Banking in Financial Services UK
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The boy who cried wolf is one of the most time-honoured parables in Western society. In its traditional telling, the shepherd boy and his flock meet an untimely end after crying “wolf” one too many times for the local villagers’ liking.
Are you ready for 1 January 2018? - Finalised PRIIPs RTS and imminent guidance pave the way for firms’ PRIIPs programmes
Many firms have swiftly resumed their PRIIPs programmes following the entry of the final Regulatory Technical Standards (RTS) on the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) in the Official Journal of the European Union, on 12 April 2017. The Regulation requires the disclosure of Key Information Documents (KIDs) when PRIIP products (such as funds, insurance investment products, structured products and structured deposits) are sold to retail investors.
On 13 June, the European Commission released the second set of proposed amendments to the European Markets Infrastructure Regulation (EMIR) on the recognition and supervision of third-country CCPs.
The proposal represents a fundamental overhaul of the EU’s approach to the recognition and supervision of third-country CCPs (the UK will be a ‘third country’ once it leaves the EU and assuming it does not join the EEA). It includes extensive and intrusive supervisory and enforcement powers for the European Securities and Markets Authority (ESMA), a significant new role for the European Central Bank (ECB) and an ability to require the most systemically significant third-country CCPs to establish themselves in the EU as a condition for providing their clearing services to EU clearing members and their EU clients. Overall the framework provides ESMA, the Commission and the ECB with very wide-ranging discretion in relation to third-country CCPs.
Credit Institutions are currently in the process of implementing solutions in response to the IFRS 9 Standard. In doing so, firms are preparing to navigate the numerous pitfalls of legacy systems and risk processes to deliver Expected Credit Loss (ECL) in a controlled and governed environment. The change in the way impairment is accounted for under IFRS 9, not only denotes a change in the way that information is used in order to measure ECL, but also signifies a transformation in operating models.
The EBA has now published the EU Commission’s proposed amendments to its draft RTS on Strong Customer Authentication (SCA) and common and secure communication under the revised Payment Services Directive (PSD2), as well as the Commission’s accompanying letter setting out the main changes introduced. Both documents were submitted to the EBA on Wednesday 24 May, but were not made public until Friday 1 June.
The PRA recently published a Policy Statement confirming amendments and optimisations to the current Senior Managers Regime (SMR) which applies to banks, building societies, credit unions and PRA-designated investment firms (referred to as Relevant Authorised Persons – RAPs) and to the current Senior Insurers Managers Regime (SIMR).
New rules on prompts to encourage shopping around in the annuities market: concerns raised over FCA reforms
On 26 May, the Financial Conduct Authority (FCA) published a policy statement on implementing information prompts in the annuity market. The FCA had consulted on this topic in November 2016, following a number of findings in its Retirement Income Market Study (published in 2015), which concluded that the retirement income market was not working well for consumers.
The WannaCry cyber attack this month did not hit financial services (FS) firms as directly as it did some other industries, but its sheer scale across more than 150 countries and the level of disruption caused by the ransomware it deployed will force all businesses to re-examine their preparation for a major cyber event. In financial services, an industry characterised by the highest levels of interconnectivity, enhancing cyber resilience has been an urgently growing priority for firms and their boards.
A focus on vulnerability and competition: What firms can expect from FCA following the publication of its Mission and Business Plan 2017/18
On 18 April 2017, the Financial Conduct Authority (FCA) published several important documents, including its Mission, Business Plan 2017/18 and – for the first time – Sector Views. Together, these documents are intended to provide a complete picture of the way the FCA identifies and assesses risks, and hence identifies its regulatory priorities, in the sectors that it regulates.
Culture remains at the forefront of the global regulatory agenda: central bankers and supervisors set out their views
On 16 and 21 March, Andrew Bailey (Chief Executive of the Financial Conduct Authority), Mark Carney (the Governor of the Bank of England) and William C Dudley (President and Chief Executive of the Federal Reserve Bank of New York), gave speeches on improving culture in banking and financial services. The speeches together highlight the ways in which governance, remuneration and incentives drive the culture of a firm. They also provide a stocktake on regulatory initiatives intended to tackle these issues, and give insights into the areas that will attract particular scrutiny when supervisors assess a firm’s culture. The Governor also outlined a broad framework for addressing conflicts of interest.