Recent regulatory developments focussing on banking and finance. Includes updates relating to COVID-19 regulatory response, an FCA guidance consultation on ATM and branch closures, and more.

Contents

• COVID-19: PRA updates statement on implementation of EBA guidelines on reporting data and public information
• International bank branch return: PRA Q&As
• COVID-19: FCA highlights difficulties caused by firms using cheques
• Branch and ATM closures or conversions: FCA guidance consultation
• Brexit: ECB blog post preparation for end of transition period
• Resolution planning: EBA statement
• European Banking Union: Bulgaria and Croatia to enter on 1 October 2020

COVID-19: PRA updates statement on implementation of EBA guidelines on reporting data and public information

The UK Prudential Regulation Authority (PRA) has updated its statement on the implementation of the European Banking Authority (EBA) guidelines addressing gaps in reporting data and public information in the context of COVID-19.

The PRA has considered how to apply the disclosure elements of the guidelines. It considers that there is a substantial benefit to disclosing information about the effects of the measures that UK firms have taken in response to COVID-19. However, the PRA intends to exercise the options available in the guidelines to ensure they are implemented in a proportionate manner.

As a result, the PRA expects that UK banks and building societies:

• are, or are controlled by, global or other systemically-important institutions designated by the PRA in the most recent list; and
• have retail deposits equal to or greater than £50 billion on an individual or consolidated basis,

should make disclosures similar to those prescribed by the guidelines, but incorporating a number of modifications that the PRA will set out. The PRA expects these firms to make the disclosures for the highest level of consolidation in the UK.

The PRA is finalising the design of the disclosure templates, including to ensure they capture the full range of payment moratoria available in the UK. It will share these with relevant firms directly in due course.

The PRA realises there may be practical difficulties caused by publication of the guidelines and templates, and the details of the PRA's implementation of the guidelines, close to the 30 June 2020 disclosure reference date. With this in mind, it does not expect firms to include these disclosures in the main Pillar 3 disclosures made for the 30 June 2020 reporting period. The PRA accepts that firms may need to make disclosures for the 30 June 2020 reference date at a later time. However, it advises that any delay to the publication of these additional disclosures should be no longer than necessary.

International bank branch return: PRA Q&As

The PRA has published Q&As on its international bank branch return template and reporting instructions, which are designed to clarify the reporting rules and instructions. The PRA advises that the material in the Q&As does not constitute new PRA policy. Answers in the Q&As provide firms with options for meeting the PRA's expectations, but it is not a PRA expectation that firms must report in line with the answers.

The Q&A process may prompt the PRA to consider whether to amend the reporting rules or instructions in the future, in which case it will consider proposals in accordance with the usual process.

COVID-19: FCA highlights difficulties caused by firms using cheques

On 16 July 2020, the Financial Conduct Authority (FCA) published its regulation round-up for July 2020, which summarises a number of its recent initiatives. This month's edition highlights in a number of sections the difficulties caused by firms making payments using cheques.

The FCA explains that some firms continue to make payments to other firms using cheques, particularly where clients are transferring to new platforms or investment management service providers. It has received reports that this is causing difficulties during the COVID-19 disruption. The FCA suggests that firms consider transferring funds using secure electronic alternatives to cheques where possible. In particular, this reduces the need for staff to be handling cheques onsite.

The FCA does not expect firms to require all customers to stop using cheques as electronic payment methods may not be appropriate for all customers.\

Branch and ATM closures or conversions: FCA guidance consultation

The FCA has published a guidance consultation, GC20/2, on branch and ATM closures or conversions (GC20/2). While these are decisions for firms, the FCA is seeking to ensure that the implementation of these decisions is carried out in a fair way, with an understanding of the needs of customers and the impact of the decision on them, which leads to fair outcomes. Accordingly, the FCA is consulting on proposed guidance setting out its expectations of firms in relation to the implementation of these decisions.

The short consultation closes on 30 July 2020. If confirmed, the guidance will start to come into force later in 2020.

Brexit: ECB blog post preparation for end of transition period

The European Central Bank (ECB) has published a blog post, by Yves Mersch, ECB Executive Board Member and Supervisory Board Vice-Chair, on banks preparing for the end of the Brexit transition period.

Taking into account the operational difficulties created by COVID-19, the ECB has identified three priority areas:

• contingency planning, to ensure banks are prepared for any stresses on funding and trading markets that may accompany stepping from the old business-as-usual situation into the new post-Brexit transition period world;
• strengthening risk management and governance arrangements to support banks' ability to safely manage their business in and from the continent; and
• reducing remote booking of EU activities, so-called "back-to-back booking", so banks retain full local oversight of the business they originate and manage. As end-state target operating models continue to apply, banks should relocate assets if, or once, commensurate onshore risk management capabilities are in place. Staff relocations can be delayed on account of new COVID-19 lockdown measures or travel restrictions only.

Mr Mersch notes that banks should be ready for all possible outcomes, including no positive equivalence decisions.

The ECB expects banks to reach their end-state target operating models soon. Banks that have failed to hire staff with sufficient seniority and skills, neglected to make necessary transfers of material assets, or unduly split trading desks across multiple legal entities, will not be considered to be complying with the ECB’s requirements. Not addressing this qualitative dimension means operating as half-empty shells. This is something the ECB will not accept.

Resolution planning: EBA statement

The EBA has published a statement on resolution planning in light of COVID-19. In the statement, the EBA advises that, following the various COVID-19-related statements and communications it issued in March and April 2020, it has identified the need to further specify key elements of the resolution authorities' toolbox.

The statement aims to reaffirm that resolution planning is crucial in times of uncertainty to ensure that resolution is a credible option in case of failure. The focus of the statement is ensuring that the current situation is effectively taken into account by resolution authorities while maintaining a "through the cycle" approach and ensuring that resolvability objectives are achieved.

European Banking Union: Bulgaria and Croatia to enter on 1 October 2020

The ECB has adopted decisions to establish close cooperation with the central banks of Bulgaria and Croatia, which means that both countries will join the European Banking Union on 1 October 2020. ECB Decision (EU) 2020/1015 and ECB Decision (EU) 2020/1016 were published in the Official Journal of the EU on 13 July 2020 and will apply on 27 July 2020.

The Single Resolution Board has confirmed that the effect of the decisions is that Bulgaria and Croatia will also join the Single Resolution Mechanism (SRM) from 1 October 2020.

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