIS: Progress report on implementation of the Basel regulatory framework
BIS has published this report which sets out the adoption status of Basel II, Basel 2.5 and Basel III regulations for each member jurisdiction as of end-September 2013. (9/10/13) http://www.bis.org/publ/bcbs263.pdf
EBA: Revised deadlines for the delivery of EBA technical standards
EBA has agreed with the EC to extend deadlines for a number of technical standards, set out in the link below. This follows the finalisation of CRD IV and the Capital Requirements Regulation, which had set deadlines within a month from their entry into force. (8/10/13) http://www.eba.europa.eu/-/revised-deadlines-for-the-delivery-of-eba-technical-standards
EBA: End of term of office report of the Banking Stakeholder Group
EBA has issued the above report which covers BSG’s outputs between March 2011 and September 2013, as information on its working methodology and its interaction with EBA. (8/10/13) http://www.eba.europa.eu/documents/10180/17417/BSG+2013+Final+Report.pdf
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 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
FCA: CRD IV FAQs
FCA has published FAQs. Topics include: reporting, data and implementation. (4/10/13) http://www.fca.org.uk/firms/markets/international-markets/eu/crd-iv/faqs?category=investment-firms
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
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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: A framework for stress testing the UK banking system
BoE has published this discussion paper which sets out proposals for annual, concurrent stress tests of the UK banking system in the medium-term. These include the expected coverage of institutions, considerations around scenario design and the approach to modelling the impact of scenarios on bank profitability and capital ratios. It discusses how the outputs of stress tests could be used to inform policy decisions by FPC and PRA’s board, and options around disclosure of stress test results. Responses are required by 10 January 2014. (1/10/13) http://www.bankofengland.co.uk/financialstability/fsc/Documents/discussionpaper1013.pdf (NB: over 40 pages long)
BoE: Speech by Paul Tucker: The reform of international banking: some remaining challenges (1 October 2013)
In this speech, Paul Tucker sets out his views (it is emphasised that these are not necessarily those of the various any of the domestic or international bodies he belongs to) on global regulatory banking reform, including “going concern v. gone concern loss-absorbency”; reconciling the Basel Concordat, the Core Principles of Banking Supervision, the Capital Accord, and resolution policy and stress testing. (1/10/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech682.pdf
EBA Final draft Regulatory Technical Standards on close correspondence between the value of an institution’s covered bonds and the value of the institution’s assets relating to the institution’s own credit risk under Article 33 of Regulation (EU) 575/2013 (Capital Requirements Regulation - CRR)
EBA has published its final draft regulatory technical standards on close correspondence between the fair value of an institution's covered bonds and the fair value of its assets. These standards will be part of the Single Rulebook. The proposed final draft standards relate to prudential filters applied to own funds. In particular, they specify the criteria for defining the close correspondence between the fair value of the covered bonds and the fair value of the assets for the purpose of calculating capital requirements. (30/08/13) http://www.eba.europa.eu/documents/10180/423258/EBA+RTS+2013+05+%28Final+draft+RTS+on+covered+bonds+close +correspondence%29.pdf
HMT: CRD 4 legal challenge
This press release notes that the Government has lodged a legal challenge with ECJ with regard to rules on pay contained in CRD 4., stating “the provision for a ‘bonus cap’ under CRD4 - which was introduced without any assessment of its impact or supporting evidence - will undermine the significant progress that has been made to implement pay practices that support financial stability … The proposals will lead to an increase in fixed salaries which would do the opposite”. It adds: “in line with other challenges Britain has lodged with the ECJ .. our challenge also covers various legal issues regarding the compatibility of the bonus cap provisions with the EU Treaty and the powers delegated to the EBA which we believe go well beyond its remit of setting technical standards. The Treasury will be seeking clarity from the ECJ on these points”. (26/09/13) https://www.gov.uk/government/news/legal-challenge-launched-into-new-rules-on-bankers-pay
BIS/EBA: Basel III monitoring/EBA: Basel III monitoring exercise
A total of 223 banks participated in the BIS report, comprising 101 Tier 1 banks and 122 smaller banks. The results of the monitoring exercise assume that the final Basel III package has been fully implemented, based on data as of 31 December 2012, and do not take account of the transitional arrangements set out in the Basel III framework, such as the gradual phase-in of deductions from regulatory capital. No assumptions were made about bank profitability or behavioural responses, such as changes in bank capital or balance sheet composition. For that reason, the results of the study are not comparable to industry estimates. EBA’s report summarises the aggregate results using data as of 31 December 2012. A sample of 170 banks submitted data for this exercise (41 of which were Tier 1). (25/09/13) http://www.bis.org/publ/bcbs262.pdf (NB: over 40 pages long) http://www.eba.europa.eu/documents/10180/16145/Basel+III_Monitoring_Report-Dec12.pdf (NB: over 30 pages long)
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EC: Proposal for a Regulation of the European Parliament and of the Council on indices used as benchmarks in financial instruments and financial contracts
Further to the proposals published last week, the EC has now published the final version of the Regulation. (25/09/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0641:FIN:EN:PDF (NB: over 80 pages long)
European Parliament: MEPs raise suspension of EU-US bank data deal
This press release notes that MEPs have raised the possibility of suspending or even terminating the EU-US Terrorist Finance Tracking Programme (TFTP), during a discussion on NSA's alleged tapping of the SWIFT company's international bank-transfer data at the Civil Liberties Committee's third hearing on US and EU countries' surveillance schemes. Cecilia Malmström, Home Affairs Commissioner, said that she had not yet received satisfactory replies from US authorities concerning the allegations. (24/09/13) http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130923IPR20604/20130923IPR20604_en.pdf
TSC: Project Verde
Further to recent hearings on this matter, TSC has published a letter from Andrew Bailey (PRA) following the recent evidence session with Neville Richardson, setting out the regulator’s view on Britannia’s assets. In the accompanying press release, Andrew Tyrie notes: “the Committee has received apparently conflicting evidence. We will be taking more, both in formal sessions and in writing, to get to the bottom of this”. (23/09/13) http://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news/letter-from- andrew-bailey/ http://www.parliament.uk/documents/commons-committees/treasury/Letter-from-Andrew-Bailey- 522F3BDE.PDF
FCA: Statement on CRD IV
Further to the publication off EBA’s consultation on its XBRL taxonomy, FCA reports that it intends to collect COREP and FINREP reports in XBRL using the proposed taxonomy via GABRIEL system. It will also collect data on behalf of PRA. (20/09/13) http://www.fca.org.uk/news/firms/fca-statement-on-crd-iv
HMT: Capital Requirements Directive 4: consultation on country-by-country reporting
This document sets out the Government’s initial approach for implementing the country-by-country reporting rules in CRD4. It explains which institutions will be considered in scope of the provisions; sets out different possible approaches for consolidation; explains the Government’s interpretation of the term “establishment”; considers issues around reporting such as auditing requirements; and sets out the Government’s interpretation of each of the key items that institutions are required to disclose; Responses are required by 18 October 2013. (20/09/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244163/PU1562_CBCR_1.pdf (NB: over 30 pages long)
HoC: Government bank rescues
This short HoC Library note provides 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. (20/09/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN05748
EBA: Consultation paper on the XBRL taxonomy related to the EBA final draft implementing technical standards on supervisory reporting requirements under the draft Capital Requirements Regulation
This consultation document aims to ensure that the data that national competent authorities collect from credit institutions and investment firms is transmitted to EBA in a uniform and consistent manner. It presents data items, business concepts, relations and validation rules. Responses are required by 9 October 2013.(19/09/13) http://www.eba.europa.eu/documents/10180/412297/EBA+CP+2013+36+%28CP+on+Draft+XBRL+taxonomy%29.pdf
EC: Proposal for a Regulation on indices used as benchmarks in financial instruments and financial contracts
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The EC has published the above, along with an FAQ. It covers all benchmarks that are used to reference financial instruments admitted to trading or traded on a regulated venue, such as energy and currency derivatives, those that are used in financial contracts, such as mortgages and those that are used to measure the performance of investment funds. It seeks to address possible shortcomings at every stage in the production and use of benchmarks. In particular the proposal: improves the governance and controls over the benchmark process; improves the quality of the input data and methodologies used by benchmark administrators; ensures that contributors to benchmarks provide adequate data and are subject to adequate controls; ensures adequate protection for consumers and investors using benchmarks and ensures the supervision and viability of critical benchmarks. Annexes contain more detailed provisions on commodity benchmarks and interest rate benchmarks. Benchmarks whose input data is provided by regulated venues are released from certain obligations to avoid dual regulation. (18/09/13) http://europa.eu/rapid/press-release_IP-13-841_en.htm?locale=en http://europa.eu/rapid/press-release_MEMO-13-799_en.htm http://ec.europa.eu/internal_market/securities/docs/benchmarks/130918_proposal_en.pdf (draft - NB: over 80 pages long)
HMT: Lloyds Banking Group
HMT has published a press release confirming its sale of a 6% stake in the bank, noting that the Chancellor received advice from UKFI that it would be appropriate to begin the process to sell part of the government’s shareholding in Lloyds. A copy of this letter is included in the link below, together with a letter from HMT’s Permanent Secretary to the Chancellor and an update from the Chancellor to TSC on this matter. (17/09/13) https://www.gov.uk/government/news/government-begins- sale-of-its-shares-in-lloyds-banking-group
European Parliament: Banking reform and resolution
This press release notes a meeting of ECON held on 16 September 2013 in which Michel Barnier stated that “the single resolution mechanism for banks can be set up without a treaty change” and added that , “he was open to improving the mechanism through treaty changes at a later stage”, but “did not see this as a pre-requisite”. ECON was to have its first detailed discussion of the EC’s proposed legislation on 17 September. (17/09/13) http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130916IPR20030/20130916IPR20030_en.pdf
BIS: Quarterly review – September 2013
Articles from this may be downloaded individually via the following link. These include items on how banks have adjusted to higher capital requirements and recent developments and trends in the market for cocos. (16/09/13) http://www.bis.org/publ/qtrpdf/r_qt1309.htm
BoE: Bank capital and liquidity
BoE has “pre-published” an article which is to appear in a forthcoming quarterly bulletin. It aims to provide a primer for the concepts of bank capital and liquidity and sets out an explanation of the different regulatory requirements firms are expected to meet, including sections on Basel III minimum capital requirements and buffers and on he relationship between a bank’s capital and liquidity. (13/09/13) http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2013/qb1303bcal.pdf
G20: Roadmap towards strengthened oversight and regulation of shadow banking
This sets out, in tabular format, forthcoming actions by regulators (including FSB and IOSCO) in respect of shadow banking between November 2013 and 2015. (10/09/13) http://www.g20.org/load/782788663
EC: Shadow banking – addressing new sources of risk in the financial sector/Regulation of the European Parliament and of the Council on money market funds
The EC has adopted a Communication on shadow banking as a follow up to last year’s Green Paper and published a proposed framework designed for money market funds. The Communication sets out the issues at stake in relation to the shadow banking system and the measures already taken to deal with related risks and outlines priorities on which the EC intends to take initiatives in areas such as money market funds and risks related to shadow banking such as transparency, risks associated with securities financing transactions and risks relating to interconnectedness with the banking system. The Regulation sets out proposed rules which include the requirement of money market funds to have at least 10% of their portfolio in assets that mature within a day and another 20% that mature within a week and establish a pre-defined capital
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buffer to take account of the constant NAV. (4/09/13) http://europa.eu/rapid/press-release_IP-13-812_en.htm?locale=en (press release) http://ec.europa.eu/internal_market/finances/docs/shadow-banking/130904_communication_en.pdf (Communication on shadow banking – in draft) http://europa.eu/rapid/press-release_MEMO-13-763_en.htm (FAQ on shadow banking) http://ec.europa.eu/internal_market/investment/docs/money-market-funds/130904_mmfs- regulation_en.pdf (Regulation - NB: over 40 pages long) http://europa.eu/rapid/press-release_MEMO-13-764_en.htm (FAQ on money market funds)
TSC: Project Verde
TSC has published a transcript of the corrected evidence with respect to the hearing held on 18 June 2013 attended by Antonio Horta-Osorio and Sir Win Bischoff in which they discussed the failed Lloyds Banking Group/Co-Operative Group deal. (3/09/13) http://www.parliament.uk/documents/commons-committees/treasury/TC%2018.06.13%20CORRECTED.pdf
EBA: Draft regulatory technical standards on the method for the identification of the geographical location of the relevant credit exposures under Article 140(7) of the Capital Requirements Directive (CRD)
EBA has launched this consultation which sets out criteria for identifying the geographical location of all relevant credit exposures (credit risk, trading book and securitisation exposures). The standards will be part of the Single Rulebook. Responses are required by 1 November 2013. (2/09/13) http://www.eba.europa.eu/documents/10180/393244/EBA-CP- 2013-35+%28CP+on+draft+RTS+to+identify+geographical+location+of+credit+exposures%29.pdf
FSB: Progress report on the oversight and governance framework for financial benchmark reform
FSB has published this short report presented to G20 finance ministers and central bank governors, which presents an update on the work of its steering group on this issue. The report details the establishment of a new market participants group which has been asked to provide an interim report and draft recommendations by the end of the year and a final report by mid-March 2014. The FSB steering group is to assess the feasibility and viability of the reformed and alternative benchmark rates proposed by the markets participants group. The steering group intends to provide its analysis and recommendations on benchmarks to FSB by June 2014. (30/08/13) http://www.financialstabilityboard.org/publications/r_130829f.pdf
FSB: Strengthening the oversight and regulation of shadow banking
FSB has published a group of reports with regard to the above which set out policy recommendations, detailing FSB’s overall approach to the issue, actions taken to date and next steps; a framework report on risks in securities lending and repos, which includes consultative proposals on minimum standards for methodologies to calculate haircuts on non-centrally cleared securities financing transactions and a framework of numerical haircut floors’ and a report on shadow banking entities that sets out a high level policy framework to address risks posed by shadow banking entities other than money market funds. FSB notes that many policy measures it has developed on shadow banking have now been finalised and will be adopted by FSB members in an internationally coordinated manner, but the proposed minimum standards for methodologies to calculate haircuts on non-centrally cleared securities financing transactions and a framework of numerical haircut floors will be defined in light of further assessments of their potential impact on the financial system. Responses to the proposals set out in Annex 2 of the second document (on securities lending repos are required by 28 November 2013. (30/08/13) http://www.financialstabilityboard.org/press/pr_130829a.pdf http://www.financialstabilityboard.org/publications/r_130829a.pdf (policy recommendations) http://www.financialstabilityboard.org/publications/r_130829b.pdf (securities lending and repos – NB: over 50 pages long) http://www.financialstabilityboard.org/publications/r_130829c.pdf (shadow banking entities - NB: over 30 pages long)
FSB: Credit rating agencies
FSB has published a progress report on reducing reliance on, and strengthening the oversight of, credit rating agencies together with an interim peer review report on implementation of FSB’s Principles in this area. The progress report includes a summary of the main findings and recommendations of the peer review, describes ongoing work by standard-setting bodies to reduce references to ratings in international standards, and provides an update on IOSCO’s work to improve transparency and competition among agencies. The interim peer review report includes a structured stock-taking of references to credit rating agency ratings in national authorities’ laws and regulations and of actions taken and underway to reduce those references. FSB notes that the final peer review report will be published in early 2014. (30/08/13) http://www.financialstabilityboard.org/press/pr_130829b.pdf http://www.financialstabilityboard.org/publications/r_130829d.pdf (progress report) http://www.financialstabilityboard.org/publications/r_130829e.pdf (peer report - NB: over 100 pages long)
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BoE: Bank liquidity
In a speech today hosted by CBI in Birmingham, Mark Carney confirmed that PRA will implement the June 2013 recommendation of the FPC) regarding the amount of liquidity held by banks and building societies. He stated: “for major banks and building societies meeting the minimum 7% capital threshold, the Bank of England will reduce the level of required liquid asset holdings. The effect will be to lower total required holdings by £90 billion, once all eight major banks and building societies meet the capital threshold.” PRA will be writing to affected banks and building societies to set out the exact details of this change in approach. PRA will allow banks to meet up to 40% of their reduced total liquidity requirement with either the “haircutted” value of assets pre-positioned at BoE’s Discount Window Facility or with certain assets specified by PRA as Level 2 assets. The remainder of the liquidity requirement must be met with assets currently qualifying as liquid assets. PRA will, in due course, publish a definition of Level 2 assets to be used on a transitional basis until EU legislation is in force. From the point of publication UK banks and building societies will be able to use such assets to meet. It is reported that PRA is developing an appropriate approach, intended to deliver a broadly similar effect as the changes set out above for the eight major banks and building societies, for smaller banks and building societies not explicitly covered by this announcement. (28;08/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/099.asp x http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech675.pdf
BIS: Report to G20 leaders on monitoring implementation of Basel III regulatory reforms
The report covers the steps taken by Basel Committee member jurisdictions towards implementing the Basel III standards, the further harmonisation of capital regulations across member jurisdictions and the finalisation of remaining post-crisis reforms. In addition, the report provides a review of work on banks' calculation of risk-weighted assets. (27/08/13) http://www.bis.org/publ/bcbs260.pdf (NB: over 30 pages long)
FSB: Enhancing the risk disclosures of banks
FSB has published the Enhanced Disclosure Task Force’s progress report with regard to the above, which considered banks’ 2012 annual reports. The banks’ self-assessment is that they have implemented 50% of the EDTF recommendations in aggregate in 2012 disclosures, up from 34% in 2011; and they expect to implement 72% of the recommendations within their 2013 disclosures. The investors and analysts within the EDTF undertook a further review of the disclosures, which indicated a lower degree of implementation than banks’ self-assessment. FSB calls on supervisory authorities to take steps to foster awareness of the EDTF principles and recommendations by banks and markets in their national jurisdictions. FSB will ask the EDTF to undertake another survey in 2014 of the level and quality of implementation in 2013 annual reports. (22/08/13) http://www.financialstabilityboard.org/press/pr_130821.pdf http://www.financialstabilityboard.org/publications/r_130821a.pdf (main report: NB: over 150 pages long) http://www.financialstabilityboard.org/publications/r_130821b.pd f (appendix: NB: 90 pages long)
BIS/IOSCO: Point of sale disclosure in the insurance, banking and securities sectors
This consultation identifies and assesses differences and gaps in regulatory approaches to point of sale disclosure for investment and savings products across the insurance, banking and securities sectors. The report considers whether regulatory approaches to disclosure need to be further aligned across sectors. It proposes a number of recommendations. It suggests that jurisdictions should consider implementing a concise written or electronic point of sale disclosure document for the product sample identified in this report, taking into account the jurisdiction’s regulatory regime and to be provided to consumers free of charge, before the time of purchase. (15/08/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD421.pdf (NB: over 30 pages long)
FMLC: Issue 168: Securitisation risk retention
FMLC has published the text of a letter it has sent to EBA with regard to its consultation on draft regulatory technical standards on the retention of net economic interest and other requirements related to exposures to transferred credit risk under Articles 394, 395, 397 and 398 of Regulation (EU) No [xx/2013] and on [...] (EBA/CP/2013/14) raising issues of legal uncertainty and urging EBA “to ensure that its final draft RTS clearly reflect the legislative text pursuant to which they are produced”. (12/08/13) http://www.fmlc.org/Documents/FMLC%20letter%20EBA-CP-2013-14%20(2).pdf
HMT: Banking Liaison Panel: annual report 2012-13
This short report sets out work discussed by the Panel over the last year and looks forward to work being carried out in 2013-14, including non-bank resolution regimes; EU legislative proposals on RRD and the euro area banking union; further 36
work on the Special Administration Regime for Investment Banks and the Small Companies and the Safeguards Order. (5/08/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226554/PU1553_final.pdf
EBA: Interim results update of the EBA review of the consistency of risk-weighted assets
EBA’s second interim report on the regulatory consistency of risk-weighted assets for credit risk in the banking book has been published with the aim of identifying and further understanding the sources of any material differences in risk-weighted assets outcomes for portfolios which are specifically challenging for the banks due to limited availability of data. http://www.eba.europa.eu/documents/10180/15947/EBA+Report+- +Interim+results+update+of+the+EBA+review+of+the+consistency+of+risk+weighted+assets.pdf (NB: over 60 pages long)
EBA: Technical advice to the Commission on possible treatments of unrealised gains measured at fair value under Article 80 of the Capital Requirements Regulation (CRR)
This discussion paper looks at possible treatments of unrealised gains of assets and liabilities measured at fair value, other than including them in Common Equity Tier 1 without adjustment. It expresses EBA's preliminary views on possible treatments of unrealised gains measured at fair value and aims at gathering the stakeholders' inputs on this topic at an early stage of the process. Responses are required by 27 September 2013. EBA intends to deliver its technical advice to the EC by 1 January 2014. (2/08/13) http://www.eba.europa.eu/documents/10180/366087/EBA-DP-2013- 03+%28DP+Technical+Advice+unrealised+gains%29.pdf (NB: over 30 pages long)
Corrigendum to 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 and amending Regulation (EU) No 648/2012/ Corrigendum to 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, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC
These have been published in the Official Journal. (2/08/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:208:0068:0072:EN:PDF http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:208:0073:0073:EN:PDF
EBA: Draft guidelines on retail deposits subject to different outflows for purposes of liquidity reporting under Regulation (EU) No 575/2013 (Capital Requirements Regulation - CRR)
The proposed guidelines, which are addressed to institutions and competent authorities, set out the criteria for identifying retail deposits subject to different outflows during the next 30 days for the purpose of liquidity reporting under CRR. With the view of taking into account the behaviour of local depositors, in particular under stress conditions, these guidelines propose to allocate retail deposits subject to different outflows to three different categories, depending on their underlying risk. Responses are required by 1 October 2013. (1/08/13) http://www.eba.europa.eu/documents/10180/365082/EBA-CP-2013- 34+%28CP+on+GL+retail+deposits+subject+to+different+outflows%29.pdf
HMT: Sanctions for directors of failed banks
Further to its July 2012 consultation, HMT has published a summary of responses with regard to proposals for a “rebuttable presumption” and the possible introduction of criminal sanctions for serious misconduct in the management of a bank. (24/07/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/211985/summary_of_consultation_responses _to_sanctions_for_the_directors_of_failed_banks.pdf
FCA: CP13/6**: CRD IV for investment firms
This CP sets out proposed changes to the FCA Handbook as a result of the transposition of CRD IV and apply principally to FCA authorised investment firms including firms that benefit from the current exemptions on capital requirements and large exposures for specialist commodities derivatives firms; and firms that only execute orders and/or manage portfolios, without holding client money or assets as well as other firms in the investment sector (exempt-CAD firms, management companies as defined under UCITS and AIFMD). The proposals in this CP do not apply to credit institutions (banks and building societies) or investment firms supervised by PRA. Specific proposals and “key messages” relate to Pillar 2; capital buffers; recovery and resolution plans; stress testing; key policy changes in the area of remuneration; country-by-country disclosure
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of corporate information; liquidity reporting; transitional provisions on capital; partnership capital; large exposures; leverage; recognised exchanges; discretions in relation to COREP and FINREP; simplified credit risk calculation; exposures secured by mortgages on commercial real estate property; definition of “significant institution” for use in a number of different provisions scattered across CRD IV. prudential requirements for certain firms that only execute orders and/or manage portfolios, without holding client money or assets; changes for certain ‘exempt-CAD firms that might now come back within the definition of investment firm and grandfathering existing Handbook waivers over to the CRR regime. Reponses are required by 30 September 2013. FCA intends to publish a PS later in the year so that firms have the final rules available before 1 January 2014. It is noted that FCA may need to consult further on issues linked to HMT or following subsequent guidelines and/or technical standards from EBA (to the extent permitted by EU law). Some of these items may be included in the PS for consultation. (31/07/13) http://www.fca.org.uk/static/documents/consultation-papers/cp13-06.pdf (NB: over 400 pages long)
PRA: Statements on bank capital and leverage ratios released in 2013
This webpage contains information on the above, set out by bank. It notes PRA’s approval of Barclays’ capital plans announced to the market yesterday and states that PRA will shortly issue a consultation on its implementation of CRD 4. (31/07/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/081a.aspx
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
EBA: Draft regulatory technical standards on classes of instruments that are appropriate to be used for the purposes of variable remuneration under Article 94(2) of the Capital Requirements Directive
EBA has published this consultation. The draft standards set out the classes of instruments which can be used for the purposes of variable remuneration under CRD and introduce requirements for Additional Tier 1 Tier 2 and other instruments to ensure that they appropriately reflect the credit quality of the institution and define for Tier 2 and other instruments the write-down and conversion mechanisms. Responses are required by 29 October 2013. EBA is to finalise the draft standards at the beginning of 2014. (31/07/13) http://www.eba.europa.eu/documents/10180/361860/EBA-CP-2013-32- instruments-for-variable-remuneration.pdf (NB: over 30 pages long)
EBA: Draft regulatory technical standards on the definition of materiality thresholds for specific risk in the trading book under Article 77 of Directive 2013/36/EU (Capital Requirements Directive - CRD IV)
EBA has published this consultation which set out requirements concerning the implementation of internal approaches for calculating own funds requirements for the specific risk relating to debt instruments in the trading book. Responses are required by 15 October 2013. (30/07/13) http://www.eba.europa.eu/documents/10180/362969/EBA-CP-2013-33- CRD_RTS-Article-77-Materiality_Threshold.pdf
IOSCO: Supervisory colleges for credit rating agencies
This final report recommends establishing supervisory colleges for internationally active credit rating agencies and provides preliminary guidelines on how to constitute and operate them.(30/07/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD416.pdf
EBA/EIOPA/ESMA: Final draft regulatory technical standards on the consistent application of the calculation methods under Article 6(2) of the Financial Conglomerates Directive under Regulation (EU) No 575/2013 (Capital Requirements Regulation -CRR) and Directive 2013/36/EU.
