Allen & Overy's weekly update on Key Regulatory Topics - 27 April 2018 – 3 May 2018

Allen & Overy LLP

Allen & Overy LLP


ECB speech considers impact of Brexit on ECB banking supervision

On 2 May, the ECB published a speech by Ignazio Angeloni, ECB Supervisory Board member, in which he considers the future of ECB banking supervision. Mr Angeloni believes that Brexit will require more cooperation and exchange between authorities and market participants across the Channel, not less, although the modalities will be different. Brexit will not mark the end of cross-border banking and financial activities between the UK and the Continent, but it will make them more complex, more costly and, at least initially, more uncertain. Mr Angeloni states that banks that are relocating operations from the City of London to the euro area will soon be supervised under the SSM and there it is essential to improve banks' perception of how ECB banking supervision works, as well as the ECB's familiarity with how banks operate.

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ECB and BoE to convene working group on risk management in financial services around end March 2019

On 27 April, the EC published a press release announcing the establishment of a new working group on EU/UK co-operation on risk management in financial services. The EC and HMT have asked the ECB and the BoE to convene a technical working group on risk management in financial services "in the period around 30 March 2019". The group will be chaired by the ECB President and the BoE Governor. The EC and HMT will attend as observers. Other relevant authorities will be invited on an issue-specific basis. The ECB and BoE will report regularly to the EC and HMT. This technical work is separate from ongoing negotiations on the withdrawal agreement between the EU and the UK, and from negotiations on the overall understanding of the framework for the future relationship between the EU and the UK.

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CPMI-IOSCO follow-up PFMI level 3 report assesses CCPs' recovery planning, financial resources and liquidity stress testing

On 3 May, the CPMI and the IOSCO published a report on the implementation monitoring of the principles for financial market infrastructures (PFMI). The report sets out the findings of a follow up level 3 assessment of CCPs’ recovery planning, coverage of financial resources and liquidity stress testing, the most serious areas of concern identified in a CMPI-IOSCO initial level 3 report published in August 2016. The report expands the 2016 sample of 10 derivatives CCPs to 19 globally active and regionally focused CCPs, spanning 17 jurisdictions and providing clearing services to a broader range of product classes. Overall, the CPMI and IOSCO found that participating CCPs have made progress in implementing arrangements consistent with the PFMI. However, some CCPs are still failing to implement a number of measures in the areas of risk management and recovery planning. The CMPI and IOSCO: (i) remind CCPs of the importance of developing comprehensive and effective recovery plans, consistent with PFMI standards and informed by guidance in the revised report on recovery of FMIs, published in July 2017; and (ii) reiterate that, under the PFMI, an FMI should maintain sufficient liquid resources in a wide range of potential stress scenarios. A CCP that has not fully implemented a comprehensive and effective recovery plan, or continues to lack sufficient liquid resources in a wide range of potential stress scenarios, represents a serious issue of concern and requires immediate attention. The CPMI and IOSCO encourage relevant CCPs to take action to address any such issues as a matter of priority. The CPMI and IOSCO will continue to monitor implementation of the PFMI.

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BoE sets out feedback on responses to consultation on incident reporting by CCPs and confirms final rule

On 2 May, the BoE published a document setting out feedback on responses to its consultation paper on a new rule for CCPs relating to incident reporting. The BoE published its consultation paper in February. It received three responses from a range of FMI firms on the proposed new rule, which formalises the requirement for CCPs to notify the BoE of certain incidents having an impact on their IT systems. Respondents were broadly supportive, although they raised a number of points on BoE's proposed approach and the drafting of the proposed rule, in relation to the following areas: (i) the meaning of "significant impact"; (ii) the types of incident requiring reporting; and (iii) the timing of reporting of incidents. In the document, the BoE responds to the points raised by respondents in these areas. Having considered the responses, the BoE has decided to proceed with the rule as proposed. The new rule, which is entitled "Rule RCH 4: Notification of incidents", is effective and binding on CCPs from 7 May. The BoE has updated its webpage on FMI supervision to include a link to the Recognised Clearing House Rules Instrument 2018 (Bank FMI 2018/1) which was made by the BoE on 2 May and sets out Rule RCH 4.

