BEING BETTER INFORMED - FS REGULATORY BULLETIN - PWC
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Being better informed FS regulatory bulletin FS Regulatory Insights August 2021 In this month’s edition: • Conduct: FCA sets out priorities in annual business plan • Diversity and inclusion: Regulators eye policy measures • Asset management: FCA raises assessment of value concerns • Prudential: PRA confirms Basel implementation rules
Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Executive summary
Representatives and their principal firms, and annually. The FCA identified a number of In other prudential news, the PRA confirmed its
how asset managers present the ESG fundamental issues where firms have not approach to implementing a range of Basel
attributes of their investment products. For conducted the required underlying analysis, Committee standards. The majority of the
more details see our At a glance analysis. and the review findings make challenging proposals will be implemented as consulted on,
reading for firms. For more information see our but in light of industry feedback the PRA is
Also of relevance to all firms is the FCA, PRA At a glance briefing. making a number of policy changes. These
and Bank of England’s joint discussion paper include the required stable funding factors
Hannah Swain on D&I. The regulators discuss the introduction Meanwhile fund managers will have been under the NSFR, large exposures proposals,
Director, FS Regulatory Insights of regulatory reporting of D&I data, as well as a digesting the FCA’s Dear Authorised Fund standardised approach for measuring
range of potential policy measures. These Manager (AFM) Chair letter, which sets out counterparty credit risk exposures and
swain.hannah@pwc.com include board representation targets, senior some guiding principles on ESG and treatment of exposures to Collective
accountability, remuneration, and the public sustainable investment. To help build trust in Investment Undertakings. For more
disclosure of D&I data and policies. They plan the sustainable investment market, the information, read our At a glance publication.
to apply the measures to all financial services regulator is putting forward guiding principles to
firms, incorporating proportionality into any support AFMs in complying with existing You can find a range of additional regulatory
policy developments. The regulators plan to requirements. It wants to see fund disclosures insights on our PwC webpage, including the
Welcome to this edition of ‘Being better consult on more detailed proposals early next accurately reflect the nature of the fund’s latest episode of our Risk & Regulation
informed’, our monthly FS regulatory year. See our At a glance publication for more sustainable investment approach, both in pre- Rundown podcast series, which looks at the
bulletin, which aims to keep you up to information. contractual disclosures and in periodic FCA’s proposals for a new consumer duty, and
speed with significant developments reporting. The regulator outlines principles how the UK’s regulatory framework is evolving
In the financial crime space, HMT published a designed to clarify the application of existing outside of the EU.
and their implication across all the call for evidence to review the UK's AML/CFT FCA handbook rules when designing,
financial services sectors. regulatory and supervisory regimes. It also delivering and disclosing information on ESG- We hope you enjoy this edition of Being better
issued a consultation paper which proposes a focused funds. For more detail see our At a informed.
set of amendments to the Money Laundering, glance publication.
Terrorist Financing and Transfer of Funds
The regulators packed a lot of updates into (Information on the Payer) Regulations (MLRs In the insurance sector, HMT published a
July ahead of the usual summer slowdown, 2017), to ensure the UK continues to meet response to its earlier call for evidence on the
including publication of the FCA’s annual international standards. Firms will need to Solvency II review. HMT confirms its priorities
business plan. This is an important document consider the implications of the proposals, for reforming the legislation, and asks the PRA
for all firms, setting out the regulator’s priorities particularly cryptoasset firms and those that to model different options for reform. As part of
for the year ahead. The regulator identifies six could be impacted by proposed changes to the this work, the PRA is carrying out a Hannah Swain
cross-market areas of focus: fraud, financial scope of the regime. See our At a glance Quantitative Impact Study this summer, before Director, FS Regulatory Insights
resilience, operational resilience, improving briefing for more information. consulting on a package of reforms in early M: +44 (0) 7803 590553
diversity and inclusion (D&I), enabling a more 2022. The PRA issued a Dear CEO letter E: swain.hannah@pwc.com
sustainable financial future, and international In the asset management sector, the FCA setting out details of the impact study, which
cooperation. Its consumer priorities remain published the results of its thematic review into will require firms to model the impact of
broadly consistent with previous years, with an firms’ assessment of value (AoV) reporting. potential reform options by October 2021. See
added emphasis on improving outcomes The AoV was one of the remedies from the our At a glance briefing for more information on
through its consumer duty proposals. In 2017 Asset Management Market Study, the Dear CEO letter.
wholesale markets, the FCA plans to increase requiring firms to assess the value of their UK
its supervisory focus of: Appointed funds, and publish their findings for investors
2 • PwC | FS regulatory bulletin | August 2021
Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Contents
How to read this bulletin? Executive summary 2
Review the Table of Contents and the relevant
Sector sections to identify the news of interest. Cross sector announcements 4
We recommend you go directly to the
topic/article of interest by clicking in the
Banking and capital markets 10
active links within the table of contents.
Asset management 12
Insurance 14
Monthly calendar 17
Glossary 19
Contacts 25
3 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Cross sector announcements
In this section: Benchmarks EC consults on third country benchmark
administrators
FCA and FSB: Push ahead with LIBOR
Benchmarks 4 transition The EC issued for consultation a draft
Conduct 5 Edwin Schooling Latter, The FCA’s Director of Delegated Regulation supplementing the
Financial crime 6 Markets and Wholesale Policy, spoke on BMR on 30 July 2021. The paper establishes
Hannah Swain LIBOR transition on 5 July 2021. He reminded the fees which third country benchmark
Market infrastructure 7
FS Regulatory Insights participants to continue their active transition administrators need to pay ESMA for
Prudential 7 and not to wait for the final policy statement on supervision as well as the procedure ESMA
Supervision 7 swain.hannah@pwc.com synthetic LIBOR. He also encouraged needs to follow to impose fines or penalties on
regulated UK firms, looking to use the so-called benchmark administrators under its
Sustainability 8
'credit sensitive' rates in UK-based business, to supervision. The consultation closes on
Wholesale markets 9 consider the risks carefully. 27 August 2021.
