Key Regulatory Topics: Weekly Update May 2021

Allen & Overy LLP

Allen & Overy LLP

Our weekly update on key regulatory topics affecting the financial services sector.


Please see our Markets and Markets Infrastructure section for product-specific updates relating to Brexit.


Please see our Markets and Markets Infrastructure section for an update on the Working Group on Euro Risk-Free Rates recommendations on EURIBOR fallbacks.

Please see our Payment Systems and Payment Services section for product-specific updates relating to Consumer/Retail.

FCA announces upcoming credit broking survey

On 12 May, the FCA published a new webpage on its upcoming credit broking survey. The FCA plans to ask regulated firms that hold the credit broking permission to complete a short survey – it is sending a pilot survey to 300 firms on 20 May, and the survey for remaining firms is expected to follow in July. The FCA states that the survey will give it an updated view of how firms are using the credit broking permission. The FCA will use the data provided, alongside existing data, to support its ongoing work to mitigate risks of harm to consumers.

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EC report on the review of the Mortgage Credit Directive (MCD)

On 11 May, the EC published a report on the review of the MCD. First, the report covers the impact on consumer protection, specifically: (i) consumer trust and satisfaction with mortgages; (ii) effectiveness of the rules on advertising and pre-contractual information; (iii) period of reflection and/or withdrawal; (iv) bundling and tying practices; (v) creditworthiness assessment; (vi) knowledge and competence of staff; (vii) foreign-currency loans; (viii) right to early repayment; (ix) arrears and foreclosure; (x) assignment of the credits to a third party; and (xi) new post-contractual rights. Secondly, the report covers the impact on the single market, covering: (a) scope of the MCD; (b) access to credit databases; (c) customer mobility/switching of providers; (d) EU passport for credit intermediaries; (e) mortgage lending by non-credit institutions; and (f) enforcement. Finally, the report also addresses the impact on financial stability. An annex to the report was also published, which sets out data relating to the role of credit intermediaries in mortgage lending.



EC consults on a retail investment strategy for the EU

On 11 May, the EC published a consultation paper on a retail investment strategy for the EU. In line with the EC’s stated objective of “an economy that works for people”, it is seeking to ensure that a legal framework for retail investments is suitably adapted to the profile and needs of consumers, helps to ensure improved market outcomes and enhances their participation in the capital markets. The EC is looking to understand how the current framework for retail investments can be improved and is seeking views on different aspects, including: (i) the limited comparability of similar investment products that are regulated by different legislation and are hence subject to different disclosure requirements, which prevent individual investors from making informed investment choices; (ii) how to ensure access to fair advice in light of current inducement practices; (iii) how to address the fact that many citizens lack sufficient financial literacy to make good decisions about personal finances; (iv) the impact of increased digitalisation of financial services; and (v) sustainable investing. Other issues covered by the consultation include reviewing the framework for investor categorisation, suitability and appropriateness assessments, consumer redress, as well as views on the PRIIPs Regulation. The EC intends to adopt a retail investment strategy in early 2022. The deadline for comments is 3 August.

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Please see the other sections for product-specific updates relating to Covid-19.


Financial Services Compensation Scheme (FSCS) confirms latest 2021/22 levy forecast of £833m

On 13 May, the FSCS published its latest outlook report, confirming its updated levy forecast for 2021/22. Based on the latest data available, FSCS has now revised its levy forecast for 2021/22 to £833m – this reforecast is £206m lower than the indicative levy announced in the FSCS’ plan and budget in January. The FSCS states that there are two main reasons for this lower forecast: (i) due to the extension of government support schemes, some firms that looked likely to fail this year could now fail in the 2022/23 financial year and beyond; and (ii) in 2020/21, FSCS saw lower claims volumes relating to recent insurance failures than had been expected, and there are also a number of self-invested personal pension (SIPP) operator claims that the FSCS now expects to be paid in 2021/22, rather than in 2020/21. These factors have led to a surplus for the 2020/21 financial year, which has been used to offset the previously forecasted £1.04bn levy.