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EMMI launches testing phase of hybrid methodology for EURIBOR and announces next steps

On 2 May, the EMMI provided an update on the development of a hybrid methodology for EURIBOR and setting out the next steps in the process. The proposed hybrid methodology, on which EMMI is currently consulting, comprises a three-level waterfall, which leverages on market transactions whenever available, in line with regulatory requirements. EMMI confirms that the three-month testing phase of the hybrid methodology has started as planned and will run until 31 July. During this period, EMMI will conduct an in-depth data analysis under a number of scenarios and assess panel banks' transactions-based level 1 and level 2 submissions. This will enable EMMI to gain a better understanding of panel banks' level 3 determination and overall contribution patterns. The testing phase will be followed by a second consultation in the third quarter of 2018. EMMI intends to launch the hybrid methodology in the fourth quarter of 2019 at the latest, in accordance with the transitional period provided under the BMR.

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ESMA publishes letter to EC to clarify scope of exemptions under EMIR

On 27 April, ESMA published a letter from Steven Maijoor, ESMA Chair, to Oliver Guersent, EC Director General, Financial Stability, Financial Services and CMU, relating to exemptions from the financial obligations under Articles 41 and 42 of EMIR. In the letter, Mr Maijoor explains that, during its March meeting, the ESMA Board of Supervisors discussed whether a CCP can exempt certain clearing members (typically public entities such as government entities, central banks and supranational entities) from the financial obligations under Articles 41 and 42 of EMIR. Under these provisions, the CCP is to be provided with initial margin and default fund contributions. ESMA believes that this issue needs to be clarified to ensure supervisory convergence and a level playing field across EU CCPs. As this issue relates to the scope of EMIR, it asks the EC to clarify whether CCPs are allowed not to collect margin and default fund contributions from these public entities and, if so, whether a specific amendment of EMIR (in the context of the ongoing review process) would be appropriate.

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ECB publishes TARGET2-Securities 2017 annual report

On 27 April the ECB published its 2017 annual report (dated 23 April) on the T2S system. As well as providing an overview of activities in 2017, the section of the report setting out next steps includes the following points of interest: (i) cyber resilience - the Eurosystem is working on further improving the cyber resilience of TARGET Services, in line with the 2016 guidance issued by the CPMI and the Board of the IOSCO; and (ii) CSDR - the platform’s CSDs are due to provide the Eurosystem with a final decision regarding their intention to use a T2S penalty mechanism in April. They will have to be implemented in T2S within 24 months of the approval and publication of the RTSs under the CSDR in question.

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FCA publishes “Five Conduct Questions” Report

On 1 May, the FCA published its second "five conduct questions" report (dated April) in which it sets out wholesale banking industry feedback for 2017. The report gives an update on industry progress by the same firms that were involved with the first report. It focuses on conduct question 2, which concerns staff engagement in conduct programmes. The second report also discusses some conduct risk observations from other FCA supervisory activity with wholesale banks in relation to pricing transparency for complex derivatives, and technology and cyber risk. In addition, it outlines FCA outreach activity with the wholesale banking sector. The FCA notes that conduct risk has remained key for boards and senior management in wholesale banking. It considers that, at an industry level, progress among the larger firms is encouraging. However, it is too early to know how effective conduct programmes are, or will be, in the longer term.

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Advocate General’s Opinion - MS legislative response to CoJ of EU ruling on unfairness subject to judicial review and term can still be unfair On 3 May, the CoJ of the European Communities published an opinion of Advocate General Evgeni Tanchev published delivered on 3 May OTP Bank and OTP Faktoring (EUECJ C-51/17). The Advocate General is of the opinion that a MS legislative response to a ruling of the CoJ concerning the unfairness of a contractual term for lack of clarity under Directive 93/13 can be subject to judicial review. The purpose of the exclusion for contractual terms reflecting mandatory statutory or regulatory provisions is to allow member states to go beyond the protective provisions of the directive, not diminish the level of protection. Therefore the Advocate General is also of the view that if the term is not formulated in the contract in a plain and intelligible manner, the national court can examine whether it is an unfair term not binding on the consumer.

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Please see the Taxes/Levies section for an update on the FSCS’ final 2018/19 levy.

FCA publishes third consultation on review of FSCS funding

On 1 May, the FCA published its third consultation paper on its review of the funding of the FSCS (CP18/11). The consultation follows on from the FCA's second consultation paper on its review of the FSCS' funding (CP17/36), which was published in October 2017. In CP18/11, the FCA: sets out policy decision and final rules relating to the issues consulted on in CP17/36; and seeks views on a proposal on changes to professional indemnity insurance (PII) for personal investment firms (PIFs). The deadline for comments is 1 August. The FCA intends to publish details of the feedback it receives in a Handbook Notice.

