Basel Committee on Banking Supervision
2023 work initiatives - published by the BCBS - 23 March 2023
The Basel Committee on Banking Supervision (BCBS) has published a statement, following its meetings on 14, 22 and 23 March 2023, in which it details its programme of initiatives in 2023.
Among other things, the BCBS intends to issue a Consultation Paper on the Pillar 3 disclosure framework for climate-related financial risks by the end of 2023. This will be inter-operable with parallel disclosure initiatives underway by the International Sustainability Standards Board. The BCBS has also agreed to consult on revisions to the Basel Core Principles by mid-2023. It has approved a workplan to continue to assess and mitigate risks from cryptoassets to the global banking system. This will include a set of targeted views of the prudential treatment of cryptoasset exposures, including the treatment of permissionless blockchains and the eligibility for ‘Group 1’ stablecoins.
Official Journal of the European Union
Single Supervisory Mechanism - ECB decisions published in OJ - 23 March 2023
Decisions made by the European Central Bank (ECB) on delegating the power to adopt decisions relating to on-site inspections and internal model investigations under the Single Supervisory Mechanism (SSM) have been published in the Official Journal of the European Union (OJ).
Broadly speaking, these Decisions set out criteria for the delegation of decision-making powers to the heads of work units of the ECB. This allows for amendments to ECB decisions on supervisory examination programmes for credit institutions made under Article 99(1) of the Capital Requirements Directive (2013/36/EU).
Decision (EU) 2023/672 of the ECB of 10 March 2023 on delegation of the power to adopt decisions relating to on-site inspections and internal model investigations (ECB/2023/5)
Decision (EU) 2023/673 of the ECB of 14 March 2023 nominating heads of work units to adopt delegated decisions relating to on-site inspections and internal model investigations (ECB/2023/6)
European Banking Authority
Fundamental Review of the Trading Book - EBA consults on expanded reporting - 21 March 2023
The European Banking Authority (EBA) has published a consultation paper (EBA/CP/2023/03) on draft implementing technical standards (ITS) that would amend the ITS on specific reporting requirements on market risks set out in the Commission Implementing Regulation (EU) 2021/453 as part of its Fundamental Review of the Trading Book (FRTB).
The original ITS on FRTB reporting applied from 5 October 2021 and introduced elements of the Basel Committee on Banking Supervision's FRTB into the EU prudential framework by means of a reporting requirement. The proposed changes include a comprehensive set of templates on the instruments and positions to which institutions apply related to the FRTB reporting framework. The paper also sets out possible amendments to the ITS on supervisory reporting, including a template for reporting information on reclassifications of positions.
The deadline for responses is 20 June 2023. The EBA expects to submit a finalised draft amending ITS to the European Commission in autumn 2023. The ITS are expected to apply in the second half of 2024. The EBA will hold a public hearing by webinar on 25 May 2023 to discuss the proposals.
EBA Consultation Paper: Draft ITS amending Regulation (EU) 2021/453 with regard to the specific reporting requirements for market risk
Lending Standards Board
Customer vulnerability - LSB publishes report - 17 March 2023
The Lending Standards Board (LSB) has published a report into customer vulnerability in the banking and lending sectors. It follows the LSB’s thematic review on vulnerable customers and whether they are receiving fair outcomes in line with the LSB’s Standards of Lending Practice.
The LSB found that a majority of firms had considered vulnerable customers within their overall strategies for achieving good customer outcomes. However, there were varying levels of progress and achievement in delivering and operationalising these strategies to ensure full adherence. In particular, the report notes that the frameworks that have been implemented should allow firms to oversee the impact of identifying and supporting vulnerable customers, as well as being underpinned by training and support for staff.
Overall, the LSB concludes that more work is required to be fully compliant, to ensure intentions are translated into actions and for firms to achieve good customer outcomes consistently.
Customer Vulnerability Review Summary Report
APP scams - LSB updates CRM Code - 17 March 2023
The Lending Standards Board (LSB) has published a series of updates to its Contingent Reimbursement Model Code (CRM Code). The CRM Code, launched in 2019 and overseen by the LSB, requires signatory firms to detect, prevent and respond to authorised push payment scams.
All signatory firms will now be required to go further in identifying new and existing accounts at higher risk of being used by criminals. By no later than December 2023, firms must be monitoring the payments that they are receiving to help them identify suspicious inbound payments and accounts that might be being used by scammers. This will help firms stop the onward movement of funds they believe are linked to scams and recover the money lost by customers who fall victim to these scams.
The CRM Code
Silicon Valley Bank - Correspondence with Treasury Committee published - 14-23 March 2023
The Treasury Committee (the Committee) has published correspondence with Andrew Bailey, Governor of the Bank of England (the Bank) and Andrew Griffith, Economic Secretary to HM Treasury, in relation to the transfer of Silicon Valley Bank UK (SVB UK) to HSBC UK Bank Plc (HSBC).
Letter from Treasury Committee to Governor of Bank of England
Letter from Treasury Committee to Economic Secretary to HM Treasury
Response from Economic Secretary to HM Treasury
Competition within the savings and mortgage markets - Treasury Committee publishes letter - 22 March 2023
The Treasury Committee (the Committee) has published a letter addressed to Nikhil Rathi, Chief Executive of the FCA, on competition in the retail banking market. The letter follows an oral evidence session held in February 2023 with four of the UK's major retail banks and responses provided by those banks on the topics raised, including in relation to competition in the savings and mortgage markets. The letter also refers to the evidence given by Mr Rathi at a session in March 2023 on the FCA’s work on interest rates on savings products.
