Financial Stability Board
Crisis management groups of G-SIBs - FSB publishes report - 30 November 2021
The FSB has published a report on good practices for crisis management groups (CMGs) of global systemically important banks (G-SIBs). CMGs bring together the home and key host authorities that have a role in the resolution of a systemically important financial institution.
The report provides a reference for home and host authorities in CMGs to help them enhance their crisis management preparedness, drawing on a stocktake undertaken in 2020 both of how G-SIB home and host authorities use and operate CMGs and of CMG members’ experience during the COVID-19 pandemic. The practices identified in the report relate to, among other things, the structure and operation of CMGs, and coordination on enhancing a firm’s resolvability.
FSB Report: Good Practices for Crisis Management Groups
EU banking macroprudential framework - European Commission publishes targeted consultation and call for evidence - 30 November 2021
The European Commission (the Commission) has published a targeted consultation on improving the EU’s macroprudential framework for the banking sector, alongside a related call for evidence document for an evaluation and impact assessment.
The Commission is required under Article 513 of the Capital Requirements Regulation (575/2013/EU) (CRR), as amended by Regulation ((EU) 2019/876) (CRR II), to conduct a review of the macroprudential provisions in the CRR and the Capital Requirements Directive (2013/36/EU) (CRD IV) by June 2022. The consultation is divided into four sections, as follows:
- overall design and functioning of the buffer framework;
- missing or obsolete instruments, reducing complexity;
- internal market considerations; and
- global and emerging risks.
In the call for evidence document, the Commission highlights that it is considering the merits of setting up a macroprudential framework that covers the entire financial sector by adopting a new and dedicated legal instrument designed to address systemic risks in a holistic and cross-sectoral way. Other policy options include streamlining existing macroprudential provisions, or upgrading the existing framework.
The review may result in a legislative proposal to amend the CRR and the CRD, depending on the results of the evaluation, consultation and impact assessment work. The deadline for responses to the consultation is 18 March 2022.
European Commission: Targeted consultation on improving the EU’s macroprudential framework for the banking sector
European Commission: Privacy statement - Targeted consultation activities (including surveys, interviews and focus groups)
Webpage: EU banking sector - review of macroprudential rules to limit systemic risk
Official Journal of the European Union
CRD IV - Commission Implementing Regulation on benchmark portfolios and reporting published in OJ - 26 November 2021
Commission Implementing Regulation (EU) 2021/2017 (the Regulation) amending Commission Implementing Regulation (EU) 2016/2070 as regards benchmark portfolios, reporting templates and reporting instructions to be used by institutions reporting under Article 78(2) of the Capital Requirements Directive (2013/36/EU) (CRD IV) has been published in the Official Journal of the European Union.
The Regulation amends Commission Implementing Regulation (EU) 2016/2070 by:
- adapting the reporting requirements to reflect changes to the focus of competent authorities’ assessments and of the EBA’s reports, as well as to the exposures or positions included in the benchmark portfolios; and
- adding two new Annexes (VIII and IX) relating to reporting the impact of International Financial Reporting Standard 9 (IFRS 9).
The Regulation will enter into force on 16 December 2021.
Commission Implementing Regulation (EU) 2021/2017 amending Implementing Regulation (EU) 2016/2017 as regards benchmark portfolios, reporting templates and reporting instructions to be applied in the European Union for the reporting referred to in Article 78(2) of Directive 2013/36/EU of the European Parliament and of the Council
Single Resolution Board
Resolvability and crisis readiness – SRB publishes 2022 work programme - 26 November 2021
The Single Resolution Board (SRB) has published its work programme for 2022, setting out its priorities for the coming year to strengthen the resolvability of banks under its remit. 2022 is the second year of the SRB’s 2021-23 multi-annual programme, and the SRB states that it is committed to making banks fully resolvable by the end of 2023.
The five strategic priorities for 2022 are: (i) achieving resolvability of SRB entities and less significant institutions; (ii) fostering a robust resolution framework; (iii) carrying out effective crisis management, (iv) operationalising the Single Resolution Fund, with the Common Backstop set to enter into force in early 2022; and (v) establishing a lean and efficient organisation.
SRB work programme for 2021
OCIR - SRB publishes updated operational guidance - 29 November 2021
The Single Resolution Board (SRB) has published an update to its operational guidance on operational continuity in resolution (OCIR), originally published in July 2020. OCIR refers to ensuring the continuity in resolution of the services required by and provided by a bank to promote the effective implementation of the bank’s resolution strategy and, consequently, the stabilisation and restructuring of the bank.