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EU General Court considers meaning of effective director under CRD IV

On 27 April, the EU General Court published the English translation of the judgment in Caisses régionales de crédit agricole mutuel Alpes Provence, Nord Midi-Pyrénées, Charente-Maritime et Brie Picardie v European Central Bank (Joined Cases T-133/16 to T-136/16). In this case, the EU General Court ruled that the same person cannot occupy both the post of chairman of the board of directors and that of "effective director" in credit institutions subject to prudential supervision under CRD IV. The General Court rejected the actions of the four regional branches and held that the ECB had correctly interpreted the concept of effective director. The court analysed the concept of effective director of a credit institution in the light of Article 13 of CRD IV. Its analysis established that the concept refers to the members of the management body who are part of the senior management of the credit institution. The court held that, as the ECB had correctly interpreted the concept of effective director, it had also correctly applied Article 88 of CRD IV, which provides that the chairman of the management body in its supervisory function of a credit institution may not exercise at the same time (without express authorisation of the competent authorities) the function of CEO in the same institution.

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ECB Supervisory Board Chair comments on money laundering

On 3 May, the ECB published a letter from Daniele Nouy, ECB Supervisory Board Chair, to Sven Giegold, Member of the European Parliament, on money laundering risks. Among other things, Ms Nouy comments on: (i) the assignment of competences in AML matters and the flow of information between relevant authorities. She states that closer co-operation among relevant authorities is needed. In this regard, the ECB welcomes the proposed MLD5 as a step towards enhancing co-operation. However, MLD5 may not be sufficient to ensure co-operation is smooth and all-encompassing. Establishing a European AML authority could bring about this degree of improved co-operation; (ii) the possibility of withdrawing a banking licence in response to a serious breach of AML rules. To decide whether a licence should be withdrawn as a result of breach of national AML provisions, the relevant national authority would need to inform the ECB of the circumstances and facts justifying withdrawal. In these cases, the ECB would look carefully at the evidence submitted to decide whether, in its view, it is strong enough to give grounds for licence withdrawal. If it is not, the ECB would share its doubts with the national authority and encourage it to investigate the breach further; and (iii) the integration of money laundering risks in prudential supervision. AML is incorporated to some extent in the ECB's supervisory assessments.

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ECB publishes framework for testing resilience to cyber attacks

On 2 May, the ECB published the European Framework for Threat Intelligence-based Ethical Red Teaming (TIBER-EU), which is the first EU-wide framework for controlled and bespoke tests against cyber attacks in the financial sector. TIBER-EU is designed to enable EU and national authorities to work with financial infrastructures and institutions to put in place a programme to test and improve their resilience against sophisticated cyber attacks. An intelligence-led red team test involves the use of a variety of techniques to simulate an attack on an entity's critical functions and underlying systems (that is, its people, processes and technologies) to help an entity to assess its protection, detection and response capabilities. In an accompanying press release, the ECB notes that it is up to the relevant authorities and institutions to decide if and when TIBER-EU based tests are performed. The tests will not result in a pass or fail, but will give the tested entity an insight into its strengths and weaknesses to enable it to attain a higher level of cyber maturity.

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FCO publishes policy note on sanctions and AML Bill exceptions and licences

On 1 May, the FCO published a policy note setting out the government's intended approach to exceptions and licenses under the Sanctions and Anti-Money Laundering Bill 2017-19 when the UK becomes responsible for implementing its own sanctions regimes. The policy note sets out the government's intended approach and indicates how this impacts the most frequently used sanctions, in particular: (i) asset freezing. Maintain a similar framework to the existing licensing grounds and keep aligned with Europe; (ii) counter-terrorism. Operate the same licensing arrangements for domestic counter-terrorism sanctions as are currently in place under section 17 of the TAFA; and (iii) restrictions on financial activities and investment. Continue with the same types of licensing grounds and authorisations as in current EU regulations.

