UK Financial Regulatory Developments - April 2016 #6


IOSCO updates information repository for OTC clearing

IOSCO has published an updated version of its information repository for central clearing requirements for over-the-counter (OTC) derivatives. The repository sets out central clearing requirements on a product-by-product level, and any exemptions from them. (Source: IOSCO updates information repository for OTC clearing)


EPC launches SEPA rulebook consultations

EPC has launched consultations on the Single Euro Payments Area (SEPA) Credit Transfer and SEPA Direct Debit rulebooks. A notable proposed change is to make the EPC Customer-to-Bank Implementation Guidelines mandatory for credit transfer originators or direct debit creditors. The consultations close on 4 July. (Source: EPC launches SEPA rulebook consultations)


EACT seeks clarification on MiFID 2 own account exemption

EACT has written to EP for a clarification of Markets in Financial Instruments Directive (MiFID 2) so that non-financial companies transacting on their own account on electronic trading platforms continue to be exempt from MiFID licensing requirements. EACT’s concern is that the new wording of the exemption for trading on own account in Article 2 and the narrowing of its scope would have the unintended consequence of excluding non-financial companies from the scope of the exemption. (Source: EACT seeks clarification on MiFID 2 own account exemption)


Basel Committee consults on leverage ratio review

The Basel Committee has proposed revisions to its Basel III leverage ratio framework and FAQ documents. The proposed are intended:

  • to measure derivative exposures by proposing to use a modified version of the standardised approach for measuring counterparty credit risk exposures (SA-CCR);
  • to ensure consistency across accounting standards by proposing two options for the treatment of regular-way purchases and sales of financial assets;
  • to clarify the treatment of provisions and prudential valuation adjustments for less liquid positions, so as to avoid double-counting; and
  • to align the credit conversion factors for off-balance-sheet items with those proposed for the standardised approach to credit risk under the risk-based framework.

The Committee is consulting on an additional leverage ratio requirement applicable to global systemically important banks until 6 July. (Source: Basel Committee consults on Basel III document revisions).


BIS reports on payment aspects of financial inclusion

BIS’s Committee on Payments and Market Infrastructures (CPMI) and the World Bank Group have published their report on payment aspects of financial inclusion. The report outlines seven principles for supervisors, regulators and private sector stakeholders which were subject to consultation (see FReD 11 September 2015) and which seek to tackle barriers to the adoption and usage of transaction accounts:

  • commitment from public and private sector organisations;
  • a robust legal and regulatory framework underpinning financial inclusion;
  • safe, efficient and widely reachable infrastructures;
  • transaction accounts and payment product offerings that effectively meet a broad range of transaction needs;
  • availability of a broad network of access points and interoperable access channels;
  • effective financial literacy efforts; and
  • the leveraging of large-volume and recurrent payment streams, including remittances, to advance financial inclusion objectives.

(Source: BIS reports on payment aspects of financial inclusion)


Basel Committee reports on RWAs in the banking book

The Basel Committee has published its second report looking at risk-weighted assets (RWAs) in the banking book. The report forms part of the Committee’s Regulatory Consistency Assessment Programme (RCAP) under the Basel III framework. It examines the variability of RWAs in banks that use internal models to calculate their credit risk regulatory capital requirements. It considers risk estimates used for exposures to retail customers and SMEs and then explores the way banks evaluate the likely exposure at default across all asset classes. The report describes sound practices observed in banks’ independent model validation functions, including the governance of the validation process, the methodology and scope of banks’ validation functions and the role of the validation function across different phases of model development and implementation. (Source: Basel Committee reports on RWAs in the banking book)

SRA updates Handbook on consumer credit regulation


SRA has released an updated version of its Handbook, which contains changes to the regulation of consumer credit work. Solicitor firms are now covered by SRA’s regulation as long as the consumer credit activities they carry out are central to the legal services they provide. (Source: SRA updates Handbook on consumer credit regulation)


PSR publishes annual plan and budget for 2016/17

PSR has published its annual plan and budget for the year 2016/17, setting out its aims, anticipated activities and expected costs for the next 12 months. PSR has a £15.25 million budget for operating costs and has grouped its work programme into three main categories, reflecting its statutory objectives. These are:

  • promoting competition;
  • promoting innovation; and
  • promoting the interests of those who use or rely on payment systems.

(Source: PSR publishes annual plan and budget for 2016/17)


PRA consults on approach to supervision of building societies

PRA has launched a consultation on changes to its supervisory statement on building societies’ treasury and lending activities. It sets out its expectations in its supervision of building societies’ lending and treasury applications and compliance with the Building Societies Act 1986 and PRA’s Rulebook. It has reorganised most of the existing content under the following six headings: introduction; overview of PRA expectations; lending; financial risk management; changes to supervisory approaches; and business model diversification. The consultation closes on 4 July. (Source: PRA consults on approach to supervision of building societies)

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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