Financial institutions general regulatory news, March 2021

Hogan Lovells

Hogan Lovells

Recent regulatory developments of interest to all financial institutions, including updates from the UK, EU and the FSB. See also our sector specific updates in the Related Materials links.


  • UK FinTech: Kalifa Review final report
  • Pension freedoms: Work and Pensions Committee call for evidence
  • Fair treatment of vulnerable consumers: FCA FG21/1
  • MoU between FCA and EHRC
  • UK CRD: PRA statement on definition of "higher paid material risk taker"
  • Transforming data collection from UK financial sector: BoE plan
  • End of Brexit transition period: EU publishes draft GDPR and LED adequacy decisions
  • EU PEPP Regulation: European Commission adopts Delegated Regulations on supervisory reporting and product intervention
  • Supervisory cooperation: ECB MoU with BoE and FCA
  • EU MiCA: ECB opinion
  • EU SFDR: Joint Committee of ESAs statement
  • EU IFD: EBA consults on technical standards on supervisory cooperation
  • FSB 2021 key areas of focus

UK FinTech: Kalifa Review final report

HM Treasury has published the final report on the review of the UK FinTech sector by Ron Kalifa OBE (the Kalifa Review). The Kalifa Review formally launched in July 2020 with objectives for supporting the growth and widespread adoption of UK FinTech, and for maintaining the UK's global FinTech reputation.

The Kalifa Review of UK Fintech highlights the opportunity to create highly skilled jobs across the UK, to boost trade, and to extend the UK's competitive edge over other leading FinTech hubs. It sets out a series of proposals for how the UK can build on its existing strengths, create the right framework for continued innovation, and support UK firms to scale.

The final report's recommendations include:

  • amendments to UK listing rules to make the UK a more attractive location for initial public offerings;
  • improvements to tech visas to attract global talent and boost the fintech workforce;
  • creation of a regulatory FinTech "scalebox" to provide additional support to growth stage FinTechs; and
  • a Centre for Finance, Innovation, and Technology to strengthen national coordination across the FinTech ecosystem to boost growth.

Hogan Lovells is hosting a webinar series on the Policy and Regulation chapter of the final report. Our first webinar of the series is a virtual panel discussion, which will cover the key findings from the Policy and Regulation chapter. This panel discussion will be followed by a series of webinars in the next couple of weeks focussing on cryptoassets, payments, digital ID, open finance and artificial intelligence. Register for the first webinar here. See also a blog by Rachel Kent, Hogan Lovells partner and vice-chair of the Policy and Regulation chapter of the Fintech Strategic Review.

Pension freedoms: Work and Pensions Committee call for evidence

The Work and Pensions Committee of the House of Commons has issued a call for evidence as the second part of its three-part inquiry into the impact of pensions freedoms and the protection of savers. This stage will look at:

  • the options open to people when they come to access their pensions;
  • the advice and guidance which is available; and
  • the information people need to make an informed choice about retirement products.

The deadline for written evidence is 14 April 2021.

Fair treatment of vulnerable consumers: FCA FG21/1

The UK Financial Conduct Authority (FCA) has published finalised guidance, FG21/1, for firms on the fair treatment of vulnerable consumers. The guidance sets out the FCA's view on what firms should do to comply with their obligations under the Principles for Businesses and ensure they treat vulnerable customers fairly.

The guidance is relevant to all firms involved in the supply of products and services to retail customers who are natural persons, even if they do not have a direct client relationship with the customers.

The FCA states that in 2023-24 it plans to evaluate what action firms have taken and whether it has seen improvements in the outcomes experienced by vulnerable customers. At the same time, the FCA will look again at how the financial services industry is adapting to meet the needs of older consumers.

MoU between FCA and EHRC

The FCA has a memorandum of understanding (MoU) that it has entered into with the Equality and Human Rights Commission (EHRC). The MoU relates to the arrangements between the FCA and the EHRC in carrying out their respective responsibilities under the Financial Services and Markets Act 2000 (FSMA) and the Equality Act 2010. The purpose of the MoU is to establish a framework for cooperation, coordination and information sharing between the two organisations.

The MoU was signed and entered into force on 19 February 2021.

The FCA published the MoU alongside its finalised guidance for firms on the fair treatment of vulnerable customers (see above).

UK CRD: PRA statement on definition of "higher paid material risk taker"

The UK Prudential Regulation Authority (PRA) has published a statement to address an error in the "higher paid material risk taker" definition in Rule 1.3 in the Remuneration Part of the PRA Rulebook. The definition currently sets the requirement that an individual would be treated as a "higher paid material risk taker" when both:

  • their annual variable remuneration exceeds 33% of their total remuneration; and
  • their total remuneration exceeds £500,000.

The PRA has identified that this is an error. Instead, an individual should be treated as a "higher paid material risk taker" where either one of the above is satisfied. This is in line with the PRA's position outlined in its consultation paper (CP12/20) and policy statement (PS26/20) on implementing Capital Requirements Directive V (CRD V).

Due to the error, the PRA intends to consult on amending the rule at the earliest opportunity. In the meantime, it expects firms to treat individuals as "higher paid material risk takers" where either of the above conditions is satisfied.

In the light of the PRA's statement, the FCA has updated the webpage on its policy statement on implementing CRD V (PS20/16) to state that it also intends to consult at the next suitable opportunity to make a corresponding amendment to the dual-regulated firms Remuneration Code.

