UK Financial Regulatory Developments - May 2016 #9

Dentons
Contact

Chancellor responds on tax deductibility of regulatory fines

The Chancellor has responded to a letter from Andrew Tyrie MP, Chairman of the Treasury Committee, to confirm that payments made by banks to regulators are viewed as “a routine cost of doing business” and are therefore “generally deductible for Corporation Tax purposes”. The letter notes that this includes routine payments and the costs of specific investigations and that the Government’s position is consistent with that for regulator payments made in other industries. The Treasury Committee believes more clarity is still needed to confirm that fines are “punitive” payments that are not tax-deductible, whereas payments that are “compensatory” are.   (Source: Chancellor responds on tax deductibility of fines)

 

Banking reform orders made

Treasury has made orders bringing into force certain provisions of banking reform legislation:

  • the Financial Services (Banking Reform) Act 2013 (Commencement No. 11) Order 2016 brings into force from 10 May the definition of “misconduct” for the purposes of regulatory action under section 66 of the Financial Services and Markets Act (FSMA); and
  • the Bank of England and Financial Services Act 2016 (Commencement No. 1) Regulations 2016 bring into force on the same day a further amendment to the FSMA provision to address the controversial burden of proof on senior managers. The effect of the provision is that a senior manager will not be guilty of misconduct under Condition C in section 66A(5) or 66B(5) of FSMA unless FCA or PRA can prove that that senior manager did not take reasonable steps to avoid the contravention of a requirement by the authorised person occurring or continuing.

(Source: Banking Reform Act Commencement Order 11 and Bank of England and Financial Services Act 2016 (Commencement No. 1) Regulations 2016)

 

Treasury updates sanctions

Treasury has updated the sanctions lists in respect of North Korea. The changes extend the scope of sanctions in line with EU measures. The changes affect credit and financial institutions and:

  • require them to close existing branches, subsidiaries or banking accounts in North Korea if Treasury has determined they could contribute to North Korea’s illicit programmes; and terminate existing joint ventures, ownership interests and correspondent banking relationships with North Korea’s banks. Institutions must comply with this requirement by the end of May;
  • oblige them to inform Treasury if they consider that the operation of any account or office might contribute to North Korea’s illicit programmes;
  • continue the current prohibitions on credit and financial institutions to open new banking accounts with North Korea or North Korean owned/controlled entities, open new branches, subsidiaries or representative offices, and enter into new correspondent banking relationships and joint ventures. All new acquisitions of ownership interests in a North Korea or North Korean owned/controlled entity, joint ventures with designated persons, and financial support for trade with North Korea are now prohibited; and
  • ban making funds or economic resources available to the Government of North Korea, the Workers’ Party of Korea, or any person acting on their direction or behalf, if Treasury has determined that to do so would contribute to North Korea’s illicit programmes.

Treasury notes that firms breaching the new requirements will commit a criminal offence because of EU measures, even though the amendments to the current UK laws on enforcement have not yet been made. Separately, Treasury updated the sanctions in respect of Libya and renewed a terrorism designation. (Source: Treasury updates sanctions)

 

BoE speaks on cyber risk

Will Brandon, BoE’s Chief Information Security Officer, spoke to the City Week conference on how firms should position cyber risk within their risk management frameworks. He stressed that cyber attacks are almost always not purely technical, but are facilitated in some way by people or process weaknesses in their victims’ defences. So firms must be aware of how social engineering can expose vulnerabilities that the firms then need to patch up. He said that outdated operating systems, poor patching, untrained staff, unsegregated networks and weak security monitoring will all increase a firm’s risk but can all be addressed. Institutions also need a plan to respond to a critical incident. He concluded by saying that firms should treat cyber risk like any other risk, and understand it so they can manage it.  (Source: BoE speaks on cyber risk)

 

EBA consults on LCR disclosure

EBA is consulting on Guidelines under the Capital Requirements Regulation to specify key liquidity ratios and figures in a harmonised manner across the EU. The draft builds on the Basel Committee’s Liquidity Coverage Ratio (LCR) disclosure standards and includes a harmonised table on liquidity risk management and harmonised templates for LCR disclosure. Consultation closes on 11 August. (Source: EBA consults on LCR disclosure)

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.

© Dentons | Attorney Advertising

Written by:

Dentons
Contact
more
less

Dentons on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.