Press Release

Outlook Report

Fund regulation

BoE speech on making money market funds (MMFs) more resilient

On 12 May, the BoE published a speech by its Governor, Andrew Bailey, on making MMFs more resilient. First, the speech covers the background to the issues posed by MMFs, and Mr Bailey notes that there are at least two problems evident in how the financial system post financial crisis operates, which cause structural vulnerabilities: (i) there are instruments which at least in some of their existing forms are neither one thing nor the other – neither properly cash-like nor properly investment-like; and (ii) there are instruments which are meant to be investment-like but which become regarded as cash-like. Furthermore, Mr Bailey discusses the large effort going towards tackling the issues which arose from the actions taken against the March 2020 “dash for cash” episode – the speech sets out the principles that should shape the changes to address these issues: (a) as a general principle for all funds, redemption terms should be aligned with the underlying liquidity of assets; (b) where investors regard funds as cash-like, they should be made resilient so they can operate as such at all times, which means running minimal maturity mismatch risk; (c) MMFs should not hold less liquid assets on a scale that would make them more suitable to be traditional investment funds; (d) MMFs should not be designed with regulatory thresholds or cliff-edges which create adverse incentives and amplify first-mover advantage behaviour; and (e) reforms should improve the ability of funds to support short-term funding markets, including by making them more resilient. In addition, Mr Bailey outlines the three big picture changes that derive from these principles, and that should form the basis of the necessary reforms: (1) remove the adverse incentives introduced by the liquidity thresholds related to the use of suspensions, gates and redemption fees; (2) simplify the landscape to make clearer the critical distinction between cash-like funds and investment funds, as well as remove the ambiguity of intermediate descriptions such as low volatility funds; and (3) define in an accounting and substantive sense more explicitly what constitutes cash-like.

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BoE statement on the progress of the Working Group on Productive Finance

On 7 May, the BoE published a statement on the progress of the Working Group on Productive Finance. In particular, the Working Group recently met to discuss progress on: (i) the work done to develop a commercially, operationally and legally viable authorised open-ended fund structure for long-term investments; (ii) the analysis undertaken to understand and begin to address operational barriers to investing in long-term assets, for example, barriers associated with investing in non-daily dealing funds; and (iii) possible initiatives to support pension schemes in keeping costs low while at the same time securing overall long-term value for their members.

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FCA consultation on a new type of fund to support investment in long-term assets

On 7 May, the FCA launched a consultation on proposals for a new category of fund designed to invest efficiently in long-term, illiquid assets. The FCA notes that the proposal is that these funds would be open-ended and would be able to invest in assets such as venture capital, private equity, private debt, real estate and infrastructure, often referred to as productive finance. The FCA states that the aim of this new long-term asset fund (LTAF) would be to provide a fund structure through which investors can invest with appropriate confidence in less liquid assets because the fund structure is specifically designed to accommodate relatively illiquid assets – these illiquid assets can offer attractive expected returns to investors and, if successful, the existence of funds investing in these assets can also help businesses and infrastructure projects have greater access to long-term capital to support investment and wider economic growth. The FCA is proposing that LTAF rules embed longer redemption periods, high levels of disclosure, and specific liquidity management and governance features – these would take account of the types of risk to which LTAFs might be exposed and help give investors confidence that they are being managed appropriately and in their interests. The deadline for comments is 25 June. Furthermore, the BoE published a statement on the progress of the Working Group on Productive Finance stating (amongst other things) that the Working Group considered how public authorities and the private sector can take concrete steps to support the objectives of the Group – the BoE notes that the FCA’s consultation on the LTAF is the first concrete step.

FCA Press Release

FCA Consultation Paper

BoE Statement

FCA feedback statement to its consultation on liquidity mismatch in authorised open-ended property funds

On 7 May, the FCA published a feedback statement to its consultation on liquidity mismatch in authorised open-ended property funds. The consultation, published in August 2020, addressed reducing the potential for investor harm that arises because the terms for frequent (typically daily) dealing in units of some property funds are not aligned with the time it takes to buy or sell the buildings in which the funds invest – this creates a liquidity mismatch between the redemption terms that the fund offers to investors and the fund’s assets. To address this, the FCA consulted on whether property funds should be required to have notice periods before an investment can be redeemed, and it suggested a notice period of between 90 and 180 days for these funds. The FCA notes that only a small number agreed with the proposal of notice periods as consulted on. However, just over half of respondents, who expressed a clear position (56 in total), supported the proposals “in principle” but subject to the following important conditions: (i) the wider “ecosystem” that supports and distributes investment funds (including platforms’ and advisers’ systems) being able operationally to support notice periods; and (ii) investments in funds with notice periods continuing to be eligible assets for ISA purposes. The FCA has summarised the feedback under three key themes: (a) whether to require notice periods for property funds; (b) consequences of introducing mandatory notice periods; and (c) feedback on further points for discussion. In its statement on its work in this area, the FCA notes that, as it has launched a consultation on long-term asset funds, it will not take a final decision on its policy position on property funds until Q3 at the earliest, so that it can also take feedback to the consultation into account. Furthermore, the FCA states that if it proceeds with applying mandatory notice periods for property funds, it will allow a suitable implementation period before the rules come into force, approximately 18 months to two years, to allow firms to make operational changes.

