- Select a blog category
Following the collapse of two major Peer-to-peer (P2P) lending platforms in the last year, Lendy and FundingSecure, with a combined loan book of £240 million, the sector has found itself in the midst of increased scrutiny and regulatory change. With institutions such as Funding Circle cutting expected returns after reporting sharp rises in loan defaults,1 the industry as a whole is under pressure. Despite the numerous disturbances the P2P sector has experienced in the past year, we highlight the collapse of Lendy as it stressed several wider issues in the P2P market.
I spotted a recent article in the Responsible Investor: ‘Europe’s Green Deal and ESG reporting standards: From (alphabet) soup to nuts’ (20 February). Aptly titled, it describes very well the challenge we face with non-financial reporting: it is fragmented, not underpinned by a global standard, and held back by inertia in the system. The author explores European moves to show leadership in this area, with the European Commission’s announcement that it intends to start work on its own standards on ESG. The article points out that this will lead to a different sort of fragmentation and would not deliver an outcome of consistent global data sets for critical ESG information.
The annual letter to CEOs from Larry Fink, Chairman and CEO of BlackRock, acts as a barometer in the responsible capitalism debate. Over the years, these letters provide progressive insight into investor thinking and can almost be seen as a chart of progress towards a more inclusive view of capitalism and purpose-led business.
The business case for addressing climate change is increasingly clear to companies. But it may be harder for them to assess the scale and urgency of the task that faces us all. A recent article in The Economist neatly captures the challenge – and what a challenge!
Since its introduction IFRS 9 has caused considerable interest, especially with respect to the potential volatility that it may cause. How a firm’s ECL may change under different economic scenarios is important in understanding whether its estimates are “unbiased” (including whether an appropriate level of both upside and downside credit risk has been incorporated) and in understanding potential earnings (and capital) outcomes in different economic environments.
In late 2018, the International Accounting Standards Board (“IASB”) extended the effective date for IFRS 17 Insurance Contracts, originally 1 January 2021, by one year to 2022. While at the time of writing some are in favour of further extension, 2022 remains the effective date in the current version of the Standard.
This is the first in a series of posts focusing on themes and hot topics relevant to Internal Audit functions in organisations in the process of adopting IFRS 17 Insurance Contracts.
Current controls climate in the UK
Financial controls are increasingly in the spotlight. Regulator and investor interest is shifting from historic financial metrics to looking for the signs of a well-run business, a strong management team and a positive future outlook. This is becoming more evident with the Government consulting on a strengthened framework around internal controls, on a similar basis to Sarbanes-Oxley in the US, in light of recent audit failures and auditors contemplating publicaly calling out control failures.
‘A transition to a green and low-carbon economy is not a niche nor is it a “nice to have” for the happy few. It is crucial for our own survival.’ These are not the words of an NGO – they come from a report issued by a group of over 30 central banks, including the Bank of England. The report says that climate-related risks fall ‘squarely within the mandates of central banks and supervisors’.1
The finance industry is becoming increasingly automated with many banks and financial institutions using or interacting with algorithms. The amount of trading algorithms has significantly increased in recent years. This trend is driving efficiencies, lowering costs and enabling firms to gain a competitive advantage. However, there is now a heightened regulatory focus with specific requirements over algorithms to ensure accountability and fairness in their use.
EU Benchmark Regulation (“EU BMR”): Kicking the can down the road? The implications of the extension of the regulation
The EU Benchmark Regulation (“EU BMR”) became effective on 1 January 2018 and seeks to increase the robustness and reliability of financial benchmarks and protect them from the type of manipulation that occurred during the financial crisis. Whilst the regulation was effective from 1 January 2018, the text includes transitional arrangements for existing EU and third country benchmark administrators, allowing these administrators to apply for authorisation any time before 1 January 2020.