European Commission
Sustainable finance – European Commission publishes consultation summary report – 10 February 2021
The European Commission has published a summary report of its consultation on a renewed EU sustainable finance strategy. The consultation ran from April to July 2020 and the report summarises the feedback received.
The strategy builds on the Commission’s 2018 Action Plan on financing sustainable growth and is intended to provide a roadmap of new actions to increase private investment in sustainable projects and activities, which, in turn, will support the actions set out in the European Green Deal and provide frameworks to facilitate the European Green Deal Investment Plan.
The consultation sought the views and feedback of interested parties on how to:
- strengthen the foundations for sustainable finance by creating an enabling framework to shift the focus of financial and non-financial companies to sustainability and long-term development;
- increase the opportunities for the public, financial institutions and corporates to have a positive impact on sustainability; and
- fully manage and integrate climate and environmental risks into financial institutions and the financial system as a whole.
The overall feedback from the consultation on the objectives and direction of travel of the strategy was supportive. Key objectives highlighted by stakeholders for mainstreaming sustainability into the financial sector included:
- providing an enabling climate and environmental long term policy framework;
- utilising the COVID-19 recovery phase for the redirection of capital; and
- utilising innovations and new technologies, including financial system digitalization.
- The key challenges raised in relation to achieving this included:
- non-sustainable short-term profit-seeking practices and greenwashing;
- the availability, comparability and quality of data on environment, social and governance (ESG); and
- the risk of complexity of the new overall regulatory framework.
Overall, the key messages from the feedback were that there is a need to: (i) strengthen sustainable finance foundations; (ii) increase opportunities for the public, financial institutions and corporates to enhance sustainability; and (iii) reduce and manage climate and environmental risks.
The Commission intends to adopt the renewed sustainable finance strategy in Q1 2021.
European Commission summary report on its sustainable finance consultation
Updated webpage
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CRD IV – European Commission adopts Delegated Regulation regarding RTS for identifying G-SIIs – 11 February 2021
The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 1222/2014 which supplements the Capital Requirements Directive (2013/36/EU) (CRD IV). The amendments relate to regulatory technical standards (RTS) for the specification of the methodology for the identification of global systemically important institutions (G-SIIs) and for the definition of sub-categories of G-SIIs. For the first time, the G-SII identification framework comprises an additional EU methodology to allocate G-SII buffer rates to identified G-SIIs.
The Regulation will enter into force on the day after its publication in the Official Journal of the EU.
Delegated Regulation amending Delegated Regulation (EU) 1222/2014 supplementing CRD IV
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Single Resolution Board – European Commission adopts Delegated Regulation – 11 February 2021
The European Commission has adopted a Delegated Regulation amending Commission Delegated Regulation (EU) 2017/2361 on the arrangements for the payment of contributions to the administrative expenditures of the Single Resolution Board.
The amendments are necessary to: (i) amend the current invoicing system of the Board; and (ii) introduce dedicated rules for 2021. Among other things, the Delegated Regulation:
- inserts a new Article 4a into the Commission Delegated Regulation to provide for the possibility for the Board to raise instalments of contributions in order to cover its administrative expenditures in the first part of the year;
- amends Article 6 of the Commission Delegated Regulation which determines the date by which the European Central Bank (ECB) must provide the Board with the data on each contributor debtor as collected by the ECB and used for the calculation of supervisory fees. This date has been changed from 31 December to 7 July each year; and
- inserts a new provision in Article 7 of the Commission Delegated Regulation (EU), establishing a cut-off date for the Board to determine the scope of entities that are to enter the calculation in any given year.
The Regulation will enter into force on the day following that of its publication in the Official Journal of the EU.
Delegated Regulation amending Delegated Regulation (EU) 2017/2361
Council of the European Union
Credit services and purchasers – Council of the EU publishes comparison table of negotiating positions on proposed Directive – 10 February 2021
The Council of the EU has published a comparison table in relation to the draft proposed Directive on credit services and purchases. The table compares the negotiating positions of the Council, the European Commission and the European Parliament in preparation for the commencement of trialogues.
The proposed Directive was adopted by the Commission in March 2018 with the aim of encouraging the development of secondary markets for non-performing loans (NPLs).