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UK Government accepts proposed amendment to Sanctions and Anti-Money Laundering Bill regarding overseas territories

On 1 May, the Government conceded in UK Parliament that it would support a backbench amendment to the Sanctions and Anti-Money Laundering Bill 2017-19 for public company registers in overseas territories. Overseas territories have introduced private central registers of ownership which are accessible to UK law enforcement and tax authorities. The amendment to the Sanctions and Anti-Money Laundering Bill 2017-19 calls on these overseas territories to make these registers publicly available by December 2020, or have UK ministers impose that requirement on them via orders in council.

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Crackdown on abuse of UK businesses for foreign money laundering

On 30 April, the Department for Business, Energy & Industrial Strategy announced measures to crack down on the abuse of a specialised financial arrangement to launder dirty foreign money through the UK, as part of a package of government reforms. SLPs and LPs are used by thousands of legitimate British businesses, particularly the private equity and pensions industry, to invest more than £30 billion a year in the UK. SLPs and LPs are business entities created by two or more partners where at least one partner is liable for what they invest. However, evidence published by the Government shows the Government says that SLPs have been exploited in complex money laundering schemes, including one which involved using over 100 SLPs to move up to $80 billion out of Russia. The Government says that they have also been linked to international criminal networks in Eastern Europe and around the world, and have allegedly been used in arms deals.

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Council of EU invites COREPER to approve final compromise text of the proposed MLD5

On 27 April, the Council of the EU published an "I/A" item note (8215/18) from the Council of EU’s General Secretariat to its COREPER on the approval of the final compromise text of the proposed MLD5. In the note, the Council of EU refers to the EP’s adoption of MLD5 at first reading on 19 April. It invites COREPER to: (i) approve the EP’s position, as an "A" item at a forthcoming meeting; and (ii) order that the statements set out in an addendum to the note are entered in the minutes of that meeting. The Council of the EU has also published: (a) a provisional agenda (8424/18) for the COREPER meeting on 2 May, which includes (at item 33 in the annex to the agenda) the adoption of MLD5; and (b) the text (PE-CONS 72/17) (dated 26 April) of MLD5, in the form in which it will be adopted. After being signed by the President of the EP and the President of the Council of the EU, MLD5 will be published in the OJ.

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Please see the “Other” section for an update on the BEIS’ consultation on reform of limited partnership law.

IA and KPMG publishes report on building cyber resilience in asset management sector

On 1 May, the IA published a report, produced jointly with KPMG, on building cyber resilience in asset management. The report provides an overview of the key cyber security risks facing the asset management sector. Among other things, it provides guidance on the practical steps firms can take to protect their business from cyber attacks, and considers the advantages of a more collaborative sector-wide response to tackling cyber threats. In particular, the report calls on boards and senior management at firms to increase collaboration across the sector, and invest in developing a cyber-response framework that allows firms to rapidly detect, respond and recover from potential attacks. In a related press release, the IA explains that to help firms with cyber resilience it has also launched a Cyber Security Committee. The committee, which met for the first time in April 2018, will work with firms, regulators and public authorities to ensure the sector is leading edge, and to develop industry guidance on cyber security.

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Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order 2018 published

On 1 May, the Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order 2018 (SI 2018/546) was published together with an explanatory memorandum and a transposition table. The Order will come into force on 1 October, apart from those provisions that will enable the FCA to make financial promotion rules under section 137R of FSMA, which will come into force on 23 May (the 22nd day after the Order was laid before Parliament).


Explanatory Memorandum


Please see our eAlert: G20 derivatives regulation - equivalence or divergence?

LEI ROC publishes second progress report on global LEI system and regulatory uses of LEI

On 2 May, the LEI ROC published a second progress report (dated 30 April) on the global LEI system (GLEIS) and regulatory uses of the LEI. Among other things, the ROC notes that: (i) governance of the GLEIS (designed by the FSB and private sector participants) is now fully in place. All active LEI issuers have now been accredited by the global LEI foundation (GLEIF), which defines the technical standards of the GLEIS and monitors LEI issuers' compliance; (ii) the ROC establishes policy standards, including: (a) the definition of eligibility to obtain an LEI and conditions for obtaining an LEI; (b) the definition of reference data; (c) the nature of due diligence and other standards necessary for sufficient data quality; and (d) high-level principles governing data and information access; (iii) the number of LEIs grew rapidly in the second half of 2017, in line with new regulatory requirements, and now exceeds 1 million. Based on ECB data, the LEI covers at least securities with a total value of EUR 95 trillion worldwide, as of November 2017; (iv) authorities in jurisdictions represented on the ROC have adopted at least 91 regulatory uses of the LEI, as described in the annex to the report, which contribute to G20 objectives; (v) financial sector standard-setters and international bodies have encouraged other uses of the LEI; and (vi) parent information on legal entities has been collected since May 2017. There would be further LEI benefits to gain from data infrastructures upgrades, continued support by the public sector, and registration for LEIs by relevant entities.