The Committee would now welcome further information from the FCA on what work it is doing to ensure there is effective competition in the markets for savings and mortgages products, and that banks are not relying on consumer inertia to allow savings interest rates to rise at a slower pace than mortgage interest rates. The annex to the letter sets out a series of questions for the FCA relating to savings rates, mortgage products and the consumer duty.
The committee has asked Mr Rathi to respond by 12 April 2023.
Letter from Treasury Committee to FCA
Payment Systems Regulator
Access to cash - PSR publishes call for views on first annual review of Specific Direction 12 - 22 March 2023
The Payment Systems Regulator (PSR) has published a call for views on its first annual review of the specific direction issued to Link Scheme Holdings Ltd (LINK) on maintaining free-to-use (FTU) ATMs in the UK (referred to as specific direction 12 or SD12).
The PSR issued SD12 in March 2022 and it will remain in force until 2 January 2025 unless the PSR varies or revokes it. Having been in force for just over a year, the PSR is seeking to understand how SD12 is working. Specifically, the PSR invites feedback on how effective SD12 has been in ensuring appropriate policies and measures are in place to support the maintenance of a broad geographic spread of the FTU ATM LINK network in the UK and meet service-user needs. The PSR is also interested to hear how well the requirements have worked in practice in relation to maintaining and replacing protected ATMs and whether the monitoring requirements under section 8 of SD12 have led to sufficient transparency.
Finally, the PSR invites feedback on whether SD12 should remain in place, given some of the wider initiatives that have been introduced or are expected at a future date (including the access to cash provisions found in the Financial Services and Markets Bill).
The call for views is open until 21 April 2023.
PSR: Call for views: First review of Specific Direction 12
APP scams - PSR publishes Policy Statement (PS23/1) - 23 March 2023
The Payment Systems Regulator (PSR) has published a Policy Statement (PS23/1) on measures to improve transparency on authorised push payment (APP) scam data across banks and building societies. This follows the PSR’s Consultation Paper (CP23/1) published in February 2023.
In the Policy Statement, the PSR explains that it has issued Specific Direction 18 (SD18) to require 14 of the largest payment service provider (PSP) groups to collect and report on data on three metrics of performance of their management of APP scams, Metrics A, B and C, (collectively ‘Measure 1’).
The PSR will publish the results on its website on a six-monthly basis. It is collecting and publishing Measure 1 data to provide greater transparency about PSPs’ APP scam levels, fraud prevention and reimbursement levels. This is intended to make PSPs more accountable for their own performance, improve the level of reimbursement for victims of APP scams and encourage further fraud prevention measures. Relevant PSPs will be required to provide the first set of data by 2 May 2023, with a view to publication in October 2023.
‘Measure 2’ work involves the PSR seeking to improve intelligence sharing between PSPs about the riskiness of payments and under ‘Measure 3’ proposals the PSR is considering requiring PSPs to reimburse victims of APP scams in all but exceptional circumstances.
PSR Policy Statement (PS23/1): APP scams: Measure 1: Collection and publication of performance data
Specific Direction 18 requiring publication of information relating to authorised push payment scams
Business Banking Resolution Board
Closure of SME Liaison Panel - BBRS publishes statement - 20 March 2023
The Business Banking Resolution Service (BBRS) has published a statement announcing the closure of its SME Liaison Panel (SMELP). This follows the resignation of Antony Townsend, BBRS SMELP Chair, and the FCA’s call for input on SME access to the Financial Ombudsman Service (FOS), as reported in the General section of this Bulletin. The BBRS board will use the findings of the FCA's review, as well as any subsequent work undertaken by the FCA, to help inform its options for the future.
SME Liaison Panel Update
Various Regulators and Banking Supervisors
Credit Suisse - Statements published by the FCA, Bank of England, EBA, the SRB and the ECB - 19 and 20 March 2023
The FCA and the Bank of England (the Bank) have both published statements about the approval by the Swiss Financial Market Supervisory Authority (FINMA) of the merger of Credit Suisse into the UBS Group, as detailed in a FINMA press release dated 19 March 2023.
The FCA's statement, dated 19 March 2023, explains it is engaging closely with UK and international regulators to monitor market developments. It notes that the FCA “is minded to approve the actions announced in relation to the entities that fall under its regulatory and supervisory remit”. A statement from the Bank, also dated 19 March 2023, welcomed “the comprehensive set of actions set out by the Swiss authorities … in order to support financial stability” and noted that the UK banking system is “well capitalised and funded, and remains safe and sound.”
A subsequent statement from the Bank on the UK creditor hierarchy, dated 20 March 2023, explains that the:
“UK’s bank resolution framework has a clear statutory order in which shareholders and creditors would bear losses in a resolution or insolvency scenario. This was the approach used for the recent resolution of SVB UK, in which all of SVB UK’s Additional Tier 1 (AT1) and T2 instruments were written down in full and the whole of the firm’s equity was transferred for a nominal sum of £1.”
It goes on to say that:
“AT1 instruments rank ahead of CET1 and behind T2 in the hierarchy. Holders of such instruments should expect to be exposed to losses in resolution or insolvency in the order of their positions in this hierarchy”.
The European Banking Authority, the Single Resolution Board (SRB) and the European Central Bank (ECB) published a joint statement on 20 March 2023 welcoming the actions taken by Swiss authorities to ensure financial stability. The statement notes that the “European banking sector is resilient, with robust levels of capital and liquidity” and explains that the EU resolution framework means common equity tier 1 (CET 1) instruments should be the first to absorb losses. This approach, it says, has been consistently applied in previous cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions.
It should be noted, however, that these statements refer to the hierarchy in resolution and not before resolution.
Bank of England statement
Bank of England statement: UK creditor hierarchy
FINMA press release