Financial Stability Board
Cross-border payments - FSB consults on interim report - 6 July 2022
The Financial Stability Board (FSB) has published for consultation an interim report on the approach for monitoring progress towards meeting the targets for the G20 Roadmap for Enhancing Cross-border Payments (the Report). The Report follows the FSB’s October 2021 final report, which set out global quantitative targets to address the four challenges (cost, speed, access and transparency) associated with cross-border payments for each of the wholesale, retail and remittances sectors.
The Report make preliminary recommendations on key performance indicators (KPIs) that could be used to monitor progress towards the targets over time and identifies existing and potential sources of data for calculating those KPIs across the four challenges.
The working group will now move to operationalise the collection of data across the data sources specified in the Report. The possibility of leveraging private-sector data aggregators will also be explored further. Once all data is collected, the working group will move on to finalising calculation methodologies.
The deadline for responses is 31 July 2022.
FSB Interim Report: Developing the Implementation Approach for the Cross-Border Payments Targets
Basel Committee on Banking Supervision
Proportionality - Basel Committee on Banking Supervision publishes high level considerations - 7 July 2022
The Basel Committee on Banking Supervision (the Basel Committee) has published high-level considerations on proportionality (the Considerations), which aim to provide practical support to supervisory authorities seeking to implement proportionality in their domestic regulatory and supervisory frameworks. The Considerations were developed by the Basel Consultative Group, and build on the Basel Committee’s previous work in this context, including its November 2019 statement on proportionality and its 2019 and 2021 surveys on proportionality practices.
The paper includes both high-level considerations to guide proportionate decision-making and technical annexes that outline more specific considerations relating to various elements of the Basel Framework.
The Basel Committee explains that the Considerations are voluntary and do not modify the core principles for effective banking supervision, the Basel Framework, nor any of the Basel Committee’s existing standards, guidelines or sound practices. They will not be used by the Basel Committee to assess proportionality in member or non-member jurisdictions, or in the Basel Committee’s Regulatory Consistency Assessment Programme.
Basel Committee on Banking Supervision: High-level considerations on proportionality
European Banking Authority
PSD2 - EBA publishes Decision on reporting payment fraud data - 1 July 2022
The European Banking Authority (EBA) has published a Decision (EBA/DC/453), dated 24 June 2022, concerning the reporting of payment fraud data by national competent authorities (NCAs) under the revised Payment Services Directive ((EU) 2015/2366) (PSD2).
The Decision specifies how NCAs should transmit aggregated statistical data on fraud to the EBA in accordance with article 96(6) of PSD2 and the EBA Guidelines on fraud reporting (EBA/GL/2020/01), which were last updated in January 2020. This data must be submitted through the European Centralised Infrastructure of Data (EUCLID) and according to the EBA Data Point Model, and will be subject to the specifications set out in the EBA’s June 2020 Decision on EUCLID (EBA/DC/2020/335).
The Decision entered into force on 24 June 2022.
Decision of the European Banking Authority EBA/DC/453
CRR - EBA assesses implementation of its Opinion on the treatment of legacy instruments - 7 July 2022
The European Banking Authority (EBA) has published an Opinion outlining how its October 2020 Opinion on the prudential treatment of so-called legacy instruments has been implemented across the EU.
In the earlier opinion, the EBA proposed certain policy options to address the risk that other layers of own funds or eligible liabilities instruments would be disqualified as the first set of grandfathering provisions expired on 31 December 2021. To address this risk, the EBA envisaged that institutions could either call, redeem, repurchase, or buyback the instrument or amend its terms and conditions. Another possible policy option was to keep the legacy instrument disqualified from own funds and total loss-absorbing capacity (TLAC)/minimum requirement for own funds and eligible liabilities (MREL)-eligible instruments, but to retain it in the balance sheet as a non-regulatory instrument, under strict conditions.
Overall, the EBA comments that significant efforts have been made by institutions to address issues related to legacy instruments and to implement the earlier Opinion in an effective and consistent manner.
EBA Opinion on legacy instruments: outcome of its implementation (EBA/Op/2022/08)
Financial Policy Committee
UK financial stability - Report published by the FPC with Financial Policy Summary and meeting record - 5 July 2022
The Bank of England’s (the Bank’s) Financial Policy Committee (FPC) has published its latest Financial Stability Report (the Report), which sets out the FPC’s view on the stability of the UK financial system and what the FPC is doing to remove or reduce any risks to it. The FPC has also published a Financial Policy Summary and Record (FPSR) of the FPC meeting held on 16 June 2022.
