BREXIT

On 21 March, ESMA published a speech by Steven Maijoor, ESMA Chair, on supervisory convergence in the context of Brexit, transaction cost transparency and the review of the ESAs. Points of interest discussed include: (i) supervisory convergence. While financial centres in the EU27 should be free to compete based on the strengths they can offer firms relocating from the UK as a result of Brexit, the EU rulebook should always be applied consistently. Regulatory or supervisory arbitrage should not feature in firms' contingency plans. ESMA does not wish to question or undermine the delegation model. Instead, it seeks to avoid the creation of "letterbox entities". To mitigate the risks to supervisory convergence from Brexit, ESMA has created the Supervisory Coordination Network; (ii) transaction cost transparency. In Mr Maijoor's view, the changes to cost transparency introduced by MiFID II and the Regulation on KIDs for PRIIPs are already having a positive impact; and (iii) review of ESAs. Mr Maijoor expresses confidence that ESMA would be able to deploy the proposed new convergence powers on delegation arrangements efficiently and proportionately.

On 20 March, the FMLC published a letter (dated 19 March 2018) to the MoJ drawing attention to potential legal uncertainties arising from provisions in clause 6 of the EU (Withdrawal) Bill 2017-19, which will govern the interpretation by UK courts of EU concepts post Brexit. The FMLC recommends that careful thought be given to the practical use of the "appropriateness" test. It suggests that the government provides the judiciary either with principles to enable it to evaluate consistently whether consideration should be given to post-Brexit ECJ judgments or with a mechanism to assist with interpretation. While it recognises that the degree of influence the ECJ's decisions may have on UK judges depends to a certain extent on the final withdrawal agreement, the FMLC believes that it is essential that the government makes provisions to guide judicial deliberation.

On 19 March, the UK government and the EC published a draft withdrawal agreement which includes the legal text agreed by the negotiators on the post-Brexit transition period. The UK government has now agreed that the transition period will end on 31 December 2020. The latest draft clarifies the steps that the UK is able to take towards new international agreements during the transition period (Article 124(4)): the UK "may negotiate, sign and ratify international agreements" entered into in its own capacity in areas of exclusive EU competence during the transition period "provided those agreements do not enter into force or apply during the transition period" unless authorised by the EU. The transition period is now described in Article 121 as "a transition or implementation period", adding the UK government's preferred term for the period.

CAPITAL MARKETS AND MARKET INFRASTRUCTURE

On 22 March, ESMA updated its Q&As on the implementation of BMR. The Q&As include one new answer regarding the following topic: requirements applicable to supervised contributors during the transitional period.

On 21 March, the EC published a proposal for a Council Decision on the position to be adopted, on behalf of the European Union, within the EEA Joint Committee concerning an amendment to Annex IX in order to incorporate EMIR Delegated and Implementing Regulations. The proposal is in addition to the incorporation of EMIR in July 2017.

CONDUCT

On 22 March, the ECB published a speech, “Governance expectations for banks in a changing financial environment”, given by Daniele Nouy, ECB Supervisory Board Chair. In her speech, Ms Nouy reminds banks of the need to follow international best practices and the guidelines on internal governance published by the EBA in September 2017. Ms Nouy recognises that banks now reflect more deeply on how they compose and organise their boards and have started to follow the ECB's suggestions on fit and proper assessments. However, progress has been too slow in a number of areas, such as: (i) the board’s oversight function, which should be reflected in the fit and proper assessments for board members; (ii) independence within the board and risk, nomination and remuneration committees; (iii) a strong link between the board and the internal control functions; (iv) risk appetite frameworks, covering a wide range of risks, both financial and non-financial; and (v) data quality, including compliance with the principles on risk data aggregation and risk reporting issued by the BCBS. Ms Nouy warns banks against taking shortcuts, such as by taking excessive risks to reap higher returns. Solid risk appetite frameworks help to ensure that banks define and adhere to a risk strategy, helping them to avoid excessive risk-taking. Finally, Ms Nouy requests that banks do not cut down on risk management, compliance and internal audit, as these functions play a key role in identifying, measuring and mitigating new risks. Ms Nouy concludes her speech by mentioning some of the supervisory work the ECB plans to undertake in 2018. This includes assessing whether remuneration schemes are conducive to the sound and prudent management of banks and are in line with European standards, as defined by the EBA. The ECB is also currently reviewing its authorisation application processes, including for fit and proper assessments, to see how it could be made more efficient.

