being better informed
TRANSCRIPT
Being better informed
FS regulatory bulletin
FS Regulatory Insights July 2021
In this month’s edition: • FCA sets out proposals for climate-related disclosures
• PRA and FPC eye changes to UK leverage ratio framework
• Bank of England launches climate stress test
• PRA confirms approach to overseas IRB models
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
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Executive summary
Welcome to this edition of ‘Being better informed’, our monthly FS regulatory bulletin, which aims to keep you up to speed with significant developments and their implication across all the financial services sectors.
The past month brought a range of developments, most significantly on climate risk and disclosures.
The BoE launched its Climate Biennial Exploratory Scenario (CBES) stress test and published key information about the landmark exercise, as well as a detailed guide for participating banks and insurers. The methodology, scenarios and pathways that the BoE has published are relevant to non-participating firms in meeting the PRA’s expectations on identifying and managing climate-related risks by the end of this year.
Read this At a glance publication for more information.
Meanwhile, the FCA issued proposals on climate-related disclosures for asset managers, life insurers and pension providers, in line with the recommendations of the TCFD. Under the proposals, firms would be required to publish annually an entity-level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments. Firms would also be required to annually produce a baseline set of disclosures in respect of their products and portfolios. The FCA proposes a phased implementation approach, starting with the largest firms on 1 January 2022. For more information, see our At a glance briefing. The regulator also issued a consultation paper proposing an extension of its climate-related disclosure requirements for companies with a UK premium listing to issuers of standard listed equity shares. This would require listed companies to include a statement in their annual financial report setting out whether they have made disclosures consistent with the TCFD’s recommendations, on a comply or explain basis. The requirements would take effect for accounting periods beginning on or after 1 January 2022. See our briefing for further details.
Digital money continues to be an area of focus for regulators. The BoE published a discussion paper on new forms of digital money, and a
summary of responses to its 2020 discussion paper on a Central Bank Digital Currency. The discussion paper considers the implications of digital money for financial stability and public policy considerations, as well as the regulatory environment. In a separate update, the FCA announced an extension to its Temporary Registration Regime for cryptoasset service providers, from 9 July 2021 to 31 March 2022. It also highlighted financial crime prevention as the most important factor in its assessment of cryptoasset businesses. For more detail please see our At a glance briefing.
The FCA remains focused on synthetic LIBOR and tough legacy contracts in its work to progress the LIBOR transition. It consulted on a proposal to require synthetic LIBOR for six sterling and Japanese yen settings, outlining what the rate may look like for 1-month, 3-month and 6-month sterling and Japanese yen LIBOR settings after 2021. The FCA plans to issue a further consultation in the coming months on precisely what legacy use it will allow for any synthetic sterling and yen LIBOR. For more information please read our At a glance briefing. You can also listen to our latest LIBOR podcast episode, featuring a guest speaker from the PRA, which looks at the impact of LIBOR transition on models.
In prudential news, the PRA published a policy statement confirming its approach to overseas IRB models in light of the UK’s departure from the EU. It sets out the conditions under which
firms can continue using models built to non-UK IRB requirements for UK group consolidated reporting. The regulator has made some amendments to the proposals it consulted on, including expanding the scope of the overseas models approach. See our At a glance publication for further details.
Finally, we’d like to highlight some of our other recently published insights – including two blogs as part of a series on vulnerable customers. These look at how firms can build on the progress they’ve already made to empower staff to treat vulnerable customers fairly, and the importance of gaining a true understanding of customers’ vulnerabilities and needs to meet regulatory expectations. In a separate blog, we look at the two definitions the FCA is considering for its proposed new consumer duty – and how these would impact firms.
We hope you enjoy reading this month’s articles.
Hannah Swain Director, FS Regulatory Insights M: +44 (0) 7803 590553 E: [email protected]
Hannah SwainDirector, FS Regulatory Insights
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How to read this bulletin? Review the Table of Contents and the relevant Sector sections to identify the news of interest. We recommend you go directly to the topic/article of interest by clicking in the active links within the table of contents.
Contents Executive summary 2
Cross sector announcements 4
Banking and capital markets 8
Asset management 10
Insurance 12
Monthly calendar 13
Glossary 14
Contacts 20
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Cross sector announcementsIn this section:
Benchmarks 4 Cryptoassets 4 Finance 5 Pensions 5 Prudential 5 Supervision 5 Sustainability 5 Wholesale markets 7
Benchmarks FCA consults on synthetic LIBOR rates for sterling and yen
The FCA published a consultation paper on 25 June 2021 on the use of its powers to compel the publication of a synthetic LIBOR. The regulator seeks feedback on its proposal to require publication of the 1-month, 3-month and 6-month tenors of GBP and JPY LIBOR based on a changed methodology: forward-looking RFR term rates plus ISDA’s spread adjustment values.
The FCA has selected ICE Benchmark Administration to provide term SONIA reference rate, and QUICK Benchmarks Inc. to provide Tokyo Term Risk Free Rate for synthetic LIBOR. The selection is not in scope for the consultation.
