FIG Bulletin

Recent developments

6 July 2020

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General 4

Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 4

UK temporary permissions regime: FCA to re-open notification window 4

EU assessment of UK equivalence decisions: Michel Barnier speech 4

UK and Switzerland future mutual recognition agreement 4

COVID-19: FCA expectations for approved persons regime 5

COVID-19: FCA extends SMCR implementation periods for solo-regulated firms 6

EU Taxonomy Regulation: House of Commons European Scrutiny Committee letter on UK

alignment 6

FCA Handbook Notice 78 6

Managing climate-related financial risk: PRA Dear CEO letter on thematic feedback 7

FCA regulated fees and levies for 2020/21: PS20/7 7

Climate-related financial risk management: Climate Financial Risk Forum guide 7

Digital advertising in financial services: FSCP discussion paper 8

Cyber incident management: UK Finance whitepaper 8

MLD4: European Commission infringement proceedings 8

EU macro-prudential policy framework: ESRB Recommendation amending 2015

Recommendation 8

COVID-19: FSB statement on impact on global benchmark reform 9

Banking and Finance 10

COVID-19: application of credit risk approaches to CBILS and CLBILS 10

COVID-19: PRA statement on CRR Amending Regulation 10

SSM banks: ECB consults on supervisory approach to consolidation 11

CRR: EBA final guidelines on treatment of structural FX 11

BRRD early intervention measures: EBA discussion paper 11

AML and CTF: BCBS updates guidelines on management of risks 12

Too-big-to-fail reforms for systemically important banks: FSB evaluation 12

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Consumer Finance 13

COVID-19: FCA further measures to support credit card, overdraft and personal loan

customers 13

Banks' overdraft pricing decisions and plans to support consumers: FCA update 13

Consumer Credit Directive review: European Commission consultation 14

Payments 15

COVID-19: FCA and PSR update on mapping access to cash 15

Interchange Fee Regulation: Commission review report 15

Securities and Markets 17

Brexit: BoE statement on recognition applications for EEA CSDs 17

REMIT: ACER updates guidance 17

ESMA Financial Instruments Reference Data System: UK Finance user guidance 17

Insurance 18

COVID-19: FCA expectations on travel insurance, handling of consumer claims and refund

requests 18

COVID-19: FCA updates expectations of motor insurers 18

COVID-19: FCA update on business interruption insurance test case 19

UK Solvency II technical provisions: PRA CP5/20 19

Solvency II 2020 review: European Commission consultation 19

Liquidity risk management: IAIS consultation 20

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General Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020

The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 (SI

2020/628) have been published, together with an explanatory memorandum.

The purpose of the Regulations, which were made on 29 June 2020, is to amend secondary

legislation and amend and revoke parts of retained EU law to address deficiencies arising from

the withdrawal of the UK from the EU. They also make minor amendments to financial services

statutory instruments made under the European Union (Withdrawal) Act 2018 (EUWA) to

correct and clarify previous financial services exit instruments.

Among other things in the Regulations, Regulation 7 reinstates Article 37 of the Markets in

Financial Instruments Regulation (MiFIR) (Non-discriminatory access to and obligation to

licence benchmarks) into the onshored MiFIR.

Regulations 2, 3, 5, 6, 11 and 16 came into force on 30 June 2020. Regulations 7 to 10, 12 to 14

and 17 come into force immediately before IP completion day (the end of the Brexit transition

period). Regulations 4, 15 and Part 3 (Regulations 18 - 24) come into force on IP completion day.

UK temporary permissions regime: FCA to re-open notification window

The Financial Conduct Authority (FCA) has announced that it will re-open the notification

window for its temporary permissions regime (TPR) on 30 September 2020 for inbound

passporting EEA firms and funds.

This will allow firms and fund managers that have not yet made a notification to do so before the

end of the Brexit transition period.

The FCA states that there will also be an opportunity for fund managers to update their

previously submitted notifications under the temporary marketing permissions regime (TMPR),

if necessary. The FCA intends to communicate further on this issue in September 2020. The

windows for EEA firms and fund managers to make notifications under the TPR and the TMPR

last closed at the end of 30 January 2020.

Nausicaa Delfas, FCA Executive Director of International, has also given a speech in which she

states that over 1,000 firms and over 600 fund managers have already made notifications under

the TPR. She states that the FCA plans to consult later in 2020 on the approach it will take when

assessing applications from overseas firms.