FCA consults on derivatives trading obligations
Separately, the FSB issued a progress report
on LIBOR transition to the G20 on 6 July 2021. The FCA issued a consultation on proposed
The body encourages regulators to set changes to derivative trading obligations on
consistent expectations that firms end the use 14 July 2021. The proposed changes would
of LIBOR in new products as soon as see GBP LIBOR swaps replaced by OIS
practicable, irrespective of currency or referencing SONIA. The consultation closes on
geographic location. 25 August 2021. Decisions on instruments tied
to other RFRs are expected at a later date.
FCA updates MiFIR data reporting
requirements
The FCA published a brief set of FAQs on
9 July 2021 to clarify MiFIR data reporting
requirements related to transactions or
financial instrument reference data impacted
by reference rate reform. Separately, the
regulator launched an updated and redesigned
LIBOR transition landing page to mark the final
six months of the sterling transition.
4 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Conduct The paper is open for comments until 30 provide further data on the result of their FAQs on vulnerable customer guidance
Regulators to strengthen diversity measures September 2021, and the regulators plan to diversity policies considering these wider The FCA published a number of FAQs
for firms consult on more detailed proposals in Q1 2022. aspects where possible. related to guidance on the fair treatment of
The BoE will separately consider how to vulnerable customers on 19 July 2021.
The FCA, PRA and BoE published a joint The proposals follow a joint discussion paper
develop proposals for FMIs. See our At a Common questions covered within the
discussion paper on diversity and inclusion on diversity and inclusion in financial services,
glance publication for more information. document include how the guidance applies to
(D&I) in financial services on 7 July 2021. issued by the FCA, PRA and BoE earlier in
FCA consults on D&I disclosure for listed digital customer journeys, how to implement
The regulators discuss the introduction of the month.
companies effective training and further details on ways to
regulatory reporting of D&I data, as well as a
The consultation closes on 20 October 2021, adhere to GDPR.
range of potential policy measures. The FCA is consulting on requiring listed
and the FCA says it intends to make relevant
These include board representation targets, companies to publicly disclose whether they FCA confirms Handbook changes
rules by late 2021.
senior accountability, remuneration, and the have met specific targets for gender and ethnic The FCA confirmed a number of minor
public disclosure of D&I data and policies. minority representation on their boards. It HMT proposes extending SM&CR to FMIs changes to its Handbook rules, in Handbook
The overall aim is to drive greater diversity and issued the proposals in CP12/24: Diversity and HMT issued a consultation proposing to create Notice No 90 on 23 July 2021.
more inclusive cultures within the financial inclusion on company boards and executive a SM&CR for FMIs on 20 July 2021. The
FCA writes to Insolvency Service
services sector, in turn creating positive committees on 28 July 2021. proposed regime would closely mirror the
The FCA published a letter sent to the
outcomes for customers, firms and markets. The regulator is proposing changes to its existing SM&CR for other parts of the financial
Insolvency Service on 20 July 2021. The FCA
Listing Rules to require listed companies to services sector, comprising a Senior Managers
The regulators envisage applying the highlights its continued focus on monitoring the
publish such a statement annually on a Regime, a Certification Regime, and conduct
measures to all financial services firms, but quality of debt advice given by regulated
‘comply or explain’ basis. The proposed rules for all staff.
incorporating proportionality into any policy entities and its supervisory focus on this area.
developments. The regulators are inviting targets are: at least 40% of the board should It would give the BoE, as the FMI regulator,
FCA finalises rules for funeral plans
views on what firm categorisation may be best be female, at least one senior board position new rule-making, supervisory and enforcement
to support this. Options include aligning to should be a woman, and at least one member powers similar to those held by the FCA and The FCA published PS21/8: Regulation of
those used under SM&CR (Enhanced, Core, of the board should be from a non-white ethnic PRA in relation to the existing SM&CR. funeral plans and CP21/20: Further proposals
Limited) or the Companies Act (micro-entity, minority background. The regulator is also The FMIs covered by the proposal are CCPs, for the regulation of funeral plans on 21 July
small, medium and large). proposing requiring companies to publish CSDs, payment systems recognised under 2021. Through these publications the FCA
data on the gender and ethnicity make-up the Banking Act 2009, and certain service makes a number of final rules regarding the
Regular reporting of employee data is also of their board and most senior level of extension of the regulatory perimeter to include
providers to those systems.
being considered. The regulators are executive management. both the provision and arranging of pre-paid
considering carrying out a pilot data survey this HMT asks for views on the proposal to create funeral plans.
autumn, to inform reporting and future policy. Further, the FCA is consulting on changes to a regime for FMIs, as well as on how an
They welcome views on which metrics to its disclosure and transparency rules to require SM&CR might be appropriately tailored to The first thing for relevant firms to note is that
include in reporting, acknowledging most firms companies to ensure any existing disclosure these entities. the application gateway opens from September
capture data on gender but reporting would go on diversity policies addresses key board 2021, with firms operating in this space
committees, and considers broader aspects of The consultation closes on 22 October 2021. requiring authorisation by 29 July 2022 – the
beyond this to include other characteristics,
diversity. This could include characteristics HMT says the Government intends to legislate date at which the funeral plan rules come
such as disability, sexual orientation and
such as ethnicity, sexual orientation, for the new regime when parliamentary time into force.
educational attainment.
disability or lower socio-economic background. allows. The BoE would consult on the new
The FCA also encourages companies to rules before they came into effect.
