Consumer credit | Are you ready for the visit from the FCA?

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The FCA have now had a few months to start showing their presence in the consumer credit market and have done so through a number of thematic reviews, firm visits and surveys. They have issued a number of fines and started s166 reviews that have specifically been focused in the pay day lender sector. Using our experience of working with the consumer credit sector over the last couple of years and understanding of the FCA’s expectations more widely, this blog post shares some insights and tips on how consumer credit firms can prepare for an FCA visit and the application process. 

Posted on 8/08/2014 | 0 Comments

Individual Accountability in UK Banking | Details of Senior Management and Certification Regimes Emerge

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The PRA and FCA have published a major consultation paper on the overhaul of the Approved Persons Regime (APR) for banks, building societies, credit unions, and PRA-designated investment firms in the UK. The new framework will make senior individuals more explicitly accountable for specific issues through ‘statements of responsibility’, and a wider range of staff will be subject to a regime of certification and codes of conduct.

Posted on 31/07/2014 | 0 Comments

What should a compliance monitoring plan look like for a consumer credit firm?

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As part of the consumer credit authorisation process the Financial Conduct Authority (FCA) will require all consumer credit firms to detail their compliance monitoring programme and attach a compliance monitoring plan as part of their application pack. This blog post highlights the key areas for consideration for consumer credit firms to contemplate when developing their monitoring plan.  

Posted on 30/07/2014 | 0 Comments

An update regarding the new QI Agreement

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On 23 July, the IRS released a bulletin encouraging entities to renew or obtain a QI agreement by 31 July 2014. This follows on from Revenue Procedure 2014-39 that contained the new QI agreement. If you have provided the required information to the IRS as part of your FATCA registration to renew a QI Agreement no further action should be required. If you have not provided this information yet, we recommend this is completed by 31 July in order to ensure that your QI Agreement is renewed. We have set out below an overview of the main changes arising from the new QI agreement.

Posted on 28/07/2014 | 0 Comments

UK bank ring-fencing – what goes where?

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UK retail bank ring-fencing recently took a step forward as two important pieces of secondary legislation were laid before Parliament, where they now await approval. These documents define the activities which ring-fenced banks will and will not be allowed to carry out from January 2019. They build on last year’s drafts, but there are some significant amendments, particularly in relation to ‘simple’ derivatives, the process for taking customers out of the ring-fence, payments, the treatment of the Crown Dependencies, and risk management. Here we focus on the main changes compared to the earlier drafts.

Posted on 23/07/2014 | 0 Comments

A drive to harmonise | EBA consults on SREP Guidelines

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On 7 July, the European Banking Authority (EBA) began a consultation on guidelines for common procedures and methodologies for the supervisory review and evaluation process (SREP) as provided for in the Capital Requirements Directive (CRD IV).

This is the most comprehensive document on how EU banking supervisors should assess risk issued to date - it extends the focus of the SREP from capital risk and adequacy to a much more comprehensive assessment of a bank’s business and risk profile. To put this in context the Guidelines are almost 5 times longer than those previously issued at an EU level. By providing a risk-by-risk approach, the Guidelines are intended to drive significant convergence in micro-prudential supervision across the EU. They should form the basis for SREP under the Eurozone’s Single Supervisory Mechanism (SSM), thus providing one of the first tangible insights into the practical application of supervision under the SSM.

Posted on 17/07/2014 | 0 Comments

Preparing for the SSM | How should Eurozone banks mind the (capital) gap?

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The next few months will barely feel like a summer holiday for Eurozone banks. As banks in the single currency area prepare for the European Central Bank (ECB) to take over banking supervision under the Single Supervisory Mechanism (SSM), the balance sheets of the largest banks are being reviewed and stressed as part of the ECB’s comprehensive assessment. In October, the results – based on an asset quality review (AQR) and EU-wide stress test - will be revealed. 

Posted on 2/07/2014 | 0 Comments

US FATCA and UK FATCA | Announcements

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As the FATCA implementation date of 1 July 2014 approaches, both HMRC and the IRS have made a number of announcements. HMRC has clarified its position on trusts as Investment Entities under US FATCA, and the treatment of accounts held by not for profit organisations under UK FATCA. The IRS has released the W8-BEN-E instructions and an updated Qualified Intermediary (QI) Agreement that takes account of FATCA.

Posted on 30/06/2014 | 0 Comments

Asset encumbrance: The elephant in the room?

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Asset encumbrance, also known as earmarking or pledging assets, refers to the existence of bank assets securing liabilities in the event that an institution fails to meet its financial obligations. It originates from transactions that are typically collateralised or asset-backed, such as repurchase agreements, securitisations, covered bonds, or derivatives.

Asset encumbrance not only poses risks to unsecured creditors that are unable to benefit from the liquidation of encumbered assets in case of insolvency, but also has wider stability implications since encumbered assets are generally not available to obtain emergency liquidity in case of an unforeseen stress event.

Posted on 24/06/2014 | 0 Comments

Are Europe’s retail banks going the way of newspapers?

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Banks in Europe are not making enough money. Since the financial crisis, they have failed to earn profits above their cost of equity and analysts don’t expect this to change any time soon. To address this, Deloitte thinks retail banking in Europe is due huge structural change that will transform its future.

The industry’s fate is being compared to what newspapers have experienced in the past decade or so. The newspaper industry was ripped open by technology. Social media, smart phones and search engines transformed how we consume information. Today, technology is making similar waves in banking, and we expect this trend to accelerate.

Posted on 23/06/2014 | 0 Comments