Transforming data collection from UK financial sector: BoE plan

The Bank of England (BoE) has published a webpage setting out a plan for transforming data collection from the UK financial sector and the findings of its review of data collection, which was launched in January 2020 with a discussion paper on transforming data collection.

The BoE and the FCA intend to establish a multi-year, and multi-phased, transformation programme. The first phase will take place over the next 24 months, with the second phase taking place over the subsequent three years. The BoE states that the subsequent phases will scale the transformation programme to maximise value. During each phase the regulators aim to deliver a series of "use cases" focusing on particular collections or types of collections.

Alongside the plan, the PRA and the FCA have published a joint Dear CEO letter sent to regulated firms that summarises the conclusions of the transformation plan and encourages firms to work with the regulators on addressing the challenges identified by the BoE. In late April 2021, the regulators will host a town hall for dual-regulated firms that will discuss how progress will be made and provide more detail about the resources required.

New FCA appointments to drive its transformation

The FCA has announced the following four new appointments to its executive team:

  • Stephanie Cohen will be the FCA's Chief Operating Officer (COO);
  • Jessica Rusu will be the FCA's first Chief Data, Information and Intelligence Officer (CDIIO);
  • Sarah Pritchard will become Executive Director, Markets; and
  • Emily Shepperd will be appointed to the newly created role of Executive Director, Authorisations.

The appointments are part of the FCA's transformation programme to build a data-led regulator that can make fast and effective decisions.

End of Brexit transition period: EU publishes draft GDPR and LED adequacy decisions

The European Commission has published a draft adequacy decision pursuant to the General Data Protection Regulation (GDPR) and a draft adequacy decision pursuant to the Law Enforcement Directive (LED) for personal data transfers from the EU into the UK.

In a related press release, the Commission states that it has carefully assessed the UK's law and practice on personal data protection, including the rules on public authorities' access to personal data, and concluded that the UK ensures an "essentially equivalent" level of protection to those guaranteed under the EU GDPR and the LED.

The UK government has welcomed the drafts, urging the EU to fulfil its commitment to complete the approval process swiftly.

Read more, including on next steps, in our separate bulletin: European Commission takes key step towards free flow of data to the UK.

EU PEPP Regulation: European Commission adopts Delegated Regulations on supervisory reporting and product intervention

Following its November 2020 consultation, the European Commission has adopted the following Delegated Regulations supplementing the Regulation on a pan-European personal pension product (PEPP Regulation):

The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulations. If neither the Council nor the Parliament object, the Delegated Regulations will be published in the Official Journal of the European Union (OJ) and enter into force on the 20th day following their publication in the OJ.

Supervisory cooperation: ECB MoU with BoE and FCA

The European Central Bank (ECB) has published an MoU between itself, the BoE and the FCA on supervisory cooperation and information sharing arrangements.

EU MiCA: ECB opinion

The European Central Bank (ECB) has published an opinion on the proposed Regulation on markets in cryptoassets (MiCA). In the opinion, the ECB, while welcoming the aims of the Regulation, sets out details of aspects of the proposals relating to the responsibilities of the Eurosystem, the European System of Central Banks (ESCB) and the ECB itself, where it considers further adjustments are warranted.

EU SFDR: Joint Committee of ESAs statement

On 25 February 2021, the European Supervisory Authorities (ESAs) published a supervisory statement made by the Joint Committee of the ESAs on the application of the Sustainable Finance Disclosure Regulation (SFDR).

Most of the provisions on sustainability-related disclosures set out in the SFDR apply from 10 March 2021. However, the envisaged application date for the regulatory technical standards (RTS), which supplements the SFDR on the content, methodologies and presentation of sustainability-related disclosures, is currently 1 January 2022. The Joint Committee submitted the final draft of these RTS to the European Commission on 4 February 2021.

In the statement, the Joint Committee recommends that the draft RTS should be used as a reference by national competent authorities (NCAs), financial market participants and financial advisers when applying the provisions of the SFDR in the interim period between the application of SFDR and the application of the RTS at a later date. Specifically, it states that the draft RTS can be used as a reference for applying the provisions of Articles 2a, 4, 8, 9, and 10 of the SFDR.

The Joint Committee notes that the draft RTS have not yet been adopted by the Commission and that the European Parliament or the Council may object to the RTS once adopted by the Commission. Therefore, the text of the final version of the RTS may differ from the draft version.

EU IFD: EBA consults on technical standards on supervisory cooperation

The European Banking Authority (EBA) has published the following consultation papers on technical standards supplementing the Investment Firms Directive (IFD):

  • a consultation paper on draft regulatory technical standards (RTS) and implementing technical standards (ITS) on information exchange between competent authorities of home and host member states under Article 13(7) and Article 13(8) of the IFD;
  • a consultation paper on draft RTS on colleges of supervisors for investment firm groups reflecting a mandate under Article 48(8) of the IFD.

The deadline for responses to the consultations is 23 April 2021. The EBA intends to finalise the technical standards by the end of June 2021.

FSB 2021 key areas of focus

The Financial Stability Board (FSB) has published a letter sent by Randal Quarles, the FSB Chair, to the G20 finance ministers and central bank governors ahead of their meeting on 26 February 2021. The letter refers to the FSB's ambitious work program, which seeks to address vulnerabilities directly related to the COVID-19 pandemic and increase resilience of non-bank financial intermediation. It also aims to support strong, sustainable, and balanced growth in a post-COVID world.

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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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