5 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
The FCA has made final rules governing FCA sets out areas of focus for platforms Other themes include Brexit, calling on firms to Financial crime
sector
conduct standards, product governance, fully consider the impacts on the firm and HMT puts AML/CFT regime in the spotlight
resolution and compensation, dispute The FCA published its platforms portfolio letter customers, and diversity and inclusion, where On 22 July 2021, HMT released a Call for
resolution, the application of SM&CR to on 26 July 2020, setting out its concerns, the regulator signals this will be a key area Evidence (CfE) to review the UK's AML/CFT
providers and intermediaries, and reporting expectations and strategy for supervising of focus. regulatory and supervisory regimes, and a
requirements. The rules relevant to funeral platforms.
FCA’s final rules on investor protections in Consultation Paper with proposals for
plan providers will sit within a newly created SPACs amendments to the Money Laundering,
Among the themes the regulator calls out are
section of the Handbook, the Funeral Plan: Terrorist Financing and Transfer of Funds
technology and operational resilience, The FCA published a final policy statement on
Conduct of Business Sourcebook (FPCOB). (Information on the Payer) Regulations 2017
highlighting the IT outages and severe the changes to its listing rules for certain
While the entire policy statement needs to operational issues experienced by firms during special purpose acquisition companies (MLRs 2017).
be digested by firms now requiring the pandemic due to a surge in trading (SPACs) on 27 July 2021. The FCA has
The CfE follows the Economic Crime plan,
authorisation, significant changes due to activities. The FCA stresses that it expects removed the presumption of suspension for
which committed HMT to look at the overall
FCA regulation include: firms to invest in their systems to ensure they certain SPACs. Instead, the FCA is providing
effectiveness of the regimes, whether key
keep pace with the growth of their business an alternative approach for SPACs which are
• a ban of funeral instalment plan products elements are operating as intended, and the
and remain fit for purpose. It adds that any IT otherwise required to provide detailed
which do not always deliver a funeral (after structure of the supervisory regime. It will look
upgrades and migrations should undergo information on a proposed target to the market
a certain moratorium period) at issues such as whether the rules relating to
thorough analysis and testing to reduce to avoid being suspended.
due diligence have become too prescriptive,
• new standards to ensure the advertising of incidents and outages that cause harm to
In order to benefit from the new approach, whether the current approach helps or stifles
plans is conducted fairly, which includes a customers. Firms are also told to have
SPACs are required to provide additional innovation, and what supervisors’ role should
ban on cold calling contingency plans in place to deal with
investor safeguards, including: be in monitoring SARs.
operational disruptions and ensure that the
• commission payments to intermediaries will Alongside the CfE, the Consultation Paper
plans have been tested, and to expect specific • a ‘redemption’ option allowing investors to
be banned to ensure products represent proposes a number of changes to the MLRs.
data requests about service disruptions on an exit a SPAC prior to any acquisition being
fair value These include exempting Account Information
ongoing basis. Firms are further reminded of completed
• fitness and proprietary assessments will the importance of the FCA’s new operational Service Providers, Payment Initiation Service
• ensuring money raised from public
be required for all firms selling funeral resilience rules, which take effect in Providers, and bill payment, telecom, digital
shareholders is ring-fenced
plans to improve governance standards March 2022. and IT service providers from the scope of the
and oversight. • requiring shareholder approval for any MLRs as they can be considered low risk.
In addition, the regulator highlights platform
proposed acquisition Other proposals include: providing
The consultation paper proposes specific transfers as an area of focus. The FCA
supervisors with powers of access to the
rules dealing with the resolution of firms, welcomes the progress STAR has made on • a time limit on a SPAC’s operating period if
content of SARs, and implementing the FATF
FSCS protection, structural provisions and improving transfer performance to date, but will no acquisition is completed.
Recommendation 16 (the so called ‘travel rule’)
several pieces of guidance for both FPCOB continue to monitor metrics related to transfer
SPAC issuers unable to meet the conditions, or for cryptoasset firms.
and PERG. times and focus on firms that are seen as
those choosing not to, will continue to be
outliers. In 2022 it will carry out a review of the Both the CfE and Consultation Paper close for
subject to a presumption of suspension. The
progress made and consider whether it needs responses on 14 October 2021. Any
new rules and guidance came into force on 10
to take further regulatory action. consultation proposals that are adopted will be
August 2021.
taken forward through secondary legislation
6 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
due to be laid in spring 2022. HMT has Prudential Supervision The FCA’s consumer approach remains
committed to publishing a report into its full PRA consults on designating investment firms FCA sets out priorities for the year ahead focused on issues such as ensuring fair value
review by 26 June 2022. The PRA published CP15/21: Designating The FCA published its 2021/22 Business Plan in a digital age, enabling effective consumer
investment firms on 5 July 2021, proposing on 15 July 2021, setting out its priorities for the investment decisions, making payments safe
For further information see our At a glance
minor changes to its policy on designating next 12 months. The regulator outlines its and accessible, and ensuring consumer credit
briefing.
investment firms. This reflects HMT’s priorities for consumers and for wholesale markets work well. In addition, the FCA
HMT clears up amendment to high risk stresses the importance of improving
previously proposed amendments to the markets. It also identifies six cross-market
countries list
PRA RAO. areas of focus: fraud, financial resilience, consumer outcomes through its consumer duty
HMT published a statement on 8 July 2021 proposals. It also plans to investigate ‘sludge
operational resilience, improving diversity and
providing further explanation regarding an The regulator proposes that there will usually practices’, which make it hard for consumers to
inclusion, enabling a more sustainable financial
amendment made to the Money Laundering be six months, rather than three months, cancel a product or service online, and to
future, and international cooperation.
