Prudential Regulation Authority
Occasional consultation paper CP3/22 - PRA publishes policy statement (PS7/22) - 8 August 2022
The PRA has published a policy statement (PS7/22) providing feedback on responses to its occasional consultation paper (CP3/22), published in March 2022. The policy statement contains, among other things, an updated supervisory statement (SS) on the UK leverage ratio framework (SS45/15) and an updated statement of policy on the PRA's approach to the publication of Solvency II technical information. It deletes legacy supervisory statements and SS3/13, SS4/15 and SS29/15.
We note in particular that the changes in PS7/22 include:
- updates to the PRA’s approach to publishing Solvency II technical information for the valuation of insurance liabilities for each relevant currency;
- changes to the reporting requirements in the PRA Rulebook and relevant UK Technical Standards (UKTS) reflecting the implementation of Basel standards; and
- amendments to the PRA Rulebook and relevant UKTS following the introduction of the Investment Firms Prudential Regime.
The implementation date for the changes is 1 September 2022, except for those relating to the Investment Firms Prudential Regime, for which the implementation date is 12 August 2022. The instruments making the policy changes can be found in the appendices to the policy statement.
PRA Policy Statement: Responses to CP3/22 ‘Occasional Consultation Paper’ (PS7/22)
Financial Conduct Authority
Change in control and cryptoasset firms - FCA publishes notification forms - 11 August 2022
The FCA has updated its webpage on change in control notification forms to include links to several forms for use by persons intending to acquire control over an FCA registered cryptoasset firm (namely, the corporate controllers form; partnership controllers form; individual controllers form; and trust controllers form).
Any person who decides to acquire 25% or more control of an FCA registered cryptoasset firm must receive prior FCA approval before completing the transaction. These persons must comply with the change in control regime set out in Part 12 of the Financial Services and Markets Act 2000 (FSMA), as modified by Schedule 6B to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLRs 2017).
These requirements were introduced through amendments to the MLRs 2017 made by the Money Laundering and Terrorist Financing (Amendment) (No 2) Regulations 2022 (SI 2022/860) and entered into force on 11 August 2022.
Updated webpage - Change in control: requirements
Glasgow Financial Alliance for Net Zero
Net-zero transition - GFANZ publishes guidance on portfolio management for consultation - 9 August 2022
The Glasgow Financial Alliance for Net Zero (GFANZ) – a practitioner-led, global coalition of financial institutions working to accelerate the world’s transition to net-zero greenhouse gas emissions by 2050 – is consulting on a draft report that sets out guidance for financial institutions on implementing and selecting portfolio alignment metrics. It follows the publication of GFANZ’s draft net-zero transition plan framework for the financial sector in June 2022, and builds on prior work conducted in 2020 and 2021 by the portfolio alignment team.
The draft report notes:
“Measuring portfolio alignment will provide transparency on whether the financial sector is reallocating capital flows to support the transition to a net-zero economy and builds on the implementation of sound real-economy transition plans, science-based net-zero pathways, and the articulation of said plans and pathways in financial sector transition plans.”
According to the draft report, portfolio alignment metrics should be “simple to use, transparent, science-based, broadly applicable, aggregable, and incentive optimal.” Four categories of metrics are being used by financial practitioners today: (i) binary metrics; (ii) maturity scale alignment metrics; (iii) benchmark divergence metrics; and (iv) implied temperature risk metrics. As it stands, they are deployed to help financial institutions assess those companies that are 1.5 degrees C-aligned and those that need to transition to become 1.5 degrees C-aligned.
The draft report refers to barriers to the wider adoption of portfolio alignment metrics as well as challenges associated with the choice of emission unit and scope. To address these issues, GFANZ has been working to enhance its previously developed key design judgement framework (the Framework) and the draft report provides refined guidance on design choices for five of the eight judgements outlined in that Framework. For example, on the choice of measurement units (Judgement 3), quantitative case studies in the draft report examine whether oil and gas companies should be assessed based on production units, physical or economic intensities or absolute emissions. The draft report also provides practical implementation guidance on single-scenario benchmark construction (Judgement 1), outlining the implementation of the fair share carbon budget approach, and the selection of benchmark scenarios (Judgement 2), with input from the GFANZ workstream on sectoral pathways.
The deadline for responses is 12 September 2022. The recommendations and guidance are voluntary. GFANZ will publish an updated report containing final recommendations and guidance in autumn 2022, before COP27.
GFANZ Report: Measuring Portfolio Alignment: Enhancement, convergence, and adoption