Council of the EU comparison table on proposed Directive
European Banking Authority
Investment Firms Directive – EBA publishes Consultation Paper on supervisory disclosure – 11 February 2021
The European Banking Authority (EBA) has published a Consultation Paper (CP/2021/02) on its draft Implementing Technical Standards (ITS) setting out the disclosure on the new prudential requirements that national competent authorities (NCAs) will be required to disclose for all investment firms authorised under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II). The draft ITS aim to ensure that the disclosed information is comprehensive and comparable across all EU Member States.
The information that NCAs would be required to disclose annually includes:
- the text of laws, regulations, administrative rules and general guidance adopted in each Member State;
- options and discretions in the application of the prudential requirements;
- criteria and methodologies of the supervisory review and evaluation process; and
- aggregated statistical data on prudential requirements.
The consultation closes on 11 May 2021 and a public hearing on the consultation will take place on 19 March 2021.
EBA CP/2021/02 on ITS on supervisory disclosure
Press release
Webpage
Prudential Regulation Authority
Productive finance investment – industry working group publishes minutes of first meeting - 8 February 2020
The Bank of England (the Bank) has published the minutes of the first meeting of the Productive Finance Working Group held on 26 January 2021.
The Working Group comprises the Bank, HM Treasury and the FCA and its remit is to build on work already undertaken and investigate the challenges and potential barriers to investment in productive finance assets in the UK. Such assets are those that further sustainable growth and make an important contribution to the real economy, including research and development, technologies such as green technology, and infrastructure.
The meeting reached agreement on the following areas:
- the Working Group’s purpose and ultimate objectives: the group is intended to run for six months with the objective of the launch at least one long-term asset fund (LTAF) and the establishment of a regulatory framework for it. That may be a new authorised open-ended fund structure which balances the flexibility needed for funds to invest in less liquid assets, with the need for appropriate consumer protection;
- the barriers to productive investment on which the group should focus: these include investor reluctance to invest in non-daily priced and less liquid funds; the lack of existing authorised fund structures; and the inability of many investment platforms to support non-daily dealing funds; and
- deliverables for the Technical Expert Group (TEG) (which sits under the Committee of the Working Group) before the next Working Group meeting in May 2021. These should include consideration of three broad solutions: (i) recommended changes to rules and regulations; (ii) improvements to operational infrastructure; and (iii) shifting investment focus from cost to net returns and across longer horizons.
Bank of England webpage
Minutes of the first Steering Committee meeting
Terms of Reference for Working Group
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Capital internal models - PRA publishes statement on 2021 supervisory benchmarking exercise – 9 February 2021
The PRA has published a statement on the 2021 supervisory benchmarking exercise relating to banks’ capital internal models, relating to reporting reference dates on, or around, year-end 2020.
The supervisory benchmarking exercise applies to firms that are permitted to use internal approaches for the calculation of risk weighted exposure amounts or own funds requirements. These firms are required to report annually on the results of the calculations of their internal approaches for the exposures or positions that are included in specified benchmark portfolios and the methodologies that underpin them.
Following the end of the Brexit transition period, the benchmark portfolios are specified in implementing technical standards (ITS) contained in the UK version of Commission Implementing Regulation ((EU) 2016/2070). However, these are not currently up to date, given the European Commission did not adopt the European Banking Authority’s proposed amendments to the ITS before the end of the transition period.
As a result, the PRA encourages firms to use the draft EBA ITS in relation to market and credit risk data in reference to the outdated versions in the UK ITS. Firms are not required to submit the IFRS 9 data specified in the EBA ITS for the 2021 supervisory benchmarking exercise, as there is currently no requirement to submit IFRS 9 information in UK law. The PRA also requests any firm that is not planning to use the 2021 benchmarking exercise reporting requirements to contact their supervisor.
The PRA will set out its proposals for the 2022 benchmarking exercise in a consultation paper to be published in due course.
Press Release
2021 Benchmarking exercise
Financial Conduct Authority
Retail banking supervision – FCA publishes Dear CEO letter on supervision strategy – 8 February 2020
The FCA has published a Dear CEO letter to retail banking firms which sets out four priority areas for its supervision of such banks over the next two years, together with: (i) its view of the key risks of harm posed in each of those areas by retail banking activities, which are heavily dominated by COVID-19 and its economic and social impact; (ii) its expectations on the steps such firms can take to mitigate those risks; and (iii) the work the FCA will undertake to ensure firms are meeting its expectations and mitigating those risks.