FCA speech identifies diversity as key supervisory issue

On 22 March, the FCA published a speech by Megan Butler, FCA Director of Supervision (Wholesale, Investment and Specialist), which was delivered at the Women in Finance Summit in London. The key points Ms Butler makes in her speech are: (i) diversity is a key supervisory issue for the FCA; (ii) firms with monocultures are significantly more likely to have governance-related issues; (iii) the FCA and industry need to keep up the pressure on creating change; and (iv) targets on gender diversity are an option for firms to consider.

On 21 March, the FCA published for consultation: (a) a document setting out its approach to supervision. In the document, the FCA explains that supervision is the continuing oversight of firms and individuals controlling firms to identify, prevent and reduce actual and potential harm to consumers and markets. The FCA takes a forward-looking and strategic approach in its supervisory work. The approach document sets out: (i) the FCA's supervisory principles; (ii) the FCA's supervisory priorities and focus; (iii) how the FCA supervises; and (iv) how the FCA evaluates its supervisory activities. The FCA will publish a final version of the document later in 2018; and (b) the FCA also published for consultation a document setting out its approach to enforcement. The approach document sets out: (i) how the FCA identifies harm; (ii) how the FCA diagnoses harm through its investigations; (iii) the sanctions and remedies available to the FCA; and (iv) how the FCA evaluates its approach to enforcement and measures its performance. The deadline for comments for both documents is 21 July.

On 19 March, the FCA published a speech by Andrew Bailey, FCA Chief Executive, on transforming culture in financial services. In the speech, Mr Bailey highlights: (i) the role of the FCA concerning culture; (ii) firms' public interest responsibilities; (iii) using regulation and supervision to create incentives for good culture; (iv) leadership in firms; and (v) the importance of positive culture.

FINANCIAL CRIME

On 20 March, the FATF published its March 2018 report to the G20 finance ministers and central bank governors. In the report, the FATF states that: (i) it will regularly review and report on its new Operational Plan regarding its work to combat terrorist financing; (ii) it is continuing with its work to understand better the risk of abuse of corporate vehicles, legal arrangements and professional intermediaries with regard to transparency and beneficial ownership; (iii) it intends to publish a report in June on the challenges and good practices required to improve the effectiveness of the criminal justice system in fighting money laundering and terrorist financing; (iv) it will consider if further action is necessary to exploit the opportunities presented for digital identification to improve the efficiency and effectiveness of customer due diligence measures; and (v) it is updating its knowledge on the financial flows associated with human trafficking, including identified links with money laundering and terrorist financing. The FATF will report on its progress against these tasks at the next G20 Leaders Summit in Argentina from 30 November to 1 December.

On 19 March, the Wolfsberg Group published FAQs on assessments for country risk in relation to financial crime. The Group has prepared these FAQs, based on the members’ views on current best practices and how the Group believes those practices should develop over time. In the Group's view, the FAQs will contribute to the promotion of effective risk management and help to prevent the use of its members for criminal purposes. The FAQs explain that the term "country risk" has typically referred to the additional risk created by investing in, or lending across borders to, a foreign country in the context of credit facilities. The issues covered by the FAQs include: (i) the data sources to be considered when developing a methodology to assess country risk; (ii) what models or methodologies are available to measure country risk; (iii) how country risk models or methodologies can be tested and validated; and (iv) who should own country risk methodologies and what resources are needed. The preamble to the FAQs notes that there is significant debate as to whether financial crime country risk assessments should be considered a model, a methodology, a tool or an application. The Group intends to publish guidance on models and methodologies later in 2018.