The consultation closes on 27 August 2021. For more information, please read our At a glance publication here.
Cryptoassets BoE develops thinking on digital money
The BoE published a Discussion paper on new forms of digital money on 7 June 2021, alongside a summary of responses to its March 2020 discussion paper on Central Bank Digital Currency (CBDC).
The BoE invites views on a number of issues by 7 September 2021. These include:
• How money is used in the UK. The BoE wishes to understand whether it has correctly captured the existing forms of money used by businesses and consumers, whether new forms of money need to have certain characteristics e.g. be safe, and asks how new digital money may impact the creation of money and credit.
• Public policy objectives. The BoE sets out its wishes for protection and privacy in any new form of digital money, and discusses interoperability alongside the extent to which direct consumer access is important.
• Impacts upon macroeconomic stability. A number of risks to stability are given by the BoE, which include confidence levels, liquidity and how transition to different forms of money in the future may occur. It also discusses the potential impact upon credit availability and invites views on unidentified risks.
• The regulatory environment. The BoE shares its view that future regulatory frameworks must be designed to allow for digital money to act as both a means of payment and a store of value. The bank outlines four regulatory models for respondents to comment on that may satisfy this requirement and wider expectations.
The second paper, summarising responses to the BoE’s discussion paper on how a CBDC
Hannah Swain FS Regulatory Insights
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Banking and capital markets Asset management Insurance Monthly calendar Glossary
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may function in the UK, highlights a number of areas of agreement. The BoE has distilled these into five core principles that will help direct its future work in this space. These are to: consider financial inclusion, promote private sector competition, assess the viability of alternatives, protect privacy, and maintain monetary and financial stability.
Finance HMT asks for views in review of Securitisation Regulation
HMT called for evidence on part of a review of the Securitisation Regulation in light of the UK’s exit from the EU on 24 June 2021.
HMT has a legal obligation to review the functioning of the Securitisation Regulation and lay a report in Parliament by 1 January 2022. The report will assess:
• the effects of the Regulation, including the introduction of the STS framework, on the functioning of the securitisation market, and the contribution of securitisation to the real economy (e.g. access to credit for SMEs and investments)
• risk retention modalities
• disclosures related to private securitisations
• an STS equivalence regime
• ESG disclosures
• the third-party verification regime
• limited licensed banks.
The consultation closes on 2 September 2021, and responses will be considered by HMT and the financial services regulators.
Pensions Govt wants greater consolidation in DC pensions
The Department for Work and Pensions launched A call for evidence on barriers to greater scheme consolidation in the UK defined contribution pension market on 21 June 2021. It asks for evidence on the barriers and opportunities for greater consolidation of occupational trust-based defined contribution schemes with between £100m and £5bn of assets under management and seeks views on how to incentivise consolidation for these schemes. The consultation closes on 30 July 2021.
Prudential PRA proposes minor rule changes
The PRA published CP13/21: Occasional Consultation Paper – June 2021 on 25 June 2021. The PRA proposes minor amendments to its rules, supervisory statements, reporting data items and instructions, the Branch Return, and associated guidance and notes. The consultation closes on 25 August 2021.
Supervision BoE consults on fees regime for FMI supervision
The BoE consulted on the 2021/22 fees regime for FMI supervision on 30 June 2021. The consultation closes on 30 August 2021. The proposed implementation date is Q3 2021, at which point invoices are expected to be issued for the 2021/22 fee year.
PRA updates on firm authorisation under the Temporary Permissions Regime
The PRA issued a statement on its approach to firm authorisation under the Temporary Permissions Regime on 14 June 2021. Due to the volume of applicants, some firms may choose to delay the process until the end of 2022. Also, the authorisation decisions are taken on a case-by-case basis and this may result in some firms receiving their outcome ahead of others.
Taskforce calls for post-Brexit regulatory changes
The Taskforce on Innovation, Growth and Regulatory Reform (TIGRR) published a report on 16 June 2021 outlining a number of recommendations for UK policy, after being commissioned by the Prime Minister to look at ways to refresh the UK’s approach to regulation following the end of the EU exit withdrawal period. The report makes a number of recommendations focused on banking regulation. These include a graduated approach to prudential regulation for banks, with a simpler regime for smaller banks, to encourage competition. This recommendation is in line with the PRA’s current initiative to create a ‘strong and simple’ regime for smaller banks.
The TIGRR also recommends amendments to the commodity derivatives and transparency regimes in MiFID to make them less burdensome, issues which are factored into HMT’s Wholesale Markets Review. In addition, the report recommends amendments to EMIR to make margin rules less prescriptive. Finally, the TIGRR calls on the BoE to develop a
Central Bank Digital Currency and to launch a pilot within 12-18 months.
In the insurance sector, the taskforce recommends prudential changes, calling Solvency II ‘restrictive’. It says Solvency II is not suited to the UK’s insurance sector, blocks investment and reduces competitiveness. The report calls for a 75% reduction in the risk margin, changes to the matching adjustments to broaden access to long-term assets, and simplification and streamlining of regulatory reporting and approvals.