The FCA’s four priority areas are:
- ensuring fair treatment of borrowers, including those in financial difficulties;
- ensuring good governance and oversight of customer treatment and outcomes during business change;
- ensuring operational resilience; and
- minimising fraud and financial crime.
The FCA indicates that firms should consider the extent to which their activities present key risks of harm and review their risk mitigation strategies. Firms should also be prepared to demonstrate how the board and senior managers are taking steps to address these risks. The regulator expects firms to remediate newly identified issues promptly and it will intervene swiftly where firms are either unwilling or unable to improve.
FCA Dear CEO Letter
Payment Systems Regulator
New Payments Architecture - PSR publishes Consultation Paper 21/2 – 5 February 2021
The Payment Systems Regulator (PSR) has published Consultation Paper 21/2 on the delivery and regulation of the new Payments Architecture (NPA), together with responses received to its Call for Input published in January 2020.
The PSR’s view is that there are unacceptably high risks that the NPA will not be cost-effective and could delay or prevent the competition and innovation benefits for payment services that it was designed to deliver. The regulator is also aware of the need to manage the potential disruption risks arising from the migration of Bacs and Faster Payments transactions to the NPA.
Given this concern, the PSR is seeking views on its proposals to: (i) narrow the scope of the initial contract for delivery of the NPA and the appropriate way to secure this contract; and (ii) reduce risks to competition and innovation in the NPA. Pay.UK will pause its current procurement while the PSR is consulting and also to allow it to build the capabilities it needs to run an effective procurement process.
The consultation in relation to the delivery of the NPA closes on 19 March 2021, following which the PSR intends to publish a follow-up document in Q3 2021. The consultation in relation to competition and innovation closes on 5 May 2021. The PSR expects to publish its final decision on both aspects in Q4 2021.
PSR Consultation Paper 21/2
PSR Call for Input
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Payment systems – PSR publishes two Consultation Papers – 11 February 2021
The Payment Systems Regulator (PSR) has published Consultation Papers CP21/3 and CP21/4 on greater consumer protections when using payment systems. CP 21/3 is seeking views on protections against authorised push payment (APP) scams and CP21/4 is focused more broadly on consumer protection in relation to interbank payments.
The PSR explains that, in the first half of 2020, losses due to APP scams totalled £208 million. The regulator has proposed three measures to prevent APP scams and to protect those who fall victim to them: (i) requiring banks and building societies to publish their APP scam data, including reimbursement and repatriation levels; (ii) requiring banks and building societies to adopt a standardised approach to sharing data to identify APP scams; and (iii) providing a minimum standard of customer protection across all banks and building societies by changing payment system rules.
In relation to interbank payments, the PSR is keen to better understand whether the protections currently in place are adequate and how the industry can ensure that customers are not disproportionately harmed when issues arise on their interbank payments. Among other things, the paper includes questions about the types of payments that might need additional protection and how consumers might claim protection.
Both consultations close on 8 April 2021.
PSR CP21/3 on APP scams
PSR CP21/4 on interbank payments
Press release
Recent cases
Walter Hugh Merricks CBE v Mastercard Incorporated and others (1266/7/7/16)
Collective proceedings, Competition Act 1998, breach of TFEU
The Competition Appeal Tribunal (CAT) has made an order giving directions in Walter Hugh Merricks CBE v Mastercard Inc and others. This case is an application to commence collective proceedings under section 47B of the Competition Act 1998, combining follow-on actions for damages arising from the European Commission’s 2007 decision in respect of Mastercard. The decision held that Mastercard’s multi-lateral interchange fee had breached EU competition law under Article 101 of the Treaty on the Functioning of the European Union (TFEU).
The CAT dismissed an application for a collective proceedings order (CPO) in July 2017, and the proposed class representative successfully appealed this decision to the Court of Appeal. In December 2020, the Supreme Court dismissed an appeal by Mastercard. The application for a CPO was remitted to the CAT for reconsideration and a remittal hearing is listed for 25-26 March 2021.
Following a case management conference on 5 February 2021, the CAT published an order giving directions and setting deadlines for the publication of the CPO Hearing and Application Notice, the filing and service of additional submissions and evidence, the filing and service of skeleton arguments and updating electronic bundles. The order also sets out that any proposed class member or third party with a legitimate interest may apply to the CAT for permission to make submissions at the hearing by 5 March 2021.
CAT order giving directions prior to new CPO application hearing