On 16 March, the SFO published a speech by Camilla de Silva who is Joint Head of Bribery and Corruption. The speech focussed on the prosecutor’s priorities: investigative techniques, priorities and future DPA use within the SFO.

FINTECH

On 22 March, the BoE published a speech by Dave Ramsden, Deputy Governor of Markets and Banking at the BoE which was delivered at the International Fintech Conference: The Bank of England - Open to Fintech. The key points Mr Ramsden makes in his speech are: (i) the importance of the BoE being attuned to the needs and challenges of a changing financial sector so that it can translate that to facilitating the infrastructure changes needed to support the UK’s financial sector and fintech development; (ii) to react appropriately to an evolving financial sector, the BoE needs to make sure it is open minded to the opportunities and potential for change that FinTech offers; (iii) the BoE’s new Fintech Hub will help consider how the Bank understands and how it applies FinTech, relevant to its mission; and (iv) as well as looking at the infrastructure changes impacting the firms it regulates, the Bank is also opening itself to change by experimenting with new technologies.

On 22 March, HMT published a document, FinTech sector strategy: securing the future of UK FinTech to ensure that the UK remains competitive on a global level, principally by reducing barriers for FinTech firms. Among other things, the strategy includes announcements on the following: (i) the establishment of a new cryptoassets task force consisting of HMT, the BoE and the FCA, which will explore the risks of cryptoassets and the potential benefits of the underlying DLT, and assess the future regulatory response. The task force will report in summer 2018; (ii) robo-regulation pilot schemes to help new FinTech firms, and the financial services industry more widely, to build software that automatically complies with regulatory requirements; (iii) the government's FinTech delivery panel will publish, by the end of 2019, industry standards to enable FinTech firms to more easily partner with existing banks; and (iv) the provision of help to new, small FinTech firms to provide complex financial services. A report to be published later in 2018 will recommend two areas where industry and government will work together to create "shared platforms" to help remove the barriers these firms face in setting up new systems. As part of the launch of the strategy, the UK government has entered into a new "FinTech bridge" agreement with the Australian government to increase regulatory co-operation, and provide a framework for the UK and Australian governments to harmonise policies across a range of issues relevant to FinTech. Separately, the FCA has published an enhanced co-operation agreement that forms part of the broader FinTech bridge and which enhances, and supersedes, the terms of a March 2016 co-operation agreement between the FCA and the Australian Securities and Investments Commission (ASIC). The agreement details the scope of assistance between the two authorities and joint innovation events and projects.

On 19 March, the FCA published a speech by Christopher Woolard, FCA Executive Director of Strategy and Competition, on establishing a global sandbox. In the speech, Mr Woolard sets out the FCA's views on the process for establishing a global sandbox: (i) the FCA should be realistic about the scale of the challenge. In particular, Mr Woolard suggests that seeking to agree on global standards as a preliminary to the sandbox is unrealistic; (ii) the FCA should work with international bodies where possible. It might wish to start with those jurisdictions that have already established sandboxes or innovation hubs; (iii) the model should allow room for experimentation. This could mean a range of sandbox tests, with a single test in one country collecting data for several regulators, or simultaneous testing in more than one country; (iv) the membership should be flexible. Not all regulators would necessarily be engaged in every test; and (v) the sandbox would have to be a joint effort by international regulators, not a UK global sandbox.

FUND REGULATION

On 22 March, the CMA published a working paper on asset manager product recommendations as part of its investment consultants market investigation. The CMA has conducted quantitative analysis to test whether asset management products which are recommended by investment consultants outperform their respective benchmarks and non-recommended products. This analysis fits into the CMA's assessment of outcomes in terms of whether investment consultants are providing value for money in relation to the quality of their services. The working paper sets out the methodology used by the CMA in conducting this analysis and its emerging thinking based on the results of this analysis. It also asks for views on possible remedies, if it were to find that the differences in the way in which firms present information on the potential or actual impact of their asset manager product recommendations were to constitute a feature of the market resulting in an adverse effect on competition. The deadline for comments on this working paper is 5 April. The CMA will publish a final version of this work in its provisional decision, taking into account comments received from parties during this consultation.

