Banking and finance regulatory news, November 2020 # 2

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Recent regulatory developments focussing on banking and finance.

Contents

  • COVID-19: FCA updates statement on CBILS and BBLS
  • Review of BRRD, SRM Regulation and DGSD: European Commission inception impact assessment
  • CRR: European Commission adpots Delegated Regulation on prudential treatment of software assets
  • G-SIBs: FSB updates list for 2020

COVID-19: FCA updates statement on CBILS and BBLS

On 10 November 2020, the UK Financial Conduct Authority (FCA) published an updated version of its statement on the regulation of firms in relation to the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS). The FCA has updated its information on managing financial crime following an amendment to the BBLS which took effect on 10 November 2020. The updates state:

  • when distributing any top-up loans, the FCA would expect firms to have assessed and addressed any specific flags (suggesting a customer poses a higher risk of, for example, fraud, money laundering or terrorist financing) that they became aware of at the time of, or subsequent to, the original loan issue; and
  • for both top-up loans and new loans, firms should also consider the risk of fraud and, in particular, risks posed by new customers seeking access to the BBLS. In such cases, firms should ensure that robust customer due diligence processes are applied in accordance with requirements set out under the BBLS rules and the Money Laundering Regulations.

Review of BRRD, SRM Regulation and DGSD: European Commission inception impact assessment

The European Commission has published a combined evaluation roadmap and inception impact assessment concerning its review of the Bank Recovery and Resolution Directive (BRRD), the Regulation for the Single Resolution Mechanism (SRM Regulation) and the Deposit Guarantee Schemes Directive (DGSD).

The Commission intends to undertake a targeted evaluation of the BRRD, SRM Regulation and the DGSD. This evaluation will focus on areas such as measures on preparing for and preventing bank failures, as well as those applicable once a bank has been declared failing or likely to fail, such as the overall incentive set-up in bank crisis management, the availability of specific tools and the level of depositor protection.

Comments can be made on the assessment until 8 December 2020. The Commission intends to publish a consultation on the review in November 2020 which will focus on fundamental issues and design principles. It intends to adopt legislative proposals for a Regulation and a Directive in the third quarter of 2021.

CRR: European Commission adopts Delegated Regulation on prudential treatment of software assets

The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 241/2014 as regards the deduction of software assets from Common Equity Tier 1 items. The Delegated Regulation specifies the application of the deductions of software assets that are classified as intangible assets for accounting purposes for the purposes of Article 36(1)(b) of the Capital Requirements Regulation (CRR). The EBA published a final report on the draft RTS in October 2020.

The next step will be for the Council of the EU and the European Parliament to consider the Delegated Regulation. If neither the Council nor the Parliament object to the Delegated Regulation, it will be published in the Official Journal of the EU and will enter into force on the day after its publication. This reflects the accelerated application for the Article 36(1)(b) exemption from deductions of prudently valued software assets made by the COVID-19 CRR Amending Regulation ((EU) 2020/873), which specifies that the exemption would apply on the date of entry into force of the RTS required under Article 36(4).

G-SIBs: FSB updates list for 2020

The Financial Stability Board (FSB) has updated its list of banks identified as global systemically important banks (G-SIBs) based on end-2019 data. The banking groups identified as G-SIBs have remained the same, although there have been changes in the allocation of banking groups to buckets reflecting the effects of changes in the underlying activity of the banks.

The BCBS has published the following information relating to the 2020 G-SIB assessment:

  • an updated list of denominators of each of the 12 high-level indicators used to calculate the banks' scores;
  • the 12 high-level indicators for each bank in the sample used to calculate the denominators;
  • the cut-off score and bucket thresholds. The cut-off score is used to identify the G-SIBs in the updated list and the thresholds are used to allocate G-SIBs to buckets for the purpose of calculating the specific higher loss absorbency requirements; and
  • the reporting instructions used by the BCBS for the G-SIB assessment exercise.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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