Technical

Your guide to this week in regulation

Gavin Stewart Gavin Stewart

Welcome to our weekly round-up for UK financial services regulation. Read on for a summary of key announcements and developments, and be sure to subscribe to receive our updates in your inbox every week.

Much debate has ensued as to the severity and duration of the economic fall-out for UK plc from the COVID-19 situation; most recently from the Bank of England's Chief Economist, Andy Haldane. Whatever your view, it is difficult to identify any near-certainties in the current climate. One, however, is that the regulatory agenda will continue to see knock-on effects if the government determines that further tapering of the various temporary measures is necessary, such as for mortgage holidays and credit payment freezes.

Meanwhile, as the deadline for agreeing an extension to the transitionary period for Brexit passes, it is perhaps not a coincidence that we see, this week, a number of regulatory updates with a distinctly European flavour. Three of our articles serve as an important reminder of the varying degrees of discretion that the UK government and the regulators will apply in setting legislation and their future supervisory approach, respectively.

In the middle of this complexity, many firms may be relieved to see the Financial Conduct Authority's (FCA) further delay  to certain aspects of its work (our first article), most recently, the deadline for  assessments of fitness and propriety of certified persons extended to 31 March 2021 for solo-regulated firms under the Senior Managers and Certification Regime (SM&CR).

This week's update covers:

Further delays to FCA activities and regulatory change

In light of COVID-19, the FCA has announced further delays to its planned work for 2020. On 25 June, the FCA changed the dates for the following publications:

  • The new directory of certified persons will be published later on in 2020
  • The FCA’s consultation papers on mortgage switching and investment platforms are now due in 2021
  • Joint Prudential Regulation Authority (PRA) and FCA work with the Climate Financial Risk Forum to develop industry-led guidance on how to integrate climate-related risks into business decision making in financial services is expected in Q3 2020
  • The interim report on the FCA’s market study on credit information will be published in 2021

The FCA also highlighted delays to implement rules covering motor finance, pension transfer advice and others.

Read more >>

PRA updates on the regulatory treatment of CBILS and CLBILS

The PRA has updated its statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) to provide clarification on the application of credit risk approaches for firms in three instances:

  • Firms using the standardised approach for exposures to the obligor
  • Firms using the internal ratings-based (IRB) approach for exposures to the obligor and the standardised approach for exposures to the guarantor (under permanent partial use or rollout)
  • Firms using the IRB approach for exposures to the obligor and the IRB approach for exposures to the guarantor.

Read more >>

FCA’s discussion paper on a new prudential regime for UK investment firms

The FCA has published a discussion paper (DP20/2) that sets out the technical details of the Investment Firms Directive (IFD), and the Investment Firm Regulation (IFR) and its interpretation of these requirements.

While the IFD and IFR are not applicable to the UK, due to its exit from the EU, the UK was a member state at the time of drafting and was heavily involved in the discussion and consultation of the regime. As such, the FCA is supportive of the regime’s intention to better align standards with business models and sources of harm.

The FCA is seeking feedback on the design of a similar prudential regime for UK investment firms before 25 September 2020.

Read more >>

EBA guidelines on ICT and Security Risk Management

The European Banking Authority (EBA) published its final guidelines on information and communication technology (ICT) and security risk management on 28 November 2019. All credit institutions, investment firms and payment service providers are expected to comply with these guidelines from 30 June 2020.

As a result of increasing digitisation in the financial sector, firms are more vulnerable to internal and external ICT security risks. The EBA guidelines set out expectations on the mitigation and management of such risks.

The FCA has confirmed that it will apply reasonable supervisory flexibility regarding the implementation of these guidelines, due to the challenges posed by coronavirus. In current times, the FCA encourages firms to focus on the provisions within the guidelines relating to information security, ICT operations and business continuity.

Meanwhile, the FCA is consulting on new requirements for operational resilience, with final rules to be published in early 2021. The rules are expected to provide further information on the EBA guidelines and how these relate to the FCA’s operational resilience policy.

FCA statement >>

EBA guidelines >>

UK’s approach to regulatory reforms before the end of the Brexit transition period

The House of Commons has published a written statement by Chancellor of the Exchequer, Rishi Sunak, on the UK’s approach to implementing regulatory reforms before the end of Brexit transition period. Under the terms of the Withdrawal Agreement, the government will implement EU legislation that comes into force before the end of the transition period on 31 December 2020.

The government is intending to exercise discretion when implementing aspects of legislation that do not come into force until after the end of the transition period. The statement provides further details on timelines and those aspects of legislation to be implemented, including among others:

  • Solvency II
  • Central Securities Depositories Regulation (CSDR)
  • Securities Financing Transactions Regulation (SFTR)
  • Fifth Capital Requirements Directive (CRDV)
  • Bank Recovery and Resolution Directive II (BRRDII)
  • Benchmark Regulation
  • Market Abuse Regulation (MAR)
  • European Market Infrastructure Regulation (EMIR Refit).

Read more >>

To discuss these or how any other regulations might impact your firm please get in touch.

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