The ESAs have published this document. The standards define the appropriate application of calculation methods for the determination of required capital at the financial conglomerate level. Their underlying principles are to eliminate multiple gearing and intra-group creation of own funds, transferability and availability of own funds and to cover deficit at financial conglomerate level having regard to definition of cross-sector capital. (29/07/13) http://www.esma.europa.eu/system/files/jc_2013-01_final_draft_regulatory_technical_standards.pdf (NB: over 60 pages long)
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EBA/FCA: Supervisory reporting
EBA has published final draft implementing technical standards on supervisory reporting which set out reporting requirements related to own funds, financial information, losses stemming from lending collateralised by immovable property, large exposures, leverage ratio and liquidity ratios. In its press release, FCA highlights the implementing technical standard regarding FINREP, noting that relevant FCA prudentially regulated and PRA prudentially regulated firms should be aware of this, and carefully consider the content when ensuring compliance with and building systems to implement COREP, and where applicable, FINREP. (26/07/13) http://www.fca.org.uk/news/firms/fca-statement-on-crd-iv http://www.eba.europa.eu/-/eba-publishes-final-draft-technical-standards-on-supervisory-reporting-requiremen-4
EBA: Own funds and credit risk adjustment
EBA has published its final draft regulatory technical standards and final draft implementing technical standards on own funds, as well as its final draft regulatory technical standards on credit risk adjustment. (26/07/13) http://www.eba.europa.eu/documents/10180/359901/EBA-RTS-2013-01-draft-RTS-on-Own-Funds-Part-1.pdf/d1217588- ff05-4063-8d6f-5d7c81f2cc64 (NB: over 80 pages long) http://www.eba.europa.eu/documents/10180/359901/EBA-RTS- 2013-02-draft-RTS-on-Own+funds-part-2-Mutuals-cooperatives.pdf/afb3c3ba-1ac9-42b2-9746-6f76575c7c13 http://www.eba.europa.eu/documents/10180/359901/EBA-RTS-2013-03-Draft-RTS-on-Gain-on-Sale.pdf/82af51c3-f251- 4bba-ae55-d6141bb63ea4 http://www.eba.europa.eu/documents/10180/359901/Merged-version-of-the-TS-submitted-to- the-EC.pdf/45e6b31c-e632-4793-a69e-af3ce41ebfe7 (NB: over 30 pages long)
EBA: Recommendation on the preservation of core Tier 1 capital during the transition to the Capital Requirements Directive/Capital Requirements Regulation framework
The recommendation sets out EBA’s view of appropriate supervisory practices within the European system offFinancial supervision and of how En law should be applied in this particular area. (22/07/13) http://www.eba.europa.eu/documents/10180/15953/EBA-Rec-2013-03_Recommendation_on_Capital_Preservation.pdf
EBA: QIS
EBA has launched a QIS to assess the capital impact of the proposals for the calculation of additional value adjustments. This QIS, which will be carried out in co-ordination with the national supervisory authorities, will also be used to calibrate the thresholds and underlying assumptions of additional value adjustments. (22/07/13) http://www.eba.europa.eu/-/eba- launches-qis-exercise-on-prudent-valuation
BIS: Liquidity coverage ratio disclosure standards
BIS has published a consultation with regard to the above, stating that internationally-active banks across Basel member jurisdictions will be required to publish their liquidity coverage ratio according to a common template. Responses are required by 14 October 2013. (19/07/13) http://www.bis.org/publ/bcbs259.pdf
EBA: Risk assessment of the European banking system
EBA has published a report on the risks and vulnerabilities of the EU banking sector. It analyses the main developments and trends affecting the sector in the current year and provides an outlook of the main micro-prudential risks and vulnerabilities, as well as of related policy implications. The report also puts forward possible measures for addressing these risks through coordinated policy and supervisory actions. (18/07/13) http://www.eba.europa.eu/documents/10180/16145/EBA+July+2013+Risk+Assessment+Report.pdf/6582a6f7-c217-4fc8- 851e-ead68f6e327f (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:
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- 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)
IOSCO: Principles for financial benchmarks
IOSCO has published its final report on the above. The guidelines have been established for benchmark administrators and other relevant bodies in the following areas: governance; benchmark quality; quality of the methodology and accountability mechanisms. The principles provide for benchmark administrators to publicly disclose their compliance with the principles within twelve months of the publication of the report, with the intention of IOSCO reviewing within an 18 month period the extent to which the principles have been implemented. (17/07/13) http://www.iosco.org/news/pdf/IOSCONEWS289.pdf http://www.iosco.org/library/pubdocs/pdf/IOSCOPD415.pdf (NB: over 40 pages long)
EBA: Draft regulatory technical standards on own funds requirements for investment firms based on fixed overheads under Article 97(4) of Regulation (EU) No 575/2013
EBA has published this consultation. The purpose of the standards is to harmonise the calculation of capital requirements for investment firms with limited authorisation to provide investment services, as well as to harmonise the conditions under which competent authorities can make adjustments to such requirements. The draft standards include a definition of fixed overheads. Responses are required by 30 September 2013. (17/07/13) http://www.eba.europa.eu/documents/10180/349599/EBA-CP-2013-30-draft_RTS- Own_Funds_Fixed_Overheads_investment_firms.pdf
EC: CRD IV/CRR
On 17 July 2013, the CRD IV package which transposes -via a Regulation and a Directive- the new global standards on bank capital (the Basel III agreement) into EU law, will enter into force. The EC has published an FAQ. (16/07/13) http://europa.eu/rapid/press-release_MEMO-13-690_en.htm?locale=en
BBA LIBOR Ltd: Code of conduct/whistleblowing policy
The first document, the interim code of conduct for contributing banks, has been confirmed as industry guidance by FCA. The whistleblowing policy for LIBOR outlines how concerns about perceived irregularities in conduct related to the administration of LIBOR and/or LIBOR submissions could be raised. (16/07/13) http://www.bbalibor.com/download/9070 http://www.bbalibor.com/download/9069
EBA: Draft implementing technical standards on the hypothetical capital of a central counterparty under Articles 50a and 50c of Regulation (EU) No 648/2012 (EMIR) as amended by Article 520(1) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR)
The consultation on the reporting of the hypothetical capital of a CCP deals with the reporting of prudential requirements for banks’ exposures to central counterparties. They specify a reporting frequency on a quarterly basis and the template for the information that a CCP has to deliver to all credit institutions and investment firms that are clearing members, as well as to the supervisory authorities competent for those clearing members. The draft standards specify the conditions under which
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the supervisory authorities may request an increase in the reporting frequency. Responses are required by 30 September 2013. (15/07/13) http://www.eba.europa.eu/documents/10180/341503/EBA_CP_2013_29.pdf
EBA: High earners – 2010/2011 data
EBA has published a report featuring data on the remuneration of EU bank staff who received €1m or more in total in 2010 and 2011 which it describes as “a first analysis of remuneration structures across the EU”. In 2011, the highest figures have been reported for the UK (2,436 high earners), Germany (170), France (162), Spain (125), Italy (96) and the Netherlands (36). EBA will publish, at the end of 2013, a more detailed report on an analysis of remuneration practices in the EU which will be based on a remuneration benchmarking exercise and which will comprise a more detailed analysis of the data presented in this report. (15/07/13) http://www.eba.europa.eu/documents/10180/16145/EBA-Report- High_Earner_results.pdf
EC: List of registered and certified credit rating agencies
The list, updated as of 1 July 2013, has now been published in the Official Journal. (15/07/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:201:0011:0012:EN:PDF
HMT: “Bad bank” review
HMT has announced the appointment of BlackRock Solutions to provide specialist advice on RBS assets as part of the bad bank review announced in George Osborne’s Mansion House speech last month. The firm will work alongside Rothschild and Slaughter & May, appointed last week as corporate finance and legal advisors respectively to the review. HMT notes that the bad bank review is assessing the merits of creating a bad bank for some RBS assets and is due to conclude in the autumn 2013. (12/07/13) https://www.gov.uk/government/news/hm-treasury-appoints-blackrock-solutions-as-asset- specialist-advisor-to-the-rbs-bad-bank-review
Financial Services (Banking Reform) Bill
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)
BBA: LIBOR Oversight Committee
BBA LIBOR Limited, the interim benchmark administrator for LIBOR, has established the Interim LIBOR Oversight Committee (ILOC) as required by FCA and recommended by the Wheatley review. An inaugural meeting was held on 22 May 2013 and BBA has published minutes, ToR, a note setting out the composition of the committee and an Interim Code of Conduct for Contributing Banks (which is currently with FCA for review). (11/07/13) http://www.bbalibor.com/download/9028 http://www.bbalibor.com/download/9026 http://www.bbalibor.com/download/9027 http://www.bbalibor.com/download/9029
EBA: Draft regulatory technical standards on prudent valuation under Article 105(14) of Regulation (EU) 575/2013 (Capital Requirements Regulation - CRR)
EBA has launched a consultation on draft standards which set out the requirements related to prudent valuation adjustments of fair valued positions. The draft standards present a methodology to calculate additional valuation adjustments) for the purpose of determining the prudent value of fair valued positions. The consultation proposes a simplified approach, which can be used by institutions to calculate additional value adjustments provided their absolute value of on- and off-balance sheet fair valued assets and liabilities is below €15bn and a core approach, which is intended to provide a consistent framework for determining prudent valuation. Responses are required by 8 October 2013. (11/07/13) http://www.eba.europa.eu/documents/10180/336425/EBA_CP_2013_28.pd f (NB: over 40 pages long)
EC: Commission adapts crisis rules for banks
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The EC has adapted its temporary state aid rules for assessing public support to financial institutions during the crisis. The main changes are aimed at improving the restructuring process and the level playing field between banks. Banks will be required to work out a sound plan for their restructuring or orderly winding down before they can receive recapitalisations or asset protection measures and, in the case of capital shortfalls, bank owners and junior creditors will be required to contribute as a first resort before banks can ask for public funding. The rules provide that failed banks should apply strict executive remuneration policies. The new Banking Communication sets out a cap on total remuneration as long as the entity is under restructuring or relying on state support. The rules will apply as long as required by market conditions. The rules will be revised as necessary. In particular, they may need to be adjusted in light of the evolution of the EU regulatory framework for banking. The text of the Communication is currently in draft (second link below). (10/07/13) http://europa.eu/rapid/press-release_IP-13-672_en.htm?locale=en http://ec.europa.eu/competition/state_aid/legislation/banking_communication_en.pdf
EBA: Draft implementing technical standards on the format, structure, contents list and annual publication date of the supervisory information to be disclosed by competent authorities under Article 143(3) of the Capital Requirements Directive
EBA has published this consultation on draft implementing technical standards which specify the format, structure, contents list and annual publication date of the supervisory information to be disclosed by competent authorities in the banking sector. The consultation and annexes can be downloaded via the following link. Responses are required byl 9 October 2013. (10/07/13) http://www.eba.europa.eu/news- press/calendar?p_p_auth=U9Ha33v9&p_p_id=8&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&_8_struts_action= %2Fcalendar%2Fview_event&_8_eventId=334830
ESMA: Discussion paper on CRA3 implementation
ESMA is required to draft regulatory technical standards on: disclosure requirements on structured finance instruments; the European Rating Platform (ERP) and the periodic reporting on fees charged by credit rating agencies and is now seeking views, to be received by 10 October 2013, on its draft standards. It is noted that ESMA is also considering publishing Q&As which will clarify some provisions and requirements of the Regulation. (10/07/13) http://www.esma.europa.eu/system/files/2013- 924_esma_launches_consultation_on_implementation_of_new_cra_regulation.pdf http://www.esma.europa.eu/system/files/2013-891_discussion_paper_on_cra3_implementation.pd f (NB: over 40 pages long)
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
EBA: Draft regulatory technical standards on collaboration concerning supervision between home and host Member States specifying the information that competent authorities shall supply to one another/Draft implementing technical standards on collaboration concerning supervision between home and host Member States in relation to sharing of information
EBA has published two consultations relating to how competent authorities collaborate and exchange information regarding institutions operating through branches and regarding the freedom of provision of services in one or more EU Member States other than that in which head offices are situated. The proposed draft technical standards focus on exchange of supervisory information between supervisory authorities, with the aim of ensuring a structured and consistent process in the provision of and access to key supervisory information across Member States. The draft Standards are therefore not directly addressed to supervised institutions nor they introduce any direct reporting requirements. The draft regulatory technical standards specify the information that competent authorities shall exchange with each other according to Article 50 of the Capital Requirements Directive, which covers the following areas: management and ownership; liquidity and supervisory findings; solvency; deposit guarantee schemes; limitation of large exposures; internal control mechanisms. The draft standards introduce some additional areas where competent authorities shall exchange information, such as leverage, general non-compliance, supervisory measures and sanctions, and preparation for emergency situations. The draft implementing technical standards outline operational procedures and set out standard forms and templates for information sharing requirements. Responses to the consultations are required by 8 October 2013 and the draft standards are expected to be submitted to the EC by 1 January 2014. (9/07/13) http://www.eba.europa.eu/documents/10180/333872/EBA_CP_2013_25.pdf http://www.eba.europa.eu/documents/10180/334019/EBA_CP_2013_26.pdf
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EC: 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, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC/ 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 and amending Regulation (EU) No 648/2012
Corrigenda to the above-mentioned texts. (9/07/13) http://register.consilium.europa.eu/pdf/en/13/st11/st11925.en13.pdf (NB: over 40 pages long) http://register.consilium.europa.eu/pdf/en/13/st11/st11906.en13.pdf (NB: over 300 pages long)
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)
BIS: The regulatory framework: balancing risk sensitivity, simplicity and comparability
BIS has published a discussion paper to initiate discussion on the topic of balancing risk sensitivity, simplicity and comparability within the Basel capital standards. It discusses the reasons behind the evolution of the current framework, and outlines the potential benefits and costs that arise from a more risk sensitive methodology. The paper also discusses ideas that could possibly be explored to further reform the framework. Responses are required by 11 October 2013. (8/07/13) http://www.bis.org/publ/bcbs258.pdf
The Credit Rating Agencies (Civil Liability) Regulations 2013/1637
These Regulations implement Article 35a of Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (“the EC Regulation”) by defining certain terms, providing for how certain terms will be interpreted and applied, applying a limitation period for claims under Article 35a, and determining which courts have jurisdiction to hear a claim brought under Article 35a. Article 35a was inserted into Regulation 1060/2009 by Regulation (EU) No 462/2013, and provides for the civil liability of credit rating agencies when an agency, either intentionally or with gross negligence, commits any of the infringements listed in Annex III to the EC Regulation. Article 35a (4) permits Member States to interpret and apply certain terms used in Article 35a which are not defined therein. The terms “intention”, “gross negligence”, “impact”, “reasonably relied”, “due care”, and “caused” are defined in regulations 3 to 8. Regulation 9 provides that where a determination is to be made of whether a limitation of liability is “reasonable and proportionate”, regard shall be had to those of the factors referred to regulations 10 to 12 that the court considers relevant. If any such factors are considered relevant, that indicates that a limitation is reasonable and proportionate. Regulations 13 to 15 provide for how damages shall be determined where a claimant is successful in a claim made under Article 35a. Where a contract exists between an investor or issuer and a credit rating agency, regulations 13(a) and 14(a) limit the level of damages recoverable under Article 35a to that recoverable under the contract. Where there is no such contract, regulation 13(b) limits the damages recoverable by an issuer of a financial instrument to the increase in the issuer’s financing costs resulting from the affected credit rating, and regulation 14(b) limits the damages recoverable by an investor to those which the investor would recover if the investor had succeeded in a claim in tort. Regulation 15 applies to damages assessed under regulations 13 and 14 the common law principle that a claimant’s damages may be reduced if the claimant fails to mitigate their loss and the provisions of the Law Reform (Contributory Negligence) Act 1954. Regulation 16 establishes a
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limitation period of one year during which claims must be brought. Regulation 17 requires that cases under Article 35a be brought in the High Court (in England, Wales and Northern Ireland) or the Court of Session (in Scotland). (Date in force: 25/07/13) (5/07/13) http://www.legislation.gov.uk/uksi/2013/1637/pdfs/uksi_20131637_en.pdf
EBA: Consultation paper on draft regulatory technical standards (RTS) on credit valuation adjustment risk for the determination of a proxy spread and the specification of a limited number of smaller portfolios under Article 383 of Regulation (EU) 575/2013 (Capital Requirements Regulation - CRR)
This is described as the second consultation on draft regulatory technical standards for credit valuation adjustment risk to further specify how a proxy spread should be determined for the calculation of own funds requirements and to provide additional details on a limited number of smaller portfolios. These standards will be part of the single rulebook aimed at enhancing regulatory harmonisation in Europe. Responses are required by 25 September 2013. (5/07/13) http://www.eba.europa.eu/documents/10180/331125/EBA_CP_2013_24.pdf
BIS: Report on the regulatory consistency of risk-weighted assets in the banking book issued by the Basel Committee
This study is a part of its wider Regulatory Consistency Assessment Programme (RCAP), which is intended to ensure consistent implementation of the Basel III framework and draws on supervisory data from more than 100 major banks, as well as additional data on sovereign, bank and corporate exposures collected from 32 major international banks as part of a portfolio benchmarking exercise. (5/07/13) http://www.bis.org/publ/bcbs256.pdf (NB: over 50 pages long)
BIS: Capital requirements for banks' equity investments in funds
This consultation sets out proposals that would revise the prudential treatment of banks' equity investments in funds. The Basel II framework outlines the current treatment of banks' equity investments in funds under the Standardised Approach and the Internal Ratings-Based (IRB) approaches for credit risk and BIS believes that the existing standard would benefit from further clarity in some areas and more appropriately reflect the risk of a fund's underlying investments and its leverage as well as helping to address risks associated with banks' interactions with shadow banking entities. Responses are required by 4 October 2013. (5/07/13) http://www.bis.org/publ/bcbs257.pdf
HMRC/HMT: Bank levy review 2013
This consultation is focused on the following aspects of the bank levy: operation and compliance aspects and whether there are changes that can be made to simplify and reduce compliance costs; fair application of the bank levy; the operation of specific design features of the levy; ensuring that the bank levy remains aligned with the current regulatory regime and that proposed changes to the regulatory rules are taken into account in the bank levy design and improving the understanding of revenues. Responses are required by 26 September 2013. (4/07/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210738/130704_Bank_Levy_Review_Consult ation_Document.pdf (NB: over 30 pages long)
EBA: Single Rulebook Q&A
EBA has launched an online tool which will allow institutions, supervisors and other stakeholders to submit their questions on the CRD IV package and related technical standards, as well as on the EBA Guidelines. (4/07/13( http://www.eba.europa.eu/-/eba-launches-new-single-rulebook-q-a-tool
TSC: Project Verde/Leverage ratio
TSC has published a press release following the evidence session with FPC on 2 July 2013 which sets out Andrew Tyrie’s comments on the above matters. It is noted that the chairman of Lloyds Banking Group told TSC that the bank had become aware of a potential capital shortfall at the Co-operative Group in December 2012 and that Andrew Bailey had said that he told the Co-operative Bank’s Board that it should inform Lloyds of the regulator’s concerns, including over its capital levels, more than a year beforehand. It had also been indicated that Andrew Bailey has evidence to suggest his requests were complied with. TSC “will want to look at whether the regulator’s message got through, how it was conveyed and what, if any, action was taken as a result”. With regard to leverage ratio, Andrew Tyrie suggests that ““FPC members today made clear that they feel a 3% leverage ratio is an appropriate minimum backstop and that the FPC can make recommendations in this area, even without an explicit power of direction. “Bank lobbying of Government only serves to reinforce the need for the power to set the leverage ratio to lie with the independent FPC, not the Treasury”. (3/07/13)
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http://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news/tyrie-comments- on-financial-policy-committee-evidence-session/
BIS: Global systemically important banks: updated assessment methodology and the higher loss absorbency requirement
The framework text sets out the methodology for assessing and identifying global systemically important banks and describes the additional loss absorbency requirements that will apply to G-SIBs, the phase-in arrangements for these requirements and the disclosures that banks above a certain size are required to make to enable the framework to operate on the basis of publically available information. (3/07/13) http://www.bis.org/publ/bcbs255.pdf (NB: over 30 pages long)
European Parliament: Parliament sets out priorities for overhauling EU banks/ European Parliament resolution of 3 July 2013 on reforming the structure of the EU banking sector
This press release announces a non-legislative resolution made by the European Parliament which sets out a number of priorities for the reform of EU banks. Among these: proposals that bank board members must be personally liable for mistakes; banks' riskier trading activities must be clearly separated from their more conservative lending ones; more competition in the banking sector and for further reform of banks' remuneration and corporate governance structure. (03/07/13) http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130628IPR14590/20130628IPR14590_en.pdf http://www.europarl.europa.eu/sides/getDoc.do?pubRef=- //EP//NONSGML+TA+20130703+SIT+DOC+WORD+V0//EN&language=EN (text of resolution is contained in this document - NB: over 200 pages long)
PRA: Anchor scenario
In line with GENPRU 1.2.73B, PRA has published a supervisory recommended scenario for the UK as a complement to firms’ own scenarios. The scenario can be used by firms as a guide to calibrate their own scenarios for Pillar 2 capital planning stress tests. This webpage includes links to detailed spreadsheets for the UK anchor scenario and baseline. (2/07/13) http://www.bankofengland.co.uk/pra/Pages/supervision/activities/anchorscenario.aspx
ESMA: Spread Research SAS
ESMA has formally approved the registration of Spread Research SAS, based in France, as a credit rating agency under Article 16 of the Credit Rating Agencies Regulation. The registration takes effect from 1 July 2013. (1/07/13) http://www.esma.europa.eu/system/files/2013-853_esma_approves_spread_research_as_a_credit_rating_agency.pdf
FCA: Banking authorisations “applicant journey”
This document, in diagrammatic and tabular format, provides information on the key activities during the authorisation process. (28/09/13) http://www.fca.org.uk/static/fca/documents/banking-authorisations-applicant-journey.pdf
EBA: On revision of the ‘Guidelines on Technical aspects of the management of interest rate risk arising from non trading activities in the context of the supervisory review process’ from 3 October 2006, under Articles 123, 124 and Annex 5 of Directive 2006/48/EC of the European Parliament and the European Council
This consultation paper proposes amendments and additions to strengthen the CEBS Guidelines of 3 October 2006 entitled ‘Technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process’ which are concerned with the application, by both supervisors and institutions, of the Supervisory Review Process under Pillar 2 of Directive 2006/48/EC. Responses are required by 27 September 2013. It is envisaged that work will be completed by the end of 2013, with the revised Guidelines applying – subject to endorsement by the EBA’s board of supervisors – in early 2014. (28/06/13) http://www.eba.europa.eu/documents/10180/322921/CP+on+amendments+to+GL+on+IRRBB.pdf (NB: over 50 pages long)