Feedback Statement


The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2021

On 7 May, the Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2021 was made. Paragraph 6A of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (the CIS Order) provides that regulated peer-to-peer lending platforms do not amount to a collective investment scheme and so are exempt from being authorised by the FCA for this particular activity – this is referred to as “the CIS exemption”. The purpose of the instrument is to clarify that a firm that takes over lending agreements operated via a peer-to-peer lending platform, specifically because the original firm is being wound up, also benefits from the CIS exemption. The Order comes into force on 18 June.


Explanatory Memorandum

The FCA and the BoE encourage market participants in a switch to SONIA in the sterling exchange traded derivatives market from 17 June

On 13 May, the FCA published a statement noting that, following close engagement with market participants, the FCA and BoE support and encourage market users and liquidity providers in the sterling exchange traded derivatives market to switch the default traded instrument to SONIA instead of LIBOR from 17 June this year – this is to facilitate a further shift in market liquidity toward SONIA, bringing benefits for a wide range of users as they move away from LIBOR.

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Draft Financial Markets and Insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021

On 13 May, the Government published the draft Financial Markets and Insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021. In the explanatory memorandum that was also published, it is explained that the instrument is being made in order to ensure there is a coherent and functioning financial services regulatory regime in the UK following the end of the Transition Period (TP). The instrument makes amendments to the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019. The instrument addresses deficiencies in retained EU law arising as a result of the UK's withdrawal from the EU.

Draft Regulations

Draft Explanatory Memorandum

ESMA consults on annual review of MiFIR RTS 2

On 12 May, ESMA published a consultation paper seeking input from market participants on its MiFIDII/MiFIR annual review report under Commission Delegated Regulation (EU) 2017/583 (RTS 2). ESMA notes that the consultation provides for the annual assessment of the operation of the thresholds for the liquidity determination of bonds and the trade percentiles determining the pre-trade SSTI-threshold which is currently subject to a four-stage phase-in regime under RTS 2. The consultation proposes to: (i) move to stage 3 for the liquidity assessment of bonds; (ii) move to stage 3 for the SSTI percentile of bonds; and (iii) not to move to stage 2 for the SSTI percentile of non-equity instruments other than bonds. ESMA states that these proposals are designed to increase the transparency available to market participants in the bond market. ESMA will consider the feedback and expects to publish a final report and submit, if necessary, regulatory technical standards to the EC for endorsement in July – following such endorsement, the RTS are then subject to a non-objection procedure by the EP and the Council of the EU. The deadline for comments is 11 June.

Press Release

Consultation Paper

ECB’s Working Group on Euro Risk-Free Rates recommendations on EURIBOR fallbacks

On 11 May, the ECB’s Working Group on Euro Risk-Free Rates published a paper containing its recommendations on EURIBOR fallbacks, discussing a variety of options relating to the introduction of fallback trigger events and fallback rates for contracts and financial instruments referencing EURIBOR. The paper includes a recommendation for an €STR-based EURIBOR fallback rate for specific use cases, including: (i) corporate lending products; (ii) retail mortgages, consumer loans and loans to SMEs; (iii) current accounts; (iv) trade finance; (v) export and emerging markets finance products; (vi) debt securities; (vii) securitisations; (viii) transfer pricing models; and (ix) investment funds.

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Global Foreign Exchange Committee (GFXC) seeks feedback on draft guidance papers for the use of ‘pre-hedging’ and ‘last look’ within foreign exchange markets

On 11 May, the GFXC published a press release to announce that it is seeking feedback on draft guidance papers for the use of ‘pre-hedging’ and ‘last look’ within foreign exchange markets. The GFXC notes that the papers are intended to be read alongside the FX Global Code – when finalised, these guidance papers will not become part of the Code, and they are intended to outline the expectations that market participants should have with regard to the usage of these practices, as well as the controls and disclosures that could help align practices with the Code. After considering the feedback received, the papers will be finalised for approval by the GFXC at its June meeting, following a fatal flaw review by the local FXCs. The final versions of the papers will be published shortly after. The deadline for comments is 31 May.