and Terrorist Financing Regulations 2021 for between the Prudential Regulation Committee shortly publish its consumer investments
High Risk Countries, to replace reference to designating an investment firm and it becoming The FCA sets out how it’s changing its overall strategy (after launching a call for input in
the EC's list of high risk countries with a new PRA-regulated. It also proposes that the PRA approach, by: September 2020).
list of countries defined in the Money takes into account whether or not an
• improving the way it uses data and On financial crime, the FCA welcomes the
Laundering Regulations. investment firm is a clearing member of a
technology, so it can identify harm and proposal to include investment fraud in the
CCP offering clearing services to other
EC proposes AML/CFT package misconduct more quickly Online Safety Bill, but says this should go
financial institutions (that are not clearing
The EC presented a package of legislative members themselves) when making a • continuing with a targeted litigation further and apply to online advertisements
proposals on 20 July 2021, to strengthen the designation decision. strategy, to provide legal clarity where For more information, see our At a glance
EU’s AML/CFT rules. The package consists of: needed (as it did with business interruption
In addition, the PRA deletes any obsolete text briefing.
a Regulation establishing a new EU AML/CFT insurance)
Authority; a Regulation on AML/CFT, covering and makes other minor textual amendments. It FCA updates on several workstreams
areas such as customer due diligence and also proposes to change the Definition of • challenging firms to focus on consumer The FCA published an announcement
beneficial ownership; a sixth Directive on Capital Part to increase the base capital outcomes, so consumers can make containing updates on four outstanding
AML/CFT (‘AMLD 6’); and a revision of the resources requirement for designated decisions in their interests workstreams on 16 July 2021. The FCA has
2015 Regulation on Transfers of Funds to trace investment firms from €730,000 to £750,000 decided to discontinue its work on assessing
• proactively addressing harm at the
transfers of cryptoassets. and to denominate it in sterling. retirement income advice, as well as diagnostic
boundaries of the regulatory perimeter.
Market infrastructure The consultation closes on 5 October 2021, work on business models that potentially
The FCA’s wholesale market priorities include benefit from customers not repaying debts.
ESMA issues methodology for assessing third with the changes taking effect on
market reform (linked to HMT’s Wholesale The FCA has also paused its post-
country CCPs 1 January 2022.
Markets Review), long-term investment funds, implementation review of SME access to the
ESMA published a methodology on 13 July and fund liquidity. It also plans to increase its FOS, along with de-anchoring remedies in the
2021 for assessing whether a third country supervisory focus of: Appointed credit card market.
CCP or some of its clearing services are of Representatives (ARs) and their principal firms
such systemic importance that the CCP should (and will consider changes to the AR regime),
not be recognised to provide certain clearing and of how asset managers present the ESG
services or activities in the EU. attributes of their investment products.
7 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
FCA confirms regulatory fees enable the FCA to prevent harm faster. The possible social taxonomy, and proposals to The standards have now been submitted for
The FCA confirmed its fees for 2021/22 in proposed decisions to be made by FCA staff amend aspects of the prudential regulatory the co-legislative process.
PS21/7: FCA regulated fees and levies include: framework to enhance financial resilience from EC adopts sustainability disclosure
2021/22 on 16 July 2021. sustainability risks. This strategy follows the requirements
• imposing a requirement on a firm or varying
EC’s initial Sustainable Finance Action Plan
PRA sets fees and levies for 2021/22 permissions, by limiting or removing certain On 6 July 2021 the EC adopted the
that was launched in 2018.
The PRA published PS15/21: Regulated fees types of business delegated act supplementing Article 8 the
and levies: rates for 2021/221 on 6 July 2021. EC launches green bond standard Taxonomy Regulation. It sets out the
• making a final decision in relation to a
The statement sets out the fee rates to meet The EC published the proposed European disclosure requirements around the
firm’s application for authorisation or an
the PRA’s 2021/22 Annual Funding green bond standard (EUGBS) on 6 July 2021. proportion of environmentally sustainable
individual’s approval that has been
Requirement for the financial period 1 March This voluntary standard is targeted at economic activities for financial and non-
challenged
2021 to Monday 28 February 2022. The paper enhancing the green bond market. It will be financial institutions.
also contains amendments to the Fees Part of • making a final decision to cancel a firm’s open to any issuer of green bonds, including TPR sets out climate risk guidance
the PRA Rulebook. permissions because a firm does not meet companies, public authorities and issuers
On 5 July 2021 TPR consulted on new
the FCA’s regulatory requirements located outside of the EU.
TSC issues report on future regulatory guidance for pension trustees and advisers on
framework • the decision to start civil and/or criminal There are four key requirements under the climate-related risks and opportunities. It aims
The TSC published its report on The Future proceedings. proposed framework: to help trustees of occupational pension
Framework for Regulation of Financial schemes meet enhanced TCFD-aligned
The consultation closes on 17 September • Taxonomy alignment: The funds raised by
Services on 6 July 2021, as part of its inquiry governance and reporting obligations
2021. The FCA aims to publish a policy the bond should be allocated fully to
into the future of financial services. The report introduced by the Department for Work and
statement in November 2021. projects aligned with the EU Taxonomy.
addresses the issues raised by HMT’s October Pensions, which will take effect from 1 October
2020 consultation on the future regulatory Sustainability • Transparency: There must be full 2021. The consultation, which closes on
framework which are relevant to the TSC’s EC launches renewed Sustainable Finance transparency on how bond proceeds are 31 August 2021, also includes TPR’s monetary
work. Strategy allocated through detailed reporting penalties policy, outlining its approach to
On 6 July 2021, the EC published its renewed requirements. imposing penalties for non-compliance.