The recommendations of the report give an interesting indication of possible future policy direction and were welcomed by the Prime Minister, suggesting they are likely to be taken forward, but enacting them would require action from HMT and the regulators. In the coming months HMT is expected to publish its response to the Solvency II Call for Evidence, which will provide more clarity on future changes to the Solvency II regime.
Sustainability BoE launches climate stress test for banks and insurers
The BoE launched its Climate Biennial Exploratory Scenario (CBES) stress test on 8 June 2021, published key information on the landmark exercise and provided detailed guidance for participating banks and insurers. Through the CBES, the BoE hopes to understand the vulnerability of banks and insurers to different climate policy pathways and changes in global warming. The CBES will use three different scenarios which explore physical and transition risks to different
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degrees, each spanning 30 years. The BoE has also published the full variable pathways associated with each scenario. Participants’ submissions are due on 13 October 2021.
While only the largest banks and insurers are participating in the exercise, all PRA-regulated banks and insurers are expected to conduct their own scenario analysis and stress testing in line with the PRA's expectations in SS3/19. The PRA expects firms to fully embed their approach to managing climate-related risks by the end of 2021. As such, the CBES scenarios and pathways will serve as useful inputs to the broader industry’s efforts to manage climate risk.
Please read this At a glance briefing for further details.
Proposed climate disclosures for asset managers, insurers and pension providers
The FCA published proposals on climate-related disclosures for asset managers, life insurers and FCA-regulated pension providers on 22 June 2021, in line with the recommendations of the TCFD. It plans to introduce a new ESG Sourcebook to the FCA Handbook to set out its proposed rules and guidance.
Firms must annually publish an entity-level TCFD report on how they take climate-related risks and opportunities into account in managing or administering investments on behalf of clients and consumers. The report must cover governance, strategy (including scenario analysis), risk management, and metrics and targets. Where a firm has set a climate-related target, it must include the KPIs
used to measure progress. Firms which are not yet setting targets must explain why they are not.
Firms must also annually produce a baseline set of disclosures in respect of their products and portfolios. This includes mandatory carbon emissions and carbon intensity metrics, additional metrics, and scenario analysis. This would need to be published on the firm’s website and in client communications; or upon client request in specific cases.
The proposals would apply to firms with more than £5bn in relevant assets. The FCA proposes a phased implementation approach, starting with the largest firms on 1 January 2022 (asset managers with AUM of over £50bn, and asset owners with over £25bn in AUM). These firms would make their first disclosures on 30 June 2023. For the remaining in-scope firms, the rules would take effect one year later. The consultation closes on 10 September 2021, with an FCA policy statement expected later this year.
For more information on what firms need to do to comply, see our At a glance briefing.
Listed companies face enhanced climate disclosures
The FCA published proposals on climate-related disclosures for standard listed companies on 22 June 2021. The requirements reference the recommendations of the TCFD. The FCA proposes extending its climate-related disclosure requirements for commercial companies with a UK premium listing to issuers of standard listed equity shares (excluding standard listed investment entities and shell
companies). The wording of the new rule and guidance would directly mirror that for premium listed companies.
Issuers of standard listed equity shares must include a statement in their annual financial report setting out whether they have made disclosures consistent with the TCFD’s recommendations in the report, on a comply or explain basis.
FCA guidance to help companies determine whether their disclosures are consistent with the TCFD’s recommendations, including on the level of detail in companies’ disclosures and clarity on the limited circumstances in which it would expect companies to explain rather than disclose, in proposed.
The new requirements will take effect for accounting periods beginning on or after 1 January 2022. This would mean that the first annual reports issued in compliance with the proposals would be published in 2023.
As part of the consultation, the FCA is also seeking views on ESG issues in capital markets, including on ways to address potential harm arising from the increasingly prominent role that ESG data and rating providers are playing in financial markets, as well as the appropriate UK framework for green bonds.
The consultation closes on 10 September 2021. The FCA plans to publish a policy statement by the end of this year, and for the new requirements to take effect for accounting periods beginning on or after 1 January 2022. It intends to issue a separate feedback statement in the first half of 2022 on the
discussion topics relating to ESG integration in UK capital markets, to inform further work in this space.
Govt takes forward climate reporting for pension schemes
The Department for Work and Pensions published its response to draft regulations and guidance on incorporating climate risks into pensions schemes’ governance and reporting arrangements on 8 June 2021. It includes draft regulations and draft amending regulations to enact the Government’s proposals. The regulations are broadly in line with the proposals set out in the January 2021 consultation, with a small number of clarifications and adjustments made in response to industry feedback.
The Government will legislate over the summer, with the requirements due to be effective from 1 October 2021. The provisions put on a statutory footing recommendations made by the TCFD. Occupational pension schemes with more than £5bn in assets and authorised master trusts will be subject to requirements to establish effective governance, strategy, risk management, and accompanying metrics and targets, for the assessment and management of climate risks and opportunities.
