CONTENTS. Monthly Regulatory Update November

Transcription

1 MONTHLY REGULATORY UPDATE NOVEMBER 2017

2 CONTENTS Contents... 1 Financial Conduct Authority (FCA)... 3 Policy Statement (PS)... 3 PS17/ Consultation Paper (CP)... 4 CP17/ CP17/ News... 5 Statements... 5 Press release... 5 Speech... 6 Prudential Regulation Authority (PRA)... 7 Policy Statement (PS)... 7 PS26/ PS27/ Consultation Paper (CP)... 8 CP22/ CP23/ CP24/ News... 9 Bank of England (BoE) Consultation Paper (CP) CP/EDMC News Payment Systems Regulator (PSR) News Building Societies Association (BSA) Policy brief News Press Release Speech... Error! Bookmark not defined. Joint Money Laundering Steering Group (JMLSG) Guidance Credit Services Association (CSA) News Monthly Regulatory Update November

3 Her Majesty s Revenue and Customs (HMRC) Consultation Outcome For Further Information Contact Monthly Regulatory Update November

4 The following is a summary of the pronouncements for the financial services sector issued in NOVEMBER FINANCIAL CONDUCT AUTHORITY (FCA) Policy Statement (PS) PS17/24 Handbook changes to reflect the new regulatory framework for Insurance-Linked Securities Feedback to CP16/34 and CP17/3 and near-final rules Date Published 1 November 2017 Insurance-linked securities (ILS) are financial instruments where the value of the security is linked to an insurable loss event. ILS are used to transfer risk to the capital markets through insurance special purpose vehicles (ISPVs), as an alternative form of risk mitigation for insurance and reinsurance firms. In November 2016, Her Majesty s Treasury (the Treasury) proposed a new regulated activity of insurance risk transformation, as part of designing a new framework to attract ILS business to the UK. The FCA have published two consultation papers (CPs) proposing changes to the rules and setting out the authorisation and supervisory approach in relation to ISPVs. This PS sets out: FCA s response to the feedback received to CP16/34 and a near-final FCA Statement authorising and supervising insurance special purpose vehicles (see Chapter 2); and FCA s response to the feedback received to CP17/34 and the near-final rules that incorporate the new regulated activity of insurance risk transformation into the FCA Handbook (see Chapter 3). This PS will be of interest to: ISPVs and firms considering becoming involved in setting up ISPVs or issuing ILS; firms that undertake outsourced activities on behalf of ISPVs; professional advisers to ISPVs; and insurers and reinsurers that want to use ISPVs as part of their risk mitigation strategy. Next Steps: If your firm is affected by these changes, you need to ensure compliance with the new ILS regime when it goes live, which the Treasury expects to be in Monthly Regulatory Update November

5 Consultation Paper (CP) CP17/37 Industry Codes of Conduct and Discussion Paper on FCA principle 5 Date Published 3 November 2017 This CP proposes a general approach to supervising and enforcing the FCA s Senior Managers & Certification Regime (SM&CR) rules for authorised firms unregulated activities, including those covered by industry-written codes of conduct. It sets out that FCA expect firms and their senior management to consider market codes in determining the proper standard of market conduct as part of the SM&CR requirements and obligations (eg individual conduct rule 5, certification and regulatory referencing), including where FCA do not have a framework of rules. FCA will supervise adherence to those SM&CR rules. FCA may take enforcement action in cases of serious and egregious misconduct leading to harm or potential harm. This CP will be of interest to all authorised firms, their senior managers and staff, particularly if they undertake any unregulated financial services alongside their regulated activities. Next Steps: FCA expect to publish a policy statement in Q It will contain: responses to the feedback received; and made rules for the areas consulted on in this paper. CP17/38 Regulatory fees and levies: policy proposals for 2018/19 Date Published 13 November 2017 This CP sets out the FCA s proposed policy changes to the way that FCA fees will be raised from 2018/19. FCA are funded entirely by the fees and levies recovered from the firms it regulates. FCA do not receive any funding from other sources. Each chapter identifies the firms and other bodies it will affect. This CP contains no material directly relevant to retail financial services consumers, although FCA fees are indirectly met by consumers. Next Steps: FCA expect to publish feedback on the comments received, along with their rules, in a handbook notice in March Monthly Regulatory Update November