Press Release

Webpage on Request for Feedback

Draft Guidance Paper 1 – Pre-Hedging

Draft Guidance Paper 2 – Last Look

BoE speech on life after LIBOR

On 11 May, the BoE published a speech by its Governor, Andrew Bailey, on life after LIBOR. With the market having definitive dates for the end of LIBOR, Mr Bailey focuses his comments on descending safely, remembering the important role benchmarks play in the financial system and why financial firms and borrowers would be well served in choosing the most robust alternative reference rates that meet their use case.

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FCA updates on changes to regulatory reporting during the Covid-19 pandemic

On 11 May, the FCA updated its webpage on changes to regulatory reporting during the Covid-19 pandemic. The FCA notes that it will allow flexibility in the submission deadline for FIN-A (annual report and accounts) – for this return only, firms will have an automatic two-month extension to the deadline for submissions up to and including 31 July. The FCA states that firms should note this flexibility is intended to cover the situation where the impacts of Covid-19 have made it impractical to finalise audited financial statements – if firms are able to submit FIN-A on time, then they should do so, and in any event should submit it as soon as they are reasonably able to and no later than 30 September.

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FCA annual transparency calculations for UK non-equity instruments

On 10 May, the FCA updated its statement on the operation of the MiFID markets regime webpage to announce that it has made its annual transparency calculations for UK non-equity instruments that will apply from 1 June. The FCA confirms that these results cover the 2021 annual bonds threshold assessment, the May 2021 quarterly bonds liquidity determination and the 2021 annual derivatives threshold and liquidity assessment.


Non-Equity Transparency Results

ICE Benchmark Administration (IBA) consults on potential cessation of GBP LIBOR ICE Swap Rate

On 7 May, the IBA published a consultation on its intention to cease the publication of GBP LIBOR ICE Swap Rate for all tenors immediately after publication on 31 December. The IBA explains that it does not expect to be able to continue to publish GBP LIBOR ICE Swap rate settings for which the three Month or six Month GBP LIBOR settings serve as the underlying rate for the floating leg of the relevant swap transaction after 31 December, because it does not expect sufficient (or perhaps any) input data to be available based on eligible new interest rate swap transactions referencing GBP LIBOR settings from this time. The deadline for comments is 4 June.

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HMT announces outcome of consultation on supporting the wind-down of critical benchmarks

On 7 May, HMT updated its webpage on its consultation on supporting the wind-down of critical benchmarks to announce the outcome of the consultation. The consultation invited responses on the case for additional legal protections for parties affected by the wind-down of a critical benchmark. Following feedback to its consultation, HMT intends to bring forward further legislation to address issues identified in the consultation. The legislation will seek to reduce disruption that might arise from LIBOR transition with regard to the potential risk of contractual uncertainty and disputes in respect of contracts that have been unable to transition from LIBOR to another benchmark (so-called “tough legacy” contracts), where the FCA has exercised the powers given to it in the Financial Services Act. However, HMT still holds the view that parties should seek to transition contracts away from LIBOR before the end of this year. HMT has also published a letter sent to the Working Group on Sterling Risk-Free Reference Rates (RFRWG) confirming this approach.

Updated Webpage


Financial Markets Law Committee (FMLC) responses to EC consultations on reviews of Settlement Finality Directive (SFD) and Financial Collateral Directive (FCD)

On 7 May, the FMLC published its responses to two of the EC’s consultations. First, the FMLC responded to the EC’s consultation on the review of the SFD, covering: (i) protection of systems – in particular, the FMLC supports the extension of the SFD's protections to third country systems that are designated by the relevant designating body under the SFD, and their operators; (ii) participants in systems governed by the law of a member state; (iii) the SFD’s interaction with other Regulations and Directives; and (iv) extension of the Article 9(2) conflicts of law rule. Secondly, the FMLC responded to the EC’s consultation on the review of the FCD, expressing the view that the definitions of "possession" and "control" give rise to serious issues of legal uncertainty and material practical difficulties.