FCA proposes new decision-making approach
sustainable finance strategy, which sets out
The FCA issued CP21/25: Issuing statutory • External review: All EU green bonds must
actions for five broad areas: transition finance;
notices – a new approach to decision makers be checked by an external reviewer who
inclusiveness; resilience of the financial system
on 29 July 2021. The consultation paper must ensure that the green bonds are
to sustainability risks; contribution of the
proposes changes to the FCA’s decision- aligned with the EU Taxonomy and meet
financial system to addressing sustainability
making process, which form part of the transparency requirements.
issues; and supporting the development of
regulator's wider transformation under new
international sustainable finance initiatives. • Registration of external reviews with
leadership.
ESMA: All external reviewers will need to
The EC's strategy will result in a range of new
The paper proposes moving certain decisions be registered and subsequently supervised
initiatives including: a possible extension of the
from the FCA’s Regulatory Decisions by ESMA to uphold quality and reliability of
EU taxonomy to recognise a wider range of
Committee (RDC) to the FCA executives. services and protect investors.
economic activities with intermediate
According to the FCA, this would streamline
environmental credentials, work to explore a
decision-making and governance as well as
8 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Wholesale markets • increasing the minimum market
FCA extends relaxation of commodities capitalisation threshold for both the
derivatives regime premium and standard listing segments for
The FCA published a statement on 9 July 2021 shares in ordinary commercial companies
extending supervisory easements related to from £700,000 to £50m
the MiFID commodities derivatives regime that
• making minor changes to the Listing Rules,
were originally introduced in December 2020.
Disclosure Guidance and Transparency
The additional easements mean that the
Rules and the Prospectus Regulation
regulator will not take supervisory or
Rules to simplify the FCA’s rulebooks
enforcement action in relation to commodity
and reflect changes in technology and
derivative positions that exceed position
market practices.
limits on cash-settled commodity derivative
contracts, unless the underlying is an The regulator thinks these proposals will
agricultural commodity. broaden investor access to companies in
higher growth sectors by improving flexibility
FCA eyes measures to improve effectiveness
of primary markets and accessibility in the FCA’s listing regime as
a gateway to the UK’s primary markets.
The FCA published CP21/21: Primary Markets
Effectiveness Review on 5 July 2021, setting The consultation also includes a chapter
out proposals to enhance the effectiveness of seeking views on the overall structure of the
the UK’s primary markets. This follows the listing regime and whether wider reforms
recent UK Listing Review chaired by Lord Hill, could improve the regime's longer-
and the Kalifa Review of UK FinTech, both of term effectiveness.
which made specific recommendations for
Stakeholders have until 14 September 2021
improvements to the regime.
to respond to the consultation, after which
The FCA’s proposals seek to address the the FCA will look to publish final rules before
recommendations in these reviews to ensure the end of 2021. Depending on feedback to the
the UK remains an attractive place to grow and discussion section of the paper, the FCA may
list successful companies. The consultation also publish a separate consultation paper on
paper sets out the following measures: wider reform of the primary markets
regulatory framework.
• allowing a targeted form of dual class share
structures within the premium listing
segment to encourage innovative
companies onto public markets sooner
• reducing the free float thresholds from 25%
to 10% to reduce potential barriers for
issuers created by current requirements
9 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Banking and capital markets
In this section: Conduct between ATMs or bank branches, and/or
FCA resumes Credit Information Market Study minimum numbers per population in a given
Conduct 10
The FCA announced in an update on area, would be useful metrics to take forward in
Consumer issues 10 the form of regulatory rules. This would be in a
30 July 2021 that it has resumed its Credit
Finance 10 Information Market Study. The regulator says it bid to maintain cash for consumers who find
themselves isolated from services.
Payments 11 Luke Nelson intends to engage with industry and consumer
FS Regulatory Insights groups and complete its analysis during Q3 The final part of the consultation proposes the
Prudential 11
2021, ahead of publishing an interim report in FCA takes sole responsibility for the
luke.a.nelson@pwc.com Q1 2022. The interim report will set out the development, supervision and enforcement of
FCA’s emerging findings (including on lenders’ policy, rules and guidance relating to the
reporting of forbearance) and its early thinking access of cash.
on any potential remedies.
The consultation closes on 23 September
Consumer issues 2021.
HMT eyes measures to maintain access
to cash FCA and PSR assessment of cash
HMT published its Access to Cash: The FCA and PSR jointly published an
Consultation, in light of responses to its Call for assessment of the UK’s cash infrastructure on
Evidence and alongside an Impact 23 July 2021. The paper explores the overall
Assessment, on 1 July 2021. HMT is cash coverage of the UK, which is determined
advancing both the debate and accountability to be healthy, along with how some vulnerable
surrounding the continued availability of cash consumers rely upon cash, cash acceptance
by proposing a number of new policy levers. trends and an overview of recent innovations in
the market.
Firstly, it proposes the introduction of
'Designated Firms'. This would be a set of firms
Finance
upon which the Government and regulators Basel Committee finalises SFT amendments
could impose certain requirements related to The Basel Committee finalised technical
maintaining cash access. These are likely to be amendments to the calculation of minimum
firms with important status within the UK’s cash haircut floors for securities financing
infrastructure – such as high street banks, the transactions (SFTs) on 1 July 2021.
post office and ATM providers. The amendments address an interpretative
issue relating to collateral upgrade transactions
The second proposal relates to geographical
and correct a misstatement of the formula used
metrics. HMT suggests a minimum distance
10 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
to calculate haircut floors for netting sets of of capital, reporting and disclosure loss given default parameter floors as part of requirements, information sharing, operational
STFs. They follow a consultation issued in requirements. The proposals broadly reflected the UK’s implementation of Basel 3.1. resilience and governance. The PRA says it
January 2021. the EU CRR II package but differed in a will take a proportionate approach to
One change that has gone ahead, and is
number of areas. implementation of the requirements.
