European Central Bank
Markets in Cryptoassets – ECB publishes opinion – 22 February 2021
The European Central Bank (ECB) has published an opinion on the proposal for a regulation on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (the Regulation).
The ECB welcomes the aim of the Regulation in addressing the different levels of risk posed by each type of cryptoasset, balanced with the need to support innovation. It observes, however, that further adjustments are necessary in several areas, including: aspects of the Regulation relating to the responsibilities of the ECB, the Eurosystem and the European System of Central Banks (ESCB) concerning the conduct of monetary policy; the smooth operation of payment systems; and the prudential supervision of credit institutions and financial stability.
The ECB suggests that the Regulation should clarify, among other things:
- that it does not apply to the issuance by central banks of central bank money based on distributed ledger technology (DLT) or in digital form as a complement to existing forms of central bank money; and
- the scope of its application. Notably, the ECB calls for clarification on the distinction between cryptoassets that may be characterised as financial instruments, thereby falling under the scope of the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II), and those which would fall under the scope of the Regulation.
The Opinion also contains a technical working document setting out the ECB’s specific drafting proposals for amendments to the Regulation.
ECB Opinion
Cover Note
Bank of England
Data Collection Transformation Plan – BoE publishes paper – 23 February 2021
The Bank of England (BoE) has published a paper on its plan to transform its ability to collect data from the UK financial sector over the next decade.
This transformation plan follows a discussion paper on transforming data collection which was published in January 2020, and is the Bank’s response to tackle strains put both on the current data collection process, and on the suppliers of data within the financial sector. These strains include technological advances and automation that mean that more data than ever before is being created and captured.
Central to the Bank’s aims are three reforms:
- Defining and adopting common data standards which identify and describe data in a consistent way throughout the financial sector. The common standards should be open and accessible for use by all who need them.
- Modernising reporting instructions to improve how they are written, interpreted and implemented.
- Integrating reporting to move to a more streamlined, efficient approach to data collection. This reform entails making data collection more consistent across domains, sectors and jurisdictions, and designing each step in the data process with the end-to-end process in mind.
To help deliver these reforms, the Bank, alongside the FCA, is seeking to set up a multi-year and multi-phased transformation programme. During each phase the Bank aims to deliver a series of ‘use cases’ focusing on particular collections of data or types of collection of data. The first phase is expected to take place over the next 24 months, and will only affect a small number of selected use cases. The second phase, taking place over roughly the subsequent three years, will focus on expanding the transformation into new areas with an increased focus on integration. Subsequent phases will scale the transformation to maximise value.
BoE paper: Transforming data collection from the UK financial sector
Updated webpage
Press release
Prudential Regulation Authority
Higher paid material risk takers – PRA statement on definition – 25 February 2021
The PRA has published a statement on the definition of ‘higher paid material risk taker’ following the identification of an error in this definition in Rule 1.3 of the Remuneration Part of the PRA Rulebook.
The definition currently sets the requirement that an individual would be treated as a ‘higher paid material risk taker’ when both: (i) their annual variable remuneration exceeds 33% of their total remuneration; and (ii) their total remuneration exceeds £500,000. The PRA has identified this as an error, and an individual should instead be treated as a ‘higher paid material risk taker’ when either of those above points are satisfied. Due to this error, the PRA intends to consult on amending the rule at the earliest opportunity.
The FCA has also updated its webpage on the dual-regulated firms Remuneration Code to reflect this statement published by the PRA. It explains that it intends to consult at the next suitable opportunity to make a corresponding amendment to its dual-regulated firms Remuneration Code to ensure its requirements remain consistent with the PRA.
PRA statement on definition of higher paid material risk taker
Financial Conduct Authority
Vulnerable customers – FCA publishes final guidance on fair treatment of vulnerable customers – 23 February 2021
The FCA has published its finalised guidance on the fair treatment of vulnerable customers (FG21/1).
The guidance aims to foster improvements in the way firms treat their vulnerable customers to ensure that they receive the same fair treatment and outcomes as other customers throughout the customer journey, from product design through to customer engagement and communications.
The guidance establishes that the FCA will continue to hold firms accountable for the treatment of vulnerable customers and firms will be asked to demonstrate how their business model, the actions they have taken and their culture ensures the fair treatment of all customers, including vulnerable customers.
