Financial institutions general regulatory news, August 2020 #2

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Recent regulatory developments of interest to all financial institution.

Contents

  • BoE Financial Stability Report and FPC summary and record
  • CRD V: FCA CP20/14 on implementing remuneration requirements
  • LIBOR transition: FCA speech on critical tasks ahead in 2020
  • AML/CTF supervision: HM Treasury annual report

BoE Financial Stability Report and FPC summary and record

The Bank of England (BoE) has published the Financial Stability Report for August 2020 and the financial policy summary and record of the meetings of its Financial Policy Committee (FPC) on 29 July and 3 August 2020.

One of the main topics discussed was the performance of the UK financial system during the COVID-19 pandemic and the outlook for financial stability as the COVID-19 shock evolves. The financial policy summary and record also covers Brexit, LIBOR transition and payments innovation, and its annex lists the FPC policy decisions that remain in force. These relate to the countercyclical capital buffer rate, mortgage loan to income ratios and mortgage affordability.

CRD V: FCA CP20/14 on implementing remuneration requirements

The UK Financial Conduct Authority (FCA) has published a consultation paper, CP20/14, on updating the Dual-regulated firms Remuneration Code to reflect the Capital Requirements Directive (CRD) V Directive.

The Dual-regulated firms Remuneration Code is set out in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) at SYSC 19D. SYSC 19D applies to banks, building societies and designated investment firms and mirrors the UK Prudential Regulation Authority (PRA) rules that apply to these firms. The FCA intends to update SYSC 19D to reflect the remuneration requirements introduced by CRD V and the PRA's proposals for implementing these requirements set out in its July 2020 consultation paper (CP12/20).

The FCA will not apply the CRD V remuneration requirements to solo-regulated investment firms. These firms should continue to apply its existing remuneration regime until the new UK prudential regime for investment firms is in place.

The deadline for responses is 30 September 2020. The FCA intends to publish a policy statement before the CRD V transposition deadline of 28 December 2020.

LIBOR transition: FCA speech on critical tasks ahead in 2020

The FCA has published a speech given by Edwin Schooling Latter, FCA Director of Markets and Wholesale Policy, on 15 July 2020, on the critical tasks ahead in the second half of 2020 relating to LIBOR transition.

AML/CTF supervision: HM Treasury annual report

HM Treasury has published its annual report for the 2018 to 2019 tax year on anti-money laundering (AML) and counter-terrorist financing (CTF) supervision. The eighth annual report notes that the UK's supervisory regime is comprehensive and its response to economic crime has been recognised as world-leading. Nevertheless, more remains to be done to tackle illicit finance.

In particular, the Treasury notes that, in December 2018, the Financial Action Task Force (FATF) noted shortcomings in the preventative measures that regulated firms take under the Money Laundering Regulations 2017 (MLRs) to detect and deter money laundering and terrorist financing. The FATF also identified inconsistencies in the performance of the 25 supervisors, whose role it is to monitor, facilitate and ensure compliance with the MLRs, and, in particular, the 22 professional bodies in the accountancy and legal sector.

The government recognises that there is more work to be done and is working to strengthen the regime further by implementing FATF's recommendations.

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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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