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ESMA publishes Financial Instruments Transparency System for bonds under MiFID II

On 2 May, ESMA published on its Financial Instruments Transparency System (FITRS) the first liquidity assessment for bonds subject to the pre- and post-trade transparency requirements under MiFIR. ESMA states in an accompanying press release that its assessment of the EU bond market for the first quarter of 2018 found 220 bonds (out of 71,000 that were assessed) to be sufficiently liquid to be subject to the MiFIR transparency requirements. It explains that the liquidity assessment is based on a quarterly assessment of quantitative liquidity criteria, such as the daily average trading activity and number of days traded per quarter. The accuracy of the assessment depends on the data that has been submitted to ESMA, and the data received so far for Q1 of 2018 is not fully complete for most instruments. ESMA warns that this has resulted in a lower number of liquid instruments being identified compared to ESMA's earlier transitional transparency calculations. ESMA will update its bond market liquidity assessments quarterly (or more frequently if it receives additional or corrected data). The transparency requirements for bonds currently deemed liquid will apply from 16 May to 15 August.

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HoC European Scrutiny Committee considers Regulation on European crowdfunding services providers

On 1 May, the HoC European Scrutiny Committee published its twenty-fifth report of the 2017-19 parliamentary session. The report outlines the committee's views of the EC’s legislative proposals for a Regulation on European crowdfunding services providers (ECSPs) and a Directive making consequential amendments to MiFID II.

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IBA publishes BMR changes and cessation procedures for LIBOR, ICE Swap Rate, and LBMA Precious Metals Prices

On 1 May, ICE IBA published BMR changes and cessation procedures for: LIBOR; ICE Swap Rate; and LMBA Precious Metals Prices (that is, LBMA Gold Price and LBMA Silver Price). The BMR changes and cessation procedures have been published by IBA to comply with Article 28 of the BMR which requires a benchmark administrator to publish, together with the benchmark statement required under Article 27 of the BMR, a procedure concerning the actions to be taken by the administrator in the event of changes to, or the cessation of, a benchmark that may be used in the EU. Each BMR changes and cessation procedure is specific to the benchmark to which it applies and sets out the steps IBA would take in the event of a change or cessation of the relevant benchmark.


ICE Swap Rate

LMBA Precious Metals

IBA becomes authorised benchmark administrator under BMR

On 30 April, ICE announced that ICE IBA has become an authorised benchmark administrator under the BMR. The press release states that authorisation was granted to IBA by the FCA on 27 April. The FCA is the UK's national competent authority under the BMR.

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UK Finance, the FDATA, the EMA and techUK publishes voluntary guidelines under PSD2

On 3 May, UK Finance, the FDATA, the EMA and techUK published jointly voluntary guidelines and encouraged market behaviours under PSD2. The voluntary guidelines aim to: (i) foster a collaborative and cooperative industry ecosystem around account information services and payment initiation services, and to further boost customer protections; and (ii) help to move the industry towards the consistent use of APIs as per industry aims for the opportunities around open banking.

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NPSO takes on operational responsibility for Bacs and Faster Payments systems

On 1 May, the New Payment System Operator (NPSO) published a press release announcing it has taken on operational responsibility for the Bacs and Faster Payments retail payments systems. The BoE also published a press release reporting on this development. In its press release, the BoE states that the successful consolidation of Bacs, Faster Payments and C&CCC has been a key focus for it and the PSR. The NPSO's responsibility for Bacs and Faster Payments is an important step in bringing three systemically important payment systems together for the first time. It will develop the capability and capacity of the retail payment system operators (PSOs), reducing the complexity and costs of having three separate PSOs. The BoE will supervise the NPSO, in its role as the operator of the three payment systems. The next step is the effective delivery by the NPSO of the new payments architecture (NPA). The BoE and the PSR will work together to monitor progress.