In addition, trustees of these schemes must report in line with the recommendations of the TCFD within seven months of the current scheme year end date or by 31 December 2022, if earlier. Trustees must include a link to the TCFD report in their annual accounts. For occupational pension schemes with assets of £1bn or more, climate-related governance requirements must be embedded by 1 October
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2022. A TCFD report must be produced within seven months of the scheme year end date or by 31 December 2023, if earlier.
Pension providers should consider these requirements alongside TPR’s recent consultation on a new draft code of practice for scheme governance, and the FCA’s proposals on climate-related disclosures for asset managers, life insurers and pension providers.
Government launches UK Green Taxonomy Advisory Group
The UK Government formally launched the UK Green Taxonomy Advisory Group (GTAG) on 9 June 2021. The GTAG is an independent expert group that will oversee the Government’s development of the Green Taxonomy, aimed at providing a common framework for investments that can be defined as environmentally sustainable. The group will be chaired by the Green Finance Institute and made up of business stakeholders, taxonomy and data experts, and experts drawn from academia and NGOs.
Wholesale markets Regulators amend margin requirements
The PRA and FCA issued a joint policy statement on 30 June 2021 regarding Margin requirements for noncentrally cleared derivatives. The statement provides feedback to CP6/21 and amendments to BTS 2016/2251. The requirements are effective from the policy statement publication date.
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Banking and capital marketsIn this section:
Cryptoassets 8 Financial crime 8 Payments 9 Prudential 9
Cryptoassets Basel Committee proposes tougher rules on crypto exposures
The Basel Committee consulted on 10 June 2021 on the prudential treatment of banks' cryptoasset exposures. According to the institution, the continued growth and innovation in cryptoassets and related services as well as the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system in the absence of specified prudential treatment.
The paper divides cryptoassets into two groups. The first group are eligible for treatment under the existing Basel Framework and include some tokenised traditional assets and stablecoins. The second group includes those assets, such as bitcoin, which pose higher risks and would be subject to a new conservative prudential treatment, based on a 1250% risk weight applied to the maximum of long and short positions.
This consultation is expected to be the first of several papers, and closes on 10 September 2021.
Financial crime FCA highlights retail banks' financial crime failings
The FCA published a Dear CEO letter to retail banks detailing control failings across financial crime and AML frameworks on 29 June 2021 (the letter was sent to firms in May 2021). The
letter follows a series of desk-based and onsite assessments, as well as targeted supervisory intervention assessments performed by the FCA. The regulator found that weaknesses exist across governance and oversight, risk assessments, due diligence, transaction monitoring and suspicious activity reporting - with a number of issues arising from a lack of system tailoring.
The FCA expressed ‘disappointment’ that significant weaknesses persist, particularly across the management of key financial crime controls and the level of documentation maintained through risk assessments and due diligence activities. The regulator identified a lack of sufficient oversight of key controls as second line teams are taking on first line activities. Furthermore, it found the majority of firms are relying on their group functions to create, document and assure key controls.
Risk assessments across the business and customer segments were found to lack sufficient detail on financial crime risks and/or mitigating controls, with customer risk assessments often too generic or showing discrepancies between rationale and documentation.
The regulator observed that transaction monitoring systems were being used with ‘off the shelf’ calibrations that had not been modified for the firm's specific requirements. It found that where group-wide systems are
Luke Nelson FS Regulatory Insights
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used, these are often not calibrated properly for activities within the UK branch or subsidiary.
The FCA expects retail banks to review the control weaknesses set out in the letter, perform a gap analysis against each of the findings by 17 September 2021, and create a plan to address those gaps. While the letter is addressed to retail banking firms only, all firms can use the findings to consider the effectiveness of their own financial crime controls.
See our At a glance briefing for further details.
Payments PSR consults on strategic priorities
The PSR published a consultation on its proposed five-year strategy on 10 June 2021.
The strategy aims to ensure payments and payment systems 'work well for everybody', support fair competition and access to payments for all. The proposed strategy is intended to lay the foundations for new products, ways to pay and payment systems in the UK.
The regulator’s proposed strategic priorities for the next five years are to:
• ensure users have continued access to the payment services they rely upon and support effective choice of alternative payment options
• ensure users are sufficiently protected when using the UK's payment systems, now and in the future
• promote competition in markets and protect users where that competition is not sufficient, including between payment systems within the UK and in the markets supported by them
• ensure the renewal and future governance of the UK's interbank payment systems support innovation and competition in payments.
The PSR also sets out a number of actions it will take to deliver the priorities. These include promoting competition around payment systems, protecting access to cash, ensuring interbank payment development, and taking account of the perspective of vulnerable consumer groups towards new ways of paying and the choices available to them.
The consultation closes on 10 September 2021.
PSR publishes regulatory fees for 2021/22
PSR published Regulatory fees: 2021/22 fees figures on 29 June 2021. This should be read together with Chapter 4 in PS18/12, which describes the PSR regulatory fees regime, including the collection and allocation methodology.