INSURANCE

On 21 March, EIOPA published it second paper on Solvency II tools with macroprudential impact. The paper aims to identify, classify and provide a preliminary assessment of the tools or measures already existing within the Solvency II framework, which could mitigate any of the systemic risk sources that were identified in the EIOPA’s first paper ‘Systemic risk and macroprudential policy in insurance’ (EIOPA, 2018). In the paper, EIOPA identifies and analyses the following tools with direct macroprudential impact: (i) symmetric adjustment in the equity risk module; (ii) volatility adjustment; (iii) matching adjustment; (iv) extension of the recovery period; and (v) transitional measure on technical provisions. EIOPA also considers a measure allowing authorities to prohibit or restrict certain types of financial activities. EIOPA's preliminary assessment is that, in addition to ensuring sufficient loss absorbency capacity and reserve, the tools identified contribute to limiting procyclicality. The tools seek to address the risk of collective behaviour by insurers that may exacerbate market price movements, although they may have limitations from a macroprudential perspective. The paper includes an annex on the macroprudential impact of some of the LTG measures under stress tests. EIOPA points out that its analysis should only be considered as a first step. Further work may be required at a later stage, once more information and data is available. EIOPA also states that it will take other elements that may have indirect macroproductional impact, such as ORSA and the capital add-on under specific circumstances into account when analysing potential new tools in the next paper in its series.

On 20 March, the Council of the EU announced that it has adopted a decision set out in document 8054/17 (dated 23 May 2017) approving the bilateral agreement between the EU and the US on insurance and reinsurance measures. The Council adopted the decision at a meeting held in its configuration as the General Affairs Council, without discussion. The decision states that the President of the Council will give the notification required under Article 8 of the agreement that the EU has completed its internal requirements and procedures. The agreement will enter into full force seven days after the EU and the US exchange notifications under Article 8.

On 19 March, Insurance Europe published its final template for data breach notifications under the GDPR. In an explanatory document, Insurance Europe states that it has developed the template as a possible way to meet this obligation and considers that it could be of particular interest to SMEs and supervisory authorities. It considers that SMEs could rely on the template instead of undertaking a descriptive exercise during a data breach, for which they may not have the resources. Supervisory authorities could benefit from a standardised format enabling them to share data about breaches across borders, detect trends and gain insights into combatting cyber threats across Europe. The template is designed so that the information gathered can be shared without the need to be anonymised or aggregated, thereby enhancing the available information and data on cyber risks and so increasing society's cyber resilience. The template consists of three sections: (i) personal details and information on the affected company (not to be shared with third parties); (ii) details on the data breach incident as per the indications in Article 33 of the GDPR, to be sent to the national supervisory authority, where feasible, no later than 72 hours after having become aware of the breach; and (iii) details to be sent following the 72 hour period, when more information is available on the data breach, which includes complementary data sets to gain more in-depth knowledge of the nature of the breach.

On 19 March, Directive (EU) 2018/411 amending the IDD as regards the date of application of member states' transposition measures was published in the OJ. The amending Directive delays the IDD's transposition date to 1 July and its application date to 1 October. It entered into force on 19 March (the day of its publication in the OJ) and applies retroactively from 23 February.