FCA: Statement on CRD IV// EC: 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 and amending Regulation (EU) No 648/2012/ 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, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC
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As the Regulation and Directive have now been published in the Official Journal (second link below), FCA notes that it will consult later this summer on the changes to FCA rules to reflect the new provisions in the Regulation and to implement the Directive and relevant discretions provided in the Regulation. FCA will also consult on the specific issues related to the procedure for transitioning, as appropriate, existing waivers. (27/06/13) http://www.fca.org.uk/news/firms/fca-statement-on- crd-iv http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:176:FULL:EN:PDF (NB: over 400 pages long)
BoE: Financial stability report
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
EBA: Consultations on draft implementing technical standards on closely correlated currencies and diversified indices
EBA has published two consultations to identify a list of relevant closely correlated currencies for the purposes of calculating the capital requirements for foreign-exchange risk; and a list of relevant appropriately diversified indices for the purposes of calculating the capital requirements for equity risk. Responses are required by 8 September 2013. (26/06/13) http://eba.europa.eu/documents/10180/316641/EBA+BS+2013+21+%28draft+CP+on+ITS+on+closely+correlated+currencie s%29%20final.pdf http://eba.europa.eu/documents/10180/316897/EBA+BS+2013+22+%28draft+CP+on+ITS+on+diversified+indices%29%20fi nal.pdf
BIS: Revised Basel III leverage ratio framework and disclosure requirements
The consultation notes that implementation of the Basel II leverage ratio requirement has begun with bank-level reporting to supervisors of the leverage ratio and its components from 1 January 2013, and will proceed with public disclosure starting 1 January 2015. Any final adjustments to the definition and calibration of the leverage ratio will be made by 2017, with a view to migrating to a Pillar 1 treatment on 1 January 2018 based on appropriate review and calibration. Revisions to the framework relate primarily to the denominator of the leverage ratio, the “exposure measure”. The major changes to this include: specification of a broad scope of consolidation for the inclusion of exposures; clarification of the general treatment of derivatives and related collateral; enhanced treatment of written credit derivatives; and enhanced treatment of securities financing transactions (eg repos). BIS is to undertake a QIS to ensure that the calibration of the leverage ratio, and its relationship with the risk-based framework, remains appropriate. Responses to the report are required by 20 September 2013. (26/06/13) http://www.bis.org/publ/bcbs251.pdf
TSC: Project Verde
TSC has published a transcript of uncorrected evidence with respect to the hearing held on 18 June 2013 attended by Antonio Horta-Osorio and Sir Win Bischoff in which they discussed the failed Lloyds Banking Group/Co-Operative Group deal. (26/06/13) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/uc300-i/uc300.pdf
European Parliament: Report on reforming the structure of the EU banking sector (2013/2021(INI))
Further to the Liikanen report, this “own initiative “report sets out several core principles: reducing complexity, enhancing competition, limiting interconnectedness between risky and commercial activities, improving corporate governance, creating a responsible remuneration system, enabling effective bank resolution and recovery, reinforcing bank capital and providing
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credit to the real economy which, are essential to deliver a change in banking culture. (26/06/13) http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0231+0+DOC+PDF+V0//EN
BIS: Regulatory consistency assessment programme (RCAP) – assessment of Basel III regulations – Switzerland
BIS has published this report which evaluates compliance of Switzerland's domestic capital rules vis-à-vis international Basel capital standards through its RCAP. Authors of the report held technical discussions with senior officials and staff of FINMA, and met with senior representatives from banks and regulatory audit firms based in Switzerland. The assessment found implementation closely aligned with Basel III standards and therefore assessed it as "compliant". 11 out of 14 assessed components were found to be "compliant", while three of the components were graded "largely compliant" (definition of capital, credit risk-IRB, and Pillar 3). Although some differences with the Basel framework were found in these three areas, none of the findings were evaluated to be material at this point. (25/06/13) http://www.bis.org/bcbs/implementation/l2_ch.pdf
PRA: Capital shortfall exercise with major UK banks and building societies
PRA has now concluded its work with the eight major UK banks and building societies in relation to FPC’s March 2013 recommendation on bank capitalisation and has set out details here and in accompanying documents. PRA’s assessment is that, at the end of 2012, five of the eight banks (Barclays, Co-operative Bank, LBG, Nationwide and RBS) fell short. These firms have been required to submit plans for additional actions. All of the firms have been informed of their requirements and have produced for PRA plans to meet them. It is for the firms themselves to announce the actions they plan to take. In aggregate, the additional actions, which include disposals and restructurings, will generate the equivalent of an additional £13.4bn of capital. The vast majority of actions are due to be completed by end-2013, but PRA has allowed some limited flexibility for a small part of these actions to be delivered during the first half of 2014. It is noted that PRA will hold firms to these plans, and will require additional actions to be taken if capital to cover the full shortfalls is at risk of not being delivered by any firm. To complement this action, the PRA board has announced its intention to require banks to deduct from Common Equity Tier 1 significant investments in insurance companies above threshold allowances under its implementation of CRD IV/CRR.6. PRA has also indicated that it will use a regular process of stress testing to ensure firms’ capital positions accurately reflect the realities of their individual circumstances. (20/06/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/081.aspx
HMT: Speech by George Osborne: Mansion House speech (19 June 2013)
Text of the above follows. He discusses future plans for RBS and Lloyds and notes the Parliamentary Commission on Banking Standards report, saying “there’s a lot of detail here – I will respond more fully next month. We’ve already supported the recommendations on new criminal sanctions and cancelling bonuses where banks are bailed out. And let me be clear: where legislation is needed, the Banking Bill currently before Parliament will be amended to ensure the recommendations can be quickly enacted”. (20/06/13) https://www.gov.uk/government/speeches/speech-by-chancellor-of- the-exchequer-rt-hon-george-osborne-mp-mansion-house-2013
BoE: Speech by Sir Mervyn King: A Governor looks back – and forward (19 June 2013)
Text of the Mansion House speech follows. Topics include: the future of the banking sector in the light of recent events and the new regulatory regime. (20/06/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech670.pdf
EC: Council adopts new bank capital requirements
The Council has adopted a directive and a regulation amending the EU's rules on capital requirements for banks and investment firms (CRD4). The decision was taken by a qualified majority of delegations, with the United Kingdom voting against. The new rules will apply from 1 January 2014. (20/06/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137544.pdf
BIS: Speech by Stephen G Cecchetti: Five years in the tower (20 June 2013)
Text of this speech, given at the BIS Annual Conference, follows. He argues: “the second lesson I have learned in my time in the BIS tower is that the nature and size of the risks financial institutions take on are much bigger than we thought … The fundamental problem is that the private interests of banks and bankers diverge from those of society at large … I believe
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that stress tests are the most powerful tool we have discovered in the past five years. Policymakers should focus on understanding how to use them. Overall, then, my regulatory insight is that market discipline is not enough”. (20/06/13) http://www.bis.org/speeches/sp130620.pdf
European Parliament: Regulation (EU) No …/2013 of the European Parliament and of the Council of on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012
A revised text. (20/06/13) http://www.europarl.europa.eu/sides/getDoc.do?type=ADDON&reference=P7-TA-2013- 0115&format=PDF&language=EN&secondRef=PROV-COR-01-EN (NB: over 1000 pages long)
European Parliament: Directive 2013/…/EU of the European Parliament and of the Council of …on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC
A revised text. (20/06/13) http://www.europarl.europa.eu/sides/getDoc.do?type=ADDON&reference=P7-TA-2013- 0114&format=PDF&language=EN&secondRef=PROV-COR-01-EN (NB: over 300 pages long)
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) 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
OFT: Market study on competition on banking for SMEs
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OFT has announced the above and is seeking views on its scope. The study is part of OFT's continuing planned programme of work in retail banking and will cover England, Northern Ireland, Scotland and Wales. OFT is launching the first step of this work today and is seeking views on its proposed scope, in particular on: competition in the supply of banking services to SMEs - whether SMEs have access to services that meet their needs and represent good value; competition in the supply of lending or other finance to SMEs - such as whether any lack of competition between banks is holding back SME lending or other finance to SMEs; and whether there are types of SME (for example, start-ups or small financial firms) that face particular difficulties, and if so why.. It is noted that OFT will work closely with FCA, BoE and PRA on this review, and will contact the industry and SME representatives. (19/06/13) http://www.oft.gov.uk/news-and-updates/press/2013/43- 13
ESMA: Speech by Steven Majoor: ISLA 22nd Annual International Securities Lending Conference (19 June 2013)
Topics include: shadow banking, UCITS guidelines, short selling and collateral. (19/06/13) http://www.esma.europa.eu/system/files/2013-797_keynote_speech_islas_annual_onference_- __steven_maijoor_prague_19_june_2013.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)
EC: Credit rating agencies/ESMA :Guidelines and Recommendations on the Scope of the CRA Regulation
The EC press release notes that from 20 June 2013, stricter rules for credit rating agencies to enter into force and sets out a synopsis of the changes arising from the Regulation and Directive. Separately, ESMA has published a document setting out clarifications on the Regulation, covering: obligation for credit rating agencies to register with ESMA; credit rating activities and exemptions from registration; establishment of branches outside the EU by registered credit rating agencies; specific disclosure recommendations for best practice; and enforcement of the scope of the Regulation. The report also provides a feedback statement to ESMA’s December 2013 consultation. (18/06/13) http://europa.eu/rapid/press-release_IP-13- 555_en.htm?locale=en http://europa.eu/rapid/press-release_MEMO-13-571_en.htm?locale=en
BoE: Financial Stability Paper No. 22: Which way do foreign branches sway? Evidence from the recent UK domestic credit cycle
This paper discusses foreign branches’ UK lending, as compared to that of UK-incorporated banks. It notes that foreign bank branches have a significant presence in the UK’s financial sector, more so than in any other major advanced economy and emphasises the importance for FPC and PRA to monitor the risks that foreign branches, particularly large ones, may pose to UK financial stability and to the broader economy. (14/06/13) http://www.bankofengland.co.uk/publications/Documents/fsr/fs_paper22.pdf
EBA: Annual Report 2012
EBA has published its annual report providing an overview of its work during the year. A summary of the report is also available to download via the second link. (14/06/13) http://eba.europa.eu/documents/10180/233831/EBA+2012+Annual+Report.pdf/50e3883d-0392-4ace-8af9-789f289dde0b (NB: 60 pages long) http://eba.europa.eu/documents/10180/233831/Summary+of+the+EBA+2012+Annual+Report.pdf/5068357b-7544-490e- 8aa9-2c62518e3225
BBA: LIBOR
BBA has announced that, following the recommendations set out in the Wheatley Review, with effect from July 2013, the publication of individual banks’ submissions to LIBOR will be embargoed for 3 months. The publication of “same day” EURO LIBOR rates for one week and one month will cease from 31 July 2013. (13/06/13) http://www.bba.org.uk/media/article/announcement-of-libor-changes/latest-news/
ESMA: Dagong Europe Credit Rating Srl
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ESMA has formally approved the registration of Dagong Europe Credit Rating Srl, based in Italy, as a credit rating agency under Article 16 of the CRA Regulation. The registration takes effect from 13 June 2013. (7/06/13) http://www.esma.europa.eu/system/files/2013-700_esma_approves_dagong_europe_as_a_credit_rating_agency.pdf
ESMA/EBA: Principles for benchmark-setting processes in the EU
Further to the January 2013 consultation, this report sets out the final text of the principles. Although the provisions will be without binding legal effect they provide benchmark users, benchmark administrators, calculation agents and publishers and firms involved in benchmark data submissions with a common framework to work together and provide a transition path toward potential future legal obligations. ESMA and EBA plan to conduct a review of the application of the principles eighteen months after their publication, but may alter that timeframe should they deem it to be appropriate or necessary. It is noted that the may revise the principles in light of potential future EU regulations, material changes in market practices or the agreement of international standards pertaining to benchmarks. (6/06/13) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/2013-658-ESMA-EBA-Principles-on- Benchmarks-Final-Report.pdf (NB: over 40 pages long)
EBA: Near-final regulatory technical standards on own funds
The standards cover, amongst other matters, Common Equity Tier 1 (CET1), additional Tier 1, deductions from CET1 and from own funds in general and transitional provisions on grandfathering. Once formally adopted by the European Commission, these RTS will be part of the Single Rulebook EBA emphasises that the publication of these near-final draft standards does not constitute a precedent for the publication of other draft technical standards, which will normally take place upon their submission to the EC. (6/06/13) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-RTS-2013-01-Near-final-Draft-RTS- on-OF-Part-1-.pdf (NB: over 80 pages long)
BIS: Speech by Jaime Caruana: Global liquidity: where do we stand? (4 June 2013)
Text of the following, given at the Bank of Korea annual conference, follows. He discusses issues surrounding global liquidity, concluding: “authorities and market participants must recognise the challenges inherent in the inevitable and desirable interest rate normalisation and seek to make their financial firms and markets resilient in the face of potential strains”. (5/06/13) http://www.bis.org/speeches/sp130604.pdf
PRA: Speech by Andrew Bailey: Challenges of prudential regulation (3 June 2013)
Text of the above, given at the Society of Business Economists Annual Dinner, follows. Topics include: bank capitalisation and Funding for Lending. (4/06/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech663.pdf
IOSCO: Principles for financial benchmarks consultation
Responses to this consultation, published in April 2013, are now available to download individually via the following link. (4/06/13) http://www.iosco.org/library/index.cfm?section=pubdocs&publicDocID=409
FCA: PS13/4: Financial Conglomerates Directive – technical review amendments
Further to FSA’s CP12/40, FCA has published the final rules implementing Directive 2011/89/EU which amends Directive 2002/87/EC and certain other directives in so far as they apply to financial conglomerates. The new rules are intended to ensure that consumers can find information about financial conglomerates and improve how the markets used by financial conglomerates and financial groups function. The rules come into force on 10 June 2013. (4/06/13) http://www.fca.org.uk/static/documents/policy-statements/ps13-04.pdf
HMRC: Strengthening the Code of Practice on Taxation for Banks
The Code was introduced in 2009. It describes the approach expected of banks with regard to governance, tax planning and engagement with HMRC. This consultation notes that, although the Code is generally operating well, it lacks public
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transparency, adding that there are no obvious downsides for banks from not adopting the Code and no codified consequences for non-compliance with a bank’s Code commitments. HMRC also states that there are concerns that a small number of banks may be interpreting the Code differently from others. Budget 2013 therefore announced that, following consultation, the Government will introduce legislation in Finance Bill 2014 requiring HMRC to publish an annual report, beginning in 2015, on the operation of the Code. The legislation will also provide that such a report may include the naming of any bank that HMRC considers has not complied with their Code commitments as well as a full list of all banks that have, or have not, adopted the Code. This consultation considers the governance process around determining non- compliance, the processes and criteria by which a decision to name a bank as being non-compliant will be made and the nature of the report to be published by HMRC. It also considers the timescale for banks to adopt or reaffirm their adoption of their Code commitments in light of these strengthened features. The consultation does not include any proposals on the content of the Code itself. Responses are required by 16 August 2013. (31/05/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/204114/130530_Code_consultation_Docprint _version.pdf (NB: over 30 pages long)
EC: Regulation (EU) No 462/2013 of the European Parliament and of the Council of 21 May 2013 amending Regulation (EC) No 1060/2009 on credit rating agencies/Directive 2013/14/EU of the European Parliament and of the Council of 21 May 2013 amending Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) and Directive 2011/61/EU on Alternative Investment Funds Managers in respect of over-reliance on credit ratings
These have now been published in the Official Journal. (31/05/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:146:0001:0033:EN:PDF (NB: over 30 pages long) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:145:0001:0003:EN:PDF
ESMA: Technical advice on credit rating agency regulatory equivalence – on Argentina, Brazil, Mexico, Hong Kong and Singapore
ESMA has provided advice to the EC in respect of the equivalence between the EU regulatory regime for credit rating agencies and the respective legal and supervisory frameworks of Argentina, Brazil, Mexico, Hong Kong and Singapore. This is in response to the EC’s request for technical advice from ESMA on the equivalence of these jurisdictions legal and supervisory frameworks with the EU regulatory regime for credit rating agencies as set out in Regulation (EC) No. 1060/2009 of the European Parliament and the Council on credit rating agencies. (31/05/13) http://www.esma.europa.eu/system/files/2013- 626_esma_technical_advice_on_equivalence_of_argentina_brazil_mexico_hong_kong_singapore_with_eu_on_cras_super vision_30_may_2013.pdf (NB: 100 pages long)
PRA: PS3/13: Financial Conglomerates Directive Technical Review
Further to FSA’s CP12/40, this PS publishes the final statement of policy and rules implementing the Financial Conglomerates Directive Technical Review (2011/89/EC – FICOD 1) which amends the Financial Conglomerates Directive (2002/87/EC) and certain other Directives in so far as they apply to financial conglomerates. FICOD 1 introduces technical amendments aimed at correcting unintended consequences and improving inefficiencies of the original directive. The FICOD 1 amendments relate to: conglomerate supervision which supplements but does not substitute sectoral supervision when a group is headed by a financial or insurance holding company; the conglomerate capital calculation methodology; inclusion of asset management companies and alternative investment fund managers within the conglomerate identification process; conglomerate identification threshold triggers; and requirements for conglomerate stress testing. (30/05/13) http://www.bankofengland.co.uk/pra/Documents/publications/policy/2013/ficodps3-13.pdf
ESMA: Economist Intelligence Unit
ESMA has approved the registration of the Economist Intelligence Unit as a credit rating agency under Article 16 of the Credit Rating Agency Regulation. The registration takes effect from 3 June 2013. (30/05/13) http://www.esma.europa.eu/system/files/2013-630_esma_approves_eiu_as_a_credit_rating_agency_30_may_2013.pdf
EBA: Draft regulatory technical standards on the definition of market under Article 330(3) of the Draft Capital Requirements Regulation (CRR)/Draft regulatory technical standards on non-delta risk of options in the standardised market risk approach under Articles 318(3), 341(6) and 347(4) of the draft Capital Requirements Regulation (CRR)
EBA has published two consultations to define the term market for the purpose of calculating the “general” component of market risk for equities under the standardised rules; and to consider a range of methods to reflect in the own funds
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requirements non-delta risks for options and warrants. Responses are required by 31 August 2013. (23/05/13) http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-15/EBA-CP-on-RTS-on-the-definition- of-market.pdf http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-16/EBA-CP-on-non- delta-risk-of-options.pdf (NB: 30 pages long)
EBA: Draft regulatory technical standards on own funds under Articles 33(2), 69a(6) and 79(3) of the draft Capital Requirements Regulation (CRR) – part III
Further to earlier consultations published in April and November 2012, this consultation relates to criteria to define broad market indices, the calculation of minority interest and the deduction of indirect and synthetic holdings. Responses are required by 18 July 2013 (23/05/13) . http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP- 17/CP-on-RTS-on-market-indices---deductions---minority-interests---final.pdf (NB: over 30 pages long)
EBA: Draft regulatory technical standards on additional liquidity monitoring metrics under Article 403(2) of the draft Capital Requirements Regulation (CRR)/Draft regulatory technical standards on additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario on the institution’s derivatives transactions, financing transactions and other contracts for liquidity reporting under Article 411(3) of the Draft Capital Requirements Regulation (CRR)
These consultations, relating to supervisory reporting of additional monitoring metrics for liquidity and additional collateral outflows, are available to download, together with accompanying annexes, via the following link. Responses are required by 14 August 2013. (23/05/13) http://www.eba.europa.eu/News--Communications/Year/2013/EBA-consults-on-draft-technical- standards-on-liqui.aspx
EBA: Draft guidelines on capital measures for foreign currency lending to unhedged borrowers under the Supervisory Review and Evaluation Process (SREP) under the Recommendation E of the European Systemic Risk Board Report of 21 September 2011 on lending in foreign currencies (ESRB/2011/1). published on 22 November 2011 (Official Journal C 342)
This consultation provides draft guidelines on capital measures for FX lending aimed at providing guidance to national competent authorities on how to deal with the specific risk of FX lending to unhedged borrowers and includes guidance on the supervisory review of FX lending governance arrangements and of capital adequacy as well as on how to calculate capital add-on as a result of the SREP. (23/05/13) http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-20/Consultation-Paper-for-GLs-on- capital-measures-for-FX-lending.pdf
PRA: Bank capital
PRA has announced that it is taking forward with the major UK banks the adjustments to capital positions identified by FPC relating to expected future losses, conduct costs and prudent risk-weighting. PRA has set out the capital requirements for Lloyds Banking Group and Royal Bank of Scotland. The two banks have advanced their plans to a position where disclosure is appropriate. Once discussions have concluded with all banks, more information will be provided along with confirmation that, where necessary, banks will take appropriate steps to ensure that they meet FPC’s recommendation on capital. (22/05/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/066.aspx
EBA: Draft regulatory technical standards on criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile under Article 90(2) of the proposed Capital Requirements Directive
This consultation considers criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile. These material risk takers will be subject to specific provisions of the Capital Requirements Directive related, in particular, to the payment of variable remuneration. EBA proposes an identification process based on a combination of standard qualitative and quantitative criteria and internal criteria developed by the institutions. Staff shall be identified as material risk takers if they meet one or more of the following criteria. Standard qualitative criteria: related to the role and decision-making power of staff members. Standard quantitative criteria: related to the level of variable or total gross remuneration in absolute or in relative terms. Staff should be identified as material risk takers if: their total remuneration exceeds, in absolute terms, €500 000 per year, or they are included in the 0.3 % of staff with the highest remuneration in the institution, or their remuneration bracket is equal or greater than the lowest total remuneration of senior management and other risk takers, or their variable remuneration exceeds €75 000 and 75% of the fixed component of remuneration. Internal criteria: these criteria shall be based on internal risk assessment processes and aim at reflecting the specific institution’s risk profile. Responses are required by 21 August 2013. (22/05/13) http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-11/EBA-CP-2013-11---Draft-RTS-on- criteria-for-Identified-Staff.pdf
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European Parliament: EU banking supervision
