Financial Stability Board
Enhancing the resilience of non-bank financial intermediation - FSB publishes 2021 progress report - 1 November 2021
The Financial Stability Board (FSB) has published a progress report on work to enhance the resilience of non-bank financial intermediation (NBFI). The report highlights what has been done so far to assess and address vulnerabilities that may have contributed to, and amplified, liquidity imbalances. This has included, for example, assessing liquidity risk and its management in open-ended funds and examining the framework for margin calls in centrally and non-centrally cleared markets.
The next part of the FSB’s work programme in this area will focus on increasing understanding of systemic risks and developing policies to address them. The FSB intends to submit reports related to specific areas of the programme, as well as an overall progress report, to the G20 forum in late 2022.
FSB progress report: Enhancing the Resilience of Non-Bank Financial Intermediation
Webpage
Press release
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Compensation practices - FSB publishes seventh progress report - 4 November 2021
The FSB has published its sixth annual progress report on the implementation of the FSB Principles for sound compensation practices in financial institutions. The report finds that there has been uneven implementation of the FSB’s principles and standards, with implementation in the banking sector tending to be relatively more advanced than in the insurance and asset management sectors.
The report finds, among other things, that the use of clawback is not widespread due to ongoing legal and practical constraints. It also notes that effective governance is becoming more important as the increasing application of non-financial measures to promote a sound risk culture requires the appropriate use of discretion and judgement by the board and internal control functions.
FSB progress report on the implementation of the FSB Principles for sound compensation practices and their implementation standards
Webpage
Press release
Digital Regulation Cooperation Forum
Digital Regulation Cooperation Forum - New CEO announced - 1 November 2021
The Digital Regulation Cooperation Forum (DRCF) has announced the appointment of Gill Whitehead as its chief executive. The DRCF is the organisation formed in July 2020 to ensure the robust regulation of online services by harnessing the collective expertise of its members, namely the Competition and Markets Authority (CMA), the FCA, the Information Commissioner’s Office (ICO) and Ofcom.
Ms Whitehead will start on 15 November 2022 and will bring with her insight from a career that has spanned the broadcast and digital media sector, having previously worked for Google, Channel 4 and the BBC.
Press release
HM Treasury
Net zero and transition plans - HM Treasury publishes press release and fact sheet on COP26 Finance Day - 3 November 2021
HM Treasury has published a press release announcing plans for the UK to be the world’s first net zero financial centre and calling for other countries to follow suit. The release was published as the chancellor, Rishi Sunak, hosted Finance Day at COP26 and welcomed “historic” climate commitments from over 450 private companies covering $130 trillion of financial assets and based in 45 countries across six continents.
The press release explains that UK financial institutions will be required to have a robust firm-level transition plan setting out how they will decarbonise as the UK moves towards a net zero economy by 2050. The accompanying factsheet notes that the government intends to legislate to incorporate standards for transition plans into the UK’s sustainability disclosure requirements. It also states that:
“The Government is moving towards making the publication of transition plans mandatory … It will be for the market to determine if these plans are adequate or credible. Investors, through their stewardship, may use their influence and their votes to encourage more ambition or accelerated progress.”
A new Transition Plan Taskforce, composed of industry and academic leaders, regulators, and civil society groups, will be set up to guard against greenwashing. The FCA will be formally involved and will have regard to the findings of the Taskforce.
In 2023, the UK will publish a transition pathway for the financial sector, with new policies and milestones marking the transition to net zero by 2050.
Press release: UK will be the world’s first net zero financial centre
Fact sheet: Net Zero-aligned Financial Centre
Webpage
Speech by Rishi Sunak, Chancellor of the Exchequer on COP26 Finance Day
Glasgow Financial Alliance for Net Zero (GFANZ): Press release
HM Treasury and the Financial Conduct Authority
LC&F Compensation Scheme - Scheme rules published - 3 November 2021
The Government has published a webpage announcing the launch of the compensation scheme for London Capital & Finance plc (LC&F) investors (the Scheme), together with questions and answers. Scheme rules have also been published. The Scheme was established under the Compensation (London Capital & Finance plc and Fraud Compensation Fund) Act 2021 and will be administered by the Financial Services Compensation Scheme (FSCS) on HM Treasury's behalf under Part 15A of the Financial Services and Markets Act 2000 (FSMA). The Scheme was set up to compensate bondholders with an outstanding investment with LC&F which had not already been compensated by the FSCS.
Separately, the FCA has published its Compensation (London Capital & Finance Compensation Scheme) Instrument 2021 (FCA 2021/43) (the Instrument). The Instrument amends the FCA’s Handbook to include new definitions and the FCA’s rules in connection with the Scheme.
Both the Instrument and the Scheme came into force on 3 November 2021.