Prudential FPC and PRA consult on UK leverage ratio
The FPC and PRA issued a joint consultation paper on 29 June 2021 on changes to the UK leverage ratio framework. The paper sets out the FPC’s proposed changes (paragraph 1.9) and the PRA’s proposed implementation approach (paragraph 1.18).
The PRA proposes an implementation date of 1 January 2022 for the changes to the definition of Leverage Exposure Measure and to reporting and disclosure resulting from this consultation. The changes to scope and level of application of the minimum requirement, buffers, and related additional reporting and disclosure requirements for firms that would be newly brought into scope of the leverage ratio minimum requirement would become effective on 1 January 2023.
The consultation closes on 24 August 2021.
PRA consults on financial holding companies
The PRA published CP12/21: Financial holding companies: Further implementation on 21 June 2021. The paper sets out proposed changes to CRD V, as transposed and to CRR II, as onshored. The changes would not create new prudential requirements. Instead, the PRA considers them necessary to ensure that where the PRA Rulebook applies on a consolidated basis, it is done at the correct level within the banking group.
The proposals would result in a new Statement of Policy (SoP) ‘Supervisory measures and penalties in relation to financial holding companies’ and amendments to the SoP ‘The PRA's approach to enforcement: statutory statements of policy and procedure’.
The consultation closes on 22 July 2021. The PRA’s proposed implementation date is 15 September 2021.
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Asset management In this section:
Conduct 10 Investment funds 10 Prudential 10 Sustainability 11
Conduct FCA reveals results of host AFM review
The FCA published the results of its multi-firm thematic review into the viability of host Authorised Fund Managers (AFMs) on 30 June 2021. The regulator focused on conflicts of interest, wider governance, controls and monitoring. Among some positive feedback on capital adequacy, resources, wind-down planning and senior management engagement, the FCA highlighted key areas for improvement which firms should consider.
It identified a lack of due diligence and challenge over delegated third-party investment managers and funds, particularly during onboarding. It also found poor examples of oversight of delegated third-party investment managers and funds. The approach to wider governance and oversight, including in discharging responsibilities relating to the assessment of value that must be undertaken by AFMs, also required further work in some cases. While these rules are comparatively new, and other firms also have additional work to do, this is a clear steer from the regulator that firms must make improvements.
The final area of concern was financial resources. The FCA found some examples of firms operating at low margins, and an over-reliance on capital from parents (not always with appropriate formal arrangements).
The FCA is providing feedback to the firms in scope of the review, and may consider s.166 skilled person reviews where necessary. The FCA will review firms’ improvements in 12-18 months.
Investment funds FSB seeks to enhance MMF resilience
The FSB published a consultation report setting out proposals to enhance MMF resilience on 30 June 2021. The proposals include measures on: swing pricing; minimum balance at risk and capital buffers to absorb losses; the removal of ties between regulatory thresholds and imposition of fees/gates and removal of the stable net asset value; and the reduction of liquidity transformation. The consultation closes on 16 August 2021, after which the FSB will look to publish final measures in October 2021.
Prudential FCA issues policy statement on IFPR implementation
The FCA published its first policy statement on the implementation of the IFPR on 29 June 2021: PS21/6: Implementation of IFPR. The FCA sets out the first tranche of near-final rules and summarises the feedback to CP20/24 (issued in December 2020 – you can read our analysis of those proposals here).
This statement covers categorisation of investment firms, prudential consolidation, own
Andrew StrangeFS Regulatory Insights
andrew [email protected]
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funds requirements, concentration risk and reporting requirements.
The FCA issued its second IFPR consultation in April 2021 and plans to publish a third one later in 2021, together with two further policy statements consolidating the final rules. The IFPR takes effect on 1 January 2022.
Sustainability IOSCO seeks consistency on ESG disclosure for asset managers
IOSCO published Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management on 30 June 2021. This forms part of the IOSCO’s wider ESG agenda, which also focuses on sustainability disclosures by corporate issuers, as well as standards for ESG data providers and ratings providers.
The global standard-setter found that approximately half of the responding jurisdictions do not have sustainability-specific rules, and instead use existing rules and principles to shape their expectations on sustainability-related risks and opportunities at the asset manager level and sustainability-related products. IOSCO wants to see more consistency in the approaches taken by regulations on ESG integration and disclosure.
The consultation sets out a series of recommendations to address this. These include measures to require firms to disclose how sustainability risks are considered in the investment process, and to be clear on the ESG features of funds. IOSCO would also like to see regulators encourage industry to
develop common sustainable finance terminology and definitions to ensure global consistency, and to promote investor education initiatives to enhance understanding of sustainable investments.
Stakeholders are asked to respond to the consultation by 15 August 2021.
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InsuranceIn this section:
Conduct 12 Solvency II 12 Supervision 12
Conduct IAIS issues proposals on insurer culture
The IAIS published Draft Issues Paper (IP) on Insurer Culture on 23 June 2021. The paper explores the concept of insurer culture as a point of intersection for prudential and conduct risks, with examples to illustrate the broader role of culture in managing these risks. The consultation period ends on 23 August 2021.