Draft laws setting up a single EU bank supervisory system have been approved in a plenary vote. ECB will supervise the eurozone's largest banks directly and have a say in supervising other banks. However, Parliament will give its final seal of approval only later, to allow time for parallel talks with ECB on detailed accountability arrangements. The European Parliament's plenary must still give its final approval of the deal in the near future. It is noted that national parliaments may, in the meantime, “express their views” and an inter-institutional agreement on detailed accountability and transparency rules will be hammered out by the European Parliament and ECB. (22/05/13) http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130521IPR08733/20130521IPR08733_en.pdf http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130521IPR08703/20130521IPR08703_en.pdf
EBA: Consultation paper on draft regulatory technical standards on the retention of net economic interest and other requirements relating to exposures to transferred credit risk (Articles 394, 395, 397 and 398) of Regulation (EU) No [xx/2013] and draft Implementing technical standards relating to the convergence of supervisory practices with regard to the implementation of additional risk weights (Article 396) of Regulation (EU) No [xx] of [xx/2013]
EBA has published a consultation on draft regulatory technical standards to specify the securitisation retention rules and related requirements and draft implementing technical standards to clarify the measures to be taken in the case of non- compliance with such obligations. The key objectives of the draft regulatory technical standards are ( i) an alignment of interest (risk) and information between securitisation sponsors, originators and original lenders and the investors buying securitisation transactions and (ii) to facilitate the implementation of the 5% retention requirements and disclosure requirements of the sponsor, originator or original lender and the due diligence requirements of investors in securitisations. The objective of the draft implementing technical standards is to specify the measures to be taken in the case of a material breach of the securitisation retention rules and related requirements. Responses are required by 22 August 2013. (22/05/13) http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-14/EBA-BS-2013-091rev2- -RTS-ITS-securitisation-retention-rules-clean.pdf (NB: over 40 pages long)
The Cash Ratio Deposits (Value Bands and Ratios) Order 2013/1189
Schedule 2 to the Bank of England Act 1998 (c. 11) makes provision concerning the maintenance by certain institutions of cash ratio deposits with BoE. The institutions covered by these arrangements are those defined as “deposit-takers” by s17(7) of, and sub-paragraphs (1A) to (1C) of paragraph 1 in Schedule 2 to, that Act. The Bank is empowered by paragraph 3 of that Schedule to give such an institution a call notice specifying an amount it is expected to have on deposit with BoE during a specified period. Under paragraph 4 of that Schedule, this depositable amount is to be calculated by multiplying so much of an institution’s average liability base as falls into each of the different value bands by the ratio applicable to that band, and adding up these amounts. This Order specifies the value bands and the ratios applicable to them and revokes the Order which specified previous value bands and ratios. The Order specifies two value bands and the applicable ratio, in the form of a percentage, to each. (Date in force; 3/06/13) (22/05/13) http://www.legislation.gov.uk/uksi/2013/1189/pdfs/uksi_20131189_en.pdf
EBA: Draft Implementing technical standards on joint decisions on institution-specific prudential requirements under Article 108 of the proposed Capital Requirements Directive
EBA has launched a consultation on the above which is intended to facilitate the reaching of effective joint decisions between the consolidating supervisor and the competent authorities responsible for the supervision of subsidiaries in a Member State. Responses are required by 16 August 2013. The paper and accompanying annexes are available to download via the following link. (21/05/13) http://www.eba.europa.eu/News--Communications/Year/2013/EBA-consults-on- joint-decisions-on-institution-spe.aspx
The Financial Conglomerates and Other Financial Groups (Amendment) Regulations 2013/1162
These regulations implement, in part, Directive 2011/89/EU of the European Parliament and of the Council amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and 2009/138/EC as regards the supplementary supervision of financial entities in a financial conglomerate (OJ L 326 8.12.2011 p.113). FCA and PRA are responsible for implementing other parts of this Directive. Regulations 2 to 6 amend the Financial Conglomerates and Other Financial Groups Regulations 2004/862) to update the definition of the financial conglomerates directive and update references to Part 12 FSMA (control over authorised persons). Regulations 7 to 11 amend the Capital Requirements Regulations 2006/3221) to include references to mixed financial holding companies in various definitions, to amend the requirement on the regulators to provide essential information to other relevant competent authorities, and to enable the competent authorities of all regulated entities within a group to participate in colleges of supervisors. Regulations 12 and 13 amend FSMA and the Financial Services and Markets
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Act 2000 (Disclosure of Confidential Information) Regulations 2001 respectively, to update definitions (Date in force: 10/06/13)| (20/05/13) http://www.legislation.gov.uk/uksi/2013/1162/pdfs/uksi_20131162_en.pdf
BoE: Speech by Andrew Haldane: Constraining discretion in bank regulation (9 April 2013)
BoE has now published the text of this speech, given at the Federal Reserve Bank of Atlanta Conference. Topics include: the shift to self-regulation and the unintended consequences and Basel and its effects; He concludes: “banking regulation has edged in a self-regulatory direction for understandable, but self-defeating, reasons. The regulatory regime has tilted from constrained discretion to unconstrained indiscretion. It will be a long journey home, but that journey has started. Making greater use of simple, prudent regulatory metrics could restore faith, hope and clarity to the financial system to the benefit of banks, investors and regulators alike.” (17/05/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech657.pdf
EC: Reforming the structure of the EU banking sector
This consultation paper outlines the main building blocks of the Commission’s follow-up of the Liikanen report. It outlines the problem that bank structural reform could address; assesses the necessity of EU action in terms of subsidiarity and sets out the main options under consideration. Responses are required by 3 July 2013. (17/05/13) http://ec.europa.eu/commission_2010-2014/barnier/headlines/news/2013/05/20130517_en.htm http://ec.europa.eu/internal_market/consultations/2013/banking-structural-reform/docs/consultation-document_en.pdf
EBA Draft regulatory technical standards on the determination of the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets under Article 379 of the proposed Capital Requirements Regulation
EBA has published a consultation on the above which sets out to define the conditions and methodologies used to determine the overall exposure to a client or group of connected clients resulting from a transaction with underlying assets and the risks inherent in the structure of the transaction itself. Responses are required by 16 August 2013. (17/05/13) http://www.eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-07/CP-on-RTS-on-Large-Exposures--- Art--379-8--CRR.pdf (NB: over 30 pages long)
EBA: EBA recommends supervisors to conduct asset quality reviews and adjusts the next EU-wide stress test timeline
EBA notes that it has agreed on recommendations to supervisors to conduct asset quality reviews on major EU banks. While banks’ capital positions were significantly strengthened under EBA’s recapitalisation exercise, the objective of the asset quality exercises will be to review banks’ classifications and valuations of their assets so to help dispel concerns over the deterioration of asset quality due to macroeconomic conditions in Europe. (17/05/13) http://www.eba.europa.eu/News-- Communications/Year/2013/EBA-recommends-supervisors-to-conduct-asset-qualit.aspx
EC: Credit rating agencies
It is reported that the Council has adopted a Directive and a Regulation amending the EU's rules on credit rating agencies. Under the rules approved, investors or issuers will be able to claim damages from a credit rating agency if they suffer a loss due to an infringement committed by the agency intentionally or with gross negligence. The Regulation calls on the EC to prepare a report by 1 July 2016, reviewing the situation in the credit rating market, and if necessary to follow it up with appropriate legislative proposals on some of the new provisions. (130513) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137078.pdf
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
EC: Proposal for a structural reform of EU banks
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The EC has published a “roadmap” document in respect of the above – it is emphasised that it is provided for information purposes only and is subject to change. It does not prejudge the final decision of the EC on whether this initiative will be pursued or on its final content and structure. (8/05/13) http://ec.europa.eu/governance/impact/planned_ia/docs/2013_markt_050_reform_structure_eu_banks_en.pdf
HoC: LIBOR, public Inquiries & FSA disciplinary powers
This HoC library note summarises some of the key points relating to the LIBOR scandal, issues surrounding public inquiries and at the role and limitations of FSA’s/FCA's disciplinary powers. (3/05/13) http://www.parliament.uk/briefing- papers/SN06376.pdf
IOSCO: Transparency and competition among credit rating agencies
IOSCO has published the text of a letter it has sent to ministers of finance and central bank governors of the G20 with regard to the above. It sets out details of IOSCO’s ongoing work on credit rating agencies. (30/04/13) http://www.iosco.org/library/briefing_notes/pdf/IOSCOBN01-13.pdf
HMT: Review of cash ratio deposit scheme: summary of consultation responses
HMT has published a brief summary of responses to its February 2013 consultation. (26/04/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/192062/review_of_cash_ratio_deposit_schem e_summary_of_consultation_responses.pdf
BIS: Structural bank regulation initiatives: approaches and implications
This paper considers the basic rationale and features of the proposals adopted to separate specific investment and commercial banking activities (Volcker rule, Vickers and Liikanen proposals). In particular, it focuses on the likely implications of such initiatives for: financial stability and systemic risk; banks' business models; and (iii) the international activities of global banks. (26/04/13) http://www.bis.org/publ/work412.pdf (NB: over 30 pages long)
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
EC: Regulation of the European Parliament and of the Council amending Regulation (EC) No 1060/2009 on credit rating agencies /Directive of the European Parliament and of the Council amending Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) and Directive 2011/61/EU on Alternative Investment Funds Managers in respect of over-reliance on credit ratings
New texts have been published in respect of the above. (24/04/13) http://register.consilium.europa.eu/pdf/en/12/pe00/pe00070.en12.pdf (NB: over 100 pages long) http://register.consilium.europa.eu/pdf/en/12/pe00/pe00069.en12.pdf
EC: Bank supervision: Council confirms agreement with European Parliament
The Council’s Permanent Representatives Committee has approved a compromise agreed with the European Parliament on the establishment of a single supervisory mechanism (SSM) for the oversight of credit institutions. The SSM will be
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composed of the ECB and the supervisory authorities in the member states. The ECB will be responsible for the overall functioning of the SSM. It will have direct oversight of eurozone banks, although in a differentiated way and in close cooperation with national supervisory authorities. Non-eurozone member states wishing to participate in the SSM will be able to do so by entering into close cooperation arrangements. The ECB's monetary tasks will be strictly separated from its new supervisory tasks, in order to eliminate potential conflicts of interest between the objectives of monetary policy and prudential supervision. A supervisory board responsible for the preparation of supervisory tasks will be set up within the ECB. Non-eurozone countries participating in the SSM will have full and equal voting rights on the supervisory board. The board's draft decisions will be deemed adopted unless rejected by the ECB governing council. National supervisors will remain in charge of tasks not conferred on the ECB (eg. consumer protection, money laundering, payment services, and branches of third country banks). EBA will retain its competence for further developing the single rulebook and ensuring convergence and consistency in supervisory practice. ECB will assume its supervisory tasks within the SSM either on 1 March 2014 or 12 months after entry into force of the legislation, whichever is later, subject to operational arrangements. (19/04/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/136846.pdf
ESMA: Credit ratings data
ESMA has published the latest set of semi-annual statistical data on the performance of credit ratings including transition matrices and default rates in its Central Rating Repository (CEREP). This new set of statistics covers ratings data up to 31 December 2012. (19/04/13) http://cerep.esma.europa.eu/cerep-web/
European Parliament: CRD IV
Adopted texts of the Regulation and Directive following the vote earlier this week are available to download via the following links. (18/04/13) http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+20130416+SIT- 03+DOC+WORD+V0//EN&language=EN http://www.europarl.europa.eu/sides/getDoc.do?pubRef=- //EP//NONSGML+TA+20130416+SIT-02+DOC+WORD+V0//EN&language=EN
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/PRA: CRD IV
Further to yesterday’s announcement by the European Parliament, FCA and PRA intend to publish two consultations. The main one, due to be published in the summer, will set out the changes to rules to remove current provisions covered in the new Regulation and to implement the Directive and relevant discretions provided in the Regulation. It should be noted that the Regulation will, in substance, replace the majority of the current capital requirements provisions in the Rulebooks (which can be found broadly in BIPRU and GENPRU). The second consultation will cover specific issues relating to the procedure for transitioning, as appropriate, existing waivers, which is expected to be conducted before or as part of the main consultation. The press releases state that in the meantime firms should discuss any queries or issues, in the first instance, with their supervisor or through their usual FCA/PRA contacts. (17/04/13) http://www.fca.org.uk/news/firms/fca-statement- on-crd-iv http://www.bankofengland.co.uk/pra/Pages/crdiv/implementationtimetable.aspx
European Parliament: Capital Requirements Regulation and Capital Requirements Directive (CRD IV)/ EC: Statement Jose Manuel Barroso and Michel Barnier
The European Parliament has confirmed the results of its vote on the above in a press release which highlights that the changes will mean a cap on bankers' bonuses; enhanced capital requirements on banks; a reduction in “nominal risk” assigned to loans extended to SMEs and a requirement for banks to disclose profits made, taxes paid and subsidies received country by country, as well as turnover and number of employees (more details on these issues are included in the first link below). From 2014, these figures should be reported to the EC and from 2015 made fully public. Banks are to be supervised by EU member states' competent authorities, in collaboration with EBA, whose supervisory powers will be expanded. The new rules must be formally approved by the Council of Ministers to apply from 1 January 2014. The EC statement welcoming the vote says that “we are setting up a body of unique rules, a Single Rulebook for all the banks in the
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single market with rules that are directly applicable in Member States without any possibility of regulatory arbitrage. And at the level of banking union, the Single Supervisory Mechanism will use this essential tool, once it will be fully operational”. (16/03/13) http://www.europarl.europa.eu/news/en/headlines/content/20130405FCS07019/3/html/Parliament-approves- reform-package-to-strengthen-EU-banks http://europa.eu/rapid/press-release_MEMO-13-338_en.htm
IOSCO/FCA: Principles for benchmarks
IOSCO’s consultation seeks comments on a set of high-level principles for benchmarks used in global financial markets. In addition, due to the wide diversity of benchmarks, IOSCO is asking for public comment on a sub-set of more detailed principles for benchmarks having specific risks arising from their reliance on submissions and/or their ownership structure. Responses are required by 16 May 2013. FCA has published a press release on the matter noting that it is undertaking further work to examine any potential weaknesses in the wider range of benchmarks captured under the IOSCO principles and will be writing to firms about this shortly (16/04/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD409.pdf (NB: over 40 pages long) IOSCO proposes Principles for Financial Benchmarks
Parliamentary Commission on Banking Standards: Written evidence from the Financial Services Authority
PCBS has published the text of this memo which was prepared in response to the requests directed to Tracey McDermott from the oral evidence taken on 10 January 2013 from Hector Sants, Tracey McDermott and Thomas Huertas, covering specific questions on LIBOR penalties. (15/04/13) http://www.parliament.uk/documents/joint- committees/Banking_Standards/S114%20-%20Financial%20Services%20Authority%20_FSA_.pdf
European Parliament: Banking reform: votes on bonus caps, capital and loans
The European Parliament has announced a plenary session taking place on 15-18 Apri 2013l. Votes on banking reform will take place on 16 April. The second link below includes links to two reports on the proposal for a directive of the European Parliament and of the Council on the access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms and amending Directive 2002/87/EC of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and a report on the proposal for a regulation of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms. (12/04/13) http://www.europarl.europa.eu/pdfs/news/public/focus/20130405FCS07019/20130405FCS07019_en.pdf http://www.europarl.europa.eu/sides/getDoc.do?pubRef=- %2f%2fEP%2f%2fTEXT%2bAGENDA%2b20130416%2bSIT%2bDOC%2bXML%2bV0%2f%2fEN&language=EN
BIS: Report to G20 finance ministers and central bank governors on monitoring implementation of Basel III regulatory reform
This report updates G20 finance ministers and central bank governors on progress in adoption of the Basel III regulatory reforms since BIS issued its report in October 2012 report. The scope of this update is broader than previous progress reports to the G20 – it also covers developments in other Basel III regulatory standards, and banks' progress in bolstering their capital bases. The report also highlights specific implementation-related shortcomings, (12/04/13) http://www.bis.org/publ/bcbs249.pdf
FRC: Statement following PCBS report into failure of HBOS
FRC has announced that it will consider the PCBS report and a forthcoming PRA report to identify whether there is a case for an investigation under its powers, saying that if there is evidence that financial statements were misleading, and there were deficiencies in the audit, it would take this as a basis to launch an investigation into potential misconduct under its powers. (11/04/10) http://www.frc.org.uk/News-and-Events/FRC-Press/Press/2013/April/Statement-following- Parliamentary-Commission-on-Ba.aspx
Parliamentary Commission on Banking Standards: Panel on mis-selling and cross-selling
PCBS has published a volume of written evidence in respect of the above. (11/04/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/writev/misselling/misselling.pdf (NB: over 190 pages long)
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Parliamentary Commission on Banking Standards: Panel on HBOS
PCBS has published the corrected evidence of a hearing held on 30 November 2012 attended by an unnamed “FSA official”. (11/04/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c705-viii/c705.pdf
BIS: Authorities' access to trade repository data
The purpose of this consultation is to provide guidance to trade repositories and authorities on the principles that should guide authorities' access to data held in the repositories for typical and non-typical data requests. The report also sets out possible approaches to addressing confidentiality concerns and access constraints. Responses are required by 10 May 2013. (11/04/13) http://www.bis.org/publ/cpss108_covernote.pdf http://www.bis.org/publ/cpss108.pdf (NB: over 40 pages long)
BIS: Monitoring tools for intraday liquidity management
This final version of the above-mentioned report provides a framework which includes the detailed design of the monitoring tools for a bank's intraday liquidity risk; stress scenarios; key application issues; and the reporting regime. (11/04/13) http://www.bis.org/publ/bcbs248.pdf
FSB: Thematic peer review on the FSB principles for reducing reliance on credit rating agency ratings
FSB is undertaking a thematic peer review, whose main objective is to assist national authorities fulfil their commitments under the agreed CRA ratings roadmap, the primary source of information for which will be the responses to this questionnaire. (8/04/13) http://www.financialstabilityboard.org/publications/r_130408.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)
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PRA: Pension obligation risk: treatment in the Internal Capital Adequacy Assessment Process (ICAAP) for banks and building societies/ Pension obligation risk: treatment under ICAS (Individual Capital Adequacy Standards) for insurance firms
PRA has adopted a number of legacy FSA policy publications relevant to the advancement of its objectives. These documents, initially issued, respectively by FSA in the form of separate letters to BBA and BSA, and in the form of a letter to ABI, both in February 2011, have been adopted by PRA as Supervisory Statements as part of this process. The PRA may choose to review these legacy publications at a later stage. (5/04/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2013/pensionobligationrisklss6-13.pdf http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2013/pensionobligationrisklss5-13.pdf
FCA: Banking applications
FCA has published webpages and documentation designed to help new applicant firms that are looking to establish a bank in the UK, as well as existing firms that want to become a bank by adding “accepting deposits” to their existing permissions. (5/04/13) http://www.fca.org.uk/firms/about-authorisation/dual-regulated-firms/banking-applications
BIS: Progress report on implementation of the Basel regulatory framework
An updated progress report on implementation of the Basel regulatory framework provides a high-level view of Basel Committee members' progress in adopting Basel II, Basel 2.5 and Basel III, as of end March 2013. It focuses on the status of domestic rule-making processes to ensure that capital standards are transformed into national law or regulation according to the internationally agreed timeframes. In addition, two updated progress report tables on Basel II and Basel 2.5 are available to download, all via the following link. (4/04/13) http://www.bis.org/publ/bcbs247.htm
Parliamentary Commission on Banking Standards: Proprietary trading
PCBS has published a letter from Andrew Tyrie to Andrew Bailey, asking how PRA intends to give effect to PCBS’s recommendations on proprietary trading as discussed in its recent report. (3/04/13) http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking- industry/news/chairman-asks-pra-how-it-intends-to-bear-down-on-proprietary-trading/
PRA: Pension obligation risk: treatment in the Internal Capital Adequacy Assessment Process (ICAAP) for banks and building societies/ Pension obligation risk: treatment under ICAS (Individual Capital Adequacy Standards) for insurance firms
PRA has adopted a number of legacy FSA policy publications relevant to the advancement of its objectives. These documents, initially issued, respectively by FSA in the form of separate letters to BBA and BSA, and in the form of a letter to ABI, both in February 2011, have been adopted by PRA as Supervisory Statements as part of this process. The PRA may choose to review these legacy publications at a later stage. (3/04/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2013/pensionobligationrisklss6-13.pdf http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2013/pensionobligationrisklss5-13.pdf
The Bank of England (Call Notice) (Benchmark Rate of Interest) Order 2013/721
Schedule 2 to the Bank of England Act 1998 (c. 11) makes provision concerning the maintenance by certain institutions of cash ratio deposits with BoE. The institutions covered by these arrangements are those defined as “deposit-takers” by s17 of, and sub-paragraphs (1A) to (1C) of paragraph 1 of Schedule 2 to, that Act. BoE is empowered by paragraph 3 of that Schedule to give such an institution a call notice specifying an amount it is expected to have on deposit with BoE during a specified period. Under paragraph 6(3), the amount BoE may require an institution to pay when eligible institutions are late in making deposits is an amount equal to interest for the period covered by the notice, at 4% over the benchmark rate. This Order replaces paragraph 7 of Schedule 2 which currently specifies the benchmark rate for this purpose. This Order specifies that the BoE rate (as defined in new paragraph 7(2)) is the benchmark rate. (Date in force: 3/06/13) (2/04/13) http://www.legislation.gov.uk/uksi/2013/721/pdfs/uksi_20130721_en.pdf
HoC: Financial Services (Banking Reform) Bill
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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
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published corrected evidence from the hearing held on 6 March 2013 attended by Mervyn King and Andrew Bailey. (28/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xl/c60601.pdf (NB: over 30 pages long)
BoE/FSA: FPC policy meeting (19 March 2013)/Methodology note on calculating capital pressures