6 News Considerations for Principals who have Appointed Representatives or Introducer Appointed Representatives (ARs) On 2 August 2016, FCA issued an alert following an increase in cases of introducers having an inappropriate influence on business carried out by authorised firms. This alert expands on that. It also highlights the risks to a Principal of not having adequate oversight of its ARs. As a Principal you are responsible for the regulated activities of your ARs and FCA expect you to consider the following risks and act upon them where relevant. Work in this area is continuing and FCA will take action where they identify non-compliance with their requirements. FCA expect you to consider the content of this alert and take appropriate action. Consumer warning about the risks of investing in cryptocurrency Contracts for differences (CFDs), including financial spread bets, with cryptocurrencies as the underlying investment are increasingly being marketed to consumers. These products are extremely high-risk, speculative products. This warning is to inform consumers about the risks of buying them. Consumer warning about the risks of investing in binary options From 3 January 2018, firms offering binary options will be regulated by the FCA and will no longer be licensed by the Gambling Commission. The FCA is issuing a warning to inform consumers about the risk of investing in these high-risk, speculative products. Statements FCA statement on LIBOR panels Andrew Bailey, FCA Chief Executive, set out in a speech earlier this year that, whilst significant improvements have been made to LIBOR since April 2013, the absence of active underlying markets means that the future sustainability of LIBOR cannot be guaranteed. The support of the panels for LIBOR is needed until the end of 2021, by when a transition can be made to alternative rates. The FCA has confirmed that all 20 of the panel banks have agreed to support the LIBOR benchmark ensuring the sustainability of the rate until Based on this support until the end of 2021, the FCA expects focus to turn towards developing alternative rates and working towards a transition that can be executed smoothly. Press release FCA launches Wholesale Insurance Brokers Market Study The FCA launched a market study to assess how competition is working in the wholesale insurance broker sector. There have been significant changes in this sector in recent years which has seen brokers developing new services and business practices. The FCA wants to ensure that the sector is working well, and fosters innovation and competition in the interests of its diverse range of clients. Shining a light on illegal money lending: consumer experiences of unauthorised lending in the UK - Last year the FCA conducted research with our consumer network partners into the experiences of consumers who had borrowed money from unauthorised lenders, otherwise known as loan sharks, in the UK. This research report summarises what the FCA was told and includes some insights from individuals directly affected by what is commonly known as illegal money. Bank and FCA launch next phase of sterling Libor transition work The Bank of England and the FCA are today announcing the next phase of work with market participants on Libor transition. From January 2018, the market-led Working Group on Sterling Risk-Free Rates will have an extended mandate and broader participation. Monthly Regulatory Update November

7 Speech Retail banking and payments Speech by Karina McTeague, Director of Retail Banking Supervision at the FCA, at the PayExpo 2017 on changes within the payments landscape. Highlights o PSD2 opens up opportunities for businesses to develop new services to help consumers manage their money, to compare financial products, or to pay for things online. o FCA expect firms to adhere to the principles of safety and security anticipated in the draft RTS. o FCA expect firms to put the interests of their customers at the heart of their business models. Effective compliance with the Market Abuse Regulation a state of mind Speech by Julia Hoggett, Director of Market Oversight at the FCA, at the Recent Developments in the Market Abuse Regime conference. Highlights o Effective oversight and compliance cannot and should not stay still. o The manner in which the FCA is set up to survey the markets today is very different from their structure several years ago, and will continue to evolve. o Market abuse impacts the smooth operation of our markets by adding cost or reducing returns for participants and ultimately eroding trust in the UK markets. o Trust is essential in any society and necessary to ensure markets function well and efficiently. Cyber resilience and supplier risk: moving beyond compliance Speech by Nausicaa Delfas, Chief Operating Officer at the FCA, at the Cyber Security Summit and Expo Highlights o Cyber resilience is not tick box. o It should be driven from the top down, with Boards asking probing questions. o It involves consideration of: people, processes, technology. o And this applies to managing risks posed by suppliers and partners too you need to assess them as you do yourselves. o Key is to continue to work together, share ideas and innovations. Regulatory priorities for retail banking Speech by Karina McTeague, Director of Retail Banking Supervision at the FCA, at the Westminster Business Forum on retail banking and payments. Highlights o The revised Payment Service Directive (PSD2) is a vital part of transitioning society to an ever more digitised world with appropriate security and privacy. This is in the interests of all firms as it ensures public trust and confidence not only in individual firms, but also in the payments market as a whole. o As the lead regulator for payment services, the FCA is deeply involved in updating their existing regulatory regime for PSD2, including engaging closely with HM Treasury (HMT), the European Banking Authority (EBA) and the Open Banking Implementation Entity. o FCA have built up their Payments capability and capacity - with a remit covering payments across wholesale and retail sectors. In addition, FCA will develop their current supervisory strategy to bring in Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs). Monthly Regulatory Update November