Solvency II PRA announces ‘resource intensive’ Solvency II impact study
Anna Sweeney, PRA Executive Director of Insurance, delivered a speech on 15 June 2021, on the Solvency II review and policyholder protection. She announced the PRA is planning to launch a Quantitative Impact Study in the summer of 2021 which will focus on certain areas of potential change to Solvency II such as the MA, risk margin and TMTP. Firms will be asked to respond to the data requests within three months, which Sweeney said will require ‘significant resource’.
Supervision IAIS consults on supervisory colleges
The IAIS published Draft Revised Application Paper (AP) on Supervisory Colleges on 24 June 2021, updating the AP initially issued in October 2014. The revised AP reflects subsequent developments of IAIS supervisory material, in particular revisions to ICP 3 (Information Sharing and Confidentiality
Requirements) and ICP 25 (Supervisory Cooperation and Coordination) and the adoption of ComFrame. The consultation period ends on 24 August 2021.
Melinda Strudwick Insurance Risk and Regulation Lead [email protected]
Anirvan Choudhury FS Regulatory Insights [email protected]
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Monthly calendar Open consultations
Closing date for responses
Paper Institution
14/07/21 Derivatives clearing obligation – modifications to reflect interest rate benchmark reform: Amendments to BTS 2015/2205 BoE
17/07/21 Draft revised Application Paper on Combating Money Laundering and Terrorist Financing IAIS
21/07/21 Regulation of non-transferable debt securities (mini-bonds) HMT
22/07/21 CP12/21 Financial holding companies: Further implementation PRA
26/07/21 CP10/21 - Implementation of Basel standards: Non-performing loan securitisations PRA
29/07/21 Future of the defined contribution pension market: the case for greater consolidation DWP
31/07/21 CP21/13: A new Consumer Duty FCA
15/08/21 Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management IOSCO
16/08/21 Policy Proposals to Enhance Money Market Fund Resilience FSB
23/08/21 Consultation on draft issues paper on insurer culture IAIS
24/08/21 Consultation on draft revised application paper on supervisory colleges IAIS
24/08/21 CP14/21 Consultations by the FPC and PRA on changes to the UK leverage ratio framework PRA
25/08/21 CP13/21 Occasional Consultation Paper PRA
27/08/21 CP21/19: Proposed decision under Article 23D BMR for 6 sterling and yen LIBOR settings FCA
10/09/21 Prudential treatment of cryptoasset exposures Basel Committee
10/09/21 Proposed PSR strategy PSR
10/09/21 CP21/17: Enhancing climate-related disclosures by asset managers, life insurers, and FCA-regulated pension providers FCA
10/09/21 CP21/18: Enhancing climate-related disclosures by standard listed companies and seeking views on ESG topics in capital markets FCA
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Glossary ABS Asset Backed Security
AI Artificial intelligence
AIF Alternative Investment Fund
AIFM Alternative Investment Fund Manager
AIFMD Alternative Investment Fund Managers Directive 2011/61/EU
AML Anti-Money Laundering
Basel II Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework
Basel III Basel III: International Regulatory Framework for Banks
Basel Committee Basel Committee of Banking Supervision (of the BIS)
BIS Bank for International Settlements
BoE Bank of England
BMR EU Benchmarks Regulation
BRRD Bank Recovery and Resolution Directive 2014/59/EU
BRRD II Bank Recovery and Resolution Directive (EU) 2019/879 amending BRRD
CASS Client Assets sourcebook
CBILS The UK Coronavirus Business Interruption Loan Scheme
CCA Consumer Credit Act 1974 (as amended)
CCB Countercyclical capital buffer
CCD Consumer Credit Directive 2008/48/EC
CCPs Central Counterparties
CDS Credit Default Swaps
CET1 Common Equity Tier 1
CFTC Commodities Futures Trading Commission (US)
CGFS Committee on the Global Financial System (of the BIS)
CIS Collective Investment Schemes
CMA Competition and Markets Authority
CMU Capital markets union
COBS FCA conduct of business sourcebook
COCON FCA code of conduct sourcebook
CoCos Contingent convertible securities
ComFrame The Common Framework
CONC FCA consumer credit sourcebook
COREP Standardised European common reporting
Council Generic term representing all ten configurations of the Council of the European Union
CPMI Committee on Payments and Market Infrastructures
CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009
CRA2 Regulation amending the Credit Rating Agencies Regulation (EU) No 513/2011
CRA3 Proposal to amend the Credit Rating Agencies Regulation and directives related to credit rating agencies COM(2011) 746 final
CRD ‘Capital Requirements Directive’: collectively refers to Directive 2006/48/EC and Directive 2006/49/EC
CRD II Amending Directive 2009/111/EC
CRD III Amending Directive 2010/76/EU
CRD IV Capital Requirements Directive 2013/36/EU
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
15 • PwC | FS regulatory bulletin | July 2021
CRD V Capital Requirements Directive (EU) 2019/878 amending CRD IV