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FCA publishes final UK list of most representative services linked to payment accounts under PARs

On 30 April, the FCA published a document containing the final UK list of the most representative services linked to payment accounts and subject to fees (referred to by the FCA as the final linked services list). The FCA was required to publish the final linked services list pursuant to Regulation 3 of the PARs. Table 2 in chapter 3 of the document contains the final linked services list. Chapter 2 of the document summarises the process that has been followed to develop the final linked services list and explains how the FCA has integrated the EU standardised terminology into the UK provisional list to form the final linked services list. The final linked services list contains the same 15 services as were included on the UK provisional list. However, terminology for eight services in the UK provisional list has been standardised at EU level. Under the PARs, PSPs that offer payment accounts must begin using the terminology in the final linked services list from 31 October.

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HMT publishes summary of responses to consultation on legislation to support cheque imaging

On 30 April, HMT published a document summarising responses, and providing feedback on responses, to its November 2017 consultation on legislation to support cheque imaging. Alongside the consultation response document, HMT has updated Annex A to the consultation, which is a document setting out sections 89D and 89E of the Bills of Exchange Act 1882, the primary legislation enabling cheque imaging. It has also published a draft version of the Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018, with an accompanying draft explanatory memorandum. The Regulations have been laid before Parliament under section 89F(3) of the Bills of Exchange Act 1882, for approval by resolution of each House of Parliament. The consultation response document states that HMT received fifteen responses and engaged with four other institutions. It has considered the responses and made some minor amendments to the proposed legislation in the light of certain representations and concerns on the part of respondents. The Regulations will come into force 21 days after they have been made.

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Financial Guidance and Claims Bill completes last stage before Royal Assent

On 1 May, the HoL approved the final amendments to the Financial Guidance and Claims Bill proposed by the HoC at the report stage and third reading on 24 April. The Bill is awaiting the final stage of Royal Assent, which is yet to be scheduled. The HoC amendments included: (i) requiring trustees or managers of both occupational and personal pension schemes to ensure that an individual seeking to access pension savings is referred to appropriate pensions guidance before proceeding with the application "or has opted out of receiving such guidance". Baroness Buscombe, Parliamentary Under Secretary of State for the Department for Work and Pensions, characterised the amendments as "a strong final nudge" from schemes for members to seek guidance; and (ii) introduction of a new clause conferring a regulation-making power on the Secretary of State to prohibit "unsolicited direct marketing relating to pensions". On this point, Baroness Buscombe stated: "Let me be absolutely clear that we are going to make regulations to ban pensions cold calling as soon as possible". The clause requires the Economic Secretary to the Treasury to lay a statement before both Houses if regulations to introduce this change have not been made by the end of June.

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Please see the Capital Markets and Market Infrastructure section for an update on the CPMI-IOSCO’s follow-up PFMI level 3 report.

PRA publishes policy statement on updating the Pillar 2 reporting requirements of CRR

On 30 April, the PRA published a policy statement on updating the Pillar 2 reporting requirements of CRR (PS8/18). PS8/18 contains the PRA's final policy and rules following its December 2017 consultation paper (CP25/17). The PRA explains that, following CP25/17, it has included additional wording in Rule 2.9 of Reporting Pillar 2 to align it with the revised SoP and clarify that it applies to firms with total assets equal to or greater than £5 billion at the relevant level of consolidation used as the basis of their ICAAP. It has also moved the definition of "Supervisory Reporting ITS" to the central Glossary as a consequential change resulting from the transfer of the "total assets" definition to the central Glossary. Finally, it has made minor amendments to reflect a change in terminology from " FDSF" to "Stress Testing Data Framework (STDF)" in paragraph 2.4 of SS32/15 and paragraphs 3.10, 3.11, 4.18, 7.30 and 8.20 of the SoP. The final rules, updated SS32/15 and updated SoP will take effect from 1 October.

