UK Financial Regulatory Developments - June 2016 #3


[co-author: Catherine Hogg]

Treasury publishes AML supervision report

Treasury has published its anti-money laundering (AML) and counter terrorist finance (CTF) supervision report for 2014-2015. The report stresses the importance of preparing properly for the UK’s FATF assessment in 2017-18 as well as for implementation of the fourth Money Laundering Directive (MLD4). The government says it is clear that money laundering obligations should be carried out in an intelligent way that ensures that businesses can grow and are not weighed down by red tape. It reiterates its commitment to the risk-based approach, and says this means not targeting an entire class of customer in a blanket manner and that this includes proportionately applying anti-money laundering measures when dealing with domestic politically exposed persons. The report concludes:

  • there are differences between supervisors in levels of sophistication and understanding of the risk-based approach and therefore to how they apply it in their supervision;
  • there was an increase in both monitoring and enforcement activity across supervisors;
  • supervisors reported proactively reaching out to their communities to improve understanding on practical application of AML and CTF requirements; and
  • there has been a greater level of information sharing, which is good as this had been identified as a deficiency.

(Source: Treasury publishes AML supervision report)


BoE makes MoU with PRA and JFSC

BoE has published a memorandum of understanding (MoU) that it has entered into with PRA and the Jersey Financial Services Commission (JFSC). The MoU covers:

  • co-operation, including the exchange of confidential information and investigative assistance;
  • supervision and resolution;
  • identifying risks to the financial system; and where necessary,
  • emergency/crisis situations, especially in instances where emergency/crisis situations involve firms with cross-border operations in Jersey or the UK.

(Source: BoE makes MoU with PRA and Jersey regulator)


BoE publishes FPC minutes

BoE has published the minutes of the Financial Policy Committee (FPC) held on 13 May. It reviewed the responses to its January 2016 consultation paper on the systemic risk buffer (SRB) framework. It decided to implement the measures it consulted upon, but also to supplement the SRB framework with a recommendation to PRA to seek to ensure that, where systemic buffers apply at different levels of consolidation, there is sufficient capital within the consolidated group, and distributed appropriately across it, to address both global systemic risks and domestic systemic risks. It also wrote to the Chancellor, responding to his letter on the remit of and recommendations for the FPC. The response noted the introduction of the SRB and welcomed the government’s intention to provide the FPC with more necessary powers, including powers of direction over the buy-to-let mortgage market.  (Source: BoE publishes FPC minutes and BoE responds on FPC remit)


CRR non-delta risk and CRD4 identified staff corrections published in OJEU

The Delegated Regulation amending RTS supplementing the CRR in relation to non-delta risk options and identified staff has been published in the OJEU. The changes clarify EBA’s intention that only institutions that exclusively purchase options and warrants may use the simplified approach to calculating these risks. The Delegated Regulation also corrects RTS supplementing CRD4 in respect of qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile. The change to these RTS identify as material risk takers those individuals with remuneration equal to or greater than that of any staff identified according to specified criteria. It entered into force on 2 June. (Source: CRR non-delta risk and CRD4 identified staff corrections published in OJEU)


BRRD bail-in exclusions published in the OJEU

The Delegated Regulation further specifying the circumstances where exclusion from the application of write-down or conversion powers is necessary under Article 44(3) of the Bank Recovery and Resolution Directive (BRRD) has been published in the OJEU. Article 44(3) permits resolution authorities to exclude certain liabilities from the scope of the bail-in tool, provided that certain conditions are met. The Delegated Regulation will enter into force on 21 June. (Source: BRRD bail-in exclusions published in the OJEU)


Amendment to CCP RTS on time horizons published in the OJEU

The Delegated Regulation amending Article 26 of the RTS on risk mitigation requirements for central counterparties (CCPs) under EMIR has been published in the OJEU. It amends RTS on the time horizons for the liquidation period for the different classes of financial instrument, which initially entered into force on 15 March 2013. The changes introduce the possibility for EU CCPs to margin on a one-day basis where a set of criteria are met, including requiring that margins are collected on a gross basis for clients’ accounts. (Source: Amendment to CCP RTS on time horizons published in the OJEU)


ESAs launch website

The European Supervisory Authorities (ESAs), formed of EBA, ESMA and EIOPA collectively, have launched a website for their joint activities. (Source: ESAs launch website)


EIOPA reports on proposed template amendments

EIOPA has published its final report on proposed amendments to ITS on templates for submitting information to supervisory authorities following prior consultation on the proposals. These proposals represent EIOPA’s response to changes to Solvency 2 on the treatment of insurers’ investments in infrastructure, in European long term investment funds (ELTIFs) and in equities traded through multilateral trading platforms. Responses to the consultation encouraged a minimalistic approach to any changes and raised concerns about qualitative information. The Commission now needs to endorse the ITS. (Source: EIOPA reports on proposed template amendments)


ESMA updates Q&A on speculative products under MiFID

ESMA has published an updated version of its Q&A relating to the provision of contracts for difference (CFDs) and other speculative products to retail investors under the current MiFID regime. A new question addresses the conflicts of interest issues national competent authorities should consider when a firm offering CFDs or other speculative products to retail investors makes use of other parties to perform activities, including conflicts of interest arising from remuneration arrangements with such parties. (Source: ESMA updates Q&A on speculative products under MiFID)


ESMA publishes responses to EU MAR consultation

ESMA has published the responses to its consultation on a list it will keep under EU MAR of information regarding commodity and spot markets. The draft guidelines set out non-exhaustive examples of information ESMA expected to be disclosed:

  • relating directly to commodity derivatives;
  • relating indirectly to commodity derivatives without a related spot market; and
  • directly relating to a spot commodity contract.

ESMA made 11 responses available from a range of regulated markets, exchanges and trading systems. (Source: ESMA publishes responses to EU MAR consultation)


ESMA updates Q&A on EuSEF and EuVECA Regulations

ESMA has updated its Q&A document in respect of the application of the European Social Entrepreneurship Funds (EuSEF) and the European Venture Capital Funds (EuVECA) Regulations. A new question has been added concerning the use of the designations of EuSEF and EuVECA funds when marketed only in their home Member State. The designations are linked to the compliance of their managers with qualitative requirements, and are not subject to any requirement to market the respective fund in more than one Member State. (Source: ESMA updates Q&A on EuSEF and EuVECA Regulations)


ESMA consults on CSDR rules and procedures guidelines

ESMA has launched a consultation on guidelines on participant default rules and procedures under the Central Securities Depository Regulation (CSDR). The proposed guidelines set out the steps a central securities depository (CSD) should set up in its rules and follow in case insolvency proceedings are opened with respect to one or more of its participants. The steps proposed include a non-exhaustive list of actions a CSD may take to manage a participant’s default. Consultation runs until 30 June. (Source: ESMA consults on CSDR rules and procedures guidelines)

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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