In November 2012 the interim FPC recommended that FSA took action to ensure that the capital of UK banks and building societies reflects a proper valuation of their assets, a realistic assessment of future conduct costs and prudent calculation of risk weights. In responding to the recommendation FSA has undertaken analysis to assess incremental capital requirements to reflect a proper valuation of assets, a realistic assessment of future conduct costs and prudent calculation of risk weights. The exercise covered large institutions, firms with significant portfolios of higher-risk loans and firms that calculated risk weights using model-based approaches. The FSA webpage describes the methodologies FSA has followed in making its assessments. Separately, BoE has published a statement with regard to the FPC policy meeting on 19 March 2013 (which also includes a link to FSA’s methodology note). This statement considers the methodology exercise and sets out a number of recommendations for PRA in the light of the fact that after 2013 further increases in capital ratios will be required. It suggests that, looking to 2014 and beyond BoE and PRA should develop proposals for regular stress testing of the UK banking system. The purpose of those tests would be to assess the system’s capital adequacy. The framework should be able to accommodate any judgements by FPC on emerging threats to financial stability. FPC notes that it will monitor implementation of these recommendations, but does not intend to issue further recommendations on bank capital ahead of a future stress testing exercise. (27/03/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/013.aspx http://www.fsa.gov.uk/library/communication/statements/2013/methodology-note-on-calculating-capital-pressures
EC: CRD 4
The Council of the EU has approved a compromise text on the CRD 4 package comprising a regulation establishing prudential requirements, and a directive governing access to deposit-taking activities – links to both documents are in the link below. The new rules will apply from 1 January 2014 if publication takes place in the Official Journal by 30 June 2013. (27/03/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/136581.pdf
FSA/BoE: A review of requirements for firms entering into or expanding in the banking sector
The Review sets out significant changes to regulatory requirements and authorisation processes which, taken together, are intended to reduce some of the regulatory barriers to entry into the banking sector. Prudential changes will involve: no longer applying the additional requirements (known as “add-ons and scalars”) which have previously applied to reflect the uncertainties inherent in start-ups; implementing the Basel III regime by applying at start-up only the 4.5% minimum Core Tier 1 capital requirement versus the 7% to 9.5% requirement which will apply to major existing banks; reduced liquidity requirements for all new banks; all new banks will benefit from a recent reduction in liquidity requirements; and there will be no automatic new bank liquidity premium. There will be improvements to the existing authorisation process - where an applicant firm is able to deliver a complete application form with all supporting materials, PRA and FCA will work together to complete all of the assessment and decision making within six months. To support firms to provide a complete application, PRA and FCA will introduce a significant level of up-front support to the firm, during the pre-application stage, including a “challenge” session. Where firms are not able to meet the six-month timetable because they cannot fund the up-front investment required, or because they have longer lead times in terms of raising capital or setting up the infrastructure, they will be able to ask for an alternative, three-stage route to authorisation which will involve in the granting of an authorisation, but with restrictions to some types of activity (26/03/13).. http://www.fsa.gov.uk/library/communication/pr/2013/030.shtml http://www.fsa.gov.uk/static/pubs/other/barriers-to-entry.pdf (NB: over 90 pages long)
EBA: Draft implementing technical standards on asset encumbrance reporting under article 95a of the draft Capital Requirements Regulation
EBA has launched a consultation on reporting for asset encumbrance. The standards, which will be part of the EU single rulebook, intend to develop reporting templates and instructions for asset encumbrance with the ultimate aim of ensuring a harmonised measure of asset encumbrance across institutions. The consultation paper and appendices are available to download via the following link. Responses are required by 24 June 2013. (26/03/13) http://www.eba.europa.eu/News-- Communications/Year/2013/EBA-consults-on-draft-implementing-technical-stand.aspx
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EBA: Draft implementing technical standards on supervisory reporting on forbearance and non-performing exposures under article 95 of the draft Capital Requirements Regulation
EBA has launched a consultation on the above, noting that harmonised definitions are crucial in addressing questions over the correct valuation. The proposed definitions and templates, once implemented, will allow European supervisors to: assess the extent of forbearance transactions and their effects on asset quality and loss recognition, capture asset quality deterioration and compare asset quality on a more consistent and homogeneous basis across EU institutions. The consultation paper and appendices are available to download via the following link. Responses are required by 24 June 2013. (26/03/13) http://www.eba.europa.eu/News--Communications/Year/2013/EBA-consults-on-supervisory-reporting-for- forbeara.aspx
BIS: Supervisory framework for measuring and controlling large exposures
This consultation sets out a proposed new standard which aims to ensure greater consistency in the way banks and supervisors measure, aggregate and control exposures to single counterparties. Acting as a backstop to risk-based capital requirements, the standard would supplement the existing risk-based capital framework by protecting banks from substantive losses caused by the sudden default of a counterparty or group of connected counterparties. It also presents proposals to strengthen the oversight and regulation of the shadow banking system in relation to large exposures. In particular, the proposals include policy measures designed to capture bank-like activities conducted by non-banks that are of concern to supervisors. Responses are required by 28 June 2013.(26/03/13) http://www.bis.org/publ/bcbs246.pdf (NB: over 30 pages long)
FSA: PS13/6: The regulation and supervision of benchmarks
This PS outlines the framework for the regulation and supervision of benchmark activities, following CP12/36. In particular, it summarises the responses received and outlines FSA’s view of those responses. It also presents the Handbook text that applies to benchmark administrators and submitters to benchmarks. The Handbook provisions will come into force on 2 April 2013, immediately after the cutover to the UK’s new regulatory structure. It is acknowledged that this only allows a short period for firms to implement the new rules and have included provisions to ensure a smooth transition for the individuals nominated to become controlled functions. As noted in the CP, a thematic review of the LIBOR-submitting firms’ compliance with these regulations is to be conducted within the first year after the regulations have come into force. (25/03/13) http://www.fsa.gov.uk/library/communication/pr/2013/029.shtml http://www.fsa.gov.uk/static/pubs/policy/ps13- 06.pdf (NB: over 50 pages long)
EC: Statement by Michel Barnier following the agreement in trilogue on new European rules to impose stronger prudential requirements on banks
Michel Barnier’s statement follows a final agreement reached on 20 March 2013 in respect of CRD IV: “these new rules will strengthen the internal governance of banks. Remuneration policies will have to be aligned with sound and effective risk management. Shareholders are given a special responsibility and an appropriate and reasonable maximum ratio is introduced between the fixed salary and the bonus for all risk takers. Supervisory authorities will also have more power to impose sanctions to ensure compliance. (22/03/13) http://europa.eu/rapid/press-release_MEMO-13-269_en.htm?locale=en
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published corrected evidence from three recent hearings: 9 January 2013 (former UBS execs) 5 February 2013 (Bill Winters of the Independent Commission on Banking and others) and 27 February 2013 (Adair Turner and Martin Wheatley). (22/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xix/c606xix.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxiii/c60601.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxix/c606xxxix.pdf (NB: all over 30 pages long
BIS: External audits of banks
BIS has published this consultation which describes, through 16 principles and explanatory guidance, supervisory expectations regarding audit quality and how that relates to the external auditor's work in a bank. Implementation of the principles and the explanatory guidance is expected to improve the quality of bank audits and enhance the effectiveness of prudential supervision. Responses are required by 21 June 2013. (21/03/13) http://www.bis.org/publ/bcbs244.pdf (NB: over 40 pages long)
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HMT/HMRC: The Budget 2013
HMT has published the Budget statement and HMRC has published comprehensive details of tax measures. Full details are available in the business as usual section of this document . Items affecting this sector include the following
Banks/building societies
Two consultations are to be issued to address competition in the banking sector. One will consider the issue of payment systems into a competition-focused regulatory regime – it is noted that subject to the outcome of the consultation, the Government intends to legislate for the new regime in the Financial Services (Banking Reform) Bill. FSA is to publish a government commissioned review on barriers to entry and expansion in banking “shortly”. The bank levy rate will increase to 0.142% from 1 January 2014. As announced at Autumn Statement 2012, the Government will legislate in Finance Bill 2013 to ensure that, from 1 January 2013, foreign bank levies paid by a foreign banking group trading in the UK cannot be claimed as a deduction against UK corporation tax and income tax. Transitional arrangements will also make clear that a claim to double taxation relief in respect of a foreign bank levy will prevent that foreign bank levy from being deducted against corporation tax and income tax. Legislation will be introduced in Finance Bill 2013 to clarify that the coupon on Tier 2 debt capital which is already in issue, or yet to be issued, will be deductible for the purposes of a bank computing its profits for corporation tax purposes. In addition, the Government will legislate to clarify that banks’ Additional Tier 1 debt capital instruments already in issue or yet to be issued will be similarly deductible for the purposes of a bank computing its profits for corporation tax purposes. Tax treatment of building societies’ capital instruments – following consultation, regulations have been made so that the tax treatment of new Basel III compliant building society capital instruments ‘Core Capital Deferred Shares’ will be the same as equivalent share capital from 1 March 2013. (It is also noted that the Government has secured a commitment from the payment card industry to reduce the time it takes for credit and debit card payments to reach SMEs’ bank accounts by up to three days, by using the Faster Payments System to process payments. (20/03/13) http://cdn.hm-treasury.gov.uk/budget2013_complete.pdf (full Budget statement - NB: over 100 pages long) http://cdn.hm- treasury.gov.uk/uk_investment_management_strategy.pdf (the UK investment management strategy) http://cdn.hm- treasury.gov.uk/help_to_buy_mortgage_guarantee_scheme_outline.pdf (mortgage guarantee scheme) http://www.hmrc.gov.uk/budget2013/index-of-documents.pdf (all HMRC documents, including SIs, in relation to the budget are available to download via this link)
ESMA: Kroll Bond Rating Agency Inc.
ESMA has formally approved the certification in the EU of Kroll Bond Rating Agency Inc. (KBRA) under Article 16 of the Credit Rating Agencies Regulation. The certification takes effect from 20 March 2013. (20/03/13) http://www.esma.europa.eu/system/files/2013-336_0.pdf
Parliamentary Commission on Banking Standards: Call for evidence on derivatives
PCBS is inviting written responses on whether the draft secondary legislation relating to the provision of derivatives by ring- fenced banks adequately addresses the concerns raised in its first report and sets out a number of questions covering issues with which it is most concerned. Responses are required by 27 March 2013. (19/03/13) http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking- industry/news/call-for-evidence-on-derivatives/
EC: Irish Presidency secures landmark deal on single bank supervisor/EC: Statement by Michel Barnier
The Irish Presidency has reached provisional agreement with the European Parliament on the single EU bank supervisor. It is noted that the provisional agreement includes strengthened democratic accountability and a greater role for the European Parliament in the appointment of the Chair and Vice Chair of the Supervisory Board. The agreement also confirms the unanimous position of the Council, agreed in December, on the core balance of rights between participating and non- participating member states. The provisional agreement the Presidency reached today with the European Parliament will now have to be endorsed by all Member States. There will also be some final technical revisions to the text. (19/03/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/136278.pdf http://europa.eu/rapid/press- release_MEMO-13-251_en.htm
BIS: Results of the Basel III monitoring exercise as of 30 June 2012/EBA: Basel III monitoring exercise
The first report presents the results of the Basel Committee's Basel III monitoring exercise. A total of 210 banks participated in the current study, comprising 101 Group 1 banks (ie those that have Tier 1 capital in excess of €3 billion and are internationally active) and 109 Group 2 banks (ie all other banks). The study found that, based on data as of 30 June 2012 and applying the changes to the definition of capital and risk-weighted assets, the average Common Equity Tier 1 capital
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ratio of Group 1 banks was 8.5%, as compared with the Basel III minimum requirement of 4.5%. In order for all Group 1 banks to reach the 4.5% minimum, an increase of €3.7bn in CET1 would be required. The overall shortfall increases to €208.2bn to achieve a CET1 target level of 7.0% (ie including the capital conservation buffer); this amount includes the surcharge for global systemically important banks where applicable. For Group 2 banks, the average CET1 ratio stood at 9.0%. In order for all Group 2 banks in the sample to meet the new 4.5% CET1 ratio, the additional capital needed is estimated to be €4.8bn. They would have required an additional €16.0bn to reach a CET1 target of 7.0%; the sum of these banks' profits after tax and prior to distributions between 1 July 2011 and 30 June 2012 was €22.9bn. EBA’s report on the European banking system was run in parallel with the BIS report which considers the matter at a global level. A total of 157 banks participated in the exercise on a voluntary and confidential basis, of which 44 Group 1 banks (with a Tier 1 capital exceeding €3bn and internationally active) and 113 Group 2 banks (all other banks). Compared to the previous exercise based on data as of 31 December 2011, results show a decrease in the capital shortfall of €86.2 bn (43.4%). Following the recent revision of the Liquidity Coverage Ratio (LCR), this report does not present the LCR results as the latter could not be calculated as of June 2012. However, the LCR results will be presented in the report based on data as of 31 December 2012. (19/03/13) http://www.bis.org/publ/bcbs243.pdf (NB: 30 pages long) http://www.eba.europa.eu/cebs/media/Publications/Other%20Publications/QIS/ISG-Basel-III-monitoring-exercise---Public- Report--Final-.pdf
EC: Decision of the ECB of 11 January 2013 laying down the framework for a public key infrastructure for the European System of Central Banks
This has now been published in the Official Journal. (18/03/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:074:0030:0035:EN:PDF
ESMA: Credit rating agencies: annual report 2012 – application of the Regulation (EC) No 1060/2009 as amended according to Article 21(5)
ESMA has published its second annual report on its supervision of credit rating agencies in the EU, including details on its supervisory, registration and policy work. It also covers ESMA’s investigation into bank rating methodologies and the follow up work to the March 2012 report on deficiencies in CRAs rating processes, governance and control mechanisms. The report finds that credit rating agencies have not sufficiently embedded the main requirements of the Credit Rating Agency Regulation in their organisations, and ESMA believes that improvements are still necessary in the areas of: the application and comprehensive presentation of rating methodologies; the empowerment and resourcing of analytical and control functions; the monitoring and surveillance of ratings; and the reliability of IT infrastructures. These issues will form the basis for much of ESMA’s supervision activities as outlined in its 2013 Work Plan. (18/03/13) http://www.esma.europa.eu/system/files/2013-308.pdf (NB: 50 pages long)
EBA: Consultation on the data point model related to the EBA draft implementing technical standards on supervisory reporting requirements for leverage ratio under the draft Capital Requirements Regulation/ Consultation on the data point model related to the technical standards on supervisory reporting requirements for liquidity coverage and stable funding
In order to assist a uniform implementation of the standards on supervisory reporting requirements for institutions, the data items included in the June 2012 consultations EBA/CP/2012/05 and 06 have been translated into a data point model which also includes the updates to the templates and instructions as published on 20 December 2012. The data point model is a structured representation of the data, identifying all the business concepts and its relations, as well as validation rules. It contains all the relevant technical specifications necessary for developing an IT reporting solution. Comments are required by 13 May 2013. (18/03/13) http://www.eba.europa.eu/Publications/Consultation-Papers/All-consultations/2013/EBA-CP- 2013-03.aspx http://www.eba.europa.eu/Publications/Consultation-Papers/All-consultations/2013/EBA-CP-2013-04.aspx
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
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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.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking- industry/news/third-report/ 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)
EBA: Update on the technical standards on supervisory reporting requirements
EBA has published an updated version of the templates, instructions, validation rules and data point model for implementing technical standards on supervisory reporting (COREP and FINREP), available to download via the following link. EBA notes that as soon as the final CRR/CRDIV texts are adopted by the EU legislator, EBA will finalise the draft standards and submit it to the EC for endorsements. EBA expects the entry into force of the CRR/CRDIV package to be 1 January 2014. If this date is confirmed, the first reporting period for COREP and FINREP requirements would be Q1 2014. (15/03/13) http://www.eba.europa.eu/News--Communications/Year/2013/Update-on-the-technical-standards-on-supervisory-r.aspx
European Parliament: Draft report on reforming the structure of the EU’s banking sector (2013/2021(INI))
This short draft report sets out the text of a motion for a European Parliament resolution on banking reform. (15/03/13) http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2f%2fEP%2f%2fNONSGML%2bCOMPARL%2bPE- 506.244%2b01%2bDOC%2bPDF%2bV0%2f%2fEN
Parliamentary Commission on Banking Standards: Financial inclusion and basic bank accounts/Tax audit and accounting
PCBS has published evidence in respect of hearings held on 1 February and 28 January 2013 respectively attended by, amongst others, representatives from Lloyds Banking Group, the Co-Operative Group and, in the case of the second item, unnamed former employees, one formerly in Barclays’ capital markets team and the other a former head of debt structuring at “Bank A”. (14/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c945-i/c945.pdf (NB: over 40 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c881-v/c881v.pdf
EBA/EIOPA/ESMA: Possible framework for the regulation of the production and use of indices serving as benchmarks in financial and other contracts
The ESAs have published this letter to Michel Barnier dated 7 March 2013 which sets out details of their initiatives and concerns with regard to the above. (14/03/13) https://eiopa.europa.eu/fileadmin/tx_dam/files/publications/otherdocuments/ESAs-2013- 007__ESAs_joint_letter_on_Benchmarks_.pdf
IOSCO: Responses to financial benchmark consultation
IOSCO has published the responses to its January 2013 consultation, available to download via the following link. It is noted that the conclusions of recent round-table discussions, the feedback and deliberations by the IOSCO board next week will inform the drafting of the final recommendations on financial benchmarks, after further public consultation in April. (13/03/13) http://www.iosco.org/news/pdf/IOSCONEWS271.pdf
EBA: Authorised credit institutions
EBA has published an updated list of credit institutions authorised to operate within the EU and EEA. The list is based on information received from national competent authorities as of 31 December 2012. (13/03/13) http://www.eba.europa.eu/News--Communications/Year/2013/Update-of-the-Credit-institutions-Register.aspx
EBA: Draft regulatory technical standards on the conditions for assessing the materiality of extensions and changes of internal approaches when calculating own funds requirements for credit, market and operational risk under articles 138(5), 301(3)(a) and 352(3)(a) of Regulation (EU) XX/XXXX of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms [CRR]
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The draft CRR contains, amongst other matters, mandates for EBA to develop draft regulatory technical standards to specify the conditions for assessing the materiality of extensions1 and changes of internal approaches when calculating own funds requirements for credit, market and operational risk. It is noted that as the CRR is still in a draft form at the time of publishing of this draft RTS, following the end of the consultation period, and to the extent that the final text of the CRR changes before the adoption of the standards, EBA will adapt the draft standards accordingly to reflect any developments. Responses are required by 11 June 2013. (13/03/13) http://eba.europa.eu/cebs/media/Publications/Consultation%20Papers/2013/CP-02/EBA-CP-2013-02-CP-on-RTS-on- materiality-of-model-extensions-and-changes.pdf (NB: over 40 pages long)
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
BIS: Speech by Stefan Ingves: Where to next? Priorities and themes for the Basel Committee (12 March 2013)
Text of the above, given at the Third BCBS-FSI High-Level Meeting for Central and Eastern Europe on “Strengthening Financial Sector Supervision and Current Regulatory Priorities”, follows. He discusses work undertaken in the past year and projects now underway. (12/03/13) http://www.bis.org/review/r130312a.pdf?frames=0
ESMA: Speech by Steven Maijoor: Regulation of systemically important financial institutions and of the shadow banking system (11 March 2013)
Text of this speech, given at the 5th CDU/CSU-Congress in Berlin, follows. He discusses risks posed by shadow banking for financial stability and the potential role shadow banking can play in financing economies. (12/03/13) http://www.esma.europa.eu/system/files/2013-279.pdf
Parliamentary Commission on Banking Standards: 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)
Parliamentary Commission on Banking Standards: Banking standards/Panel on tax, audit and accounting
PCBS has published the uncorrected evidence of the hearing held on 24 January 2013 (attended by, among others, Paul Sharma of FSA and representatives from HMT, FRC and HMRC); corrected evidence from the hearing held on 6 February 2013 (attended by Stuart Gulliver and Douglas Flint of HSBC); corrected evidence from the hearing held on 21 January 2023 (attended by past and current Lloyds Banking Group execs); corrected evidence from the hearing held on 23 January 2013 (attended by representatives from ICAEW, CIOT, ACCA and the “big four” audit firms); corrected evidence from the hearing held on 16 January 2013 (attended by economists); and corrected evidence from the hearing held on 31 January 20`3 (attended by Natalie Ceeney and Tony Boorman of FOS). (11/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c881-iv/c88101.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxiv/c60601.pdf (NB: over 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c860-iii/c86001.pdf (NB: over 50 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c881-iii/c88101.pdf (NB: over 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c881-i/c88101.pdf (NB: over 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c860-iv/c86001.pdf
EBA: Policy workshop call for evidence
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EBA has issued this call for papers in respect of a workshop being held in London on 14-15 November 2013 on the topic: “How to regulate and resolve systemically important banks”. (7/03/12) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/Call-for-papers-for-the-2nd-EBA-policy- research-workshop.pdf
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published corrected transcripts of evidence given on 11 February by former and current RBS execs. (7/03/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxvi/c606xxxvi.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxv/c606xxxv.pd f (NB: both `over 30 pages long)
FSA: Internal audit report – a review of the extent of awareness within the FSA of inappropriate LIBOR submissions
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. (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)
EC: CRD IV
The European Council has broadly endorsed the outcome of the most recent political trilogue with the European Parliament on the above and has mandated the Permanent Representatives Committee to finalise negotiations with the European Parliament on outstanding technical issues, with the aim of reaching a final deal in the second half of March 2013. (5/03/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/135823.pdf
TSC: HBOS report
TSC has announced that it has appointed Sir Nicholas Monck, former Second Permanent Secretary at HMT, Stuart Bernau, former Chairman and Chief Executive of the Chelsea Building Society, and Iain Cornish, former Chief Executive of the Yorkshire Building Society, to review the report that FSA is preparing on the failure of HBOS. TSC has also published the ToR for its review – second link below. (1/03/13 Treasury Committee appoints specialists to review FSA report into HBOS - News from Parliament - UK Parliament http://www.parliament.uk/documents/commons- committees/treasury/Terms%20of%20Reference%20HBOS%20review.pdf
HMT: The Hogg Tendering Advisory Committee for LIBOR
HMT has now published ToR for the Committee. (1/03/13) http://www.hm-treasury.gov.uk/libor_tender_tor.htm
EC: CRD IV
This Council press release notes that the Irish Presidency reached a breakthrough in talks with the European Parliament on banking rules. The provisional agreement includes restrictions on bankers’ pay. It is noted that the agreement will have to
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be approved by EU Member States before it is final and significant further technical work remains to be carried out. (28/02/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/135718.pdf