8 The future of competition and regulation in retail banking Speech by Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered at Future of Retail Banking Highlights o Retail banking is on the cusp of some of the most significant change the sector has ever seen in the form of PSD2 and Open Banking. o These changes are welcome, as competition has long been a concern in the retail banking industry. o As the regulator, FCA need to understand the impact of these changes on firms business models, and how they may affect consumers. o PSD2 and Open Banking offer opportunities for incumbents, as well as challengers. PRUDENTIAL REGULATION AUTHORITY (PRA) Policy Statement (PS) PS26/17 Authorisation and supervision of insurance special purpose vehicles Date Published 1 November 2017 This PRA Policy Statement provides feedback to responses to Consultation Paper (CP) 42/16 Authorisation and supervision of insurance special purpose vehicles and sets out the PRA s final approach and expectations in relation to the authorisation and supervision of insurance special purpose vehicles (ISPVs), subject to the Risk Transformation Regulations 2017 (RTR) being passed through parliament. This PS is relevant to all parties who wish to apply to the PRA for, or have obtained authorisation as, an ISPV. It is also relevant to insurers and reinsurers seeking to use UK ISPVs as risk mitigation in accordance with Solvency II. Next steps: Firms should consider the content of the PS and the relevant CP. PS27/17 Regulated fees and levies: Adjustment to rates for 2017/18 Date Published 6 November 2017 This PRA policy statement provides feedback to responses to Consultation Paper (CP) 17/17 Regulated fees and levies: Adjustment to rates for 2017/18. It sets out final rules intended to correct the fee rates for the PRA s Annual Funding Requirement (AFR) for 2017/18 published in PS17/17 Regulated fees and levies: rates for 2017/18. This PS is relevant to all firms that currently pay PRA fees or are expecting to do so within the 2017/18 fee year (1 March 2017 to 28 February 2018). Monthly Regulatory Update November

9 PS27/17 Regulated fees and levies: Adjustment to rates for 2017/18 Next steps: Firms should consider the content of the PS and the relevant CP. Consultation Paper (CP) CP22/17 Solvency II: supervisory approval for the volatility adjustment Date Published 3 November 2017 This CP sets out the PRA s proposals to clarify its expectations in respect of firms seeking approval to apply a volatility adjustment (VA) to insurance and reinsurance business. These proposals clarify the risks that may arise from use of the VA and how firms are expected to consider those risks. The PRA proposes to update Supervisory Statement (SS) 23/15 Solvency II: supervisory approval for the volatility adjustment. This CP is relevant to insurance and reinsurance companies using or intending to use the VA. Next Steps: The consultation closes on Friday 9 February CP23/17 Financial management and planning by insurers Date Published 9 November 2017 In this CP, the PRA seeks views on a draft supervisory statement (SS) on effective financial management and planning by insurance firms and groups. The draft SS in the Appendix to this CP sets out the PRA s expectations for financial management and planning by insurers. These include the framework for the development and maintenance of a risk appetite statement by an insurer, the application of this risk appetite to an insurer s business and financial plans, and the assessment of the suitability and sustainability of capital distribution plans in the context of this risk appetite. This CP is relevant to all UK insurance firms, and groups, in scope of the Solvency II Directive, and to the Society of Lloyd s and managing agents ( insurers ). Next Steps: The consultation closes on Friday 9 February Monthly Regulatory Update November

