Basel Committee on Banking Supervision
Basel III - BCBS publishes evaluation report - 14 December 2022
The Basel Committee on Banking Supervision (BCBS) has published a third report on its evaluation of the impact and efficacy of the implemented Basel III reforms. This report assesses whether the implemented reforms have met their intended objectives, in particular of increasing bank resilience and reducing systemic risk. It also examines potential unintended efforts, notably on banks’ lending and capital costs.
The report indicates that the implemented reforms are an important driver of the overall increase in bank resilience, and shows that market-based measures of systemic risk have also improved. The report further finds no considerable evidence of negative side effects of the reforms on banks’ lending and capital costs, nor does it identify redundancy among elements of the reforms, while acknowledging greater regulatory complexity.
Based on the progress made in implementing the outstanding Basel III standards, the BCBS will continue to pursue its work programme on evaluating the impact and efficacy of Basel III in the medium term.
Evaluation of the impact of the efficacy of the Basel III reforms
Press release
European Banking Authority
Overall recovery capacity in recovery planning - EBA publishes Consultation Paper - 14 December 2022
The European Banking Authority (EBA) has published a Consultation Paper on draft guidelines on overall recovery capacity (ORC) in recovery planning.
Under the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), institutions are required to set up recovery plans to strengthen their ability to restore financial and economic viability when facing potential situations of significant deterioration. The guidelines aim to set up a consistent framework for the determination of ORC by institutions in their recovery plans and the respective assessment by competent authorities.
The deadline for responses is 14 March 2023, and there will be a public hearing on 14 February 2023.
EBA Consultation Paper: Draft guidelines on overall recovery capacity in recovery planning
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Transparency and level of fees and charges for retail banking products - EBA publishes thematic review - 14 December 2022
The European Banking Authority (EBA) has published a thematic review on the transparency and level of fees and charges levied by financial institutions on retail banking products in the EU.
The review covers all retail banking products and services which fall within the EBA’s consumer protection mandate, namely mortgage credit, consumer credit, deposits, payment accounts, payment services and electronic money. The report provides evidence that, for some financial institutions, fees and charges represent an important source of their income, and that they vary widely across the EU market both in terms of type and level of fees. The review concludes that, despite improvements in consumer protection brought about by several EU sectoral directives introduced in the past decade to regulate banking retail products, market practices for fees and charges are causing significant detriment to consumers.
EBA: Thematic review on the transparency and level of fees and charges for retail banking products
Press release
European Central Bank
Single Supervisory Mechanism - ECB publishes priorities for 2023-25 - 12 December 2022
The European Central Bank (ECB) has published its supervisory priorities for the Single Supervisory Mechanism (SSM) for 2023-25. They are as follows:
- Priority 1: strengthening resilience to immediate macro-financial and geopolitical shocks;
- Priority 2: addressing digitalisation challenges and strengthening management bodies’ steering capabilities;
- Priority 3: stepping up efforts in addressing climate change. According to the ECB, climate change can no longer be regarded only as a long-term emerging risk, since its impact is already visible and is expected to grow materially.
Blog post
HM Treasury
Ring-fencing regime reform - HM Treasury responds to Ring-fencing and Proprietary Trading Independent Review - 9 December 2022
Announced as part of the Edinburgh Reforms, the government has confirmed that it will introduce secondary legislation to improve the functioning of the UK bank ring-fencing regime. It has published a policy paper that responds to the March 2022 final report of the Ring-Fencing and Proprietary Trading (RFPT) Review Panel, in which a number of recommendations were made for revisions to the existing legal and regulatory framework governing the ring-fencing of UK banks. HM Treasury states that it will take forward the Panel's recommendations on near-term measures on the design of the framework: this will include taking banking groups without major investment banking operations out of the regime and permitting ring-fenced banks to establish operations or service customers outside the EEA. HM Treasury is also considering raising the ring-fencing threshold of core retail deposits to £35 billion from £25 billion. HM Treasury intends to consult on these reforms in mid-2023 with a view to bringing forward secondary legislation later in 2023.
The government will also issue a public call for evidence in the first quarter of 2023 to review the practicalities of aligning the ring-fencing and resolution regimes. The outcome of the call for evidence will inform decisions on the long-term future of the ring-fencing regime to be taken later in this Parliament.
