EMEA Centre for Regulatory Strategy in Financial Services UK
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The PRA and FCA have published a joint consultation paper (CP) on a series of measures to formalise whistleblowing procedures in firms. The aim is to encourage employees to raise concerns and protect whistleblowers from victimisation. This initiative responds to the Parliamentary Commission on Banking Standards’ recommendation to put in place effective mechanisms to allow employees to raise concerns internally.
UK regulators refine the scope of the Senior Managers Regime and clarify how the ‘Presumption of Responsibility’ will be applied
The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have confirmed how the new Senior Managers Regime (SMR) and Senior Insurance Managers Regime (SIMR) will apply to Non-Executive Directors (NEDs) in banks and insurers respectively. This follows the responses received to the Consultation on Strengthening accountability in banking: a new regulatory framework for individuals –CP14/14 published in July 2014, which expressed concern about the proposed approach to NEDs under the SMR.
FCA competition study may come to have far-reaching implications for investment and corporate banking
The Financial Conduct Authority (FCA) has announced that it will kick-off a market study looking at competition in investment and corporate banking services in spring 2015. This comes as part of its review into competition in the wholesale sector, published yesterday, and follows its call for inputs last July. The FCA has found that limited transparency over both price and quality may make it difficult for clients to assess the value for money of investment banking and corporate banking services, and that bundling and cross-selling of services may make it difficult for new or smaller firms to compete against the established investment banks and universal banks.
The European Commission has fired the starting gun on the Capital Markets Union (CMU), the flagship agenda to deliver a single market for capital, by publishing its widely trailed first green paper (GP). In December we set the scene for the rapidly evolving CMU agenda and, although the GP is wide ranging, it contains little new information.
Proposed revisions to the standardised approach to credit risk | More risk sensitivity, more complexity
On 22 December, 2014 the Basel Committee on Banking Supervision (BCBS) published a consultation paper on “Revisions to the standardised approach for credit risk”(CRSA) (Footnote 1). The aim of the revised CRSA as proposed by the BCBS is to tackle weaknesses in the current approach, including:
• over-reliance on external credit ratings;
• lack of granularity and risk sensitivity;
• out-of-date calibration;
• lack of comparability across different banks and jurisdictions; and
• misalignment of treatment between the current CRSA and exposures risk weighted under the internal ratings based (IRB) approach.
We are now a step closer to understanding how the EU landscape for capital markets and investment services is set to change following the publication last month of a bumper package of MiFID II / MiFIR implementing measures by the European Securities and Markets Authority (ESMA). On 19 December 2014, ESMA published final technical advice to the EU Commission and two consultation papers on regulatory technical standards (RTS) and implementing technical standards (ITS) (part 1 covers ESMA’s commentary and part 2 sets out the draft technical standards).
A New Year, and progress, of sorts, for EU bank structural reform. The European Parliament’s Rapporteur, Gunnar Hökmark, has published his draft report for the Parliament’s Committee on Economic and Monetary Affairs (ECON), while the outgoing Italian Presidency of the Council of the European Union published a progress report as the file was handed over to the Latvians. The picture remains too unclear for an assessment of eventual outcomes, but the parameters for the debate are beginning to emerge. In particular, Mr Hökmark’s report contains a number of significant proposed amendments which demand close scrutiny.
The Bank of England today announced the results of the first exercise under its new framework for stress testing the UK banking system. The results are themselves important, but once they have been pored over, attention will turn to how the exercise will evolve. There is a growing trend for supervisory stress testing exercises to increase in intensity over time. The BoE makes clear in its comments today that the UK exercise will be no exception.
The Capital Markets Union (CMU) is a flagship initiative in the European Commission’s agenda for financial services during the next five years. This “concept under construction” has already caused much debate as stakeholders attempt to define the CMU and set its primary aims and principles. However, the real debate is only just starting. The agenda will evolve rapidly over the coming months with a Commission consultation paper expected in Q1 2015 and a road map in Q3 2015.
2015 has the potential to be a turning point in terms of the post-crisis re-regulatory agenda, when the focus shifts from repairing balance sheets and reputations to the role of financial services in promoting jobs and growth. And indeed from proposing new rules to implementing the multitude that has been agreed over that last few years. Deloitte’s EMEA Centre for Regulatory Strategy have identified what we believe to be the ten key areas of regulatory focus for financial markets in 2015.