EU assessment of UK equivalence decisions: Michel Barnier speech

The European Commission has published a speech given by Michel Barnier, the EU's chief

negotiator on its future relationship with the UK. In his speech, Mr Barnier provides an update

on the Brexit negotiations as they impact on the financial services sector and the EU's ongoing

process for the assessment of equivalence determinations relating to the UK.

UK and Switzerland future mutual recognition agreement

HM Treasury has published a joint statement with the Swiss Federal Department of Finance, on

deepening cooperation in financial services. They have agreed a shared ambition to conclude an

international agreement that will enhance the cross-border market for financial services between

the UK and Switzerland.

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The UK and Switzerland will work towards mutual recognition of each other's regulatory and

supervisory regimes in the fields of insurance, banking, asset management and capital markets

(including market infrastructure).

The parties intend for the agreement to:

• establish outcomes-based mutual recognition, providing rights for the provision of

relevant financial services from one jurisdiction into the other, and reducing regulatory

frictions for cross-border activity;

• establish structures and appropriate safeguards to underpin these rights, including

provisions for regulatory and supervisory cooperation; and

• create a clear, transparent and managed process in the event that recognition is

withdrawn in the future or re-established after a withdrawal.

In particular, the parties intend to improve access for the cross-border provision of financial

services for wholesale and sophisticated clients on the basis of recognition, reciprocity and

enhanced regulatory and supervisory cooperation. Both parties note their willingness to defer to

each other's national regimes and supervisory practices where they achieve comparable overall

outcomes with regard to market integrity, financial stability and the protection of consumers and

investors.

Technical work on the future financial services relationship is currently underway and will be

intensified ahead of the next UK-Swiss dialogue on 8 September 2020.

HM Treasury has also published a speech given by Rishi Sunak, the Chancellor of the Exchequer,

on the future agreement. In the speech, Mr Sunak states that the UK has completed its

equivalence assessment of Swiss stock markets and found them to be equivalent. On its webpage

on the agreement, HM Treasury states that it will lay a statutory instrument on the equivalence

of the Swiss stock markets in Parliament at the earliest opportunity once its equivalence powers

come into force at the end of the Brexit transition period.

COVID-19: FCA expectations for approved persons regime

On 30 June 2020, the FCA published a statement setting out its expectations to help benchmark

administrators and firms using appointed representative arrangements apply the approved

persons regime during the coronavirus pandemic.

The FCA recognises that some benchmark administrators and appointed representatives have

had to make temporary arrangements to cover absences in direct response to COVID-19 and that

this uncertainty continues. The FCA intends to issue a modification by consent to the 12-

week rule, which will allow temporary arrangements for up to 36 weeks rather than 12 if a firm

notifies the FCA that it consents to the modification. If the modification by consent is being used

in relation to an appointed representative, the principal, rather than the appointed

representative, should notify the FCA. The FCA notes that roles requiring approval under the

customer function (CF30) cannot be covered using the 12-week rule. The FCA states on its

webpage that the "Modification by consent does varies this exclusion"[sic].

The FCA also notes that there may be cases where benchmark administrators or appointed

representatives decide to furlough approved persons. Unless an individual is permanently

leaving their post, they can retain their approval during their absence and will not need to be re-

approved by the FCA when they return. However, the benchmark administrator, or, in the case

of an appointed representative, the principal, is still responsible for ensuring the approved

person is fit and proper.

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The FCA does not expect firms to notify it under Form D of the temporary arrangements set out

in its statement. However, it does expect the arrangements to be clearly documented

internally, so that everyone understands who is responsible for what. This should be available if

requested by the FCA now or in the future. Firms' internal records should aim to keep a "running

commentary" of their personnel performing significant influence functions and their

responsibilities during this period. Firms should make sure that their appointed representatives

do the same.

The FCA reminds regulated firms that use appointed representatives to carry on regulated

activities that they remain responsible for their appointed representatives meeting the FCA's

rules.

COVID-19: FCA extends SMCR implementation periods for solo-regulated firms

On 30 June 2020, the FCA extended the deadline for solo-regulated firms to undertake their first

assessment of the fitness and propriety of their certified persons under the senior managers and

certification regime (SMCR) from 9 December 2020 until 31 March 2021. The FCA's intention is

to provide relief to firms significantly affected by COVID-19 and give them time to make the

changes they need.

Read more in our briefing: SMCR: UK FCA extends implementation periods for solo-regulated

firms.