MARKETS

On 21 March, ESMA published an opinion on the treatment of packages under MiFIR. In the opinion, ESMA notes that that the trading obligation as specified in Delegated Regulation 2017/2417 is designed to apply at the level of a financial instrument and not at the level of the package. Accordingly, only components of a package are subject to the trading obligation, but not the package as such. ESMA considers it is important to ensure that investment firms can continue trading packages that include components subject to the trading obligation, while not undermining the policy objective of trading standardised derivatives on trading venues. ESMA suggests a tailored approach, ensuring that, only where it is feasible to trade components of a package that are subject to the trading obligation on a trading venue without creating undue operational or execution risk, do those components need to be concluded on a trading venue. This approach applies to the following categories of packages: (i) all components of the package are subject to the trading obligation; (ii) at least one component is subject to the trading obligation and all other components are subject to the clearing obligation for derivatives; and (iii) at least one component is an IRS subject to the trading obligation and all other components are government bonds denominated in the same currency. ESMA may review the opinion if there are indications that it is feasible to execute, in a smooth manner and without increasing operational and execution risks, categories of packages other than those specified.

PAYMENT SYSTEMS

On 20 March, the PSR published its annual plan and budget. The document sets out a summary of the PSR's key aims and activities for the year 2018/19 and its expected costs. The PSR will continue the exploratory projects it began in 2017/18, including in relation to: (i) payments data. The PSR will publish the outcome of this work in a discussion paper in April 2018; (ii) changing competitive dynamics in payments; and (iii) consumer protection. The PSR will also continue to: (a)  work on its first investigation under the Competition Act 1998, opened in 2017/18, with the CMA; and (b) work to implement and monitor compliance with the IFR, PSD2 and PARs. There will be new PSR projects in 2018, including in relation to card payment systems, building on what the PSR has learned from monitoring the IFR, to give it a more detailed understanding of how the market works and enable it to determine whether there are issues that it needs to address. The PSR will also consult on adapting its general and specific directions to the industry so they remain fit for purpose and will issue a policy statement in this regard later in 2018.

On 16 March, the PSR published a report (dated 9 January 2018) of an independent review undertaken by Independent Audit Ltd into the effectiveness of the PSR board. The review, which was carried out towards the end of 2017, involved interviews with board members and other senior members of the PSR, review of documentation and observance of board and committee meetings. The report sets out various things for the PSR to consider, along the following themes: (i) composition of the board; (ii) strengthening links between board members and the wider organization; (iii) exercising oversight of a broad range of technologically demanding matters; (iv) increasing engagement with the relevant sub-committees that perform duties on the PSR's behalf; and (v) maintaining strong collaborative relationships with the FCA. The PSR states that the board agrees that the report was a fair reflection of the way it was currently operating and accepts that the themes identified by the review were areas for potential further improvement. Steps were in hand to give effect to many of the suggestions made, for example it was already working on strengthening links between board members and with the wider organisation, increasing engagement with the relevant sub-committees and maintaining strong collaborative relationships with the FCA. The board will discuss the other areas with its new Chair when he takes up his role in April.

PENSIONS

On 19 March, the FCA and the Pensions Regulator (TPR) published a call for input on their joint strategic approach to regulating the pensions and retirement income landscape. In the call for input, the two bodies seek views on current and future risks to the industry. In particular, TPR and the FCA have identified five key areas where their remits could intersect to address the risks, and raise a number of specific questions. These are: (i) access to pensions; (ii) effective governance and scheme funding; security for pension savings; (iii) value for money in pensions; and (iv) supporting good choices and outcomes for members. The deadline for comments is 19 June. The FCA and TPR will publish the final strategic approach, in light of the recommendations, in the autumn.

PRUDENTIAL REGULATION

Please see the Insurance section for an update on Solvency II and the Council of EU’s decision to approve a EU-US bilateral agreement on insurance and reinsurance prudential measures.