10 CP24/17 Solvency II: Internal models - modelling of the matching adjustment Date Published 10 November 2017 This CP seeks feedback on a draft supervisory statement (SS) setting out the Prudential Regulation Authority s (PRA) proposed expectations of firms regarding the application of the Solvency II matching adjustment (MA) within the calculation of the Solvency Capital Requirement (SCR). The purpose of the proposals in this CP is to update and consolidate all of the PRA s expectations regarding the modelling of the MA in internal models into a single SS in order to provide clarity. The CP is addressed to UK Solvency II firms and to the Society of Lloyd s and its managing agents. It is most relevant to firms with or seeking MA approval and which use a full or partial internal model to determine the SCR, together with UK Solvency II firms when making an assessment as to the appropriateness of the standard formula for their risk profile. Next Steps: This consultation closes on Friday 9 March The PRA invites feedback on the proposals set out in this consultation. News PRA Rulebook: Administration Instrument (No.3) 2017 Following consultation on this administration instrument, the PRA intends to make corrections to the PRA Rulebook. The corrections are not substantive and are not intended to change PRA policy. Following consultation on this administration instrument in CP18/17, the PRA intends to make corrections to the PRA Rulebook. The PRA published details of how people can make written statements to the PRA on ring-fencing transfer schemes (RFTS) Persons alleging they would be adversely affected by the carrying out of an RFTS are entitled to be heard by the court if, before the final hearing, they file (or lodge in Scotland) their written statement with the court and serve copies on the PRA and the firm whose business is to be transferred (section 110(5) FSMA). The firms have provided further information on their websites about how persons can file their written statements, and by when this must be done. The deadlines will be different for each firm. RFTS purpose is to enable firms to restructure their businesses in order to comply with the ringfencing requirements that will apply from 1 January PRA advises on voluntary disclosures on the qualitative aspects of IRRBB in line with the new Basel standards The PRA believes that the voluntary disclosures on the qualitative aspects of Interest rate risk in the banking book (IRRBB) in line with the new Basel standards would be useful for year end 2017 and While this steer applies only to the largest building societies and banks, PRA is keen to make others aware of the direction of travel. The EBA is due to publish a consultation paper on updated guidelines for IRRBB by the end of Monthly Regulatory Update November

11 BANK OF ENGLAND (BOE) Consultation Paper (CP) CP/EDMC2017 Procedure for the Enforcement Decision Making Committee Date Published 10 November 2017 In this CP, the Bank of England (the Bank) sets out in detail how a new Enforcement Decision Making Committee (EDMC) will operate. The EDMC will strengthen the independence and robustness of the decision-making process by the Bank in any contested enforcement cases. This consultation will be of interest to authorised deposit-takers and insurance firms, their professional advisers, their auditors and actuaries, and approved persons within the Senior Managers Regime. This consultation will also be relevant to any other firms or individuals, who may be interested in the enforcement jurisdiction of the regimes operated under the auspices of the Bank, including: central counterparties, recognised payment systems, critical service providers and securities settlement systems. Next Steps: The consultation closes on Friday 2 February News Stress testing the UK banking system: 2017 results The results of the stress tests of the UK banking system for 2017 has been announced. The results of the stress test shows that the UK banking system is resilient to deep simultaneous recessions in the UK and global economies, large falls in asset prices and a separate stress of misconduct costs. Bank Rate increased to 0.5 per cent The Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase Bank Rate by 0.25 percentage points, to 0.5 per cent. The MPC voted unanimously to maintain the stock of sterling nonfinancial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at 10bn. It also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at 435bn. Financial Stability Report, November 2017 The Bank of England has published its Financial Stability Report setting out the FPC s view on the stability of the UK financial system and what it is doing to remove or reduce risks to it. Monthly Regulatory Update November