EU Taxonomy Regulation: House of Commons European Scrutiny Committee letter on UK alignment

The House of Commons European Scrutiny Committee has published a letter from its chair, Sir

William Cash, to John Glen, Economic Secretary to the Treasury, on the Regulation on the

establishment of a framework to facilitate sustainable investment (Taxonomy Regulation). The

Committee seeks clarification on, and to be kept informed of, the government's intentions as

regards implementing (or not) this initiative at the end of the Brexit transition period.

FCA Handbook Notice 78

The FCA has published Handbook Notice 78, which sets out changes to the FCA Handbook made

by the FCA board on 21 May and 25 June 2020 by the following instruments:

• Conduct of Business Sourcebook (Pension Transfers) (No 3) Instrument 2020 (FCA

2020/21) which partially came into force on 15 June 2020, with the remainder coming

into force on 1 October 2020;

• Individual Accountability (FCA-Authorised Benchmark Firms) Instrument 2020 (FCA

2020/23), partially in force on 3 June 2020, with the remainder coming into force on 7

December 2020;

• Handbook Administration (No 53) Instrument 2020 (FCA 2020/25), in force on 26 June

2020, except for Part 2 of Annex A and Part 2 of Annex C, which come into force on 1

October 2020;

• Variation of Permission and Cancellation Form (Miscellaneous Amendments)

Instrument 2020 (FCA 2020/28), in force since 26 June 2020; and

• Collective Investment Schemes Sourcebook (Miscellaneous Amendments) Instrument

2020 (FCA 2020/29), in force since 1 July 2020.

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Managing climate-related financial risk: PRA Dear CEO letter on thematic feedback

The Prudential Regulation Authority (PRA) has published a Dear CEO letter in which it builds on

its expectations set out in its supervisory statement, SS3/19, on enhancing banks' and insurers'

approaches to managing the financial risks from climate change, provides observations on good

practice, and sets out next steps for implementation.

The PRA instructs firms to have fully embedded their approaches to managing climate-related

risks by the end of 2021. By this time, firms should be able to demonstrate that the expectations

set out in SS3/19 have been implemented and embedded throughout their organisation as fully

as possible. In doing this, firms should take a proportionate approach, reflecting the particular

institution's exposure to such risks and the complexity of its operations.

The letter includes further detail on the PRA's expectations in this respect, together with

feedback from its review of firms' SS3/19 implementation plans.

FCA regulated fees and levies for 2020/21: PS20/7

The FCA has published a policy statement, PS20/7, setting out the final 2020/21 fees and levies

for the FCA, the Financial Ombudsman Service, the Money and Pensions Service, the devolved

authorities debt advice levy and HM Treasury's illegal money lending levy expenses. The FCA

also sets out feedback on the responses received to its April 2020 fees and levies consultation

paper (CP20/6).

The Appendices to PS20/7 contain the FCA Handbook instruments making relevant

amendments to the Fees manual (FEES):

• Periodic Fees (2020/2021) and Other Fees Instrument 2020 (FCA 2020/26); and

• Fees (Primary Market Transaction Fees Amendments) Instrument 2020 (FCA 2020/27).

These instruments came into force on 2 July 2020.

The FCA states that firms can use its online fees calculator to calculate their individual fees based

on the final rates in PS20/7. The FCA will invoice fee-payers from July 2020 onwards for their

2020/21 periodic fees and levies.

Climate-related financial risk management: Climate Financial Risk Forum guide

The Climate Financial Risk Forum (CFRF) has published a guide to help financial services firms

approach and address climate-related financial risks. The guide provides practical

recommendations to firms of all sizes on: disclosure of climate-related financial risks; effective

risk management; scenario analysis; and opportunities for innovation in the interest of

consumers.

The CFRF was established by the PRA and FCA in 2019, with the aim of sharing best practice

across financial regulators and industry to advance the sector's responses to the financial risks

from climate change. Membership is drawn from a wide range of industry participants.

The PRA and FCA have convened and facilitated CFRF discussions but the views expressed in

the guide do not necessarily represent the view of the regulators and does not constitute

regulatory guidance.

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The guide is designed to be complementary to existing frameworks and initiatives, such as the

UN-supported Principles for Responsible Investment and the Taskforce on Climate-related

Financial Disclosures.

Digital advertising in financial services: FSCP discussion paper

The Financial Services Consumer Panel (FSCP) has published a discussion paper on digital

advertising in financial services. The FSCP is "deeply concerned" about potential consumer harm

linked to digital advertising of financial services and the use of advertising technology ("adtech")

to create detailed profiles of individual consumers. It notes that, while these techniques enable

personalised, targeted marketing, they also potentially create an environment for discrimination,

manipulation and exploitation. The FSCP's concerns are seriously heightened by the impact of

COVID-19 on the financial situation of UK households.

