European Systemic Risk Board
COVID-19 - Monitoring the financial stability implications of support measures - 8 September 2021
The European Systemic Risk Board (ESRB) has published a note on monitoring the financial stability implications of support measures to protect the real economy from the effects of COVID-19.
The analysis is based both on data shared by the European Banking Authority (EBA) and the European Central Bank (ECB), and data collected for Q4 2020 and Q1 2021 under an ESRB recommendation (ESRB/2020/8). The ESRB identifies, among other things, that:
- fiscal support continues to play a role in sustaining the economic recovery and the functioning of credit markets;
- while banks are increasingly provisioning for balance sheet risks, they may be underestimating macroeconomic risks; and
- looking ahead, banks and supervisors need to pay attention to the fact that the link between economic and financial losses has become weaker during the pandemic.
Publication: Monitoring the financial stability implications of COVID-19 support measures
Prudential Regulation Authority
Remuneration - PRA publishes consultation paper on identification of material risk takers - 8 September 2021
The PRA has published a consultation paper (CP18/21) setting out its proposed changes to the requirements on the identification of material risk takers (MRTs) for the purposes of the PRA’s remuneration regime.
The PRA’s proposals would result in changes to the Remuneration Part of the PRA Rulebook, updates to Supervisory Statement SS2/17 ‘Remuneration’ and the revocation of the onshored Commission Delegated Regulation (EU) 604/2014 concerning PRA-regulated firms.
The proposed amendments put an end to the duplicative and partially-diverging requirements that currently apply to the identification of MRTs (in part, a product of the transposition of Capital Requirements Directive (EU) 2019/878 (CRD V) in the UK), and promote clarity by consolidating legislative requirements within the PRA Rulebook.
The PRA states that rationalising the MRT identification regime would be beneficial for firms by reducing the burden of complying with two sets of requirements regarding the identification of MRTs. Subject to currency threshold amendments, the substance of the provisions remains the same, and so the PRA does not expect firms will incur additional costs.
The consultation, which is relevant to banks, building societies and PRA-designated investment firms (including third country branches) closes on 8 November 2021, and final rules are expected in Q4 2021.
Consultation paper: Remuneration: Identification of material risk takers (CP18/21)
Webpage
Financial Conduct Authority
Quarterly consultation No. 33 - FCA publishes consultation paper CP21/27 - 3 September 2021
The FCA has published its Quarterly Consultation No.33 (CP21/27) inviting comments on miscellaneous amendments to its Handbook.
The amendments are minor and reflect, among other things, the cessation of LIBOR and changes to legal expenses insurance reporting. The deadline for comments depends on the particular amendment, and is either 27 September 2021, 4 October 2021 or 11 October 2021.
Quarterly Consultation No. 33 (CP21/27)
Webpage
Response form
-
Cryptoasset Regulation - FCA publishes speech - 6 September 2021
The FCA has published a speech by Charles Randell, Chair of the FCA, on risks associated with cryptoassets. In his speech, Mr Randell signals that the “tide of regulation is turning” as it has become more generally accepted that “we can’t allow online business to operate in ways we wouldn’t tolerate with any other business”.
To this end, he warns that while platforms’ efforts to crack down on fraudulent advertisements are welcome, a permanent and consistent solution to the problem of online fraud from paid-for advertising requires legislation. A two-pronged approach will be required, one that involves (i) appropriate regulation (including self-regulation by online platforms) and robust enforcement by the authorities; and (ii) greater consumer awareness about online scams.
Mr Randell went on to ponder the thorny question of whether speculative tokens should be brought within FCA regulation, observing that “it is difficult for regulators around the world to stand by and watch people, sometimes very vulnerable people, putting their financial futures in jeopardy”. He further notes that, given the decentralised way speculative tokens are created, any effective system of regulation would require a business seeking registration or authorisation with the FCA to bring themselves within reach.
More specifically Mr Randell suggested that in regulating digital tokens, legislators need to consider: (i) how to make it harder for digital tokens to be used for financial crime; (ii) how to support useful innovation; and (iii) the extent to which consumers should be free to buy unregulated, purely speculative tokens and to take responsibility for their decisions to do so.
Mr Randell concluded by summarising two cases where regulators should be given powers to take action in this space: (i) where cryptoasset promotions mislead consumers that speculative tokens are regulated; and (ii) where unregulated activities such as speculative tokens pose risks to FCA-authorised firms in terms of conduct and prudential soundness.
FCA Speech by Charles Randell: The risks of token regulation
-
Green FinTech challenge - FCA updates webpage to announce launch of second application window - 6 September 2021
The FCA has updated its Green FinTech Challenge webpage to announce the launch of a second application window. The Green FinTech Challenge is aimed at firms looking to deliver innovation to aid the transition to a net zero economy that is either regulated business or supports regulated business in the UK financial services market, providing firms with access to support services and reduced time-to-market at potentially lower cost.
The FCA states that it is particularly interested in firms that are developing innovations in the area of ESG data and disclosure, such as products and services that will:
- enable transparency in disclosure and reporting on sustainability by companies along the investment chain; and
- help consumers better understand the ESG characteristics of relevant products and providers they engage with, as well as provide visibility around alternatives aligned with their needs and preferences.
The FCA has also published a webpage that explains how its Green FinTech Challenge and digital sandbox are different. The deadline for applications is 15 November 2021.
Updated webpage: Green FinTech Challenge 2021
Green FinTech Challenge and Digital Sandbox: which service to apply for
-
Financial Services Act 2021 - FCA guidance on new cancellation and variation power - 9 September 2021
The FCA has published a consultation paper (CP21/28) on proposed changes to its Handbook and Enforcement Guide to reflect the new cancellation and variation power granted to it under the Financial Services Act 2021. This power is set out in Schedule 6A to the Financial Services and Markets Act 2000 (FSMA), and allows the FCA to vary or cancel firms’ permissions more quickly and efficiently if they are no longer using them.
The FCA proposes, among other things:
- to amend chapters 6 and 7 of the Supervision manual (SUP) to describe the new power and how the FCA will use it;
- to amend the Enforcement Guide to refer to the FCA’s possible use of the power alongside investigations; and
- to add guidance to the Compensation sourcebook (COMP) and the Dispute Resolution: Complaints sourcebook (DISP) to provide clarity about what happens to Financial Services Compensation Scheme (FSCS) claims and complaints when the FCA annuls a decision to cancel.
The consultation closes on 29 October 2021.
Consultation paper: New cancellation and variation power: Changes to the Handbook and Enforcement Guide (CP21/28)
Webpage
Press release
Response form
