Pillar 2 Liquidity: Cashflow Mismatch Risk

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Introduction

The PRA recently issued their policy statement on Pillar 2 Liquidity and have finalised the reporting requirements for Cashflow Mismatch Risk (CFMR). This followed the consultation papers released in May 2016 and July 2017. While the policy statement covers CFMR, franchise viability, intraday liquidity and other liquidity risks, this blog focuses on CFMR given the significant implications for firms.

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Posted on 19/04/2018 | 0 Comments

PRA Business Plan 2018/19

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The PRA published its Business Plan for 2018/2019 on 9 April 2018. The Business Plan, structured around the PRA’s eight core strategic goals, is cross-sectoral, outlining the work the PRA intends to undertake for the upcoming year across both banking and insurance sectors.

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Posted on 17/04/2018 | 0 Comments

FCA’s Business Plan 2018/19

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This blog provides an overview of the FCA’s 2018/19 Business Plan. It discusses the key cross-sector priorities the FCA identifies and compares them to those in the previous year’s business plan, noting dropped, changing and new priorities. It also outlines the FCA’s sector priorities for 2018/19.

Alongside the business plan, the FCA also published its 2018 Sector Views – the FCA’s annual analysis of how each sector is performing – covering retail banking, retail lending, general insurance and protection, pensions and retirement income, retail investments, investment management and wholesale financial markets.

Notably, the UK’s withdrawal from the EU is called out as a top priority, over and above any cross-sector or sector priorities. The FCA notes that they will have to dedicate extra resources to this programme of work, and that this will mean reduced activity in other areas as a result.

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Posted on 17/04/2018 | 0 Comments

FCA and PRA business plans: technological innovation remains a priority

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Technology and innovation (“FinTech”) again featured prominently in this year’s Financial Conduct Authority (FCA) business plan. Andrew Bailey, Chief Executive of the FCA, remarked that “technology is supporting competition, transforming markets and changing the way consumers engage with them. […] creating a conveyor belt of risks and opportunity”. Given this, and despite the need for the FCA to dedicate a significant proportion of its resources to the UK’s withdrawal from the EU, FinTech was confirmed as a key priority for the FCA over the coming year. The two specific FinTech priorities highlighted in the business plan are: Innovation, big data, technology and competition and Data security, resilience and outsourcing.

The Prudential Regulation Authority (PRA)'s emphasis on technological innovation in its business plan is relatively less pronounced. Nevertheless, it too is exploring ways to innovate as a regulator, by continuously monitoring FinTech developments, and supporting the authorisation and supervision of new banks and insurers.

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Posted on 16/04/2018 | 0 Comments

Assessing value for money in investment funds

Investment funds

On 5 April 2018 the FCA published a policy statement, summarised in our recent blog, on its first round measures as part of its asset management market study. Particular interest has been generated by the new rules and prescribed responsibility this contains on assessing value for money. In this blog, we focus on these new rules and consider their implications for firms and senior managers.

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Posted on 16/04/2018 | 0 Comments

AI in financial services - Highlights from the IFGS18 roundtable

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Deloitte and UBS[1] hosted a roundtable on Artificial Intelligence (AI) at the recent Innovate Finance Global Summit 2018 (IFGS18). We had representatives from across the FinTech ecosystem covering incumbents, start-ups, scale–ups, consultants and other service providers.

AI is clearly a hot topic and there are a number of challenges and opportunities to explore. We chose four key themes, crowdsourced from experts in the area:

  1. Navigating the hype
  2. Bias and transparency
  3. Collaboration
  4. Role of the regulator

After a lively discussion, we used a voting system to identify the top messages by theme. The messages that earned the highest number of votes are summarised below.

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Posted on 13/04/2018 | 0 Comments

Derivatives trading under MiFID II: data, reporting and optimisation

Derivatives Trading under MiFID II

Almost a decade ago at the 2009 Pittsburgh Summit, G20 Leaders committed to reform the OTC derivatives markets with the objective of reducing systemic risks, improving transparency and protecting investors against market abuse.i To fulfil this commitment in the EU, MiFID II introduced specific requirements to the derivatives markets in order to bring more trading onto venues and increase the level of price transparency in these financial instruments as of 3 January this year.ii MiFID II also significantly enhanced the transaction reporting regime, designed to provide information to enable regulators’ monitoring and detection of market abuse. As a consequence firms subject to MiFID II have to report much more information about their derivative transactions.

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Posted on 12/04/2018 | 0 Comments

FCA’s asset management market study | Shining a light on value for money

FCA

As part of its asset management market study, the FCA has published:

  • a policy statement on its measures on fund governance, moving investors to better value share classes, and treatment of dealing profits;
  • a consultation paper on proposed measures on investor disclosures; and
  • an occasional paper on costs and charges disclosures.

These papers follow the FCA’s final report on its asset management market study which was published in June 2017 (see our blog). 1 Below we summarise the key rule changes and assess the implications for firms.

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Posted on 09/04/2018 | 0 Comments

What do we know about the UK's post-Brexit approach to financial services regulation?

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The Government’s recently published response to the House of Lords European Union Committee Report “Brexit: The Future of Financial Regulation and Supervision”1 gives us part of the answer to this question.  Much of it confirms what was already known or widely expected.  The UK will remain a strong proponent of, and adherent to, global regulatory standards, including those set by the Financial Stability Board and the Basel Committee on Banking Supervision.  The UK regulators will continue to adopt a proportionate approach to the application of regulation, with the Government welcoming the PRA’s “proportionate application of Basel rules”.  And the Government and regulators will ensure that regulation supports innovation, including through fintech.

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Posted on 05/04/2018 | 0 Comments

Are the upbeat messages in reinsurers’ 2017 earnings presentations justified?

Reinsurers’ 2017

Signalling from reinsurance CEOs around the 2017 earnings announcements has been more bullish about the outlook for their industry than in previous years, citing increasing interest rates and a hardening market. But is this optimism merely panglossian naivety? And if not, how might the reinsurance industry feasibly improve its results?

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Posted on 28/03/2018 | 0 Comments

PSD2 finalised standard on SCA and CSC: the wait is over, but questions remain

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Twenty months after the European Banking Authority (EBA) issued the first draft, on 13 March the regulatory technical standard (RTS) on strong customer authentication (SCA) and Common Secure Communication (CSC) under revised Payment Services Directive (PSD2) was finally published in the Official Journal of the European Union.

The length of the process and the number of iterations required to finalise the standard evidence the complexity of developing rules to establish a level playing field between different market participants, while at the same time ensuring technological neutrality, consumer protection, and enhanced security in payments services.

The finalisation of the RTS is an important milestone which will give firms much more clarity and certainty on how to push forward their PSD2 compliance and strategic programmes. Nevertheless, the final RTS still leaves a number of important questions open, particularly in relation to the development and testing of access interfaces for Third Party Providers (TPPs).

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Posted on 27/03/2018 | 0 Comments