On 22 March, the BCBS issued revisions to the minimum capital requirements for market risk for consultation. The proposals aim to address issues that the BCBS has identified in the course of monitoring the implementation and impact of the market risk standard issued in January 2016: Minimum capital requirements for market risk. The proposed changes include: (i) changes to the measurement of the standardised approach to enhance its risk sensitivity, including changes to FX risk; (ii) recalibration of standardised approach risk weights applicable to general interest rate risk, FX risk and equity risk; (iii) revisions to the assessment process to determine whether a bank's internal risk management models appropriately reflect the risks of individual trading desks; (iv) clarifications on the requirements for identification of risk factors that are eligible for internal modelling; and (v) clarifications on the scope of exposures that are subject to market risk capital requirements. In addition, following the BCBS’s consultation in June 2017 on a simplified alternative to the standardised approach, the consultation document proposes a recalibration of the Basel II standardised approach for banks with less material market risk exposure. These proposals follow the decision by the Group of Governors and Heads of Supervision, the BCBS’s oversight body, to extend the implementation date of the market risk standard to 1 January 2022 to give banks additional time to develop systems infrastructure and for the BCBS to address certain aspects of the framework. The BCBS plans to finalise any revisions to the market risk standard as soon as possible to allow enough time for national implementation and for banks to develop the necessary infrastructure. The proposed revisions are designed to support smooth implementation of the standard. The deadline for comments on the proposals is 20 June.

On 22 March, the BCBS updated its FAQs on the Basel III standardised approach for measuring counterparty credit risk exposures. The FAQs that have been added since the publication of the previous version of this document in August 2015 are: (i) question 1.2 on the collateral taken outside of netting sets; (ii) question 2.2 on the treatment of eurodollar futures; (iii) question 2.6 on the supervisory delta adjustments for negative interest rates; (iv) question 3.2 on credit derivatives; and (v) question 3.4 on effective notional calculation. The updated FAQs are highlighted in yellow.

On 22 March, the BCBS updated its FAQs on market risk capital requirements. The FAQs that have been added since the publication of the previous version of this document in January 2017 are highlighted in yellow and include, amongst others: (i) are bonds with multiple call dates considered instruments bearing other residual risks for the purpose of the RRAO? (ii)  how are commodity delta risk factors computed for futures and forward contracts? and (iii) how are shocks defined for commodity risk factors for the computation of delta and curvature risk?.

On 22 March, the BCBS published a consultation document, Pillar 3 disclosure requirements: regulatory treatment of accounting provisions (BCBS435). The consultation document seeks comments on the BCBS's proposals to make a technical amendment on additional Pillar 3 disclosure requirements for those jurisdictions implementing an ECL accounting model, and for those adopting transitional arrangements for the regulatory treatment of accounting provisions. The technical amendments are intended to provide users with: (i) disclosures that fully reflect any transitional effects for the impact of expected credit loss accounting on regulatory capital; and (ii) further information on the allocation of accounting provisions in the regulatory categories of general and specific provisions for standardised exposures during the interim period. Revised templates reflecting the amendments are set out in the Annex to the consultation document. The deadline for comments on the proposals is 4 May. As the application of ECL accounting models and introduction of any transitional arrangements took effect from 1 January, the Committee proposes that the additional amendments to the Pillar 3 standard will come into effect from 1 January 2019.

On 19 March, the EBA published a report on the credit risk mitigation (CRM) framework set out in the CRR. The report constitutes the EBA’s fourth and final phase of the EBA's roadmap on the IRB approach, which it launched in February 2016.  In the report, the EBA seeks to clarify the application to the different credit risk approaches of the provisions in CRR on CRM. It sets out a mapping of relevant provisions to the corresponding credit risk approach, detailing the provisions for the techniques, eligibility and methods of CRM available to institutions under the SA and the F-IRB. It also contains a quantitative overview of the usage of the CRM framework. The EBA recommends a number of amendments to the CRR intended to clarify how the CRR provisions are to be applied in practice. The EBA also considers that it would be useful to develop a set of guidelines on the use of current CRM provisions for A-IRB banks and indicates that it intends to consult on these guidelines.