The guidance further explains that in order to achieve good outcomes for vulnerable customers, firms should:
- understand the needs of their target market/customer base;
- ensure their staff have the right skills and capability to recognise and respond to the needs of vulnerable customers;
- respond to customer needs throughout the product design, flexible customer service provision and communications; and
- monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability and make improvements where this is not happening.
This guidance affects all FCA regulated firms and their appointed representatives, industry groups and trade bodies, professional bodies, consumer organisations and organisations that promote the interests of vulnerable consumers, and consumers and consumer advisers.
As stated in a previous edition of this bulletin, the FCA published a consultation on the guidance in July 2020. Following this, the FCA has published a feedback statement summarising its policy decisions taken in response to the feedback. In summary, most respondents supported the FCA’s proposals; therefore, the FCA is implementing them as consulted on, subject to minor changes.
Finalised Guidance
Feedback Statement
Webpage
Infographic
Press release
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MoU – FCA publishes MoU with EHRC – 23 February 2021
The FCA has published the memorandum of understanding (MoU) that it has entered with the Equality and Human Rights Commission (EHRC).
The MoU sets out the framework that supports the working arrangements between the FCA and the EHRC in light of their respective responsibilities under the Financial Services and Markets Act 2000 (FSMA) and the Equality Act 2010. The MoU further establishes the basis on which co-operation, co-ordination and information sharing between the two organisations can occur.
In particular, the MoU considers the FCA’s approach to the Public Sector Equality Duty (PSED)—as introduced by the Equality Act 2010—under which public authorities are required to have due regard to the need to eliminate unlawful discrimination, harassment and victimisation and other conduct prohibited by the Equality Act 2010. The MoU outlines that whilst the FCA does not have any enforcement powers under the Equality Act 2010, which is the sole reserve of the EHRC, it is likely that a breach of the Equality Act will also be a breach of the FCA’s Principles for Businesses. The MoU states that the FCA can and will use its expertise of financial services markets to assist the EHRC in its enforcement work, for example by advising on the financial services markets it regulates.
Alongside the MoU, the FCA and the EHRC will develop a more detailed action plan (which will not be published) on how they will work together. The FCA and the EHRC will monitor the functioning and effectiveness of the MoU and action plan, and will review it one year after the date of signature. This review will be followed by further periodic reviews to evaluate their continuing fitness for purpose.
The MoU was signed and entered into force on 19 February 2021.
MoU between the FCA and EHRC
Transformation programme – FCA announces four executive appointments – 25 February 2021
The FCA has announced four new appointments to its executive team as part of its transformation programme to build a data-led regulator that is able to make fast and effective decisions. The appointments are:
- Stephanie Cohen - Chief Operating Officer;
- Jessica Rasu - Chief Data, Information and Intelligence Officer;
- Sarah Pritchard - Executive Director, Markets; and
- Emily Shepperd – Executive Director, Authorisations.
FCA press release announce new senior appointments
Prudential Regulation Authority and Financial Conduct Authority
Data Collection – PRA and FCA publish joint Dear CEO letter – 23 February 2021
The PRA and the FCA have published a joint Dear CEO letter providing an update on the work they have done in transforming the way they collect data. The letter affirms their commitment to work in partnership with firms to tackle challenges relating to data collection.
The letter states that the PRA and FCA recognise that reporting is one of the most demanding parts of regulation; therefore, they have been working on projects looking at the future of data collection. These projects have highlighted that the challenges facing regulators and firms in areas of data collection can be summarised in three questions:
- How can we ensure our data collections are worthwhile and valuable exercises for regulators and industry to invest in?
- How can industry best understand and interpret our reporting instructions so that high quality data is provided?
- How can we remove legacy data, process and technology siloes and streamline the reporting process?
The PRA and FCA aim to tackle these three questions through a work programme that delivers on three areas of reform, which are:
- Integrating reporting – increasing consistency in designing and delivering data collection for value, reuse and efficiency.
- Modernising reporting instructions – rethinking the way reporting requirements are designed and expressed, and improving the ease with which they can be interpreted and implemented by firms.
- Defining and adopting common data standards – standardising how financial data is described, defined and sourced at an operational level within firms.
The PRA and FCA are running a Town Hall in late April for firms who are dual-regulated to discuss how progress will be made, and provide more detail about the resources required.
See also the article above on the Bank of England’s Data Collection Transformation Plan.
Dear CEO letter