Payments reflected in SS11/13, is the need for firms
This means that where firms are not currently
PSR updates on the NPA delivery The majority of the proposals will be applying the IRB approach to embed an
meeting the PRA’s expectations, they will be
The PSR issued a policy statement and implemented as consulted on, but in light of exposure-weighted average risk weight of at
given time to do so.
consultation on reducing the delivery of the industry feedback the PRA is making a number least 10% for all UK residential mortgage
New Payments Architecture (NPA) on of policy changes. These include the required exposures. These changes need to be in place In SS5/21, the PRA calls on firms to undertake
29 July 2021. Pay.UK will phase the stable funding factors under the NSFR, large for 1 January 2022. a gap analysis of where they may not currently
development of the NPA exposures proposals, standardised approach PRA removes constraints on shareholder meet the expectations set out in the statement
by narrowing the scope of the central for measuring counterparty credit risk distributions and share this with their supervisory team, with
infrastructure services contract. The PSR exposures and treatment of exposures to a plan for meeting the requirements.
PRA released a statement on 13 July 2021
also consults on the related draft Collective Investment Undertakings.
providing an update on shareholder For more information, please refer to our At a
legal instruments. The consultation closes on The material in PS 17/21 is published as near- distributions by large UK banks. Having glance publication.
10 September 2021. final. The PRA plans to publish the final rule reviewed its approach to shareholder
EBA updates on intermediate EU parent
Prudential instruments in a subsequent policy statement, distributions, the PRA judges that banks undertaking
after HMT has laid a required Statutory remain well capitalised and resilient to
Basel Committee reports early lessons from The EBA issued its final guidelines on the
COVID-19 Instrument. The policies are intended to come economic shocks. It has therefore removed the
monitoring of the threshold and other aspects
into force on 1 January 2022. constraints within which it asked bank boards
The Basel Committee issued a report on 6 July of the establishment of an intermediate EU
to determine the appropriate level of
2021 on the impact of Basel reforms For more information on the changes and what parent undertakings (IPU). The guidelines
distributions in relation to full-year 2020 results,
implemented during the pandemic. The they mean for firms, please read our At a specify how third country groups which are in
with immediate effect.
preliminary assessment is part of a broader glance publication. scope of the CRD V requirement should
evaluation of the reforms’ effectiveness. PRA sets out expectations for calculate and monitor the total value of their
PRA updates IRB supervisory statement international banks
According to the report, higher quality capital assets in the EU, to ensure timely application
and liquidity levels helped banks absorb the The PRA published an update to SS11/13: The PRA published SS5/21 International of the IPU requirement.
significant impact of the COVID-19 shock. Internal Ratings Based (IRB) approaches as banks: The PRA’s approach to branch and
part of its policy statement PS16/21: IRB UK subsidiary supervision on 26 July 2021. On the
PRA confirms Basel implementation rules
mortgage risk weights – managing deficiencies same day, it also published PS 19/21, setting
The PRA published PS 17/21 Implementation in model risk capture on 6 July 2021. out its supervisory approach to PRA-authorised
of Basel Standards, confirming its approach to banks and designated investment firms that
As a result of the consultation process, the
implementing a range of Basel Committee are headquartered outside the UK or are part
PRA has decided not to introduce a 7%
standards, on 9 July 2021. It follows a previous of a group based outside of the UK.
minimum risk weight on individual mortgage
consultation (issued in February 2021), which
exposures, nor will mortgage exposures in In PS19/21, the PRA largely confirms the
proposed new requirements to implement a
default be expected to carry a 10% average approach previously consulted on, making a
range of Basel Committee reforms, including
minimum risk weight. Instead, it will consider number of changes and clarifications in certain
the NSFR, LCR, large exposures regime,
the calibration of the probability of default and areas. These include the implementation of the
counterparty credit risk, market risk, definition
11 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Asset management
In this section: Conduct merged criteria, resulting in a lack of focus on
FCA finds failings in value assessments by the specific requirements.
Conduct 12 asset managers
Funds 12 Firms must undertake the AoV at a unit-class
The FCA published the results of its thematic
level. The FCA found that not all firms
Prudential 13 review into the ‘assessment of value’ (AoV)
undertook the AoV at a unit-class level and,
Andrew Strange reporting by asset managers on 6 July 2021.
Sustainability 13 FS Regulatory Insights separately, in some cases firms had not
The regulator identified several fundamental
considered net performance, or had done so
andrew .p.strange@pwc.com issues where firms have not conducted the
for only for one unit class (typically the
required underlying analysis, and has called for
wholesale unit).
improvements to be made during the next
reporting period. The FCA will revisit firms' efforts in 12-18
months. It expects firms to have taken on
The FCA found that firms which had clearly
board its findings and addressed any
defined procedures and metrics for collating
shortcomings. The regulator says it will
and presenting information to the AFM board
consider further action then if firms are still not
generally made informed decisions about
complying with the rules.
funds’ value. However, in some firms, the
information was either insufficient or poorly See our At a glance briefing for further details.
designed to enable a proper assessment. Funds
There was also a disconnect between the
UK regulators maintain focus on fund liquidity
conclusions of the board, and the underlying
data, and on some occasions a lack of The BoE published a report on Assessing the
sense checking. resilience of market-based finance, which
includes conclusions from the joint BoE and
The role of independent non-executive FCA review into open-ended funds.