On 16 March, the EC published a consultation document on the EU implementation of the outstanding Basel III post-crisis regulatory reforms (referred to as "Basel IV"). In the consultation, which is described as an "exploratory consultation", the EC states that the implementation of these reforms will require amendments to current banking regulation, particularly CRR. It does not intend to implement these reforms through the legislative proposal on extensive amendments to the CRR that it adopted in November 2016. The EC seeks views on the implementation of the following aspects of the reforms: (i) standardised approach for credit risk (SA-CR); (ii) IRB approaches for credit risk; (iii) CVA risk framework; (iv) operational risk framework; and (v) output floor. The deadline for comments is 12 April.

On 16 March, the BoE published a report setting out the key elements of the 2018 stress test for the UK banking system. In 2018, the BoE will conduct one stress test, the annual cyclical scenario (ACS). Seven banks and building societies will take part, which account for around 80% of the outstanding stock of PRA regulated banks' lending to the UK real economy. The participating institutions remain the same as those that were subject to the 2017 test. The BoE states that the stresses applied to the economic and financial market prices and measures of activity in the 2018 ACS will be the same as in the 2017 test. However, the hurdle rates for the 2018 test will evolve from those used in earlier years in the following ways: (i) the BoE will hold banks of greater systemic importance to higher standards; (ii) hurdle rates will incorporate buffers to capture domestic systemic importance as well as global systemic importance; (iii) the calculation of minimum capital requirements incorporated in the hurdle rates will more accurately reflect how they would evolve in a real stress; and (iv) adjustments will be made to reflect the increased loss absorbency that will result from higher provisions in stress under the new IFRS9. The BoE has also published guidance for participating banks and building societies, together with: (a) a spreadsheet identifying variable paths for the 2018 stress test; and (b) a spreadsheet on the traded risk scenario. The BoE will publish the results of the stress tests in the fourth quarter of 2018.

RECOVERY AND RESOLUTION

On 20 March, the SRB published a speech by Elke König, SRB Chair, given at a public hearing with EP’s ECON. The speech includes comments on the proposed Directive amending the BRRD and the proposed Regulation amending the SRM Regulation. In the speech, Mr König comments on: (i) MREL. Ms König states that if the SRB is to adopt a proportionate approach to MREL, it must be given the necessary discretion. The SRB recommends streamlining the framework for setting MREL by moving from the current two-tier process, where the SRB determines MREL targets and direct NRAs, to a single-tier approach under which the SRB addresses decisions directly to banks. This would increase the operational efficiency of the SRB and protect it from additional challenges; and (ii) the moratorium tool. The SRB believes the proposed moratorium tool will provide benefits and that it will be possible to minimise any negative effects. The tool, which should be used only in exceptional circumstances, should act as a bridge between a determination of failing or likely to fail and resolution. It will help to reduce the first mover advantage that triggers bank runs, provide time to prepare a resolution scheme where necessary and help to harmonise existing tools across the EU and avoid future divergent national moratoria. Ms König comments that the tool will help to address these challenges only if it has a broad scope and by including covered deposits.

OTHER

On 22 March, the EC published an EU and US joint statement from the Joint Financial Regulatory Forum on 22 January. Participants of the Forum included, amonst others: (i) ESMA; (ii) the EBA; (iii) the SEC; and (iv) the FRB. The topics discussed at the Forum included: (a) the capital markets and derivatives reform; (ii) banking initiatives, namely the progess on cross-border bank resolution and the co-operation of regulators on cross-border issues; (iii) data protection; and (iv) the implication of the recent US tax reform on the operations of foreign banks and insurers recent US tax reform. The next Forum meeting will take place in Brussels in summer 2018.