SFD Consultation Response

FCD Consultation Response

FCA and PSR joint statement on access to cash

On 13 May, the FCA and PSR published a joint statement on access to cash. Amongst other things, it is stated that: (i) cash continues to serve a socially useful purpose for many communities; (ii) there is a need to maintain access to cash and banking services for those that still need it, particularly vulnerable consumers – at the same time, a critical part of maintaining this access will be supporting others that can, to transition to digital and other alternative ways of banking and making payments; (iii) the FCA and PSR expect individual firms to protect the ability of their customers to access cash and other services that meet their needs when they close branches; (iv) the FCA and PSR support the government’s commitment to protect access to cash through legislation and they will have a role in supervising that legislation; and (v) the FCA and PSR are committed to ensuring that cash, and the infrastructure that supports it, remains available for those who need it – this includes new and innovative ways for accessing cash, such as banking hubs that are being piloted, alongside more traditional routes of bank branches, ATMs, cashback from retailers and cash services over Post Office counters. Amongst other things, the statement also covers: (a) what the FCA and PSR have done about cash; (b) the FCA’s and PSR’s expectations of firms; and (c) industry activity and regulatory expectations.

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FCA speech on protecting access to cash and banking services

On 13 May, the FCA published a speech by Sheldon Mills (Executive Director, Consumers and Competition) on protecting access to cash and banking services. The speech sets out the current state of cash use, and how it’s changing, and also outlines what the FCA wants to see happening to help maintain appropriate access to cash. The speech provides data showing that cash use is declining – however, Mr Mills notes that a large number of consumers still rely on cash and cannot easily switch to digital alternatives. Furthermore, additional evidence shows that access to cash across the UK is generally good for most people – Post Office counter services and ATMs provide a significant and important part of the existing geographic coverage. The speech notes that cash usage is declining, but that those who still rely on it are some of the most vulnerable. From the FCA’s perspective, it is a crucial component of a well-functioning retail banking market that consumers and business can access cash and banking services in a way that meets their needs. Over the longer term, the FCA believes that new services will become available to meet the needs of consumers and businesses alike – Mr Mills highlights that this is a turning point for the banking market, and it does provide some opportunities for industry to find solutions to meet the challenge of maintaining access to cash.

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HMT speech on protecting access to cash

On 13 May, HMT published a speech by John Glen MP, Economic Secretary to the Treasury, on protecting access to cash. The speech covers: (i) Mr Glen’s view of the need to strike a balance between protecting cash, while simultaneously welcoming innovation; (ii) the important role of cash and the Government’s work to protect it; (iii) cashback without purchase – specifically the recent legislative measure which will come into force from June to make it easier for shops and other businesses to offer cashback to customers, without those customers having to buy anything; and (iv) the role of industry – if cashback without a purchase is going to be a real success, the Government needs the financial industry to play its part too, by making it easy and cost effective for retailers to provide this service. The speech notes that the BoE brought together the industry to help design a new model for the wholesale cash network, and the Government welcomes the progress on this work so far and looks forward to seeing further steps this summer – alongside this, the Government will continue to work closely with the BoE to ensure it has the powers it needs to keep this network sustainable and resilient into the future.

Furthermore, in the summer, the Government will be launching a consultation on legislative proposals. Specifically, the approach of the consultation focuses on: (a) making sure that the Government finds the balance between supporting the use of cash by individuals and businesses, while allowing flexibility in terms of how this is achieved as the cash landscape continues to evolve – thus, the Government is going to be setting out proposals for establishing requirements that ensure people and businesses can access cash withdrawal and depositing facilities, over time, within reasonable travel distances; (b) ensuring industry, notably banks, continue to play a key role in ensuring these cash withdrawal and depositing facilities are available – the Government will set out proposals on which organisations should be in scope of the legislation; (c) giving regulators appropriate responsibilities and powers without placing undue burdens on businesses; and (d) seeking views on proposals to ensure that the FCA is properly positioned for a leading role in holding firms to account on access to cash, so that the needs of consumers and businesses are met.

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Prudential regulation

EBA speech on the implementation of Basel 3 in the post-Covid-19 setting

On 12 May, the EBA published a speech by its Chair Jose Manuel Campa, on implementation of Basel 3 in the post-Covid-19 setting. The speech covers: (i) a look back on the measures taken in relation to Covid-19; (ii) the Basel III implementation, outlining that a swift implementation of Basel III in the EU is desirable; and (iii) what is needed to support the recovery after Covid-19 – in particular how banks, supervisors and regulators can play a key role in both managing the risks of non-performing loan (NPL) losses, but also highlighting that the EBA has a responsibility to ensure that the corporate restructuring of firms hit by Covid-19 is done in a proper manner to ensure a sound recovery. The speech concludes that the key challenge from a macroeconomic perspective will be to help a sound recovery by facilitating the restructuring of firms affected by the crisis in a viable and sustainable manner – the role of the banking sector is crucial in this regard, by relying on sound credit judgements and adequate lending.

