Capital Markets in Financial Services UK
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Deloitte’s report “Marketplace lending – a temporary phenomenon?” explores whether marketplace lenders (MPLs) represent a truly disruptive threat to the UK banking industry. As part of our research, we commissioned YouGov to carry out a survey of individuals and small and medium-sized enterprises (SMEs) to find out more about the awareness, usage and growth potential of marketplace lending in the UK.I
Firms subject to Senior Managers and Certification Regimes (SMCR) are obligated to capture, assess, and report breaches of Conduct Rules by individuals who are in scope of the rules. Holding individuals to account is a core concept of the new regime.
A perfect storm
In the wake of the global financial crisis, UK banks pulled back from lending, owing to higher regulatory capital requirements and greater regulatory and shareholder scrutiny of their business models. They have adopted more risk-averse lending strategies in this environment, with more stringent reviews of the creditworthiness of borrowers.
In recent papers1, the Basel Committee (BCBS) has proposed a number of changes to the scope and use of internal modelled approaches. Taken together, they represent a tectonic shift in banks’ ability to use internal models for regulatory capital purposes:
Cooling the buy-to-let spending spree | PRA proposes higher standards and capital charges for buy-to-let mortgage lending
The PRA published a Consultation Paper and draft Supervisory Statement on 29 March on more strict standards for buy-to-let lending. The proposals coincided with the FPC’s statement on macroprudential risks on the same day, which included concerns about the buy-to-let property market.
The FCA published its 2016-17 Business Plan on 5 April. The document is shorter and less detailed than in previous years, with only a brief Risk Outlook section, and makes limited announcements of new work. This may reflect the fact that the new CEO, Andrew Bailey, will not join the FCA until July, although as a member of the FCA Board, he will already have had an opportunity to influence the Plan. Like last year, the FCA has continued with its magic number of seven priority areas, rolling over five areas and prioritising two new areas – wholesale markets and the provision of advice.
The Senior Managers and Certification Regimes (“SMR”) and new Conduct Rule requirements are high on the agenda for many of our clients’ Audit Committees following their landing earlier this year. The changes, impacting banks, building societies, credit unions and designated investment firms, are designed to improve professional standards and culture. They have led to a flurry of activity across the sector in changing and implementing policies and processes to enable compliance.
When the EU launched the Banking Union, the ultimate objective of the project was to be able to share risks between countries, rather than retain them at the national level. It is an aspiration that faces many complex political challenges, including the trade-off necessarily made by countries involved between risk sharing and risk reduction. The current EU debate on European deposit insurance, the so-called third pillar of the Banking Union, and the sovereign exposures of banks, reflects precisely such a compromise.
Following months of speculation, the European Commission published yesterday (10 February) legislative proposals to delay both the MiFID II and MiFIR implementation dates by a year to 3 January 2018. This is an important development. The delay will apply to the package in full, rather than in part, and is deemed necessary due to the “magnitude” of the data challenges.
Just in time for Christmas, the EBA published its long-awaited report setting out recommendations for a review of the current prudential regime for investment firms. Produced at the request of the European Commission, and in cooperation with ESMA, the report identified a number of issues in the current application of the CRD/CRR requirements to investment firms (including a lack of adequate risk sensitivity and the complexity of the framework stemming from the current categorisation of firms based on MiFID definitions) and suggested a new approach to their categorisation. The latter would distinguish between systemic and "bank-like" investment firms, to which full CRD/CRR requirements should apply, and other investment firms namely those that are not considered ‘systemic’ or ‘interconnected’. For the ‘non-systemic’ firms, the EBA recommended that requirements should be tailored to reflect the risks specific to their activities.