HoC: Financial Services (Banking Reform) Bill
A library research document setting out information on the Bill and the lead-up to it (Independent Commission on Banking). (1/03/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=RP13-15 (NB: over 30 pages long)
HoC: Taxation of banking
This briefing note looks at the public debate about reforming the tax treatment of the banking sector in the wake of the recent financial crisis, before discussing the different approaches taken by the current and last governments. (1/03/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN05251
Parliamentary Committee on Banking Standards: Banking standards
PCBS has published the uncorrected transcript of the hearing held on 25 February 2013 attended by George Osborne. (27/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxxviii/uc606xxxviii.pdf (NB: over 30 pages long)
EBA: Interim results of the EBA review of the consistency of risk-weighted assets. Top-down assessment of the banking book
This report, which illustrates the outcomes of the first phase of the investigation into risk-weighted assets (RWAs), is part of a wider EBA analysis with the objective of better understanding the differences in their calculation and, if need be, to formulate the necessary policy solutions to enhance convergence between banks and to improve disclosure. The analysis conducted using the existing supervisory reporting data from 89 European banks across 16 countries confirms material differences between banks in the calculation of the Global Charge (GC) defined as the sum of RWAs (unexpected losses) and the expected losses (EL). The analysis conducted so far suggests that 50% of the differences in terms of GC between banks mainly stem from the approach for computing RWAs in use (standardised vs IRB) as well as from the composition of each bank’s loan portfolio and that the remaining 50% stem from the IRB risk parameters applied thus reflecting each bank’s specific portfolio and risk management practices. EBA notes that work is currently underway on two bottom-up steps of the analysis on banking book exposures. These analyses which are expected to be achieved by the end of 2013, include an investigation of the low default portfolio exposures and an ad-hoc review of SMEs and residential mortgage exposures. EBA is also planning to: conduct interviews with the banks and the supervisors in to complement the bottom-up exercises and to detect inconsistent practices; perform a review of the Pillar 3 disclosures on RWAs and carry out an assessment of the trading book exposures by the end of 2013. (26/02/13) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/Interim-results-EBA-review-consistency- RWAs_1.pdf (NB: over 30 pages long)
BIS: Speech by Wayne Byres: Simplicity, risk sensitivity and comparability: the regulatory balancing act
Text of a speech given at the BCBS-EMEAP-FSI High-Level Meeting on 25–26 February 2013, follows. He discusses aspects of Basel III, including capital requirements; complexity in the capital framework; comparability between banks and ways to enhance the comparability of risk-based capital ratios. (26/02/13) http://www.bis.org/speeches/sp130226.pdf
HMT: Hogg Tendering Advisory Committee for LIBOR
HMT has announced the membership of the independent committee which will recommend a new administrator for LIBOR. The Committee’s work is now underway. It will recommend who should be the new administrator of LIBOR in succession to BBA. (25/02/13) http://www.hm-treasury.gov.uk/press_15_13.htm
Parliamentary Commission on Banking Standards: Banking standards/Mis-selling and cross-selling
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PCBS has published corrected evidence from the session on 11 February (attended by former and current RBS execs); uncorrected evidence from the hearing on 17 January (attended by former RBS execs and union officials) and corrected evidence from the hearing on 29 January (attended by Tracey McDermott of FSA and Graham Nicholson of BoE). (25/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxv/c606xxxv.pdf (NB: over 60 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c860-ii/c86001.pdf (NB: over 60 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxviii/c60601.pdf
EBA: Speech by Andrea Enria: The crisis in Europe, the impact on banks and the authorities’ response (20 February 2013)
EBA has published the text of this speech, given at the University of Trento. Topics include: the current state of European banking; the euro crisis; future regulation of the banking sector. (25/02/13) http://www.eba.europa.eu/cebs/media/Publications/Other%20Publications/Speeches/Speech-at-University-of-Trento---Final- English---check-against-delivery.pdf
FSA: Statement regarding CRD IV implementation
FSA notes that the proposed deadline for entry into force of CRD IV has now passed. Negotiations between the European Parliament, EC and Council of Ministers to finalise the legislation are still underway. FSA now expects to be able to begin collecting data under Common Reporting for the period beginning 1 January 2014, should the legislation have entered into force by this date. FSA will continue to undertake all preparatory work that is possible in the absence of finalised legislative text and expects all firms in scope of CRD to do likewise. Once finalised legislative text is available at the EU level. FSA intends to publicly consult on changes to FSA rules. The provisions of the Regulation will directly apply to firms. (22/03/13) http://www.fsa.gov.uk/library/communication/statements/2013/crd-iv-implementation
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
EBA: Discussion Paper on defining liquid assets in the liquidity coverage ratio under the draft CRR
This discussion paper presents the methodology and scope of EBA’s forthcoming analysis on definitions of highly liquid assets. The proposed methodology is based on a scorecard, which aims at producing an ordinal ranking of assets by combining a set of different liquidity indicators. Following the outcome of the analysis, EBA will report to the EC on appropriate definitions of high and extremely high liquidity and credit quality of transferable assets for the purpose of the LCR. Responses are required by 21 March 2013. (21/02/13) http://www.eba.europa.eu/cebs/media/Publications/Discussion%20Papers/DP%202013%2001/DP-on-defining-liquid-assets- in-the-LCR.pd f (NB: 50 pages long)
EBA: Discussion paper on retail deposits subject to higher outflows for the purposes of liquidity reporting under the Capital Requirements Regulation
This paper outlines EBA’s preliminary thinking on a methodology for identifying retail deposits subject to higher outflows and for calculating the associated outflow rates. Responses are required by 21 March 2013. (21/02/13) http://www.eba.europa.eu/cebs/media/Publications/Discussion%20Papers/DP-on-retail-deposits-subject-to-higher- outflows.pdf
EBA/ESMA: Consultation on principles for benchmarks-setting processes in the EU
ESMA has published the responses to the joint consultation, which are available to download via the following link. (20/02/13) http://www.esma.europa.eu/consultation/Consultation-Principles-Benchmarks-Setting-Processes-EU#responses
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HMT: Review of the cash ratio deposit scheme – consultation on proposed changes
The cash ratio deposit scheme was placed on a statutory footing in the Bank of England Act 1998, with effect from 1 June 1998. The scheme was reviewed in 2003 and 2008. As part of the review in 2008 the Government made a commitment to conduct a further formal review at the latest in five years’ time. This consultation document sets out the conclusions of that review. The purpose of publishing this consultation document is to enable any interested parties to make representations about the recommendations of the review, including: the proposal to increase it from 0.11% to 0.18%; the proposal to raise the deposit threshold from £500m to £600m; and whether there are any technical aspects of the operation of the scheme that could be improved. The conclusions affect eligible cash ratio deposit paying institutions throughout the UK. Responses are required by 15 March 2013. (19/02/13) http://www.hm- treasury.gov.uk/d/consult_review_of_the_cash_ratio_deposit_scheme_180213.pdf INB: over 30 pages long)
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published the corrected evidence of hearings held on 5 February 2012 attended by Bill Winters of the Independent Commission on Banking, and separately, Sir Brian Pomeroy E, former Chairman of the Treasury’s Financial Inclusion Taskforce, and Sian Williams, Head of Financial Inclusion, Toynbee Hall. It has also published the uncorrected evidence of the hearing held on 14 February 2013 with Eric Daniels (Lloyds), in which PPI is discussed in some detail. (18/02/13() http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxxiii/uc606xxxiii.pdf (NB: over 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxxvi/uc606xxxvi.pdf
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published the corrected evidence of a hearing attended by Antony Jenkins and Sir David Walker on 5 February 2013. Topics include: governance and culture at Barclays; remuneration; LIBOR; and PPI. (15/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxxii/c60601.pdf (NB: over 40 pages long)
BIS: Supervisory guidance for managing risks associated with the settlement of foreign exchange
The purpose of this guidance is to provide updated guidance to supervisors and the banks they supervise on approaches to managing the risks associated with the settlement of FX transactions. This guidance expands on, and replaces a document of the same name published in September 2000. It sets out seven "guidelines" that address governance, principal risk, replacement cost risk, liquidity risk, operational risk, legal risk, and capital for FX transactions. An annex to the final guidance provides detailed explanation of FX settlement-related risks and how they arise. (15/02/13) http://www.bis.org/publ/bcbs241.pdf (NB: over 40 pages long)
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
EC: Financial transaction tax
Details of the tax to be implemented have been set out in a proposal adopted by EC. As requested by the 11 Member States (Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia) that will proceed with this tax, the proposed Directive mirrors the scope and objectives of the original proposal put forward by the EC in September 2011. The approach of taxing all transactions with an established link to the financial transaction tax zone is maintained, as are the rates of 0.1% for shares and bonds and 0.01% for derivatives. It notes that there are certain limited changes in today's proposal compared to the original one, to take into account the fact that the tax will be implemented on a smaller geographical scale than originally foreseen. These changes are intended to ensure legal clarity and to reinforce anti- avoidance and anti-abuse provisions. However, the "residence principle" will apply, which means that the tax will be due if any party to the transaction is established in a participating Member State, regardless of where the transaction takes place. This is the case both if a financial institution engaged in the transaction is, itself, established in the financial transaction tax zone, or if it is acting on behalf of a party established in that jurisdiction. The new proposal adds an "issuance principle" which means that financial instruments issued in the 11 Member States will be taxed when traded, even if those trading them are not established within the financial transaction tax zone. The proposed Directive will now be discussed by Member States, with a view to its implementation under enhanced cooperation. All 27 Member States may participate in the discussions on this proposal. However, only the Member States participating in enhanced cooperation will have a vote, and they must agree unanimously before it can be implemented. The European Parliament will also be consulted. (14/02/13) http://europa.eu/rapid/press-release_IP-13-115_en.htm http://europa.eu/rapid/press-release_MEMO-13-98_en.htm (Q&A) http://ec.europa.eu/taxation_customs/resources/documents/taxation/com_2013_71_en.pdf (NB: over 30 pages long)
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ESMA: Considerations of materiality in financial reporting
Further to ESMA’s November 2011 and August 2012 summary of responses, it now publishes a feedback statement which provides an overview of the views expressed by respondents to the questions in the CP as well as the feedback of participants at a roundtable held In October 2012 which sets out ESMA’s response to the issues arising from the consultation process. (14/02/13) http://www.esma.europa.eu/system/files/2013-218.pdf
Parliamentary Commission on Banking Standards: Banking standards
PCBS has published the corrected evidence of hearings attended by former and current RBS execs. The hearings discuss the LIBOR investigation in some detail, including its implications for bonuses at the bank. (13/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxxv/uc60601.pdf (NB: over 60 pages long)
Parliamentary Commission on Banking Standards: Banking standards/Tax, audit and accounting
PCBS has published corrected evidence in respect of hearings which took place on 8, 21, and 24 January 2013 variously attended by execs from trade bodies and former BoE execs. (12/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xviii/c606xviii.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c881-ii/c881ii.pd f http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxvi/c60601.pdf (NB: 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/c606-xxx/c606xxx.pdf (NB: over 40 pages long)
BIS/IOSCO/IAIS: Mortgage insurance: market structure, underwriting cycle and policy implications
This consultation considers the interaction of mortgage insurers with mortgage originators and underwriters and sets out a number of recommendations directed at policymakers and supervisors with the aim of reducing the likelihood of mortgage insurance stress and failure in such tail events. Responses are required by 30 April 2013. (11/02/13) http://www.bis.org/publ/joint30.pdf (NB: over 40 pages long)
Parliamentary Commission on Banking Standards: Financial exclusion and basic bank accounts/Banking standards
PCBS has published uncorrected oral evidence in respect of hearings held on 1 and 5 February attended by execs from Citizens Advice, Post Office, Lloyds Banking Group and the Co-Operative Bank and by Winfried Bischoff and Antonio Horta- Osorio of Lloyds Banking Group respectively. (11/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc945-i/uc94501.pdf (NB: over 40 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxxi/uc60601.pdf (NB: over 30 pages long)
Parliamentary Commission on Banking Standards: Panel on tax, audit and accounting
PCBS has published a volume of written evidence, including submissions from FSA, HMT and FRC. (11/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/writev/panelontax/panelontax.pdf (NB: over 200 pages long)
EC: Consultation on a possible framework for the regulation of the production and use of indices serving as benchmarks in financial and other contracts
The EC has published responses to its September 2012 consultation, available to download individually via the first link and a short summary report on the responses. The HMT/FSA response (third link) provides a response informed by the Wheatley review. (11/02/13) http://ec.europa.eu/internal_market/consultations/docs/2012/benchmarks/summary- replies_en.pdf http://ec.europa.eu/internal_market/consultations/2012/benchmarks/index_en.htm http://ec.europa.eu/internal_market/consultations/2012/benchmarks/public-authorities/uk-treasury_en.pd f
EC: Statement by Michel Barnier: Interbank interest rate benchmarks
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The statement reports that the EC is to propose further legislation on benchmarks in Q2 2013 in order to further clarify the framework under which benchmarks should operate, adding “I expect that proposal to include the power to impose mandatory submissions for systemic benchmarks such as EURIBOR”. The EC is to ask ESMA and EBA to start preparatory work aimed at identifying banks in view of their involvement in interbank lending markets which should be subject to a mandatory participation in benchmark setting. (8/02/13) http://europa.eu/rapid/press-release_MEMO-13- 82_en.htm#PR_metaPressRelease_bottom
EC: Financial transaction tax
On 14 February 2013, the EC will adopt the substantive proposal for a Directive on the Financial Transactions Tax to be implemented under enhanced cooperation. (8/02/13) http://europa.eu/rapid/press-release_AGENDA-13-5_en.htm
BIS: International financial markets and bank funding in the euro area: dynamics and participants
This article, originally published in the journal "Economistas", in December 2012, looks at the development of bank funding in the euro area in recent years, analysing how euro area funding markets were severely disrupted by effects arising from the weaknesses of sovereigns and banks. (8/02/13) http://www.bis.org/publ/othp18.pdf
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
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,
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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/
ECB: Recommendations for the security of internet payments
This report presents a set of recommendations to improve the security of internet payments and includes some best practices, which payment services providers, governance authorities of payment schemes and other market participants, such as e-merchants, are encouraged to adopt. (1/02/13) http://www.ecb.int/pub/pdf/other/recommendationssecurityinternetpaymentsoutcomeofpcfinalversionafterpc201301en.pdf
Parliamentary Commission on Banking Standards: Tax, audit and accounting
PCBS has published the uncorrected evidence from hearings on 23 and 24 January 2013 attended by various execs from the Big Four accountancy firms and, separately, HMRC/FRC/FSA/HMT/BIS-BERR. (1/02/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc881-iii/uc881iii.pd f (NB: over 30 pages long) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc881-iv/uc881iv.pdf
BIS: Regulatory consistency assessment programme (RCAP) - analysis of risk-weighted assets for market risk
This analysis of risk-weighted assets in the trading book is part of the wider RCAP initiated in 2012; a similar analysis is currently under way for the banking book. The programme aims to ensure consistent implementation of the Basel framework, which will help strengthen the resilience of the global banking system, maintain market confidence in regulatory ratios and provide a level playing field for banks operating internationally. The report brings together two pieces of analysis. The first is based on an examination of publicly available bank data for a selection of large banks. It also contains the results of a hypothetical test portfolio exercise, in which 15 internationally active banks participated. BIS intends to conduct a further hypothetical test portfolio exercise later this year. This will include other, more complex, hypothetical test portfolios, with the aim of helping BIS to deepen its analysis of the variation in risk measurement of trading books across banks. (31/01/13) http://www.bis.org/publ/bcbs240.pdf (NB: over 70 pages long)
Parliamentary Commission on Banking Standards: Written evidence from Alison Carnwath
PCBS has published this text in which Alison Carnwath discusses remuneration at Barclays: and concludes: “annual bonuses should continue to be awarded but only after shareholders have themselves benefited from performance. … . It is questionable whether some regulations such as the definitions of FSA code staff (with the associated pay structures) are yet working. It is also questionable whether it is appropriate to require all payments at a senior level always to be deferred into shares”. (31/01/13) http://www.parliament.uk/documents/joint- committees/Banking_Standards/Alison%20Carnwath%20evidence%202013-01-30.pdf
HoC: European Scrutiny Committee – Twenty-ninth Report of Session 2012–13
The report looks at documents relating to European initiatives considered by the Committee on 23 January 2013. With regard to FS matters, section 17 considers documents in relation to the banking union, which is cleared from scrutiny by the Committee. However, the Committee has asked Greg Clark, Financial Secretary to HMT, to address how concerns over the legality of the Draft Regulation conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions delegating the Treaty– based powers of the ECB to the Single Supervisory Mechanism have been met. (30/01/13) http://www.publications.parliament.uk/pa/cm201213/cmselect/cmeuleg/86-xxix/86xxix.pdf (NB: over 100 pages long)
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FSB: Shadow banking
FSB has published responses to the consultative documents on strengthening oversight and regulation of shadow banking which are available to download via the following link. (29/01/13) http://www.financialstabilityboard.org/publications/c_130129.htm
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: Statement on Basel III rules on capital requirements for exposures to CCPs
FSA reports that, in July 2012, BIS agreed a revised regulatory rules text on the capital requirements for bank exposures to central counterparties. FAQs published at the end of 2012 clarified that during 2013, if a CCP regulator has not yet implemented the CPSS-IOSCO Principles for Financial Market Infrastructures (but has publicly stated that it is working towards implementing these principles, the CCPs that are regulated by the CCP regulator may be treated as qualifying CCPs. However, a CCP regulator may still declare a specific CCP non-qualifying.' FSA notes that it is working towards implementation and reserves the right to declare a specific CCP to be non-qualifying. However, currently all recognised clearing houses based in the UK and prudentially supervised by FSA may be treated as qualifying CCPs for a transitional period that, unless extended, expires on 31 December 2013. It is further noted that FSA’s supervision is currently focused on preparing domestic CCPs to meet the requirements of EMIR, and it is anticipated that UK CCPs will apply for authorisation under EMIR during 2013. From 1 April 2013, responsibility for the supervision of CCPs will pass to EoE. (25/01/13) http://www.fsa.gov.uk/portal/site/fsa/menuitem.10673aa85f4624c78853e132e11c01ca/?vgnextoid=24445ec45227c310VgnV CM2000004fbc10acRCRD&vgnextchannel=de5a7a662c93c310VgnVCM2000004fbc10acRCRD&vgnextfmt=default
Parliamentary Commission on Banking Standards: Banking standards/Panel on tax, audit and accounting
PCBS has published the evidence from hearings held on 16 January 2013 (attended by academics). (25/01/13) http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc606-xxiv/uc606.pdf http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/uc881-i/uc881i.pdf (NB:
FSA: Securitisation standing group
FSA has published the minutes of a meeting which took place on 7 December 2012 attended by representatives from various banks, trading associations and law firms. Topics include: new issuance conduct principles; CRD IV; regulatory reporting of securitisations and significant risk reporting. (25/01/13) http://www.fsa.gov.uk/static/pubs/international/ssg- minutes25.pdf
EBA: Risk assessment of the European banking system
This report provides an update on risks and vulnerabilities in the EU banking sector. With this report and that prepared in July 2012, the EBA discharges its responsibility pursuant to Recital 43 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 to monitor and assess market developments and provide information to other EU institutions and the general public. (24/01/13) http://www.eba.europa.eu/cebs/media/Publications/report/EBA-BS- 2012-273--Risk-Assessment-Report---January-2013-.pdf (NB: over 30 pages long)
BIS: Speech by Stefan Ingves: From ideas to implementation (24 January 2013)
BIS has published the text of a speech given at the 8th High Level Meeting organised by BIS and the Financial Stability Institute. He discusses the development and implementation of Basel III and notes “in 2013, we will seek to set out the specification of the backstop leverage ratio, and the NSFR [Net Stable Funding Ratio] will be refined between now and the
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end of 2014. Clearly, we still have work to do, but increasingly it is about getting the technical details correct rather than new far-reaching ideas”. (24/01/13) http://www.bis.org/review/r130124a.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)
ESMA: 2013 CRA supervision and policy work plan
ESMA has set out the key elements of its supervisory programme for the registered and certified credit rating agencies in the EU. The key areas of supervisory focus will be: thematic reviews on the rating processes for structured finance products ratings and sovereign credit ratings; raising standards of compliance with the obligations of the Credit Rating Agencies Regulation, including a review of the effectiveness of IT structural and procedural controls around the publication of credit ratings; ensuring that small and medium-sized agencies meet required compliance, systems and controls and business strategy standards policing the perimeter to ensure that all firms operating within the scope of the Regulation are registered and subject to supervision. Highlighted policy work includes the production of draft regulatory technical standards and implementing the new supervisory tasks on the prevention of conflicts of interest regarding agencies’ significant shareholders and the new provisions for sovereign debt ratings. (23/01/13) http://www.esma.europa.eu/system/files/2013- 87.pdf
EC: Proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 1060/2009 on credit rating agencies/ Proposal for a directive of the European Parliament and of the Council amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings of collective investment in transferable securities (UCITS) and Directive 2011/61/EU on Alternative Investment Funds Managers in respect of the excessive reliance on credit ratings
These documents discuss the European Parliament's first reading of the Credit Rating Agencies Regulation and relevant amendments on the UCITS and AIFM Directives on 14 -17 January 2013. Marked-up versions of the legislation to reflect the changes made by the amendments to the EC's proposals are provided. It is noted that the European Parliament's position reflects what had been agreed between the institutions and ought therefore to be acceptable to the European Council, which should be in a position to approve this once the text has been examined by “legal-linguistic experts”. (23/01/13) http://register.consilium.europa.eu/pdf/en/13/st05/st05251.en13.pdf (NB: over 130 pages long) http://register.consilium.europa.eu/pdf/en/13/st05/st05252.en13.pdf
HoC: Government bank rescues: financial consequences
This HoC library note provides 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. (21/01/13) http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN05748
ESMA: European enforcers review of impairment of goodwill and other intangible assets in the IFRS financial statements