directors (INEDs) saw mixed results. Many The regulators have suggested a possible
have been recently appointed and, while many framework for classifying liquidity for funds,
were well informed, the FCA expected INEDs as well as setting out considerations around
to provide greater challenge to the process and the calculation and use of swing pricing.
value in funds. They will consider these conclusions in the
Not all firms had assessed the minimum seven context of ongoing international work on open-
criteria. Where firms had weighted the criteria, ended funds.
this led to insufficient focus on certain areas,
notably economies of scale. Some firms also
12 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Prudential Sustainability comprehensible. Firms should disclose IOSCO has proposed a series of
FCA issues second policy statement on IFPR FCA launches ESG principles for asset information to enable consumers to make recommendations to mitigate these risks,
implementation managers informed investment decisions. Periodic fund including recommending that regulators
The FCA published PS21/9: Implementation of The FCA published a Dear AFM Chair letter on reporting should include evaluation against increase their focus on ratings and data
Investment Firms Prudential Regime on 19 July 2021, which sets out some guiding stated ESG characteristics, themes or providers, and consider whether they have
26 July 2021. This is the second Policy principles on ESG and sustainable outcomes, as well as evidence of actions taken sufficient powers to oversee these firms.
Statement on IFPR implementation and follows investment. The FCA notes that, as the in pursuit of the fund’s stated aims.
Other recommendations were targeted at the
the consultation issued in April 2021 (read our sustainable investment market continues to
The FCA expects firms to follow the guiding providers themselves, including encouraging
summary here). The FCA finalises rules related mature, it has received a number of poor
principles now when applying for a new fund their products to be based on publicly-available
to many key aspects of the regime, notably quality authorisation applications for funds
authorisation or managing funds on an ongoing company data where possible, providing
own funds requirements, liquidity, ICARA, pursuing a sustainable investment objective, or
basis. It will separately be working with HMT to transparency around their sources and
supervisory approach and remuneration. promoting ESG characteristics or themes.
develop the Integrated Sustainability methodologies, and ensuring that they identify
The FCA has largely implemented the To help build trust in the sustainable Disclosure Requirements that were announced and manage any conflicts of interest. IOSCO
proposals as consulted on, but has made some investment market, the regulator is putting in the Chancellor's Mansion House speech. also recommended that financial market
notable changes and provided additional forward guiding principles to help AFMs comply Risk framework for ESG rating and data participants using rating and data products
clarifications in places. These changes and with existing requirements. It wants to see fund products conduct robust due diligence on the quality and
clarifications include: disclosures accurately reflect the nature of the any limitations of the product.
IOSCO consulted on ESG ratings and data
fund’s sustainable investment approach, both providers on 26 July 2021. It recognises that
• amending the calculation of the daily The consultation closes on 6 September 2021.
in pre-contractual disclosures and in periodic ESG ratings and data providers are a key
trading flow (DTF) to also apply to firms
reporting. component of asset managers' investment
that trade in their own name on an agency
basis The regulator expects references to ESG in a decision making process and, therefore, need
fund’s name, financial promotions or fund to meet the same level of scrutiny as
• confirming that any firm with a non-zero mainstream financial data providers. The
documentation to fairly reflect the materiality of
value of average DTF cannot be an SNI consultation highlights a range of potential
ESG considerations to the objectives and/or
firm risks associated with ESG ratings and data
investment policy and strategy of the fund. The
• clarifying that the definition of ‘investment FCA states that the resources a firm applies in providers:
advice of an ongoing nature’ must involve pursuit of a fund’s stated ESG objectives • inconsistent definitions, including on what
the provision of MiFID investment advice should be appropriate. The FCA adds that the ratings and data providers' products are
(i.e. personal recommendations). way that a fund’s ESG investment strategy is intended to measure
implemented, and the profile of its holdings,
The new regime is due to come into force on 1 • a lack of transparency over the
should be consistent with its disclosed
January 2022. methodology underpinning their products
objectives on an ongoing basis.
The regulator wants to see firms make ESG- • conflicts of interest
related information in a key investor • inadequate communication between ratings
information document easily available. That and data providers and the companies that
information should be clear, succinct and are subject to their products.
13 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
Insurance
In this section: Conduct addresses the potential for PRIIPs being
FCA consults on PRIIPs regulation divergence assigned an inappropriately low summary
Conduct 14
The FCA issued CP 21/23 – PRIIPs – risk indicator in the KID, and concerns over
Prudential 14 the methodology for calculating transaction
Proposed scope rules and amendments to
Supervision 15 Regulatory Technical Standards on 20 July costs. The consultation closes on
Melinda Strudwick 2021, setting out proposals to change 30 September 2021.
Insurance Risk and Regulation Lead disclosure documents provided to retail Prudential
melinda.strudwick@pwc.com investors under the PRIIPs regulation. The PRA consults on changes to Solvency II
proposed changes aim to provide more clarity reporting
to consumers about what the products are, the The PRA launched Consultation Paper
associated risk, and likely future performance. (CP11/21): Review of Solvency II: Reporting
The consultation clarifies the scope of the (Phase 1) on 8 July 2021, proposing changes
PRIIPs regulation, making it clearer that certain to the Solvency II reporting requirements. The
common features of these instruments do not PRA’s proposals include:
make them into PRIIPs.