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PRA publishes policy statement and final rules on groups policy and double leverage

On 30 April, the PRA has published a policy statement on groups policy and double leverage (PS9/18). Following a review of the groups policy framework, the PRA set out in an October 2017 consultation paper (CP19/17) a collection of proposals intended to ensure that banking groups have appropriate financial resources to cover the prudential risks of the whole group. PS9/18 provides feedback on CP19/17. The PRA received three responses. Respondents supported the overarching principle that consolidated capital requirements should take into account all risks that a group faces and that the financial strength of the holding company is of great importance. They also sought clarity on certain aspects of the proposals, set out by theme in chapter 2 of PS9/18. It also contains updates to: (i) Rule 14.10 in the Internal Capital Adequacy Part of the PRA Rulebook, set out in the PRA Rulebook: CRR Firms: Internal Capital Adequacy Assessment (No 2) Instrument 2018 (PRA 2018/11); (ii) the supervisory statement on the ICAAP and the SREP (SS31/15); (iii) the SoP on the PRA's methodologies for setting Pillar 2 capital; and (iv) the supervisory statement on the PRA's approach to supervising funding and liquidity risks (SS24/15). The rule change and updates to SS31/15, SS24/15 and the SoP will come into effect on 1 January 2019.

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PRA publishes policy statement on model risk management principles for stress testing

On 30 April, the PRA published a policy statement on the model risk management principles for stress testing (PS7/18). PS7/18 contains the PRA's final supervisory statement on model risk management principles for stress testing (SS3/18), which take effect from 1 June. SS3/18 sets out the PRA's expectations as to the model risk management practices firms should adopt when using stress test models. PS7/18 also contains the PRA's feedback to responses it received to its December 2017 consultation paper (CP26/17). The PRA explains that, while respondents were supportive of the model risk management principles for stress testing, they also asked for further clarification, guidance and alternative wording in some areas. Having considered respondents' comments, the PRA has made a number of changes to SS3/18 to make the statements in some principles clearer (it has amended P3.1, P3.7 and P4.2). It has also provided greater clarity on its expectations in a number of specific areas. The PRA also confirms that: (i) it does not expect boards to understand the statistical and mathematical underpinnings of models. However, both senior management and boards should ensure that they possess a general understanding of the most material models, the uncertainty around judgements, where the model is expected to work well and in what circumstances it is likely to break down; and (ii) the principles are intended to be relevant to all model types, not only those used in a stress-testing context. In the future, it will consider whether it should further extend the principles to be applied to other types of models. It will work closely with industry to assess whether to widen the scope of the principles and, if it plans to do so, will consult on this separately. All firms applying the principles are expected to undertake a self-assessment of their stress test model risk management practices against the principles as part of the ICAAP and report the findings in the ICAAP documents from 1 January 2019 onwards, depending on the frequency of the SREP. It takes effect from 1 June.

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EBA publishes consultation on draft guidelines on disclosure of non-performing and forborne exposures

On 27 April, the EBA published a consultation paper on draft guidelines on the disclosure by credit institutions of information on non-performing and forborne exposures (EBA/CP/2018/06). The draft guidelines (in section 4 of the consultation paper) apply to credit institutions that are subject to all or part of the disclosure requirements in CRR. These requirements are applied in a proportionate manner, based on the significance of the credit institution and the level of NPEs. The draft guidelines specify the information related to NPEs, forborne exposures and foreclosed assets that credit institutions should disclose. They also include disclosure templates. Proportionality is embedded in the guidelines. For example, some of the templates apply only to significant institutions with a high level of NPEs. The uniform disclosures will help to provide meaningful information to market participants on credit institutions' asset quality. The EBA explains that, by addressing potential asymmetries of information, and providing common disclosure on the quality of credit institutions' assets, the draft guidelines seek to foster transparency and market discipline. The EBA will hold a public hearing on the draft guidelines on 27 June. The deadline for comments on the draft guidelines is 27 June. The final version of the guidelines will be published before the end of this year.

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Please see the Capital Markets and Market Infrastructure section for an update on the CPMI-IOSCO’s follow-up PFMI level 3 report.


ECB publishes decision on SSM total supervisory fees for 2018 published in OJ

On 2 May, the ECB decision (ECB/2018/12) on the total amount of annual supervisory fees under the SSM for 2018 (Decision (EU) 2018/667) was published in the OJ. On 30 April, the ECB published a press release relating to the decision, under which the supervisory fees for the banking system for 2018 is estimated at EUR474.8million. The ECB notes in the press release that the fees are higher than that for 2017, which was EUR425 million after taking into account an unspent surplus of EUR41.1 million carried forward from 2016. It explains that the increase reflects both external and internal factors and different supervisory priorities identified by the ECB for 2018. These factors include Brexit and the costs associated with the ECB's involvement in conducting the EBA's biennial supervisory stress tests for significant banks in 2018. The ECB adopted the decision on 19 April and it will come into force 20 days after its publication in the OJ (that is, on 22 May).

