Investment Management in Financial Services UK

Make sure you’re on the right track - Internal audit of remuneration

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In recent years, the regulatory and governance framework in financial services organisations has become increasingly complex. A key area of focus has been in the area of remuneration structures, policies and processes, where there has been a significant amount of regulatory development.

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Posted on 20/02/2017 | 0 Comments

Bank provisions – an unavoidable legacy?

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Last month, RBS announced it is to increase its provisions by over GBP 3 billion in relation to investigations and litigation centred on the US residential mortgage-backed securities it underwrote.i  At the same time, the US DoJ has levied further fines exceeding USD 12bn on two European banks to settle claims of abuse within the RMBS market.ii On this backdrop, and prior to the 2016 reporting season, we thought it a suitable time to reflect on the level of provisions within European banking institutions and to explore whether the tide of regulatory penalties is starting to turn.

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Posted on 14/02/2017 | 0 Comments

IFRS 9 and the “is it a bird, or is it a bomber?” problem

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With the adoption of the IFRS 9 accounting standard into EU law, it is full steam ahead for banks to deploy credit models that estimate Expected Credit Loss (ECL) accounting values. The standard requires firms to account for lifetime ECL on loans that have experienced a “significant increase in credit risk” (SICR), but allows firms to reach their own conclusions as to just how much credit risk ought to be viewed as “significant”.

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Posted on 10/02/2017 | 0 Comments

Biased Expectations: Will biases in IFRS 9 models be material enough to impact accounting values, as well as other applications such as pricing?

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As European IFRS reporters enter 2017, the first generation of Expected Credit Loss (ECL) models have generally been developed, and granular transitional impacts quantified.

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Posted on 17/01/2017 | 0 Comments

Complaint identification and reporting: The impact of recent rule changes

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‘We want to ensure that the process of complaining is straightforward, transparent and fair to consumers, while allowing firms to handle complaints as efficiently as possible and for consumers to have effective access to the ombudsman service if they remain dissatisfied.’ Financial Conduct Authority (FCA)

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Posted on 19/12/2016 | 0 Comments

Regulating cyber-resilience

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Looking ahead to 2017, one of the most important areas of regulatory development that we see in financial services is rising supervisory expectations of firms’ cyber resilience. A spate of recent incidents of cyber-crime and IT failure have sharpened the focus of firms on their cyber preparedness, but management and boards should now also expect to be more routinely challenged by their supervisors on how well they understand and what they have done to limit their exposure to cyber and IT risks.

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Posted on 14/12/2016 | 0 Comments

11 ways to navigate financial markets regulation in 2017

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2016 has been another difficult year for the financial sector, with economic and political uncertainty complicating the completion of the post-crisis regulatory repair agenda.

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Posted on 06/12/2016 | 0 Comments

FCA’s asset management market study | Shining a spotlight on fund charges, fund performance and competition

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The Financial Conduct Authority (FCA) has published an interim report on its asset management market study. It found evidence of high profitability relative to market benchmarks and weak price competition, especially in actively managed retail investment funds. The FCA’s proposed remedies are primarily intended to improve the transparency of fund charges and fund performance, reform governance standards for UK authorised funds, and increase scrutiny of the unregulated investment consultancy market. The FCA also proposes to carry out further research on how asset management services and products are distributed to retail investors. The regulator is seeking feedback on its proposals by 20 February 2017.

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Posted on 22/11/2016 | 0 Comments

European Commission proposes 12 month PRIIPs Delay, but uncertainty around timing of the legislation means firms should maintain momentum

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On 9 November, the European Commission published a legislative proposal to extend the application date of the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) by one year. PRIIPs requires the disclosure of Key Information Documents (KIDs) when PRIIPs are sold to retail investors. The delay has been widely anticipated by the market and gives manufacturers and distributors of PRIIPs products until 1 January 2018 to put implementation plans in place. The Commission did not amend any other provisions in the Level 1 text. The proposal follows a vote by the EU Parliament on 14 September to reject the EU Commission’s Regulatory Technical Standards (RTS) on PRIIPs and concerns expressed by 24 Member States in the Council in a vote by the Competitiveness Council of the EU on 20 September (see our blog of 20 September for further detail on the Parliament’s rejection of the RTS).

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Posted on 17/11/2016 | 0 Comments

New prudential regime for investment firms | Little detail yet

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Last week the EBA released a discussion paper (DP) setting out possible options for a new prudential regime for investment firms, particularly those that are not deemed “systemic and bank-like”. Published in response to the European Commission’s call for advice back in June, the paper was expected to shed some light on the direction of travel that the EBA is going to take in developing a more appropriate regime for investment firms given the distinctive nature of risks that they pose to investors and other market participants. The guiding principle behind the proposed regime is that firms that pose more risk to customers and markets, or which have more own risk, should attract higher capital requirements. However, the paper does not include any specific calibrations and, therefore, offers relatively little detail on the likely impact on firms’ individual capital requirements.

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Posted on 11/11/2016 | 0 Comments