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Commission Implementing Regulation laying down implementing technical standards (ITS) with regard to the supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL) and the total loss absorbency requirement (TLAC) published in OJ – CRR

On 12 May, Commission Implementing Regulation (EU) 2021/763, laying down ITS for the application of the CRR with regard to the supervisory reporting and public disclosure of the MREL and the TLAC, was published in OJ. The ITS reflect mandates set out in Articles 430(7) and 434a of the CRR, as amended by the CRR II, and Articles 45i(5) and (6) of the BRRD, as amended by the BRRD II. The Regulation enters into force on 1 June, this being 20 days after its publication in the OJ. There are different application dates for the supervisory reporting and public disclosure requirements: (i) supervisory reporting requirements – these will apply from 28 June; and (ii) public disclosure requirements – in respect of disclosures made in accordance with Article 437a and point (h) of Article 447(h) of the CRR (disclosures relating to TLAC), these will apply from 1 June. Additionally, in respect of disclosures made in accordance with Article 45i(3) of the BRRD, these will apply from 1 January 2024, or from any later compliance deadline set by the relevant resolution authority.

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The Capital Requirements Regulation (Amendment) (EU Exit) Regulations 2021

On 7 May, the Capital Requirements Regulation (Amendment) (EU Exit) Regulations 2021 were made. The explanatory memorandum states that the Regulations will ensure that the CRR continues to operate effectively now that the UK has the left the EU and before the UK’s Investment Firms Prudential Regime (IFPR) is introduced, in particular by addressing failures of retained EU law in the CRR. The Regulations come into force on 1 June.


Explanatory Memorandum

Sustainable finance

Please see our Other Developments section for an update on the Financial Services Regulatory Initiatives Forum’s third edition of the Regulatory Initiatives Grid and the FCA Policy Development Update.

The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2021

On 10 May, the Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2021 were made. The explanatory memorandum states that the instrument amends the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021 (the Auctioning Regulations). The Auctioning Regulations make provision for the auctioning of emissions allowances to emit 1 tonne of carbon dioxide equivalent under the UK Emissions Trading Scheme (ETS) and introduce mechanisms to support market stability in this new scheme. The UK ETS was established by the Greenhouse Gas Emissions Trading Scheme Order 2020. The Regulations come into force on 19 May.


Explanatory Memorandum

Government guidance on supply of allowances in the UK Emissions Trading Scheme (ETS)

On 10 May, the Government published guidance on the supply of allowances in the UK ETS. In particular, the guidance covers: (i) UK ETS markets, explaining the supply of allowances in the UK ETS in the early years of the scheme; (ii) UK ETS auctions – these will begin on 19 May and will be hosted by ICE Futures Europe (ICE), and during this year auctions will be held every two weeks following this date; (iii) 2022 auctions – the UK ETS Authority aims to ensure that the 2022 auction calendar is published by 15 July; (iv) the secondary market; (v) supply of allowances; (vi) net zero consistent cap review; (vii) free allocation; (viii) market stability mechanisms – the UK ETS has important design features to guard against instability in the early years of the market including an Auction Reserve Price and the cost containment mechanism; and (ix) participating in the UK ETS auctions.

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EC call for public feedback on draft Delegated Regulation containing disclosure obligations under the Taxonomy Regulation

On 7 May, the EC published a call for public feedback on its draft Delegated Regulation supplementing Article 8 of the Taxonomy Regulation by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU (the Accounting Directive) concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation. In addition, the EC has also published an FAQ on Article 8 of the Taxonomy Regulation, and how it will work in practice. The deadline for comments to the call for feedback is 2 June.

Draft Delegated Regulation


Consultation Webpage

FCA statement on firms’ handling of complaints during Covid-19 no longer in force

On 12 May, the FCA updated its statement on firms’ handling of complaints during Covid-19. The FCA confirms that as of 1 May, the statement is no longer in force.

