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

Compliance monitoring
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

Insurance resolution | Under the supervisory spotlight

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Through a series of announcements this week, the Prudential Regulation Authority (PRA) reiterated the need for insurers to plan for failure.

This message is certainly not new. Nor do the announcements – an updated PRA approach to insurance supervision and finalised set of Fundamental Rules – constitute a change in supervisory approach or policy. However, they confirm that the resolvability expectations communicated by the PRA in the past are being taken forward. An associated change to the PRA’s Fundamental Rules entered into force yesterday. Boards and senior management should be prepared to understand, and mitigate, the potential impact that failure will have on their firm and its policyholders.

Posted on 20/06/2014 | 0 Comments

The Financial Policy Committee: The time to repair the roof is when the sun is shining

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The Bank of England’s Financial Policy Committee (FPC) met this Tuesday, 17 June. We will have to wait until 26 June when its latest Financial Stability Report is published before we know what conclusions it reached, but at least one of the topics on its agenda is clear – the housing market. The question being asked is what, if any, action the FPC will take to check what to many appears as the emergence of an asset price bubble in the UK’s residential property market, or at least that part of it centred around London and the south east of England. That the issue has risen to the top of the FPC’s agenda has been well signalled over the past several months. How though might it respond; what factors will it consider; and what are the potential implications for mortgage lenders?

Posted on 19/06/2014 | 0 Comments

PS 14/09 “Review of the Client Assets Regime for Investment Business”

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PS 14/09 “Review of the Client Assets Regime for Investment Business” (the ‘PS’), the FCA’s response to CP 13/5 (the ‘CP’), was published on 10 June and amends large elements of the client money and custody asset (CASS) rules.  It excludes most elements of the CP relating to the return of client assets following a ‘pooling event’ which are expected to be the subject of further consultation following the current review of the Special Administration Regime.

Posted on 19/06/2014 | 0 Comments