Financial institutions general regulatory news, June 2020 #3

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Recent regulatory developments of interest to all financial institutions. Includes updates from the FCA, draft RTS on identifying material risk takers, EBA call for input on de-risking, and more.

Contents

  • Financial system to support recovery: FCA speech
  • FCA complaints scheme: FCA statement on approach to remedies
  • BoE annual report and accounts 2020
  • MiFIR third-country regime and UK cross-border services: UK Finance briefing
  • CRD: final draft RTS on criteria to identify material risk takers for remuneration purposes
  • De-risking and its impact on access to financial services: EBA call for input
  • Fighting serious and organised crime: Council of EU conclusions
  • CMU: ECON draft report

Financial system to support recovery: FCA speech

The UK Financial Conduct Authority (FCA) has published a speech given by Charles Randell, FCA Chair, on having a financial system to support recovery following COVID-19. Mr Randell talks about business and personal debt, investments, digitisation, a financial system for the recovery and lessons learned by the regulator from the past and its ambition for the future.

FCA complaints scheme: FCA statement on approach to remedies

The FCA has published a statement setting out its approach to deciding what to do when it agrees that a complaint made about the FCA under the complaints scheme established under Part 6 of the Financial Services Act 2012 is well founded. The FCA states that it aims to apply a consistent and fair approach to ensure remedies are appropriate and proportionate, based on the individual features of the complaint and what went wrong. Further details on the potential remedies are given in the statement.

In the near future, the FCA intends to consult on its approach to remedies for complaints, including compensation.

BoE annual report and accounts 2020

The Bank of England (BoE) has published its annual report and accounts for 1 March 2019 to 29 February 2020.

MiFIR third-country regime and UK cross-border services: UK Finance briefing

UK Finance has published a technical briefing on the impact of the third-country equivalence regime under the Markets in Financial Instruments Regulation (MiFIR) on the provision of UK-EU cross-border financial services after Brexit.

The briefing considers how the MiFIR third-country regime operates and the implications for UK firms if the European Commission makes an equivalence decision in respect of the UK under MiFIR, including the impact of the amendments to the regime that will apply from 21 June 2021 under the EU Investment Firms Regulation. It also discusses the implications for EU firms if the UK makes a corresponding equivalence decision in respect of the EU under the UK's "onshored" MiFIR.

CRD: final draft RTS on criteria to identify material risk takers for remuneration purposes

Following its earlier consultation, the European Banking Authority (EBA) has published a final report on draft regulatory technical standards (RTS) on the criteria to identify all categories of staff whose professional activities have a material impact on the institutions' risk profile ("risk takers") under the Capital Requirements Directive (CRD). The identification process is based on a combination of qualitative and quantitative criteria.

The qualitative criteria have been retained to a large extent. However, they have been amended to enhance the application of proportionality. The definition of managerial responsibility has been revised taking into account that institutions of different sizes have different layers of hierarchical levels. The final draft RTS also clarify how the criteria should be applied on a consolidated, sub-consolidated and individual basis. In addition, some flexibility in calculating the amount of remuneration for the application of the quantitative requirements has been introduced.

De-risking and its impact on access to financial services: EBA call for input

The EBA has published a call for input to understand why financial institutions choose to de-risk instead of managing the risks associated with certain sectors or customers.

Responses to the call for input can be made until 11 September 2020. The feedback gathered will feed into the EBA's opinion on the risks of money laundering and terrorist financing affecting the EU's financial sector that the EBA is mandated to issue under Article 6(5) of the Fourth Money Laundering Directive that will be published in Q1 2021. It may also inform other EBA policy outputs.

Fighting serious and organised crime: Council of EU conclusions

The Council of the EU has approved conclusions on enhancing financial investigations to fight serious and organised crime, calling on member states to enhance cooperation and make financial investigations form part of criminal investigations in respect of organised crime.

Read more in our briefing: Council of the EU calls for better response against serious and organised crime.

CMU: ECON draft report

The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published a draft report on the capital markets union (CMU), which focuses on improving access to capital market finance and further enabling retail investor participation.

The draft report, prepared by Rapporteur Isabel Benjumea Benjumea, contains a motion for a European Parliament resolution, the text of which includes the following recommendations:

  • there needs to be supervisory convergence to promote a common EU model, guided by the European Securities and Markets Authority (ESMA), to reduce the existing obstacles to cross-border financial operations;
  • in view of the demographic challenges faced by the EU, there should be measures to promote retail investments to increase the participation of retail investors in capital markets through more attractive and appropriate personal pension products;
  • the European Commission should consider introducing a category of semi-professional investors to better respond to the reality of participation on the financial markets. This would make it possible to tailor the treatment of clients according to their knowledge and experience on the markets;
  • the current reporting frameworks under the Markets in Financial Instruments Directive and the European Market Infrastructure Regulation should be simplified as they are very costly and complex, which hinders the effectiveness of the system;
  • legislation should be amended to ensure access to independent advice by financial intermediaries (while avoiding promotion of an institution's own financial products) and to ensure the fair marketing of financial products; and
  • the European Commission should create a pan-European "sandbox" for financial services to enhance the innovation and competitiveness of the sector.

[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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