ESMA has published a review of 2011 IFRS financial statements related to impairment testing of goodwill and other intangible assets. The review, which looked into the accounting practices of a sample of 235 European issuers from 23 countries, found €800bn (€790bn in 2010) worth of goodwill balances in the 2011 financial statements of issuers, with 5% (c. €40bn) of that amount recognised as impairment losses in 2011. The report indicated that significant impairment losses of goodwill were limited to a handful of issuers, mostly in the financial services (€19,2bn) and telecommunication industry (€9,7bn). ESMA recommends that users: better specify the key assumptions used in the impairment test; include sensitivity analyses with sufficient detail and transparency, especially in situations when indicators are present that impairment might have occurred; determine the growth rates used to extrapolate cash flows projections based on budgets and forecasts; and disclose specific discount rates for each material cash-generating unit rather than average discount rates. ESMA and national competent authorities responsible for IFRS enforcement will use the review’s findings as areas to focus their assessments on when reviewing 2012 IFRS financial statements. ESMA expects issuers and their auditors to consider the findings of this review when preparing and auditing their IFRS financial statements. In addition, national competent authorities will take, or have already, taken appropriate enforcement action whenever material misstatements are identified. ESMA will collect data on how European listed entities have applied IFRS requirements in this area in 2012 and will report its findings to the market. (21/01/13) http://www.esma.europa.eu/system/files/2013-02.pdf
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BBA: Banking standards
Following the appearance of Anthony Browne (CEO, BBA) before a hearing of the Parliamentary Commission on Banking Standards on 14 January 2013, BBA has published the text of its submission to the PCBS, together with a covering note, which sets out a range of possible options to improve standards of banking practice. The submission also includes industry proposals to rejuvenate the oversight and enforcement mechanisms. It proposes a new Banking Standards Review Council (BSRC), an idea which has been developed in a report by KPMG for a BBA taskforce of ten BBA members including two European banks and one American bank. The idea has also been discussed with the chairmen of the six main UK banks. BBA proposes that the approved persons regime could be expanded to cover all people involved in customer-facing activity and significant wholesale market transactions or dealing. It advocates an increase in the independent oversight of professionalism and training which could be done by FCA taking the lead on producing guidance or setting standards, including the creation of a professional standards board. It also proposes a new code of conduct applied universally across all bank employees that sets out ethical principles to which they would be expected to adhere. Responsibility for the oversight and monitoring of the code could sit with FCA; or if the PCBS and Government think it is the right approach, the industry would support the establishment of the BSRC, which would be responsible for ensuring that banks and their employees adhere to the Code. The Code would need to cover expectations on company boards, senior management, controls, systems and remuneration structures. Another option is that a blacklist of employees be developed with the aim of preventing individuals from working in either banking or the wider financial services sector. BSRC would need to be independent of BBA and the industry, with an independent chair and a majority of independent non-exec drectors. (16/01/13) http://www.bba.org.uk/download/8607 http://www.bba.org.uk/download/8608
European Parliament/EC: Credit rating agencies
Further to the European Parliament’s vote to approve the Regulation which will allow agencies to issue unsolicited sovereign debt ratings only on set dates, and enable private investors to sue them for negligence, the EC has published a statement by Michel Barnier along with an FAQ on the matter.(16/01/13) http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130114IPR05310/20130114IPR05310_en.pdf http://europa.eu/rapid/press-release_MEMO-13-14_en.htm http://europa.eu/rapid/press-release_MEMO-13-13_en.htm
European Parliament: Credit rating agencies
This press release notes that MEPs were to discuss the legislation in respect of credit rating agencies on 15 January 2013 and vote on an agreement that has been reached with the European Council on the following day. (15/01/13) http://www.europarl.europa.eu/pdfs/news/public/story/20130111STO05284/20130111STO05284_en.pdf
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: 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- xix/uc606xix.pdf (NB: over 30 pages long) http://www.parliament.uk/documents/joint- committees/Banking_Standards/Letter%20Dr%20Marcel%20Rohner.pdf
EBA/ESMA: EURIBOR
EBA and ESMA have published the results of their joint work on EURIBOR and have set out proposals for benchmark rate- setting processes. The publications include a review of EURIBOR’s administration and management and clear recommendations to EEBF to improve the governance and transparency of the rate-setting process; formal EBA recommendations to national authorities on the supervisory oversight of banks participating in the EURIBOR panel; and a joint EBA/ESMA consultation on principles for benchmark setting processes in the EU which establish a framework for the conduct of benchmark rate-setting and the activities of participants in the process. EBA/ESMA highlight a number of weaknesses in the current process. It notes the steering committee, responsible for the governance of the rate-setting process, is not sufficiently independent as a majority of its members come from the panel banks; criticizes EEBF for not
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assuming sufficient direct responsibility and control on the process; suggests that the definition of EURIBOR is unclear and ambiguous; rates are not assessed sufficiently against evidence from real transactions and notes that no formal requirements exist for EURIBOR panel banks to have adequate internal governance, a code of conduct and conflicts of interest management in relation to the submission process and set out suggestions on how EEBF should improve processes, with a view to reviewing the implementation of their recommendations within six months. EBA has set out recommendations on supervisory oversight of activities related to banks’ participation in the EURIBOR panel addressed to national supervisory authorities which focus on strengthening the panel banks’ internal governance arrangements, including a code of conduct. This should improve the identification and management of conflicts of interest, internal control arrangements including audits, record keeping and comparison with actual transactions. The EBA/ESMA principles with regard to benchmark setting processes include a general framework for benchmarks settings (calculation methodology, governance, supervision, transparency of the methodology, contingency plans etc.) and provide guidance to firms involved in benchmark data submissions and to benchmark administrators, calculation agents, publishers and users. Responses to the consultation are required by 15 February 2013. (11/01/13) http://www.eba.europa.eu/News-- Communications/Year/2012/ESMA-and-the-EBA-take-action-to-strengthen-Euribor.aspx http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-BS-2013-001--Euribor--- Recommendations-to-EBF--final.pd f (recommendations to EEBF) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-BS-2013-002-Annex-1--Euribor--- Report--final.pdf (report on administration and management of EURIBOR) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-BS-2013-005--Euribor---EBA- recommendation-to-NSAs--final.pd f (recommendations to national supervisory authorities) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/JC-CP-2013-01-Consultation-Paper-on- Principles-on-Benchmark-Rate-Setting-in-the-EU.pdf (benchmark setting consultation)
IOSCO: Financial benchmarks
This consultation report discusses concerns regarding the potential inaccuracy or manipulation of benchmarks and identifies benchmark-related policy issues across securities and derivatives and other financial sectors including: the appropriate level of regulatory oversight of the process of benchmarking; standards that should apply to methodologies for benchmark calculation; credible governance structures to address conflict of interests in the benchmark setting process within the reporting financial institutions as well as in the oversight bodies; and the appropriate level of transparency and openness in the benchmarking process. It also looks at issues that market participants might confront when seeking to make the transition to a new or different benchmark. Responses are required by 11 February 2013. (11/01/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD399.pdf (NB: over 50 pages long)
EC: Report from the Commission to the European Parliament and of the Council: The review of the Directive 2002/87/EC of the European Parliament and the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate
This review of the Financial Conglomerates Directive concludes that “the criteria for the definition and identification of a conglomerate, the identification of the parent entity ultimately responsible for meeting the group-wide requirements and the strengthening of enforcement with respect to that entity are the most relevant issues that could be addressed in a future revision of the Financial Conglomerates Directive. The identification of the responsible parent entity would also enhance the effective application of the existing requirements concerning capital adequacy, risk concentrations, intra-group transactions and internal governance”. (11/01/13) http://register.consilium.europa.eu/pdf/en/13/st05/st05127.en13.pdf
BIS: Principles for effective risk data aggregation and risk reporting
Implementation of the principles is intended to strengthen banks' risk data aggregation capabilities and internal risk reporting practices, particularly at globally systemically important banks. Specifically, the principles are expected to support a bank’s efforts to: enhance the infrastructure for reporting key information, particularly that used by the board and senior management to identify, monitor and manage risks; improve the decision-making process throughout the banking organisation; enhance the management of information across legal entities, while facilitating a comprehensive assessment of risk exposures at the global consolidated level; reduce the probability and severity of losses resulting from risk management weaknesses; improve the speed at which information is available and hence decisions can be made; and improve the organisation’s quality of strategic planning and the ability to manage the risk of new products and services. (9/01/13) http://www.bis.org/publ/bcbs239.pdf
BIS: Basel III: The liquidity coverage ratio and liquidity risk monitoring tools/EC: CRD4
BIS met on 6 January 2012 to consider amendments to the liquidity coverage ratio. A summary description of the agreed LCR is in Annex 1. The changes to the definition of the LCR include an expansion in the range of assets eligible as high quality liquid assets and some refinements to the assumed inflow and outflow rates to better reflect actual experience in times of stress. These changes are set out in Annex 2. The full text of the revised LCR was published the following day and appears in the second link below. It was agreed that the LCR should be subject to phase-in arrangements which align with
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those that apply to the Basel III capital adequacy requirements. Specifically, the LCR will be introduced as planned on 1 January 2015, but the minimum requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach 100% on 1 January 2019. It was further agreed that that, during periods of stress it would be entirely appropriate for banks to use their stock of high quality liquid assets, thereby falling below the minimum and that it was the responsibility of bank supervisors to give guidance on usability according to circumstances. BIS also noted plans to review the net stable funding ratio. In addition, a new charter for the Basel Committee has been published. The EC has published a statement by Michel Barnier in which he discusses the implications for CRD 4. (7/01/13) http://www.bis.org/press/p130106.pdf (press release) http://www.bis.org/publ/bcbs238.pdf (NB: over 70 pages long) http://www.bis.org/press/p130106a.pdf (Annex 1) http://www.bis.org/press/p130106b.pdf (Annex 2) http://www.bis.org/bcbs/charter.pdf (Charter) EUROPA - PRESS RELEASES - Press Release - Statement by Commissioner Michel Barnier on the impact of the latest Basel Committee liquidity developments for Capital Requirements (CRD 4) in the EU
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
Payment systems and non-consumer banking
Payments Council: Paym
The Payments Council has confirmed that its new secure way for consumers to pay using just a mobile number will be called Paym. A launch date will be announced in April when customers of Bank of Scotland, Barclays, Cumberland Building Society, Danske Bank, Halifax, HSBC, Lloyds Bank, Santander and TSB Bank will be able to use the new service. It is anticipated that the system will expand further later in the year and early in 2015. Full details of participating institutions are set out in the press release. (11/03/14) http://www.paymentscouncil.org.uk/media_centre/press_releases/-/page/2838/
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. (5/05/14) 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. (3/03/14) http://www.fca.org.uk/firms/firm-types/payment-systems
EC: Regulation (EU) No .../2014 of the European Parliament and of the Council of 26 February 2014 amending Regulation (EU) No°260/2012 as regards the migration to Union-wide credit transfers and direct debits
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Further to last week’s report on the amendment of the SEPA migration deadline, the text of the Regulation has now been published. (3/03/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=PE%209%202014%20REV%201
European Parliament: Payment services
This press release reports that MEPs have endorsed the draft legislation governing online payments by electronic transfer (20/02/14) http://www.europarl.europa.eu/news/en/news-room/content/20140219IPR36455/html/Economic-Affairs- Committee-backs-plan-to-update-online-payment-rules
HoC European Scrutiny Committee: 34th report of session 2013-14
Section 17 of the report considering the draft SEPA Regulation, noting Government concerns over the processing of the proposal. (18/02/14) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmeuleg/83-xxxi/83xxxi.pdf
EC: SEPA payments deadline
This press release notes that the European Council has adopted a Regulation postponing the end date in the euro area for the migration of domestic and intra-European credit transfers and direct debits in euros to the new SEPA-standard-based credit transfers and direct debits. The original deadline in the Regulation had been set at 1 February 2014 and this has now been amended to 1 August 2014. (18/02/14) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/141058.pdf
ECB: Opinion of the ECB of 5 February 2014 on a proposal for a directive of the European Parliament and of the Council on payment services in the internal market and amending Directives 2002/65/EC, 2013/36/EU and 2009/110/EC and repealing Directive 2007/64/EC
The Opinion includes recommendations with regard to the above-mentioned Directive as well as suggested amendments to the text. (11/02/14) http://www.ecb.europa.eu/ecb/legal/pdf/en_con_2014_09_f_sign.pdf
ECB: Opinion of the ECB of 5 February 2014 on a proposal for a regulation of the European Parliament and of the Council on interchange fees for card-based payment transactions
The Opinion includes recommendations with regard to the above-mentioned Regulation as well as suggested amendments to the text. (11/02/14) http://www.ecb.europa.eu/ecb/legal/pdf/en_con_2014_10_f_sign.pdf
HoC European Scrutiny Committee, 33rd Report of Session 2013–14
Section 8 of this report considers concerns over payment services and details the latest ministerial response to the Committee’s specific concerns to the relevant draft EU legislation. (11/02/14) http://www.publications.parliament.uk/pa/cm201314/cmselect/cmeuleg/83-xxx/83xxx.pdf
ECB: Assessment guide for the security of internet payments
This assessment guide is intended for supervisory and oversight authority staff of the Member States who are in charge of assessing compliance with the internet recommendations. The recommendations contained here are intended to help in efforts to prevent payment fraud and notes that items in the guide may be subject to any revisions of the Payment Services Directive. (5/02/14) http://www.ecb.europa.eu/pub/pdf/other/assessmentguidesecurityinternetpayments201402en.pdf
European Payments Council: SEPA rulebooks
EPC has published a press release setting out information on its various rulebooks which come into effect on 1 February 2014, and providing links to new versions (28/01/14)
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http://www.europeanpaymentscouncil.eu/content.cfm?page=news&news_id=538
Council of the EU: Extension of deadline for SEPA migration: Council confirms deal with EP
The Council issued a press release to announce its agreement with the European Parliament over a Regulation to postpone the deadline for SEPA migration from 1 February 2014 to 1 August 2014. (22/01/14) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140734.pdf
ECON: Report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) N° 260/2012 as regards the migration to Unionwide credit transfers and direct debits [SEPA Migration Regulation]
Following its agreement with the Council of the EU on postponing the deadline for SEPA migration, the European Parliament Economic & Monetary Affairs Committee published the amendments above. (22/01/14) http://www.europarl.europa.eu/document/activities/cont/201401/20140122ATT78002/20140122ATT78002EN.pdf
European Payments Council: White Paper on Mobile Wallet Payments
A ‘mobile wallet’ is an interface allowing one to organise payments from a mobile phone. The EPC white paper elaborates on this concept, as part of its remit to promote the Single Euro Payments Area (SEPA). (22/01/14) http://www.europeanpaymentscouncil.eu/knowledge_bank_download.cfm?file=EPC163%2D13%20v2%2E0%20White%20P aper%20Mobile%20Wallet%20Payments%2Epdf
Council of the EU: Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) N° 260/2012 as regards the migration to Union-wide credit transfers and direct debits [SEPA Regulation] - Approval of the final compromise text
The Council has published an Item Note on the above, regarding the provisional agreement between Council and Parliament on the SEPA Regulation. (20/01/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%205250%202014%20REV%201&r=http %3A%2F%2Fregister.consilium.europa.eu%2Fpd%2Fen%2F14%2Fst05%2Fst05250-re01.en14.pdf
ECB: New statistics show SEPA migration gathers pace in December
According to new figures published by the ECB, 74% of euro-area credit transfers in December were compliant with the Single Euro Payments Area initiative, a marked increase from November, when the figure stood at 64%. (17/01/14) http://www.ecb.europa.eu/press/pr/date/2014/html/pr140120.en.html
Council of the EU: Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) N° 260/2012 as regards the migration to Union-wide credit transfers and direct debits [SEPA Migration Regulation]
A ‘final’ Presidency compromise text dated 16 January 2014 has been published. (17/01/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%205250%202014%20INIT&r=http%3A% 2F%2Fregister.consilium.europa.eu%2Fpd%2Fen%2F14%2Fst05%2Fst05250.en14.pdf
EC: Regulation of the European Parliament and of the Council amending Regulation (EU) N° 260/2012 as regards the migration to Union-wide credit transfers and direct debits
The press release notes that the EC has adopted a proposal (second link below) to give an extra transition period of six months during which payments which differ from the SEPA format can still be accepted so as to minimise any possible risk of disruption to payments for consumers and businesses. It is emphasised that the proposal does not change the formal deadline for migration of 1 February 2014. (10/01/14) http://europa.eu/rapid/press-release_IP-14-6_en.htm?locale=en http://ec.europa.eu/internal_market/payments/docs/sepa/1401069_proposal_en.pdf
European Payments Council/Cards Shareholder Group: SEPA cards standardisation volume 79
EPC and CSG have published a new version of the document, which defines a standard set of requirements to ensure an interoperable and scalable card and terminal infrastructure across SEPA, based on open international card standards. (8/01/14) http://www.europeanpaymentscouncil.eu/content.cfm?page=sepa_cards_standardisation_volume_version70_published_in_ 2014_ready_for_market_implementation
EC: Council sets out its position on payment accounts
COREPER, on behalf of the European Council, has agreed a general approach on a draft directive aimed at improving the transparency and comparability of information on fees related to payment accounts. (23/12/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140274.pdf
ECB: ERPB
ECB has announced the creation of the Euro Retail Payments Board, which replaces the SEPA Council. It is noted that the new body’s composition and mandate will be broader than those of its predecessor.. ERPB’s work will consist mainly of identifying strategic issues and work priorities (including business practices, requirements and standards) and ensuring they are addressed. (20/12/13) http://www.ecb.europa.eu/press/pr/date/2013/html/pr131219.en.html
EC: Opinion of the European Economic and Social Committee on the ‘Proposal for a Directive of the European Parliament and of the Council on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features’
This has been published in the Official Journal. (21/11/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:341:0040:0043:EN:PDF
ECB: Recommendations for the security of mobile payments
ECB has published this document in draft and as a consultation. The recommendations were developed by the European Forum on the Security of Retail Payments, SecuRe Pay. The report raises concerns that the current generation of mobile devices and their operating systems were generally not designed with the security of payments in mind, over reliance on radio technology; the involvement of the likes of mobile network operators and trusted service managers, compared with traditional payments; and what is seen as the general reduced security awareness of mobile device users or unsafe customer behaviour. The recommendations specified in the report are applicable to all payment services providers, as defined in the Payment Services Directive, when providing mobile payment services, as well as to governance authorities (of payment instrument schemes developing and offering mobile payment services (including card schemes, credit transfer schemes, direct debit schemes, e-money schemes, etc.) Responses are required by 31 January 2014. (21/11/13) http://www.ecb.europa.eu/paym/cons/pdf/131120/recommendationsforthesecurityofmobilepaymentsdraftpc201311en.pdf?7f 9004f1cbbec932447c1db2c84fc4e9
ECB: SEPA and migration
ECB has published a page of FAQs on its website with regard to the above. (13/11/13) http://www.ecb.europa.eu/paym/sepa/html/sepa-faq.en.html
BoE: Speech by Chris Salmon: The UK payments landscape (4 November 2013)
Text of the above, given at the C D Howe Institute Special Policy Conference: Canadian Payment Systems in Toronto, follows. He discusses aspects of the UK payments structure, including risks such as cyber risk; infrastructure provision and the changing regulatory landscape for payments in the UK. (5/11/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech691.pdf
ECB: Second SEPA migration report
The report analyses the state of play in euro area countries in creating a single market for credit transfers and direct debits in euro across Europe and provides guidance on managing the transition process. It is noted that payment orders that do
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not comply with the legal requirements as laid down in the SEPA Migration End-date Regulation will not be allowed to be processed by payment service providers after 1 February 2014. (24/10/13) http://www.ecb.europa.eu/pub/pdf/other/secondsepamigrationreport201310en.pdf?922f2a10a2152bb313e65f0ed5b4b980
FCA: Stakeholder Liaison Group
FCA has published minutes of the meeting held on 29 July 2013 between representatives from FCA, HMT, the Payments Council and various industry representatives which discussed draft second Payment Services Directive. (4/09/13) http://www.fca.org.uk/static/documents/stakeholder-liaison-group-minutes-july-13.pdf
HMT: Setting the strategy for UK payments
HMT has published responses to its July 2012 consultation which proposes that the Payments Council be brought within the scope of financial regulation. These are available to download in three separate documents via the link below. (20/08/13) https://www.gov.uk/government/consultations/setting-the-strategy-for-uk-payments
OFT: UK Payment systems – how regulation of UK payment systems could enhance competition and innovation
OFT has carried out a short exercise, gathering evidence from stakeholders on competition and innovation in payment systems in the UK and this report summarises its views concerning how the proposed regulator could stimulate competition and innovations in payment systems. This follows on from HMT’s “Opening up payment systems” consultation published in March 2013. Among OFT’s recommendations: in addition to its proposed regulatory objectives set out in its consultation, HMT should ensure that legislation for the regulator provides objectives to minimise barriers to entry in retail banking markets and ensure that both existing and new providers are able to compete on an equal basis for business and personal customers; that direct access to existing payment systems is available to all banks and building societies, including smaller entities; that HMT considers setting out in legislation for the regulator, a suitable redress mechanism to ensure that all providers of bank accounts are able to compete on a level playing field; and that HMT seeks to ensure that its approach to regulating payment card networks will be compatible and consistent with that proposed by the EC, (31/07/13) http://www.oft.gov.uk/shared_oft/markets-work/OFT1498.pdf (NB: over 60 pages long)
EC: Payments legislative package
The EC has adopted a legislative package in the field of the EU payments framework. This proposes a revised Payments Services Directive (PSD2) and a Regulation on Multilateral Interchange Fees. It has also published a short report from the EC to the European Parliament and the Council on the application of Directive 2007/64/EC on payment services in the internal market and on Regulation 924/2009 on cross-border payments in the Community. (24/07/13) http://europa.eu/rapid/press-release_IP-13-730_en.htm?locale=en (press release) http://europa.eu/rapid/press- release_MEMO-13-719_en.htm?locale=en (FAQ) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0547:FIN:EN:PDF (NB: over 100 pages long) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0550:FIN:EN:PDF (NB: over 30 pages long) http://ec.europa.eu/internal_market/payments/docs/framework/130724_report-application-psd_en.pdf
OECD: Competition and payment systems