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FCA finalises guidance for insolvency practitioners (IPs) on how to approach regulated firms

On 12 May, the FCA published its finalised guidance for IPs on how to approach regulated firms. The guidance: (i) explains the scope of the guidance and the FCA’s role in regulated firm failures; (ii) outlines considerations for IPs before a regulated firm’s entry into an insolvency procedure, such as obtaining consent for out of court administration appointments and sharing court documentation with the FCA; (iii) explains the FCA’s expectations on IPs at the point of a regulated firm’s entry into an insolvency procedure and shortly thereafter, such as communications with clients and creditors; (iv) explains the FCA’s expectations on IPs during an insolvency procedure, such as treatment of client assets and treating customers fairly; (v) explains the FCA’s expectations when a regulated firm enters into a company voluntary arrangement, scheme of arrangement or restructuring plan; and (vi) summarises the key steps from the guidance that an IP will need to consider when appointed over a regulated firm.

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EBA report on convergence of supervisory practices in 2020 and 2021 convergence plan

On 12 May, the EBA published a report on the convergence of supervisory practices in 2020. Overall, the EBA’s report finds that, in 2020, increased supervisory attention was given to the assessment of profitability and business models, as well as to selected areas of ICT risk and operational resilience, while loan origination received less supervisory attention – therefore, loan origination practices should remain an area of attention for supervisors in 2021 and onwards. The EBA also observed continued efforts by competent authorities to cooperate with their resolution authority counterparts and prudential supervisory practices have been converging in the context of money laundering and terrorist financing risk – nevertheless, some differences remain in supervisory practices. Another key element of the report is the convergence in supervisory colleges, where the EBA observed increased interaction in 2020, compared to 2019. In addition, the report sets out the four key topics identified for the 2021 convergence plan for prudential supervisory purposes: (i) asset quality and credit risk management; (ii) ICT and security risk, and operational resilience; (iii) profitability and business model; and (iv) capital and liability management.

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FCA replaces Gabriel with RegData

On 11 May, the FCA updated its webpage on news relating to Gabriel, its previous platform for gathering regulatory data from firms. In the update, the FCA confirms that it has replaced Gabriel with RegData, its new data collection platform for gathering regulatory data from firms – all 52,000 firms that provided regulatory submissions in Gabriel now need to use RegData.

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Queen's Speech 2021 – the Dormant Assets Bill

On 11 May, the Queen’s Speech and the background briefing to this were both published, setting out the government's legislative priorities for the next parliamentary session. In particular, one of the measures announced was the Dormant Assets Bill, which intends to expand the Dormant Assets Scheme into the insurance and pensions, investment and wealth management, and securities sectors. The main elements of the Bill include: (i) expanding the Scheme into new asset classes and improving consumer protection in reuniting people with forgotten money; (ii) aligning the model for how dormant assets funding is allocated in England with that used in the devolved administrations; and (iii) improving the Scheme’s operation. Should the measure pass, the Government intends to launch a consultation on the causes to which future funding can be distributed. The speech also announces the Online Safety Bill, which is intended to keep people safe online – the FCA has previously called for financial harms to be included in the Bill, although these are not mentioned specifically by the Government in its background briefing. In addition, on 12 May, the Dorman Assets Bill had its first reading in the HOL – HMT has published two factsheets on the Bill: (a) Bill overview; and (b) policy context and background. The UK Parliament has published the text of the Bill, and this was presented by Baroness Barran.

Queen’s Speech

Background Briefing

Bill Overview

Policy Context and Background

FCA Policy Development Update – May 2021

On 7 May, the FCA published its Policy Development Update for May, summarising its proposed future publications. Newly announced upcoming publications include: (i) a consultation paper (CP) on enhancing climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers, due for publication in June; and (ii) proposals to extend climate-related disclosure rules to standard listed issuers and ESG-related discussion topics in capital markets. The update also lists out upcoming quarterly consultation papers.

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Financial Services Regulatory Initiatives Forum’s third edition of the Regulatory Initiatives Grid

On 7 May, the Financial Services Regulatory Initiatives Forum published the third edition of the Regulatory Initiatives Grid. In its press release, the FCA notes that the publication marks the end of a successful one-year pilot exercise – the Forum will continue and the Grid will be published twice a year. Upcoming work in the latest iteration includes eight new ESG initiatives, the BoE’s and FCA’s work to transform data collection, and HMT’s Future Regulatory Framework Review. Furthermore, the Financial Reporting Council has also now joined the Forum with effect from 7 May and will be contributing towards the Grid for the first time.

Regulatory Initiatives Grid

FCA Press Release

BoE Press Release

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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