12 PAYMENT SYSTEMS REGULATOR (PSR) News Authorised push payment scams PSR led work Authorised push payments are made when consumers authorise their bank to make a payment from their bank account to another account. An authorised push payment (APP) scam occurs when people are tricked into sending money to a fraudster. The PSR published a paper which explains the work the PSR, the FCA and the payments industry have been doing in the past year to reduce the harm to consumers from authorised push payment APP scams where people are tricked into sending money to a fraudster. BUILDING SOCIETIES ASSOCIATION (BSA) Policy brief Cyber-attack incident management guide The BSA released a guide to help building societies and credit unions prepare incident management plans for responding to a successful cyber-attack on your systems by setting out best practice based on the experience of firms who have been through a cyber-attack or a similar crisis for users to self-assess against their own plans.the guide is based on the experience of organisations both within and outside the financial sector who have been the victims of cyber-attack and other crisis management situations and the lessons that they have learned from their experiences. The guide also includes details of regulatory expectations in respect of defending against cyber-attacks - including recovery following a successful attack. IFRS 9 disclosures IFRS 9 introduces a large number of financial statement disclosures as well as changes to existing regulatory reporting, such as FINREP returns. The requirements are many and varied and differ in several respects to IAS 39. Financial institutions including IFRS 9 building societies will need to produce meaningful disclosures that describe clearly how they have applied the key concepts in the standard and how they are managing their credit risk. FCA Organisation The FCA published minutes for its Board meeting on 18 and 19 October. Among other things, the minutes record a discussion of the FCA's approach to delivering effective supervision, including a new approach to 'watch lists' enhanced supervision, and various changes for 'flexible portfolio' firms including a move towards more firms becoming flexible portfolio, a clustering of flexible portfolio firms with similar business models, and (something the BSA has supported) each flexible portfolio firm to have a FCA designated contact for most issues. The FCA plans to publish confirmed policy and details in an 'approach to supervision' document in early News Lending into retirement Update In 2015 the BSA published its first report on Lending into retirement, looking at the impact of our ageing population on the needs and demands of consumers and the effect on the housing market. This update shows how the market has developed over the two years since. Monthly Regulatory Update November

13 Press Release Building societies support the mortgage market with 29 per cent of approvals as lending activity remains subdued Lending and savings figures from the BSA show that building societies approved 29 per cent of all new mortgages in Q3 2017, and savers deposited 1.3bn in building society accounts. JOINT MONEY LAUNDERING STEERING GROUP (JMLSG) Guidance Prevention of money laundering and the financing of terrorism JMLSG published proposed further revisions to its guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry. The proposed further revisions reflect: o o the correction of a number of references in the text to take account of late changes made during the finalisation of the new Money Laundering Regulations, published by HM Treasury on 22 June 2017; and reference to some provisions of the Criminal Finances Act 2017 which came into effect recently. CREDIT SERVICES ASSOCIATION (CSA) News CSA urges collections agencies to prepare for new card payment ban From 13 January 2018, businesses, including CSA members, will no longer be able to charge surcharges for certain card transactions, but will still face the costs for processing card payments. John Ricketts, President of the CSA, says this could have serious implications for debt collection agencies managing card payments for outstanding debts, and they need to be prepared: Members need to act now to ensure their websites and letter suites are updated or they will be breaking the law, he explains. HER MAJESTY S REVENUE AND CUSTOMS (HMRC) Consultation Outcome Designation of banks and finance platforms for finance platforms regulations This notice designates the banks and finance platforms to which the Small and Medium Sized Business (Finance Platforms) Regulations The government has passed regulations that require designated banks to pass on the details of small businesses they have rejected for finance with four designated finance platforms. These platforms will then share these details with alternative finance providers and go on to facilitate a conversation between the business and any provider who expresses an interest in supplying finance to them. These new rules make it easier for businesses to access finance when they have been turned down by traditional lenders. Monthly Regulatory Update November

14 FOR FURTHER INFORMATION CONTACT Jonathan Pepper RSM Springfield House 76 Wellington Street Leeds LS1 2AY Tel No: Mob No: rsmuk.com The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm each of which practises in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number ) whose registered office is at 50 Cannon Street, London EC4N 6JJ. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. RSM Corporate Finance LLP, RSM Restructuring Advisory LLP, RSM Risk Assurance Services LLP, RSM Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP, RSM Employer Services Limited, RSM Northern Ireland (UK) Limited and RSM UK Tax and Accounting Limited are not authorised under the Financial Services and Markets Act 2000 but we are able in certain circumstances to offer a limited range of investment services because we are members of the Institute of Chartered Accountants in England and Wales. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide. RSM Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number , to undertake reserved and non-reserved legal activities. It is not authorised under the Financial Services and Markets Act 2000 but is able in certain circumstances to offer a limited range of investment services because it is authorised and regulated by the Solicitors Regulation Authority and may provide investment services if they are an incidental part of the professional services that it has been engaged to provide. Baker Tilly Creditor Services LLP is authorised and regulated by the Financial Conduct Authority for credit-related regulated activities. RSM & Co (UK) Limited is authorised and regulated by the Financial Conduct Authority to conduct a range of investment business activities. Before accepting an engagement, contact with the existing accountant will be made to request information on any matters of which, in the existing accountant s opinion, the firm needs to be aware before deciding whether to accept the engagement RSM UK Group LLP, all rights reserved