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FSCS confirms final 2018/19 levy

On 1 May, the FSCS published a press release announcing its final levy for 2018/19. The FSCS will levy firms £407 million, which includes management expenses of £72.7 million. The figure is £71 million more than the indicative levy that the FSCS forecast in its plan and budget for 2018/19, published in January. The 2018/19 levy covers the nine months from 1 July to 31 March 2019 to reflect the decision to align the FSCS levy year with the financial year. This approach was finalised in February.

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BoE Governor appoints senior advisor on long-term future of financial system

On 2 May, the BoE announced that Mark Carney, BoE Governor, has appointed Huw van Steenis as a senior advisor on the long-term future of the financial system. Mr van Steenis, who has previously worked at Schroders and Morgan Stanley, will work with colleagues from around the BoE to deepen its understanding of a number of major issues, including: (i) the prospects for new financial technologies to better serve UK households and businesses; (ii) the implications of the further growth and integration of major emerging economies for cross-border financial flows; and (iii) the challenges and opportunities arising from the transition to a low carbon economy. Commenting on the appointment, Mr Carney notes that Mr van Steenis has experience of both the asset management and banking industry and is able to take the long-term view on the major structural forces driving the economy. This will be invaluable to the BoE in developing its thinking on the financial system of the future. The BoE expects Mr van Steenis' appointment to last between six and nine months.

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UK Finance publishes FAQs on the GDPR

On 2 May, UK Finance published a set of FAQs on the GDPR. The FAQs consider a range of issues: (i) how will the GDPR impact on consumers of financial services and what changes will they notice? (ii) how will firms' obligations change? (iii) will firms always need customer consent to process personal data? (iv) how will the GDPR affect marketing? (v) is there any connection with Open Banking or the revised PSD2? and (vi) what impact will Brexit have?

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BEIS publishes consultation on reform of limited partnership law

On 30 April, BEIS published a consultation paper seeking views on proposals to reform the law of limited partnerships. The consultation sets out the need for reform highlighting the fact that the law in this area has not changed much since the 1907 Partnership Act. The proposals include, amongst others: (i) requiring anyone presenting an application for an LP to provide evidence of supervision under money laundering regulations; (ii) requiring LPs to do business or maintain a service address in the UK; (iii) requiring all LPs to file an annual statement confirming that the information on the register is correct; and (iv) giving the Registrar powers to strike off LPs in circumstances that mirror those in place for limited companies (voluntary strike off and non-operating strike off). It also seeks views on the operational and legislative procedures that could be put in place to mitigate the risk of LPs being struck off in error. The deadline for comments on the consultation is 23 July.

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Joint Committee of ESAs enters into MMoU with EFTA Surveillance Authority

On 27 April, the Joint Committee of the ESAs published a MMoU (dated 26 March) on co-operation, information exchange and consultation with the EFTA Surveillance Authority (EFTA SA). In a related press release, the Joint Committee explains that the MMoU establishes practical arrangements between the ESAs and the EFTA SA on product intervention, breach of EEA law, action in emergency situations, mediation, and the adoption of specific opinions effective within EEA-EFTA states.

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FCA Handbook Notice 55

On 27 April, the FCA published Handbook Notice 54, which sets out the changes made to the FCA Handbook under instruments made by the FCA board on 22 March and 26 April, and by the FOS board on 7 March. The Handbook Notice reflects changes made to the Handbook by the following instruments: (i) Fees (Tariff Data for Insurers from 2018/2019) Instrument 2018 (FCA 2018/14/FOS 2018/2); (ii) Fees (Consumer Financial Education Body Levy) Instrument 2018 (FCA 2018/10); (iii) Financial Services Compensation Scheme (Management Expenses Levy Limit 2018/2019) Instrument 2018 (FCA 2018/12); (iv) Collective Investment Schemes Sourcebook (Miscellaneous Amendments) Instrument 2018 (FCA 2018/17); (v) Collective Investment Schemes Sourcebook (Miscellaneous Amendments) (No 2) Instrument 2018 (FCA 2018/18); (vi) Financial Conduct Authority (Change of Address) Instrument 2018 (FCA 2018/21); and (vii) Fees (Office for Professional Body Anti-Money Laundering Supervision) Instrument 2018 (FCA 2018/23).

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JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.