This document comprises proceedings in the original languages of a roundtable on competition and payment systems held in October 2012. It sets out the structure of payment systems in various jurisdictions and considers issues such as new technologies and regulatory challenges. (8/07/13) http://search.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP(2012)24&docLanguage=En (NB: over 200 pages long)
European Payments Council: Clarification paper - SEPA credit transfer and SEPA direct debit
This revised document addresses operational issues arising from implementation of the SEPA credit transfer scheme rulebook, SEPA core direct debit scheme rulebook and SEPA business-to-business direct debit scheme rulebook. (27/06/13_ http://www.europeanpaymentscouncil.eu/knowledge_bank_download.cfm?file=EPC348- 12%20v2.0%20SCT%20and%20SDD%20Clarification%20Paper.pdf
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FCA: The FCA’s role under the Payment Services Regulations 2009: our approach
This new version of the approach document has been updated to reflect the change of regulatory body from FSA to FCA. FCA highlights that chapter 3 has been amended in the light of changes made by the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2013; chapter 6 has been amended in respect of the definition of “establishment”, which has changed back to that used in the Directive and chapter 7 has been updated to reflect policy on FSA/FCA logos. (21/06/13) http://www.fca.org.uk/static/documents/payment-services-approach.pdf (NB: over 100 pages long)
FCA: The FCA’s role under the Electronic Money Regulations 2011: our approach
FCA has updated this approach document to reflect that the transitional period in the Electronic Money Regulations has come to an end and the change of regulatory body from FSA to FCA. It has clarified information provided on: spent convictions; the definition of a head office; when FCA may cancel an electronic money issuer’s authorisation or registration; the passporting process; the application of host state legislation to FCA-authorised electronic money issuers; the use of FSA/FCA logos; the application of the conduct of business rules to distributors and the SEPA legislation; the process for submitting reporting returns and the fees applicable to e-money issuers. (21/06/13) http://www.fca.org.uk/static/documents/emoney-approach.pdf (NB: over 100 pages long)
Payment Services Council: Account number portability
The Payment Services Council has published market research in respect of the above which asked participants to compare and contrast three different switching models - with particular emphasis on account number portability to explore customers’ views of this. The three models were: changing account numbers but with a payment re-direction service (as will be provided by the new industry-wide switching service being launched this September).account number portability (customers retaining their sort code and account number when they change provider) and the use of portable unique proxy customer IDs, which would be used to make and receive payments instead of using sort codes and account numbers. The Payments Council notes that the its new account switching service, due to be launched in September, should deliver all the main features that customers have identified as being essential in any successful transfer system, but notes its support for the independent review of the new account switching service that OFT will be undertaking in 2015. (21/06/13) http://www.paymentscouncil.org.uk/media_centre/press_releases/-/page/2604/ http://www.paymentscouncil.org.uk/files/payments_council/accountswitching/market_resesarch/optimisa_report.pdf http://www.paymentscouncil.org.uk/files/payments_council/accountswitching/market_resesarch/optimisa_number_portability _presentation.pd f
Payments Council: Payments roadmap - an initial report
The roadmap is intended to set out an industry strategy for the development of payment systems in the UK and establish a shared view, at a strategic level, of how the shared infrastructure could be set up five to ten years from now, and the key development initiatives collectively required to migrate the shared infrastructure and services to that destination. Following the publication of this initial report, version 1 of the roadmap will be delivered during the Q1 2014 and version 2 published later in 2014. (18/06/13) http://www.paymentscouncil.org.uk/files/payments_council/roadmap/3560_payments_road_map_proof_lr.pdf
EC: Commission closes investigation of EPC but continues monitoring online payments market
EC has closed an antitrust investigation opened in September 2011 to examine the standardisation process for e-payments carried out by EPC. The EC had concerns that through its work on standards for e-payments, and in particular the e- Payments Framework, EPC could exclude new entrants not linked to a bank from the e-payments market. In the course of the investigation EPC announced its decision to stop the development of the e-Payments Framework and any other standardisation initiatives that would have the same object or effect. As a result, the complainant in this case, Sofort AG, withdrew its complaint. Under these circumstances, the EC has decided to close its investigation, but notes it will monitor the market to ensure a level playing field for all operators and may propose legislation to establish objective and non- discriminatory rules for all players active in the e-payments market. (14/06/13) http://europa.eu/rapid/press- release_MEMO-13-553_en.htm
EC: Council conclusions on SEPA
This sets out a number of Council conclusions, including concerns “that the current SEPA migration in Member States, with few exceptions, is far from being complete … some stakeholders seem to be planning for a late SEPA migration and
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therefore may be exposed to undue operational risks impacting smooth handling of payments”. (14/05/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137111.pdf
Payments Council: Current account switch guarantee and trustmark
The Payments Council has announced details of the above, which will be used by all participating financial institutions, from the launch of the new service in September 2013. The new service aims to increase competition in banking by making it simpler for customers to switch their current account. The switching process will be completed within seven working days – a substantial improvement on the current process that can take between 18 and 30 days. (11/06/13) http://www.paymentscouncil.org.uk/media_centre/press_releases/-/page/2563/
HMT: Special administration regime for payment and settlement systems
This consultation seeks industry views on the Government’s proposal: to introduce legislation allowing in certain circumstances for a special administration regime to be applied to operators of recognised inter-bank payment systems, operators of securities settlement systems, and key service providers to these firms, in order to protect the stability of the UK financial system should any of these firms become insolvent. Responses are required by 19 June 2013. (25/04/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/192483/consult_special_administration_regim e_for_payment_and_settlement_systems.pdf (NB: over 30 pages long)
HMT: Opening up UK payments
This consultation invites views on options for reforming the regulation and governance of payments systems in the UK. The Government is proposing to proceed with bringing payment systems under economic regulation, and establish a new competition-focused, utility-style regulator for retail payment systems. The regulator will operate according to the established institutional model for economic regulation, and will act to ensure that the Government’s aims for the payment systems are met. In particular, it will seek to ensure that the governance and operation of the payment systems is not a barrier to competition in the provision of payment services, and in the wider UK financial services market. It will also ensure that decisions about the operation and development of UK payment systems are made with the views of all stakeholders, including end-users, being properly taken into account, and that adequate investment is made to act on the results of these decisions. It is proposed that the regulator will be FCA or an existing economic regulator. The consultation also sets out the Government’s response to the previous July 2012 consultation entitled “Setting the strategy for UK payments” (individual responses are available to download via the third link below). (26/03/13) http://www.hm-treasury.gov.uk/press_31_13.htm http://www.hm-treasury.gov.uk/d/consult_opening_up_uk_payments.pdf http://www.hm- treasury.gov.uk/consult_opening_up_uk_payments.htm
BoE: 2012 Payment Systems Oversight Report.
The Oversight Report provides an account of how BoE has exercised its responsibilities in respect of payment system oversight during the period since the previous report (published in April 2012). It also notes changes to the Bank’s oversight regime that will come into effect on 1 April 2013, when BoE assumes wider supervisory responsibilities for financial market infrastructures including central counterparties and securities settlement systems. (25/03/13) http://www.bankofengland.co.uk/publications/Documents/psor/psor2012.pdf
ECB: Recommendations for the security of internet payments
This report presents a set of recommendations to improve the security of internet payments and includes some best practices, which payment services providers, governance authorities of payment schemes and other market participants, such as e-merchants, are encouraged to adopt. (1/02/13) http://www.ecb.int/pub/pdf/other/recommendationssecurityinternetpaymentsoutcomeofpcfinalversionafterpc201301en.pdf
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European Payments Council: Clarification paper – SEPA credit transfer and SEPA direct debit
This document addresses operational issues arising from implementation of the SEPA Credit Transfer Scheme Rulebook, SEPA Core Direct Debit Scheme Rulebook and SEPA Business-to-Business Direct Debit Scheme Rulebook. It provides guidance and, where feasible, recommendations to scheme participants on how to handle situations that are not as such described in the rulebooks. (30/01/13) http://www.europeanpaymentscouncil.eu/knowledge_bank_download.cfm?file=EPC348- 12%20v1.1%20SCT%20and%20SDD%20Clarification%20Paper.pdf
EC: Guideline of the European Central Bank of 5 December 2012 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) (recast) (ECB/2012/27)
This has now been published in the Official Journal. (30/01/13) http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:030:0001:0093:EN:PDF (NB: over 90 pages long)
FSA: The FCA’s role under the Electronic Money Regulations 2011 - our approach
FSA has published a draft marked-up updated version of its 2011 paper, amended to reflect the changeover to FCA in April 2013 and to provide clarification on spent convictions; the definition of a head office; when FCA may cancel the authorisation or registration of electronic money institutions; passporting processes; the application of the conduct of business rules to distributors and the SEPA legislation; the process for submitting reporting returns and the fees applicable to e-money issuers. (18/01/13) http://www.fsa.gov.uk/static/pubs/international/draft-approach-emoney.pdf (NB: over 150 pages long)
Building societies and mutuals
The Co-operative and Community Benefit Societies and Credit Unions (Investigations) Regulations 2014/574
These Regulations repeal s48 of the Industrial and Provident Societies Act 1965 (“1965 Act”) which gave FCA power to require Industrial and Provident Societies and Credit Unions (“societies”) to produce documents and provide information. By applying provisions of Part 14 of the Companies Act 1985 with modifications, the Regulations replace s48 with more extensive powers for FCA to obtain information from societies, including powers of entry to premises, and new powers for FCA to arrange investigations of societies. (Date in force: 6/04/14) (11/03/14) http://www.legislation.gov.uk/uksi/2014/574/pdfs/uksi_20140574_en.pdf
The Industrial and Provident Societies and Credit Unions (Arrangements, Reconstructions and Administration) Order 2014/229
This Order applies company insolvency rescue legislation to industrial and provident societies (other than societies which provide social housing) and to credit unions. In the Order these are called “relevant societies”. Rescue legislation means Part 1 (company voluntary arrangements) and Part 2 (administration) of the Insolvency Act 1986 (“the 1986 Act”) and Part 26 of the Companies Act 2006 (arrangements and reconstructions). (Date in force: 6/04/14) (7/02/14) http://www.legislation.gov.uk/uksi/2014/229/pdfs/uksi_20140229_en.pdf
The Industrial and Provident Societies (Increase in Shareholding Limit) Order 2014/210
This Order increases from £20,000 to £100,000 the amount specified in s6(1) of the Industrial and Provident Societies Act 1965 (c. 12) (“the Act”). That amount is the maximum interest in the withdrawable shares of a society registered under the Act which may be held by a member (other than a member who is not subject to the maximum shareholding limit). For the purposes of this Order “registered society” does not include a credit union. Article 3 provides that the committee of a registered society may resolve to increase the maximum interest specified in the society’s rules to any amount up to £100,000. A resolution cannot be varied or revoked. The power to make a resolution is lost if it is not exercised within 18 months from the date on which this Order comes into force. It is also lost if the society’s rules are amended before a resolution is made. Article 4 revokes previous orders made to increase the maximum shareholding limit. (Date in force; 6/04/14) (7/02/14) http://www.legislation.gov.uk/uksi/2014/210/pdfs/uksi_20140210_en.pdf
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The Industrial and Provident Societies and Credit Unions (Electronic Communications) Order 2014/184
This Order amends section 2 of the Industrial and Provident Societies Act 1965 (c.12) to allow those applying to register a society by electronic means to submit only one copy of the society’s rules. (Date in force: 6/04/14) (03/02/14) http://www.legislation.gov.uk/uksi/2014/184/pdfs/uksi_20140184_en.pdf
The Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Commencement No. 2) Order 2014/183 (C.6)
This Order brings section 3 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 (c.7) (the “2010 Act”) into force on 6 April 2014 and s1 of the 2010 Act into force on 1 August 2014. Section 1 requires that in future societies to be registered under s1 of the Industrial and Provident Societies Act 1965 (c.12) must be either registered as cooperative societies or as community benefit societies. Section 3 applies the Company Directors Disqualification Act 1986 (c.46) to societies registered or deemed to be registered under the Industrial and Provident Societies Act 1965. (31/01/14) http://www.legislation.gov.uk/uksi/2014/183/pdfs/uksi_20140183_en.pdf
The Building Societies (Accounts and Related Provisions) (Amendment) Regulations 2014
HMT made these Regulations “to remove the requirement on a building society to include in its annual business statement certain information relating to officers who are not directors of the society and persons connected to them.” (16/01/14) http://www.legislation.gov.uk/uksi/2014/48/made
PRA: Credit unions
On this webpage, PRA notes that it has seen that a number of credit unions are marketing themselves (especially on their websites) – as offering similar services to those offered by banks and/or building societies and in some cases stating that they are subject to a similar regulatory regime to banks and/or building societies. PRA notes that this is “misrepresentation” and that credit unions “should consider whether statements on their websites are appropriate and take steps to ensure the description of services offered is accurate”. (7/01/14) http://www.bankofengland.co.uk/pra/Pages/supervision/creditunions/default.aspx
Co-operative and Community Benefit Societies Bill [HL]
A Bill to consolidate certain enactments relating to co-operative societies, community benefit societies and other societies registered, or treated as registered, under the Industrial and Provident Societies Act 1965 with amendments to give effect to recommendations of the Law Commission and the Scottish Law Commission. It received its first reading on 18 December 2013. The second reading has yet to be scheduled. (20/12/13) http://www.publications.parliament.uk/pa/bills/lbill/2013- 2014/0069/14069.pdf
HMT: Industrial and provident societies: growth through co-operation:
Further to its July 2013 consultation, HMT has published a summary of responses. As a result of the responses: the Government will proceed with increasing the limit for withdrawable share capital to £100,000; will introduce insolvency rescue procedures for societies, will reproduce Companies Act provisions for societies with regard to FCA’s investigative powers and allow societies to submit electronic copies of registration documents to FCA. However, it will not proceed with proposals to apply provision for bank insolvency rescue to Credit Unions (Part 2 of the Banking Act 2009) or reproduce Companies Act provisions onto societies with regard to inspection of the register of members to prevent vexatious use of the register by disaffected members. (18/12/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/266635/PU1610_IPS_response_to_consultati on.pdf
PRA: Interest bearing shares
PRA has published this webpage which sets out information on interest bearing shares for UK credit unions. It includes details on recent tests undertaken by PRA on credit unions data, information for credit unions on reporting requirements as well as links to letters sent to credit unions with regard to capital requirements (5/12/13) http://www.bankofengland.co.uk/pra/Pages/supervision/creditunions/default.aspx
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The Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Commencement No. 1) Order 2013/2936 (C.120)
This Order brings into force ss 4 to 7 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 (c.7) (the “2010 Act”). Section 4 gives HMT power by regulations to apply to societies registered under the Industrial and Provident Societies Act 1965 (c.12) certain statutory provisions applying to companies. Section 5 gives HMT power by regulations to make provision for credit unions corresponding to provision for building societies. Section 6 gives HMT power by regulations to make amendments to legislation in consequence of the 2010 Act. Section 7 contains provision about regulations under the 2010 Act. (Date in force: 1/12/13) (19/11/13) http://www.legislation.gov.uk/uksi/2013/2936/pdfs/uksi_20132936_en.pdf
FCA: Regulating consumer credit for credit unions
This factsheet provides a brief overview of the implications for credit unions of the new consumer credit regime, including clarification on regulated consumer credit activities for credit unions. (15/11/13) http://www.fca.org.uk/static/documents/factsheets/factsheet-032-regulating-consumer-credit-for-credit-unions.pdf
The Credit Unions (Maximum Interest Rate on Loans) Order 2013/2589
This Order increases the limit on the interest which a credit union may charge on loans made by it under the Credit Unions Act 1979 (c.34) from 2% to 3% per month. (Date in force:: 1/04/13) (10/10/13) http://www.legislation.gov.uk/uksi/2013/2589/pdfs/uksi_20132589_en.pdf
Law Commission: Draft Co-operative and Community Benefit Societies Bill
The Law Commission has published a consultation with regard to the draft Bill and supporting documents, all available via the link below. It invites stakeholders to consider whether the Bill accurately reproduces the effect of the legislation being consolidated (with the changes described in the draft Law Commission recommendations); whether the drafting of the Bill can be improved, without altering the effect of the law, asks for comments on those recommendations and the contents of the drafter’s note and whether relevant legislation has been consolidated. Responses are required by 15 November 2013. (27/09/13) http://lawcommission.justice.gov.uk/consultations/2536.htm
FCA: Speech by Linda Woodall: The FCA and our approach to building societies (3 September 2013)
Text of the above, given at BSA, follows. Topics include: a broad overview of FCA’s approach to supervising building societies; strengths and risks posed by the mutual sector; forthcoming thematic work (including “fairness” in mortgage contracts, (3/09/13) http://www.fca.org.uk/news/speeches/the-fca-and-our-approach-to-building-societies
PRA: Category 5 credit unions
PRA notes that it wrote to credit unions in March 2013 confirming their status for supervision purposes, adding that the vast majority of credit unions were categorised as “Category 5” firms. PRA will not review them individually but will conduct an annual assessment of them as part of a large peer group. The 2013 assessment has now taken place and PRA has written to credit unions with their findings. It has published the texts of the two letters sent – which letter was received depended on whether the credit union had been on track to meet the enhanced capital requirements that come fully into force at the end of September 2014. (1/09/13) http://www.bankofengland.co.uk/pra/Pages/supervision/creditunions/default.aspx#1 http://www.bankofengland.co.uk/pra/Documents/creditunions/Category%205%20credit%20unions%20meeting%20capital%20requir ements.pdf http://www.bankofengland.co.uk/pra/Documents/creditunions/Category%205%20credit%20unions%20not%20likely%20to%20meet %20capital%20requirements.pdf
HMT: Industrial and provident societies: growth through co-operation
HMT has published this consultation which sets out a number of proposed steps to modernise legislation in this sector. Proposals include: making available insolvency procedures for industrial and provident societies; making available further insolvency procedures for credit unions and allowing industrial and provident societies to submit electronic copies of registration documents to FCA instead of printing and posting conventional paper documents. Responses are required by 20 September 2013. (26/07/13)
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https://www.gov.uk/government/consultations/industrial-and-provident-societies-growth-through-co-operation/industrial-and- provident-societies-growth-through-co-operation (not available as a PDF)
HoC: Redeemable Shares Bill
A Bill to enable the law relating to societies registered under the Industrial and Provident Societies Act 1965 or the Friendly Societies Act 1992 and certain mutual insurers to be amended to permit and facilitate the use of a new and additional class of redeemable share capital; to provide consequential rights to members of such societies or insurers; and to restrict the voting rights of certain members who hold such shares. The first reading took place on 22 July 2013 – the second reading has yet to be scheduled. (24/07/13) http://www.publications.parliament.uk/pa/bills/lbill/2013-2014/0043/140043.pdf
HMT: Raising the maximum interest rate cap
Further to its December 2012 consultation, HMT has now published a document which summarises responses and announced plans to amend the Credit Union Act 1979. This will allow firms to increase the maximum interest rate that credit unions can charge from 2% to 3% per calendar month. The increase will not be compulsory and individual credit unions will be able to choose whether or not it would be appropriate for them to increase their rates. The new, higher cap will come into effect on 1 April 2014. The new 3% interest rate will be introduced alongside DWP’s Credit Union Expansion Project which will enable credit unions to reduce their running costs and be financially sustainable. (12/06/13) https://www.gov.uk/government/news/government-to-increase-access-to- affordable-credit https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206091/raising_the_maximum_interest_rate_cap_res ponse_to_consultation_110613.pdf
FSCS: Dunfermline Building Society update
FSCS’s press release notes that, in April 2013, the independent valuer delivered the reconsideration and report, responding to FSCS’s request for a reconsideration. Following review of the reconsideration and report, FSCS has decided not to refer it to the Upper Tribunal. The valuer’s reconsideration and report for publication is available (although it is partly redacted). (7/06/13) http://www.fscs.org.uk/industry/news/2013/june/dunfermline-building-society-update/index.html
The Financial Services Act 2012 (Mutual Societies) Order 2013/496
This Order provides for functions of FSA relating to mutual societies to be exercisable by FCA and PRA. (Date in force: 1/04/13) (8/03/13) http://www.legislation.gov.uk/uksi/2013/496/pdfs/uksi_20130496_en.pdf (NB: over 50 pages long)
The Building Societies (Core Capital Deferred Shares) Regulations 2013/460 (previously reported on when in draft)
These Regulations make provision in relation to the taxation of a certain type of regulatory capital instrument that may be issued by building societies. These instruments are known as “core capital deferred shares” and are defined in regulation 2 as deferred shares that form part of the core tier o ne capital of a building society. Regulation 3 disapplies tax and stamp duty provisions relating to building society shares in relation to core capital deferred shares and provides that such shares are not loan capital for stamp duty purposes under section 78(7) of the Finance Act 1986, qualifying corporate bonds under the Taxation of Chargeable Gains Act 1992 or restricted preference shares under s60 of the Corporation Tax Act 2010. (5/03/13) (Date in force: 1/03/13) http://www.legislation.gov.uk/uksi/2013/460/made/data.pdf
The Building Societies (Core Capital Deferred Shares) Regulations 2013 (Draft)
These Regulations make provision in relation to the taxation of a certain type of regulatory capital instrument that may be issued by building societies known as “core capital deferred shares” and are defined in regulation 2 as deferred shares that form part of the core tier one capital of a building society. Regulation 3 disapplies tax and stamp duty provisions relating to building society shares in relation to core capital deferred shares and provides that such shares are not loan capital for stamp duty purposes under s78(7) of the Finance Act 1986, qualifying corporate bonds under the Taxation of Chargeable Gains Act 1992 or restricted preference shares under s160 of the Corporation Tax Act 2010. (12/02/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533765/pdfs/ukdsi_9780111533765_en.pdf
The Financial Services Act 2012 (Mutual Societies) Order 2013 (Draft)
This Order provides for functions of FSA relating to mutual societies to be exercisable by FCA and PRA. (Date in force: 1/04/13) (31/01/13) http://www.legislation.gov.uk/ukdsi/2013/9780111533772/pdfs/ukdsi_9780111533772_en.pdf (NB: over 50 pages long)
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FSA: Scottish Building Society/Century Building Society
FSA has confirmed the proposed transfer of the engagements of the Century Building Society to the Scottish Building Society and published its written decision on the matter. (8/01/13) http://www.fsa.gov.uk/static/pubs/other/scottish-century.pdf
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: 27/03/13
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.
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