Financial Stability Board
Regulation, supervision and oversight of ‘global stablecoin’ arrangements - FSB publishes report on implementation of high-level recommendations - 7 October 2021
The Financial Stability Board (FSB) has published a report on the progress made on the implementation of its high-level recommendations for the regulation, supervision and oversight of ‘global stablecoin’ arrangements (the Recommendations). The report:
- discusses key market and regulatory developments since the publication of the Recommendations in October 2020;
- takes stock of the implementation of the Recommendations across jurisdictions;
- describes the status of the review of the frameworks, standards, guidelines and principles of existing standard-setting bodies, including the Basel Committee on Banking Supervision (Basel Committee) and the International Organization of Securities Commissions (IOSCO), in light of the Recommendations; and
- identifies areas for consideration for potential future international work.
The report notes that, overall, the implementation of the Recommendations across jurisdictions is still at an early stage. Jurisdictions have taken, or are considering, different approaches towards implementing the Recommendations, which could give rise to the risk of regulatory arbitrage and harmful market fragmentation. The report also notes that standard-setting bodies, including IOSCO, the Basel Commitee and the Committee on Payments and Market Infrastructures (CPMI), are assessing whether and how existing international standards and principles may apply to stablecoin arrangements and, where appropriate, adjusting them in light of the Recommendations. The report stresses that a number of issues may not be fully covered by existing standards and principles and that gaps should be addressed in a holistic and co-ordinated manner across sectors.
National authorities have identified several issues relating to the implementation of the Recommendations that may warrant further consideration and where further work at international level could be useful. These include:
- conditions for qualifying a stablecoin as a ‘global stablecoin’;
- prudential, investor protection and other requirements for issuers, custodians and providers of other global stablecoin functions (e.g. wallet providers);
- redemption rights;
- cross-border and cross-sectoral co-operation and co-ordination; and
- mutual recognition and deference.
The FSB intends to continue to support the effective implementation of the Recommendations and facilitate co-ordination among standard-setting bodies. The FSB will undertake a review of the Recommendations in consultation with other relevant standard-setting bodies and international organisations. The review, which will be completed in July 2023, will identify how any gaps could be addressed by existing frameworks and will lead to an update of the Recommendations if needed.
Report: Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements
Webpage
Press release
Organisation for Economic Co-operation and Development
ESG - OECD publishes reports on investing, financial markets and climate transition - 4 October 2021
The Organisation for Economic Co-operation and Development (OECD) has published the two reports as part of its work on sustainable finance and climate transition.
The first report is entitled: ‘ESG investing and climate transition: Market practices, issues and policy considerations’ and is an input report to the G20 Sustainable Finance Working Group. It highlights the main findings from recent OECD research on environmental, social and governance (ESG) rating and investing. It sets out policy considerations to strengthen ESG practices with a view to fostering global interoperability and comparability, as well as encouraging greater alignment of environmental metrics.
The second report is entitled ‘Financial markets and climate transition: Opportunities, challenges and policy implications’. It focuses on the critical contribution that financial markets must play in achieving an orderly transition to low-carbon economies and the policies needed to support this. It considers the key elements that could be factored into market pricing of climate transition risks and opportunities, from stranded assets and production processes to renewables transition strategies. Among other things, it offers frameworks and case studies to understand how facets of the transition can affect market pricing, reviews the growing range of market products and practices that have emerged, and puts forward policy options that can support the transition.
Report: ESG investing and climate transition: Markets practices, issues and policy considerations
ESG investing report webpage
Report: Financial markets and climate transition: Opportunities, challenges and policy implications
Financial markets report webpage
European Commission
EU-US Financial Regulatory Forum - European Commission publishes joint statement following September 2021 meeting - 4 October 2021
The European Commission has published a joint statement by members of the EU-US Financial Regulatory Forum following a meeting held on 29 and 30 September 2021. Participants included representatives from the Commission, the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), the European Insurance and Occupational Pensions Authority (EIOPA), the European Central Bank (ECB), the US Department of the Treasury, the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC).
Discussions at the meeting focused on:
- Market developments and the current assessment of financial stability risks: In light of the uncertain economic outlook, participants agreed that co-operative international engagement to mitigate financial stability risks remains essential;
- Sustainable finance: Participants recognised the importance of addressing climate-related challenges for the financial sector and discussed priorities relating to sustainable finance, along with addressing climate-related financial risks;
- Multilateral and bilateral engagement in banking and insurance: Among other things, participants discussed implementation of the Basel III reforms, the treatment of foreign bank branches by both jurisdictions, the review of the Solvency II Directive (2009/138/EC) and the implementation of the EU-US covered agreement;
- Regulatory and supervisory co-operation in capital markets: Participants discussed progress in their respective legislative and supervisory efforts to ensure a smooth transition away from LIBOR, exchanged views on the upcoming EU reviews of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) and the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR), and also took stock of ongoing discussions regarding data transfers and the registration of EU funds in the US;
- Financial innovation: Participants shared views on developments in financial innovation and recent efforts by the EU and the US to improve operational resilience in the financial sector. They also exchanged views on recent developments, including regulatory proposals involving new forms of digital payments, cryptoassets and stablecoins. Participants acknowledged the importance of ongoing international work in this area and recognised the benefits of greater international supervisory co-operation with a view to promoting responsible innovation globally; and
- Anti-money laundering (AML) and counter-terrorist financing (CTF): Participants discussed progress made in strengthening their domestic AML and CFT frameworks. They also exchanged views on the opportunities and challenges arising from financial innovation in this area and explored potential areas for enhanced co-operation to combat money laundering and terrorist financing bilaterally and within the framework of the Financial Action Task Force.
Participants intend to continue engaging on these topics ahead of the next Forum meeting, which is expected to take place in early 2022.
