EMEA Centre for Regulatory Strategy in Financial Services UK
- Select a blog category
Many of us, particularly those of us lucky enough to have been away over the summer, will now be experiencing the financial services professional's equivalent of the dreaded "back to school" feeling. Only for us, it's a case of "back to Brexit". Judging by the amount of new material they have published, neither the UK nor the EU authorities have taken much holiday. So to ease our "back to Brexit" blues, we've brought together the key publications in one note together with some summary commentary.
The UK motor finance sector has grown rapidly over the last few years. This is due, in large part, to the popularity of personal contract purchase (PCP) arrangementsi which now account for around 80% of gross flows for new dealership car finance1. In response, the UK authorities have undertaken a series of reviewsii to assess the risks they may pose to consumers, firm solvency and the market. Explaining the FCA’s stance on PCP lending, Andrew Bailey has said that while the FCA does not regard PCP contracts as “per se bad” “there are issues that we seek to understand on the terms of such lending and how well they are understood by consumers, so we are not complacent on such terms2.”
On 12 July, UK and US regulators sent the clearest warning signal yet to market participants on the need to abandon the London Interbank Offered Rate (LIBOR) and transition to alternative Risk Free Rates (RFRs). We circulated a briefing note to clients on 13 July regarding these developments. Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA), J. Christopher Giancarlo, Chairman of the U.S. Commodity Futures Trading Commission (CFTC), and Commissioners Brian Quintenz and Rostin Behnam, as well as the Financial Stability Board (FSB) released statements on benchmark reform.
On 27th July 2018, the PRA published its Consultation Paper (CP) 17/18 on Credit Risk Definition of Default (DoD). This paper sets out the PRA’s proposed approach to implementing the European Banking Authority’s (EBA’s) three regulatory packages relating to DoD in the Capital Requirements Regulation (575/2013) (CRR) specifically:
- Regulatory Technical Standards (RTS) for the materiality threshold for credit obligations past due1;
- Guidelines (GL) on the application of the DoD2; and
- Opinion paper (‘the EBA Opinion’)3 on the use of the 180 days past due (DPD) criterion in the DoD.
The FCA launched its Retirement Outcomes Review (ROR) Market Study in June 2016, in order to explore how the retirement income market had changed since pension freedoms were introduced in April 2015, and to “assess how the market is evolving, to address any emerging consumer harm and to put the market on a good footing for the future”.
Having published an Interim Report in July 2017, the FCA has now published its Final Report, alongside a Consultation Paper, CP18/17, on its proposed packaged of remedies. The FCA is exploring further remedies which it intends to cover in a later consultation paper due in January 2019.
The revised Markets in Financial Instruments Directive (MiFID II) introduced new rules requiring investment managers to pay for investment research either from their own funds or via a research payment account (RPA) funded by an explicit client charge. In addition, research providers are required to price research separately from execution. These rules seek to increase the transparency of research costs for investors, reduce conflicts of interest where research is bundled with execution, and promote competition in the research market.
Last Friday, 13 July, marked six months since the revised Payment Services Directive (PSD2) came into effect across the European Union (EU). With this in mind, we have been taking the pulse of the market to understand how Account Servicing Payment Service Providers (ASPSPs) are progressing with both their compliance programmes and strategic responses.
With few exceptions, ASPSPs seems to us to be broadly compliant with the PSD2 conduct requirements which became enforceable in January, and progressing well against those which will go live next year. However, determining what a successful open banking strategy looks like, and developing compelling use cases, continues to be more elusive.
On 4 July 2018, the Financial Conduct Authority (FCA) issued a Consultation Paper (FCA’s CP 18/19), setting out its plans to introduce a new Directory. This will act as a public register, allowing consumers and firms to check the status and history of people working in the financial services sector. The CP states that the Directory will include all those who hold Senior Manager Functions (SMFs) as well as all those who are in Certified roles.
This latest CP was issued alongside a suite of publications setting out near-final rules and providing guidance on the extension of the Senior Managers and Certification Regime (SMCR) to all Financial Services and Markets Act (FSMA) authorised firms, including asset managers, investment firms, insurers and consumer credit firms.
Agile is bringing a new shape to the world of delivery management, successfully adopted from software development and advocating a less rigid delivery mechanism, the agile movement aims to drive improved outcomes across all industries. In the latest in our agile blog series focusing on insight from across Deloitte about the world of agile, we look at agile funding; demonstrating how the alignment of capital expenditure to an agile delivery approach is imperative in this new world of change.