On 21 March, the G20 published a communiqué, together with an annex, following a meeting of finance ministers and central bank governors in Buenos Aires, Argentina, on 19 and 20 March. The communiqué states that the G20 remains committed to the full, timely and consistent implementation and finalisation of the Basel III reforms and their evaluation. The aim of this work is to help identify and address any material unintended consequences, and ensure that the reforms accomplish their objectives. It looks forward to the evaluation of the reforms led by the FSB, including their effects on the financing of infrastructure investment and on incentives for central clearing of OTC derivatives. The G20 notes that crypto-assets raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering, terrorist financing and, potentially in the future, financial stability. It commits to implement the FATF standards as they apply to crypto-assets, and looks forward to the FATF review of those standards. It also calls on the FATF to advance their implementation worldwide. It calls on international SSBs to continue their monitoring of crypto-assets and their risks. In the annex, the G20 highlights that it has asked the SSBs, FATF, GPFI and SFSG to report on issues, such as crypto-assets and sustainable finance by July. The G20 will also continue to address the decline in correspondent banking relationships.

On 18 March, the FSB published a letter (dated 13 March 2018) from Mark Carney, FSB Chair, to G20 finance ministers and central bank governors ahead of their summit in Buenos Aires from 19 to 20 March 2018. The letter outlines the FSB's four priorities under the Argentine G20 Presidency: (i) monitoring to identify, assess and address new and emerging risks. The FSB will continue to identify and assess emerging risks, including through the bi-annual early warning exercise conducted jointly with the IMF; (ii) completion of financial reform priorities. The FSB is making significant progress on the G20's outstanding financial reform priorities, with many initiatives on track to be completed by or before the Buenos Aires summit; (iii) policy evaluation to ensure reform programme is efficient, coherent and effective. The FSB is moving away from design of new policy initiatives towards implementation and evaluation of the effects of the agreed G20 reforms; and (iv) optimising how the FSB works. To make sure it is fit for the next phase, the FSB's membership is undertaking a thorough review of how the FSB works. The review will consider the FSB's transparency and mechanisms for setting its strategic agenda, and how to ensure discipline and efficiency in the FSB's member-led groups that are responsible for analysis, policy development, implementation and evaluation. A list of the priority deliverables from the FSB during the Argentine G20 Presidency is set out in Annex A to the letter.

On 16 March, the ECB published the SSM supervisory manual. The manual sets out the approach taken by the ECB in carrying out its supervisory tasks under the SSM. The manual covers: (i) the functioning of the SSM; (ii) the supervisory cycle (that is, the way in which regulation and supervisory policies provide the foundation for supervisory activities, which in turn affect the development of future regulation and supervisory policies); (iii) the conduct of SSM supervisions exercised over all supervised institutions; (iv) the supervision of significant institutions; and (v) the supervision of less significant institutions. The  ECB emphasises that the manual is not a legally binding document, does not establish new regulatory requirements and cannot, in any way, replace the legal requirements laid down in the relevant applicable EU law. It will depart from the policy set out in the manual if there are factors in specific cases that justify doing so and if sufficient rationale is provided.

On 16 March, the FSB published the following two reports as part of its work on assessing and addressing the decline in correspondent banking relationships: (i) a progress report on the FSB's action plan to address the decline in correspondent banking; and (ii) a stocktake on remittance service providers' access to banking services. The progress report provides an update on the implementation of the FSB's November 2015 action plan. It sets out the work that has been undertaken since the FSB's July 2017 progress report. Steps taken to implement the FSB's action plan since its last update include: (i) strengthening tools for due diligence by correspondent banks; (ii) data collection and analysis; (iii) clarifying regulatory expectation; and (iv) domestic capacity building. The FSB explains that the reduction in correspondent banking relationships has also had a significant impact on remittance service providers' ability to access banking services. Its second report provides a stocktake of remittance service providers' access to banking services and an action plan to address the gaps and barriers identified. The report makes 19 recommendations in the following four areas: (i) promoting dialogue and communication between the banking and remittance sectors; (ii) improving the implementation of international standards and oversight of the remittance sector; (iii) encouraging the use of innovation to facilitate remittance firms' greater access to banking services; and (iv) encouraging technical assistance related to remittances.

Progress report: http://www.fsb.org/wp-content/uploads/P160318-2.pdf

Stocktake on remittance service providers' access to banking services: http://www.fsb.org/wp-content/uploads/P160318-3.pdf