HM Treasury Guidance: London Capital & Finance (LCF) Compensation Scheme Rules
Webpage
FCA Handbook Instrument: Compensation (London Capital & Finance Compensation Scheme) Instrument 2021 (FCA 2021/43)
Financial Conduct Authority
Regulatory Initiatives Grid - FCA publishes fourth edition - 1 November 2021
The Financial Conduct Authority (FCA) has published on its website the fourth edition of the Regulatory Initiatives Grid. The first edition was launched in April 2020 by the Financial Services Regulatory Initiatives Forum (FSRIF) to assist the financial services industry and other stakeholders in their planning for regulatory initiatives with a significant operational impact. The FSRIF comprises representatives from the Bank of England, the PRA, the FCA, the Payment Systems Regulator and the Competition and Markets Authority, with HM Treasury as an observer member.
Amongst the initiatives included in this new edition are new climate-related additions around the introduction of a sustainable finance disclosure regime, net zero transition plans and work on ESG issues in capital markets.
The Grid is published at least twice a year.
FSRIF Regulatory Initiatives Grid
Webpage
Dashboard webpage
Press release
October 2021 FSRIF minutes
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Data-led regulation - FCA publishes speech - 2 November 2021
The FCA has published a speech delivered by Jessica Rusu, Chief Data, Information and Intelligence Officer, on drivers of change in the financial services industry and the FCA’s response to them. Speaking at the Chief Data Officer (CDO) Exchange for Financial Services, Ms Rusu noted that:
“A data-driven industry needs a data-led regulator – a regulator which understands how data is used and leverages the same techniques as in industry to prevent harm, tackle poor practice, and support innovation and growth – enabling financial services to be the best they can be. Data is also central to our own transformation as an organisation.”
The FCA intends to publish a refreshed data strategy in due course.
Speech by Jessica Rusu on drivers of change in the financial services industry and how the FCA is responding
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ESG priorities - FCA publishes strategy and upcoming milestones - 3 November 2021
The FCA has published a webpage on its environmental, social and governance (ESG) priorities, explaining its strategy in this area, with target outcomes and the actions it expects to take to deliver them. In short, the strategy sets out the FCA’s role in supporting the transition to a “more sustainable economy, working with industry, listed companies, government and international partners”. It refers to:
“a risk of harm if the financial sector responds to rising consumer demand and awareness of ESG issues without a supportive regulatory foundation and adequate guard-rails … If the financial sector is going to help support the transition to a more sustainable future, market participants and financial services firms need high quality information, a well-functioning ecosystem and clear standards. And consumers need to be able to rely on firms to take ESG seriously, avoid ‘greenwashing’ and deliver on their ESG promises.”
The FCA’s strategy is based on the following five themes:
- transparency: promoting good disclosures along the value chain;
- trust: ensuring that the market delivers sustainable finance instruments and products that genuinely meet investors’ sustainability preferences;
- tools: government, regulators and industry all working together to share experience, develop guidance tools, and provide mutual support to develop consistent and globally-aligned standards on ESG issues;
- transition: supporting a market-led transition to a net zero, sustainable future; and
- team: ensuring the right organisational structures, resources and capabilities are in place to appropriately integrate net zero and ESG considerations into the FCA’s work.
A number of key actions are set out under each of these five headings. The document also contains tables setting out the steps taken to deliver actions emerging from the FCA’s earlier feedback statements on Climate Change and Green Finance (FS19/6) and on Building a Regulatory Framework for Effective Stewardship (FS19/7).
The FCA has also published a document summarising its key workstreams, the themes and Business Plan outcomes to which they relate, and key milestones to the end of 2022. A new Discussion Paper (DP21/4) has also been released (see the item in the Asset Management section of this Bulletin), inviting views on potential criteria to classify and label investment products, which forms part of the FCA’s strategy.
The FCA will provide interim updates on its work in this area as part of its business plan and annual report for 2022. A more detailed report on progress will be produced in early 2023.
FCA Webpage on ESG strategy
FCA’s Upcoming ESG Milestones
Financial Ombudsman Service
Reporting of complaints data - FOS publishes feedback statement - 1 November 2021
The Financial Ombudsman Service (FOS) has published a feedback statement to its October 2021 consultation on proposed temporary amendments to the way in which the FOS reports business-specific complaints data. The FOS will be implementing a time-limited change to the way in which it publishes outcome data, in line with the proposal. It is making a modification to its original proposal: rather than presenting all proactive offers to customers neutrally, the FOS will review any proactive offers made, will present only those that are fair and reasonable to customers and will challenge those that are not.
November 2021 consultation feedback statement: Temporary changes to reporting the outcomes of proactively settled complaints
See the Securities and Markets section for an item on an announcement by the IFRS Foundation of the International Sustainability Standards Board, consolidation with CDSB and VRF, and the publication of prototype disclosure requirements.