Joint statement: EU-US Financial Regulatory Forum
Financial Ombudsman Service
Proactively settled complaints - FOS publishes consultation paper on temporary change to complaints data reporting - 4 October 2021
The Financial Ombudsman Service (FOS) has published a consultation paper on proposals to reduce customer waiting times and a temporary proposed change on its reporting of firm-specific complaints data.
The context of the consultation is the significant operational challenge the FOS is facing following unprecedented demand for its services during COVID-19. Although it is on track to exceed the complaint resolution target set out in its 2021/22 business plan, it has, nonetheless, received 90,000 more cases than anticipated in the financial year 2020/21 and this means it will end the year with a significant number of cases still to be dealt with.
As a result, the FOS is exploring a range of initiatives to help it move faster and reduce customer waiting times. This includes a temporary proposed change to the reporting of firm-specific complaints data. For a limited period, complaints that are proactively settled by businesses before the FOS issues its opinion will not count towards the relevant business’s complaint uphold rate. Instead these cases will be reported as a separate category within the FOS’s firm-specific complaints data until the end of the financial year, 31 March 2022.
The intention is this will encourage businesses to settle complaints proactively and pragmatically, and bring down the number of cases waiting to be processed. The FOS currently expects to resume the normal reporting approach in the next financial year, given complaint volumes have fallen significantly since the height of the pandemic and stabilised at lower levels for several months.
The consultation closes on 18 October 2021. The FOS intends to publish its decisions and any associated plans by 1 November 2021.
Consultation paper: Consultation on temporary changes to reporting the outcomes of proactively settled complaints
Press release
Competition and Markets Authority
Anti-competitive arrangements in the financial services sector - CMA updates timetable - 4 October 2021
The Competition and Markets Authority (CMA) has published an update on the progress and timing of its ongoing investigation into alleged anti-competitive arrangements in the financial services sector. The CMA had stated that its initial investigation would continue until September 2021. It now states that the investigation will continue from October 2021 until Q1 of 2022, including further gathering and analysis of information and evidence.
CMA Update
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Reforming competition policy and new pro-competition regime for digital markets - CMA publishes responses to BEIS consultations - 4 October 2021
The Competition and Markets Authority (CMA) has published its responses to the consultations issued by the Department for Business, Energy and Industrial Strategy (BEIS) in July 2021 on proposals for: (i) reforming competition and consumer policy; and (ii) a new pro-competition regime for digital markets.
- CMA response to BEIS consultation on competition and consumer policy reform
The BEIS consultation on competition and consumer policy reform includes proposals to bolster the CMA’s powers, and enhance and robustly enforce, consumer rights. Overall, the CMA has welcomed the government’s proposals, considering them to be a “compelling package” of legislative reform to promote fair, open and competitive markets, protect the interests of consumers and help fair-dealing businesses to grow, enter new markets and compete with larger incumbents.
The CMA sets out a number of specific concerns in relation to the structure of the markets regime, which it considers should be maintained as it currently exists, and also in relation to the CMA Panel, which has a number of responsibilities including in relation to market investigations and regulatory references and appeals. The CMA’s view is that the Panel membership should not be reduced as proposed, given this may limit the expertise and experience on the Panel, increase the possibility of conflicts of interest and impact the speed at which cases can be completed.
- CMA response to BEIS consultation on new digital markets regime
The CMA has welcomed the government’s proposals, which it considers can provide the toolkit for boosting competition in digital markets, ensuring consumers and businesses are provided with a good deal and encouraging innovation and growth in the UK economy. The CMA comments on several aspects of the proposed new regime, including: the Strategic Market Status (SMS) test, which will determine the firms subject to the regime; the development of Codes of Conduct for these firms; the need for pro-competitive interventions to ensure SMS firms do not abuse their strong positions in digital markets; a new SMS merger regime so that acquisitions involving SMS firms can be properly scrutinised by the CMA and stopped if they pose a threat to competition; and the funding of that regime.
The CMA also comments on how the Digital Markets Unit (DMU) will work with other regulators. The DMU was established in non-statutory form in April 2021 and has been providing advice to the government on the potential design of the new regime. Regulators such as the FCA play a vital role in digital markets and the CMA states that the DMU will need to work closely with regulators to ensure approaches are effectively co-ordinated, which, in turn, will require information-sharing and close joint working between regulators. In some cases, regulators other than the DMU may be better placed to take action forward under the regime where it sits within the markets they regulate. More generally, the regime will be most effective and coherent if the DMU is able to take account of the views of other regulators when reaching its decisions.
The CMA states that it, and the non-statutory DMU, will continue to provide all practical support to the government in the development of the regime.
CMA Response: Reforming Competition and Consumer Policy – Driving growth and delivering competitive markets that work for consumers (CMA149con)
Webpage
CMA Response to the government’s consultation ‘A new pro-competition regime for digital markets’
Webpage
Press release: CMA welcomes government proposals on new powers
Financial Services Skills Commission
Future skills - Financial Services Skills Commission launches framework - 7 October 2021
The Financial Services Skills Commission (FSSC) has published its Future Skills Framework to enable organisations to identify their future skills needs and prioritise long-term-investment in those areas.
The framework identifies those skills where there are acute shortages or where there is rapid and growing demand. The online tool also provides a uniform set of eight essential industry skills and behaviours including cyber security, machine learning and artificial intelligence; user experience; and adaptability, designed to help individuals currently working in, or aspiring to work in, financial services.
The framework will be updated with a new set of priority skills in 2022. It is part of a wider suite of skills tools designed by the FSSC that includes a skills gap analysis toolkit to be launched in early 2022. The FSSC developed the framework in collaboration with industry and the Chartered Insurance Institute.
Press release: Financial Services Skills Commission launch online Future Skills Framework
Webpage