The updated document provides additional details on topics related to financial resilience and staffing, with new sections on measures to ensure the financial resilience of unregulated intra-group service providers and measures to ensure adequate staffing of key roles within a bank.
The SRB intends banks to phase in their compliance with OCIR by end-2023.
Operational Guidance on Operational Continuity in Resolution: November 2021 update
Solvent wind-down of trading books - SRB publishes guidance - 1 December 2021
The Single Resolution Board (SRB) has published guidance on the solvent wind-down (SWD) of derivatives and trading books in resolution. SWD is an approach that can be used for exiting trading activities in an orderly manner while avoiding risks to financial stability.
In particular, the new guidance provides additional detail to banks on how to demonstrate resolvability under Principle 7.1 of the SRB’s ‘Expectations for Banks’ (EfB) document, first published on 1 April 2020.
The SRB guidance states that all global systemically important banks (G-SIBs) are expected to work on SWD planning as a priority for the 2022 resolution planning cycle (RPC). Other banks will be identified and approached during 2020, following a further assessment of their trading books. These identified banks will be expected to work on SWD planning as an RPC 2023 priority.
SRB: Solvent wind-down of trading books: Guidance for banks 2022
Financial Conduct Authority
Strong customer authentication - FCA publishes Policy Statement (PS21/19) - 29 November 2021
The FCA has published a Policy Statement (PS21/19) outlining changes to its technical standards on strong customer authentication and common and secure methods of communication (SCA-RTS), to its guidance in its approach document to payment services and electronic money, (the Approach Document), and to its Perimeter Guidance Manual (PERG).
The changes outlined in the Policy Statement aim to make the e-money sector (including open banking) more resilient and to protect consumers if firms fail. In light of the feedback received to CP21/3, the FCA is maintaining most of the proposals, with some minor changes. The FCA has also published the instruments making the changes, and these will come into force variously on 30 November 2021, 26 March 2022 and 26 May 2023.
Finally, the Policy Statement highlights that both: (i) account servicing payment service providers (ASPSPs) offering personal payment accounts within the scope of the Payment Account Regulations 2015, and (ii) equivalent payment accounts held by SMEs and credit card accounts operated for consumers or SMEs will need to have a dedicated interface to enable third-party provider (TPP) access in place no later than 18 months after the rules come into force. The FCA strongly encourages ASPSPs to apply the new exemption from the obligation to carry out strong customer authentication (SCA) as soon as practicable after it has come into effect. TPPs will, moreover, need to reconfirm customer consent under Article 36(6) of the SCA-RTS no later than four months after the rules come into force.
FCA Policy Statement: Changes to the SCA-RTS and to the guidance in ‘Payment Services and Electronic Money - Our Approach’ and the Perimeter Guidance Manual (PS21/19)
Perimeter Guidance (Payment Services) Instrument 2021 (FCA 2021/44)
Technical Standards on Strong Customer Authentication and Common and Secure Methods of Communication (Amendment) (No 2) Instrument 2021 (FCA 2021/45)
Mortgage Prisoners Review published by FCA - 29 November 2021
The FCA has published its Mortgage Prisoners Review (CP 576) which aimed to look in more detail at the characteristics of mortgage prisoners and review the effect of recent regulatory interventions to remove barriers to switching. Mortgage prisoners are defined as borrowers who, despite being up to date with payments, cannot switch when it might benefit them to do so because they have loan and/or borrower characteristics that are outside current lender risk appetite.
The review sets out the loan and borrower characteristics of 195,000 mortgages in closed books with inactive firms. The FCA’s estimates that, of these borrowers, 47,000 are mortgage prisoners.
Appraising the impact of its regulatory interventions to date, the FCA observed that it had expected the flexibility provided by the modified affordability assessment to have enabled more borrowers to switch. The intra-group switching rule, which addresses situations where a borrower has a mortgage in a closed book and wants to switch to a new deal with an active lender in the same financial group as their current provider, seems to have been met with more success.
The FCA states that, aligned with its proposals for a new ‘consumer duty’, it wants to see a mortgage market that provides good outcomes for all borrowers. To achieve this goal the FCA will, among other things, carry out work to further understand the issues facing borrowers (in both closed and active books) who have interest-only or part repayment mortgages and who do not have a credible strategy to repay the capital borrowed at the end of the mortgage term.
The government and industry will use the review to consider further practical and proportionate solutions for mortgage prisoners.
FCA: Mortgage Prisoners Review (CP 576)
Annex 1: Closed book mortgages - segmentation analysis
Annex 2: Closed book mortgages with inactive firms