• removing the requirement to report a
The FCA is proposing to amend the scope of number of Solvency II Quantitative
Anirvan Choudhury
the PRIIPs regime in relation to corporate Reporting Templates
FS Regulatory Insights
bonds, confirming which features do not turn a
anirvan.choudhury@pwc.com debt security into a PRIIP as well as looking to • reducing reporting frequency of the
clarify the type of corporate bond that would minimum capital requirements collected via
normally be a PRIIP. In addition, the FCA S.28 templates
proposes that legacy products issued before • amending a reporting proportionality
the PRIIPs regime came into force have never threshold to further exempt reinsurance
been PRIIPs and do not require a KID even if undertakings from reporting template
they continue to be made available to retail S.16.01 on annuities stemming from non-
investors in secondary markets. life insurance obligations
The regulator proposes to amend the PRIIPs • expanding the PRA’s modification by
RTS to require written explanation on consent to waive certain quarterly
performance in the KID. It suggests replacing returns, to firms that the PRA
the requirement for presentation of designates as Category 3 under its
performance scenarios in the KID with a Potential Impact Framework
requirement for narrative information on
performance. The consultation paper also
14 • PwC | FS regulatory bulletin | August 2021Executive summary Cross sector Banking and capital markets Asset management Insurance Monthly calendar Glossary
announcements
• removing the requirement to complete premium and valuation uncertainties. Firms Supervision business with technical provisions of over
templates submitted under the financial with approval to use TMTP are required to Regulators propose changes on insurance £100m, and where the scheme will increase
stability reporting obligation contained in recalculate the TMTP after allowing for the business transfers the transferee’s technical provisions by 10% or
EIOPA Guidelines on Financial Stability impact of the sensitivities and specification. The FCA launched GC21/3: Proposed changes more, the PRA will utilise its powers under
Reporting, which in the UK are reported by to guidance on the FCA’s approach to the s.166 of FSMA to assess the operational
The PRA expects firms to ensure that the QIS
firms with total assets exceeding €12bn. review of Part VII insurance business transfers readiness of the transferee, unless it is able to
data is consistent with the YE 2020 QRTs and
on 8 July 2021. In addition, the PRA published satisfy itself of the transferee’s operational
The PRA is consulting on changes to Solvency to undertake reasonableness checks on the
Consultation paper (CP 16/21): Insurance readiness by other means.
II reporting and disclosure in two phases. direction and magnitude of the balance sheet
business transfers (IBTs) on 28 July 2021,
The first phase, reflected in this CP, focuses on movements. In addition, the PRA requires firms Where the transferee is in run-off, the firm
proposing updates to its approach to IBTs, to
proposals to reduce the volume of financial to validate the data and obtain sign-off of the should be able to demonstrate that it has
reflect legislative changes following the UK’s
information reported to the PRA with a low QIS submission from an appropriate individual considered both its existing risks and risks it is
withdrawal from the EU.
operational impact. The second phase will be approved under the SM&CR. acquiring over the ‘ultimate time horizon’, until
undertaken over the remainder of 2021, with a The consultations contain guidance for the risks taken on are fully run-off.
The deadline for submitting responses to the
view to consulting on additional proposals independent experts (IEs) and firms on the
QIS is 20 October 2021. The PRA will use the The FCA’s consultation closes on
in 2022. regulators’ expectations in assessing IBTs. For
data to inform a comprehensive package of 31 August 2021 and the PRA’s consultation
example, where there are significant changes
This consultation closes on 8 October 2021. reforms, due to be issued for consultation in closes on 28 October 2021.
during the IBT process (e.g. due to the
PRA launches Solvency II Quantitative early 2022. See our At a glance briefing for EIOPA consults on supervision of run-off firms
pandemic or economic fluctuations), the FCA
Impact Study more information.
expects the IE to have adequately reflected on EIOPA issued EIOPA-BoS-21/318
The PRA issued a Dear CEO letter announcing PRA opens application window for these in a supplementary report. The FCA also Consultation on Supervisory Statement on
the launch of Review of Solvency II: TMTP recalculations
expects the IE to review and give their opinion supervision of run-off undertaking on 23 July
Quantitative Impact Study (QIS) on 20 July The PRA announced on 19 July 2021 that it on administrative changes affecting 2021 to specify supervisory expectations to
2021. The QIS is particularly relevant for life will accept applications from firms to policyholders, and scrutinise the possible risks better consider and deal with potential risks
insurers as it focuses on three key structural recalculate TMTP as at 30 June 2021. In their associated with the transfer that may impact stemming from run-off business models. The
components of a life insurer’s balance sheet: applications the PRA expects firms to service levels. These include but are not consultation sets out expectations relating to
risk margin, MA and TMTP. demonstrate that a material change in risk limited to: consumer risks of harm and aligned investment management, reinsurance, capital
profile has occurred. The PRA says it would be mitigants, vulnerable customers identification, adequacy and conduct of business.
The QIS exercise asks firms on a voluntary
reasonable for a firm to take a forward-looking and a detailed report of any migration of
basis to calculate their balance sheets and EIOPA proposes that if the standard formula
view of how its risk profile is expected to systems or services. Where the IBT scheme
solvency capital ratios under different underestimates the SCR, then NCAs should
evolve as a result of the GBP RFR transition includes employers' or public liability policies,
scenarios. Within each scenario firms are consider using their powers under Solvency II
to SONIA. the FCA expects the IE to include their view of
required to assume different sensitivities in to impose a capital add-on. Furthermore,
respect of RFRs (e.g. SONIA +200/-100bps), the quality of the firm's Employers’ Liability
EIOPA states that NCAs should require run-off
bond yields (e.g. +200/-100bps) and credit tracing office, management information,
firms to limit the amount of reinsurance cession
spreads and downgrades. The QIS scenarios complaints and execution of claims.
and/or require firms to incorporate collateral
also include design and calibration In addition, the PRA is consulting on two arrangements or financial guarantees in their
specifications for various components of the specific proposals for run-off business reinsurance contracts to mitigate credit risk and
fundamental spread (FS) such as credit risk transfers. For schemes that involve non-life ensure policyholders remain protected. From
15 • PwC | FS regulatory bulletin | August 2021You can also read