Government response
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Building Societies Act 1989 - HM Treasury responds to consultation - 9 December 2022
HM Treasury has published a call for evidence further to its December 2021 consultation on proposed amendments to the Building Societies Act 1986 as part of its Edinburgh Reforms. The call for evidence provides a summary of responses to the consultation and sets out planned next steps. Respondents were broadly supportive of the proposed amendments to building societies' funding model and corporate governance requirements. Among other things, HM Treasury will legislate to implement changes to the funding limit with a view to providing greater flexibility for building societies in financial stress, bringing the 1986 Act more in line with companies and continuing to support building societies' mutual model.
Call for Evidence
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Modernisation of consumer credit legislation - HM Treasury announces plans - 9 December 2022
As part of its Edinburgh Reforms, HM Treasury has published a consultation as the first step in a process to reform consumer credit legislation, as announced in June 2022. HM Treasury is seeking views on the objectives, principles and overall direction of the proposed reform. The consultation notes:
“Reforming the regulatory regime based around the [Consumer Credit Act 1974] will modernise and simplify consumer credit and consumer hire regulation, facilitating innovation in products and the arrival of new entrants into the market. Providing a wide range of credit products which are appropriate for a broad consumer market is an important part of growing the economy”.
The document goes on to explain that the government: “does not envision provisions being purely replicated in FCA rules, but recast - potentially not mirroring their current composition … There may be some provisions that it will not be desirable or possible to move to FCA rules and if this is the case they will stay in legislation, subject to any modifications or refinements considered appropriate.”
Comments can be made on the consultation paper until 17 March 2023. HM Treasury intends to develop more detailed policy proposals in due course, which it will put to stakeholders through a second stage consultation. Implementation of the final approach will likely require primary legislation to be brought forward when parliamentary time allows. The FCA will consult on its approach to any new rules in due course.
Consultation on reforming the Consumer Credit Act 1974
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Payment Account Regulations - HM Treasury consults on proposed changes to information requirements - 9 December 2022
HM Treasury has published a Consultation Paper on information requirements in the Payment Accounts Regulations 2015 (SI 2015/2038) (PARs) - specifically requirements in Part 2 of, and Schedules 1 and 2 - as part of its Edinburgh Reforms. The PARs transposed the Payment Accounts Directive (2014/92/EU) (PAD) into UK law. HM Treasury considers that many of the information requirements intended to improve the comparability of fees connected with payment accounts are either “too prescriptive or less necessary” in a UK context.
Comments can be made on the consultation paper until 17 February 2023.
Consultation on Payment Account Regulations
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Bank of England
Wholesale cash distribution - Bank of England publishes Consultation Paper on supervisory approach - 14 December 2022
The Bank of England (the Bank) has published a Consultation Paper on its supervisory approach to wholesale cash distribution. In its March 2020 budget, the government recognised the importance of maintaining access to cash for those who need it, and committed to giving the Bank powers to ensure that the wholesale cash infrastructure is effective, resilient and sustainable as cash usage further declines. These new powers are included in the Financial Services and Markets Bill (FSMB). The Consultation Paper outlines how the Bank will use its new powers contained in the FSMB, and in particular the proposals will cover:
- the Bank’s approach to wholesale cash distribution oversight;
- principles for the wholesale cash distribution market oversight regime;
- high-level codes of practices for participating members. The Bank notes a consultation on these will be provided in Q1 2023; and
- fees required to fund the Bank’s supervisory activity.
The Consultation Paper further notes that, should a systemic entity emerge in the wholesale cash distribution market, it will be subject to a prudential supervisory regime (similar to the one that currently applies to systemic payment systems) because such an entity could pose risks to financial stability and the confidence in the UK financial system. The deadline for feedback on the proposals is 10 February 2023.
Consultation on the Bank of England’s supervisory approach to wholesale cash distribution
Press release
HM Treasury
Statutory debt repayment plan - HM Treasury publishes response to Consultation Paper - 13 December 2022
HM Treasury has published a response to its May 2022 Consultation Paper on draft regulations introducing a new statutory debt solution known as the ‘statutory debt repayment plan’ (SDRP). For those who can afford to repay their debts in full, the SDRP could offer a more sustainable route out of problem debt than other existing statutory and voluntary debt solutions, while improving returns to creditors.
The government has reflected on the feedback on the Consultation Paper—which raised a number of challenges and concerns relating to both the design of the scheme and the timing of its implementation—and notes that it will not proceed with its plans to introduce the SDRP this year. Instead, the government will base further decisions on the future of the SDRP on the outcomes of the government’s review of the personal insolvency framework that was initiated in July 2022.
HM Treasury Consultation Response: Statutory Debt Repayment Plan