Key aspects of the Report, which are also reflected in the FPSR, include:
- UK bank resilience: the FPC judges that major UK banks have considerable capacity to support lending to households and businesses even with the deterioration in the economic outlook and have the capacity to weather the impact of severe economic outcomes;
- domestic debt vulnerabilities: aggregate household debt relative to income has remained broadly flat in recent quarters and there is little evidence of a deterioration in lending standards. However, the FPC cautions that the risk in living costs and interest rates will put increased pressure on UK household finances in coming months. Debt-servicing remains affordable for most UK businesses and the FPC continues to judge that major UK banks are resilient to domestic debt vulnerabilities;
- global debt vulnerabilities: tighter financial conditions and reduced real incomes will weigh on debt affordability for households, businesses and governments in many countries. These pose risks to UK financial stability through economic and financial spillovers;
- UK countercyclical capital buffer (CCyB) rate decision: the FPC is increasing the CCyB rate to 2% from 5 July 2023. It will continue to monitor the situation given the considerable uncertainty around the outlook and is ready, if necessary, to vary the UK CCyB rate;
- 2022 annual cyclical scenario: the Bank will conduct its delayed annual cyclical scenario stress test in 2022 and will publish the results in summer 2023;
- financial markets and the resilience of market-based finance: reflecting the developments in the economic outlook, global financial markets have been volatile in recent months. Among other things, cryptoasset valuations have fallen sharply, exposing a number of vulnerabilities within cryptoasset markets, but not posing risks to financial stability overall. Increasing the resilience of Money Market Funds (MMFs) is an important step towards reducing the systemic risks they pose to the UK and global financial system; and
- commodity market vulnerabilities: commodity and wider financial markets have continued to function, despite price volatility following the Russian invasion of Ukraine. The FPC cautions that heightened uncertainty means that there is a significant risk of further disruption, which could propagate and amplify macroeconomic shocks. The FPC notes that, due to opacity and lack of data in some markets, quantifying the size and scale of these fragilities and interconnections remains challenging, and addressing this globally should be a priority. The FPC therefore welcomes the Financial Stability Board’s ongoing in-depth analysis and assessment of vulnerabilities in commodity markets.
The next FPC meeting will be held on 30 September 2022. The record of this meeting will be published on 12 October 2022.
Financial Stability Report: July 2022
Financial Policy Summary and record of the Financial Policy Committee meeting on 16 June 2022
European Payments Council
Single Payments Area - EPC publishes version 2.1 of the Single Euro Payment Area Request-To-Pay scheme rulebook - 30 June 2022
The European Payments Council (EPC) has published the second version (version 2.1) of the Single Euro Payments Area (SEPA) Request-To-Pay (SRTP) scheme rulebook (the Rulebook) (EPC014-20). The SRTP scheme covers the set of operating rules and technical elements (including messages) that allow a payee to request the initiation of a payment from a payer in a wide range of physical or online use cases. Version 2.0 of the Rulebook was published in November 2021.
On the accompanying webpage, the EPC explains that the change introduced in version 2.1 of the Rulebook has no operational impact at this stage but specifies that, as of 30 November 2023, the SRTP scheme participants will be required, as a minimum, to exchange SRTP messages based on application programming interfaces (APIs) to ensure full reachability, and SRTP scheme participants may already do so if they wish.
Version 2.1 of the Rulebook became effective on 30 June 2022.
SEPA Request-To-Pay (SRTP) Scheme Rulebook (Version 2.1) (EPC014-20)
Bank of Beirut (UK) Ltd v Moukarzel EWHC 377 (Comm) - 15 October 2021 - section 140A Consumer Credit Act 1974 - unfair relationship - financial restructuring arrangements
The High Court has allowed an application by the Bank of Beirut (UK) Ltd (the Bank) for summary judgment in its claim against a high net worth individual (the Borrower), pursuant to a guarantee, for moneys due under a loan agreement.
The judgment highlights that borrowers may find it difficult to establish unfairness in the relationship under section 140A of the Consumer Credit Act 1974 (CCA), particularly where: (i) they are a sophisticated counterparty; (ii) there were sound commercial reasons for the terms of the lending; (iii) there was a clear written warning that the borrower should seek independent legal advice before entering into any arrangements; and (iv) the financial institution has exercised restraint in its enforcement of any outstanding debt. The court also noted that section 140B(9) of the CCA provides that the burden is on the Bank to show that the relationship with the Borrower was fair. However, it noted that, if a claimant relies on evidence which is uncontested and suggests no basis on which the relationship could be said to be unfair, then the burden switches to the defendant.
On the facts, the judge noted that there were no signs which would result in the conclusion that the relationship between the Bank and the Borrower was unfair within the meaning of section 140A of the CCA. The court highlighted that this was commercial lending to a sophisticated commercial borrower, whereby the part-owner of a multinational group was replacing their own guarantee of some delinquent lending with a new loan on equivalent terms, effectively giving themselves another chance to clear the borrowing, rather than the Bank proceeding to enforcement under the guarantee. Furthermore, the Borrower could point to nothing about the terms, the way in which the restructuring was done, or about the Bank’s subsequent conduct which was suggestive of unfairness.
Bank of Beirut (UK) Ltd v Moukarzel EWHC 377 (Comm)