CRR Capital Requirement Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms
CRR II Capital Requirements Regulation (EU) 2019/876 amending CRR
CSD Central Securities Depository
CSDR Central Securities Depositories Regulation (EU) 909/2014
CSMAD Criminal Sanctions Market Abuse Directive 2014/57/EU
CTF Counter Terrorist Financing
DEPP The FCA’s Decision Procedure and Penalties Manual
DG FISMA Directorate-General for Financial Stability, Financial Services and Capital Markets Union
DGS Deposit Guarantee Scheme
DGSD Deposit Guarantee Schemes Directive 2014/49/EU
DLT Distributed ledger technology
D-SIBs Domestic Systemically Important Banks
EBA European Banking Authority
EC European Commission
ECB European Central Bank
ECJ European Court of Justice
ECL Expected credit loss
ECOFIN Economic and Financial Affairs Council (configuration of the Council of the European Union dealing with financial and fiscal and competition issues)
ECON Economic and Monetary Affairs Committee of the European Parliament
ECP Eligible counterparty
EDIS European Deposit Insurance Scheme
EEA European Economic Area
EEC European Economic Community
EIOPA European Insurance and Occupations Pension Authority
ELTIF European long-term investment fund
EMIR Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (EU) No 648/2012
EP European Parliament
EPC European Payments Council
ESA European Supervisory Authority (i.e. generic term for EBA, EIOPA and ESMA)
ESCB European System of Central Banks
ESG Environmental, social and governance
ESEF European Single Electronic Format
ESMA European Securities and Markets Authority
ESRB European Systemic Risk Board
€STR Euro short-term rate
ETC Exchange-traded commodity
ETN Exchange-traded note
EU European Union
EU Securitisation Regulation
Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012
EURIBOR Euro Interbank Offered Rate
Eurosystem System of central banks in the euro area, including the ECB
EuSEF The European social Entrepreneurship Funds Regulation
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
16 • PwC | FS regulatory bulletin | July 2021
EuVECA European Venture Capital Funds Regulation (EU) 345/2013
FAMR Financial Advice Market Review
FATF Financial Action Task Force
FC Financial counterparty under EMIR
FCA Financial Conduct Authority
Fiat currency Currency whose value is underpinned by the strength of the issuing government, e.g. USD, GBP, euro and other major world currencies
FICC Fixed income, currencies and commodities
FiCOD1 Amending Directive 2011/89/EU of 16 November 2011
FiCOD Financial Conglomerates Directive 2002/87/EC
FMI Financial Market Infrastructure
FMLC Financial Markets Law Committee
FMSB FICC Markets Standard Board
FOS Financial Ombudsman Service
FPC Financial Policy Committee
FRC Financial Reporting Council
FRTB Basel Committee fundamental review of the trading book market risk capital requirements
FSB Financial Stability Board
FSCS Financial Services Compensation Scheme
FSI Financial Stability Institute (of the BIS)
FSMA Financial Services and Markets Act 2000
FTT Financial Transaction Tax
GDPR General Data Protection Regulation
G-SIBs Global Systemically Important Banks
G-SIIs Global Systemically Important Institutions
HCSTC High Cost Short Term Credit
HMRC Her Majesty’s Revenue and Customs
HMT Her Majesty’s Treasury
IA Investment Association
IAIS International Association of Insurance Supervisors
IASB International Accounting Standards Board
IBA ICE Benchmark Administration
IBOR Interbank Offered Rate
ICAAP Internal Capital Adequacy Assessment Process
ICARA Internal Capital and Risk Assessment
ICAS Individual Capital Adequacy Standards
ICO Initial coin offering
ICOBS Insurance: Conduct of Business Sourcebook
ICPs Insurance Core Principles
ICT Information and Communication Technology
IDD The Insurance Distribution Directive (EU) 2016/97
IFD Investment Firms Directive
IFPR Investment Firm Prudential Regime
IFRS International Financial Reporting Standards
ILAA Internal Liquidity Adequacy Assessment
ILAAP Internal Liquidity Adequacy Assessment Process
ILS Insurance-Linked Securities
IMAP Internal Model Approval Process
IMCO The European Parliament’s Committee on Internal Market and Consumer Protection
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
17 • PwC | FS regulatory bulletin | July 2021
IMD Insurance Mediation Directive 2002/92/EC
IMF International Monetary Fund
IORP Institutions for Occupational Retirement Provision
IOSCO International Organisation of Securities Commissions
IRB Internal Ratings Based
IRRBB Interest rate risk in the banking book
ISDA International Swaps and Derivatives Association
ITS Implementing Technical Standards
JCESA Joint Committee of the European Supervisory Authorities
JMLSG Joint Money Laundering Steering Committee
KID Key Information Document
KIID Key Investor Information Document
KYC Know your customer
LCR Liquidity coverage ratio
LEI Legal Entity Identifier
LIBOR London Interbank Offered Rate
MA Matching Adjustment
MAD Market Abuse Directive 2003/6/EC
MAR Market Abuse Regulation (EU) 596/2014
Material Risk Takers Regulation
Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU of the EP and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile
MCD Mortgage Credit Directive 2014/17/EU
MCOB Mortgages and Home Finance: Conduct of Business sourcebook
MCR Minimum Capital Requirement
Member States Countries which are members of the European Union
MiFID Markets in Financial Instruments Directive 2004/39/EC
MiFID II Markets in Financial Instruments Directive (recast) 2014/65/EU – also used to refer to the regime under both this directive and MiFIR
MiFIR Markets in Financial Instruments Regulation (EU) No 600/2014
MLRO Money Laundering Reporting Officer
MMF Money Market Fund
MoJ Ministry of Justice
MoU Memorandum of Understanding
MPC Monetary Policy Committee
MREL Minimum requirements for own funds and eligible liabilities
MTF Multilateral Trading Facility
NBNI G-SIFI Non-bank non-insurer global systemically important financial institution
NCA National competent authority
NDF Non-Directive Firms – firms that do not fall within Solvency II
NFC Non-financial counterparty under EMIR
NIS Directive Proposal for a directive of the EP and Council concerning measures to ensure a high common level of network and information security across the EU
NPE Non-performing exposure
NSFR Net Stable Funding Ratio
NST National specific template
NURS Non-UCITS Retail Scheme
OECD Organisation for Economic Cooperation and Development
Official Journal Official Journal of the European Union
OFT Office of Fair Trading
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
18 • PwC | FS regulatory bulletin | July 2021
Omnibus II Second Directive amending existing legislation to reflect Lisbon Treaty and new supervisory infrastructure (2014/51/EU). Amends the Prospectus Directive (Directive 2003/71/EC) and Solvency II (Directive 2009/138/EC)
ORSA Own Risk Solvency Assessment
O-SIIs Other systemically important institutions
OTC Over-The-Counter
OTF Organised trading facility
PAD Payment Accounts Directive 2014/92/EU
PERG Perimeter Guidance Manual
PPI Payment Protection Insurance
PRA Prudential Regulation Authority
Presidency Member State which takes the leadership for negotiations in the Council: rotates on 6 monthly basis
PRIIPs Packaged retail and insurance-based investment products
PSD2 The revised Payment Services Directive (EU) 2015/2366
PSP Payment service provider
PSR Payment Systems Regulator
P2P Peer to Peer
QIS Quantitative Impact Study
QRT Quantitative Reporting Template
RAO Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)
RDR Retail Distribution Review
REMIT Regulation on wholesale energy markets integrity and transparency (EU) 1227/2011
RFB Ring-fenced bank
RFQ Request for quote
RFRs Risk-free rates
RFRWG The Working Group on Sterling Risk-Free Reference Rates
RONIA Repurchase Overnight Index Average
RRPs Recovery and Resolution Plans
RTS Regulatory Technical Standards
RWA Risk-weighted assets
SARON Swiss Average Rate Overnight
SCA Strong Customer Authentication (rules under PSD2)
SCR Solvency Capital Requirement (under Solvency II)
SCV Single customer view
SEC Securities and Exchange Commission (US)
SECR Securitisation Regulation
SEPA Single Euro Payments Area
SFP Structured finance product
SFT Securities financing transaction
SFTR Securities Financing Transactions Regulation (EU) 2015/2365
SFO Serious Fraud Office
SI Systematic internaliser
SIMF Senior Insurer Manager Function
SIMR Senior Insurer Managers Regime
SM&CR Senior Managers and Certification Regime
SME Small and Medium sized Enterprises
SMF Senior Manager Function
SOCA Serious Organised Crime Agency
SOFR Secured Overnight Financing Rate
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
19 • PwC | FS regulatory bulletin | July 2021
Solvency II Directive 2009/138/EC
SONIA Sterling Overnight Index Average
SPV Special purpose vehicle
SREP Supervisory Review and Evaluation Process
SRF Single Resolution Fund
SRM Single Resolution Mechanism
SRMR Single Resolution Mechanism Regulation (EU) No 806/2014
SRMR II Single Resolution Mechanism Regulation (EU) 2019/877 amending SRMR
SSM Single Supervisory Mechanism
SSR Short Selling Regulation (EU) 236/2012
STS Simple Transparent and Standardised (concerning securitisations)
SUP FCA supervision manual
SYSC The part of the FCA handbook titled senior management arrangements, systems and controls
T2S TARGET2-Securities
TSC Treasury Select Committee
TCFD The FSB Task Force on Climate-related Financial Disclosures
TLAC Total Loss Absorbing Capacity
TMTP Transitional Measure on Technical Provisions
TONA Tokyo Overnight Average Rate
TPR The Pensions Regulator
UCITS Undertakings for Collective Investments in Transferable Securities
UCITS V UCITS V Directive 2014/91/EU
UKLA UK Listing Authority
UTI Unique Trade Identifier
XBRL extensible Business Reporting Language
Executive summary
Cross sector announcements
Banking and capital markets Asset management Insurance Monthly calendar Glossary
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Contacts
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