Two of the FSCP's priority areas for 2020/21 are the high-cost credit market and the pensions-

to-cash market. The purpose of the discussion paper is to set out the FSCP's concerns about

digital marketing in these markets with reference to evidence from two exploratory research

studies it commissioned. The FSCP comments that similar issues seem likely to exist in other

financial services markets.

The FSCP sets out what action it would like the FCA to take.

Cyber incident management: UK Finance whitepaper

UK Finance has published a whitepaper on cyber incident management. By publishing the paper,

UK Finance intends to help firms assess their incident response plans by providing insight on

some of the regulatory and operational considerations, including a number of issues that are

specific to the financial sector, such as:

• how to contact customers during a cyber crisis when systems might be compromised;

• how regulatory reporting is to be managed; and

• what access to cash provisions need to be made.

MLD4: European Commission infringement proceedings

The European Commission has announced details of infringement decisions it has taken in

respect of nine member states concerning the transposition and implementation of the Fourth

Money Laundering Directive (MLD4), including the referral of Austria, Belgium and the

Netherlands to the Court of Justice of the European Union (ECJ) with a request for financial

sanctions.

EU macro-prudential policy framework: ESRB Recommendation amending 2015 Recommendation

European Systemic Risk Board (ESRB) Recommendation ESRB/2020/9 amending

Recommendation ESRB/2015/2 on the assessment of cross-border effects of, and voluntary

reciprocity for, macro-prudential policy measures has been published in the Official Journal of

the EU.

ESRB/2015/2 is addressed to authorities entrusted with the adoption or activation of macro-

prudential policy measures (or both) (relevant authorities). It is intended to address the cross-

border effects of macro-prudential measures (that is, measures that have been adopted by

member states to prevent and mitigate systemic risk).

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Recommendation ESRB/2020/9 amends Recommendation ESRB/2015/2 by excluding the

systemic risk buffer rate imposed by the relevant authorities in Estonia from the list of macro-

prudential policy measures that the ESRB recommends should be reciprocated by relevant

authorities. The revised list now specifies macro-prudential policy measures adopted by relevant

authorities in Belgium, Finland, France and Sweden.

COVID-19: FSB statement on impact on global benchmark reform

The Financial Stability Board (FSB) has published a statement on the impact of COVID-19 on

global benchmark reform. The FSB maintains its view that financial and non-financial sector

firms across all jurisdictions should continue their efforts in making wider use of risk-free rates

in order to reduce reliance on interbank offered rates where appropriate and in particular to

remove remaining dependencies on LIBOR by the end of 2021.

The FSB confirms that it intends to publish a report on the remaining challenges to benchmark

transition later in July 2020, as requested by G20 finance ministers and central bank governors

in their February 2020 communiqué.

FSB members, in collaboration with other standard-setting bodies and international institutions,

will continue to monitor developments.

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Banking and Finance COVID-19: application of credit risk approaches to CBILS and CLBILS

On 26 June 2020, the UK Prudential Regulation Authority (PRA) published an updated

statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan

Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS).

The update relates to the application of credit risk approaches. The PRA provides clarification for

firms under three scenarios:

• firms using the standardised approach for exposures to the obligor: the

portion of an exposure benefiting from the protection of a government guarantee under

the schemes is assigned the relevant sovereign risk weight prescribed by the standardised

approach (the amount of guarantee recognised should be adjusted under relevant credit

risk mitigation (CRM) provisions for any payment types excluded under the guarantees).

The residual part of the exposure (that is, the portion not benefitting from such a

guarantee) is assigned the standardised approach risk weight that would apply if the

exposure were not guaranteed;

• firms using the internal ratings based (IRB) approach for exposures to the

obligor and the standardised approach for exposures to the guarantor

(under permanent partial use or rollout): the portion of an exposure benefiting

from the protection of a government guarantee under the schemes is assigned the

relevant sovereign risk weight prescribed by the standardised approach (the amount of

guarantee recognised should be adjusted under relevant CRM provisions for any payment

types excluded under the guarantees). The residual part of the exposure is risk weighted

according to the relevant approved IRB approach as if the exposure were not guaranteed;

and

• firms using the IRB approach for exposures to the obligor and the IRB

approach for exposures to the guarantor: firms should adopt an approach to

reflect the effect of the government guarantee that is consistent with their approved IRB

models and their IRB permissions.

COVID-19: PRA statement on CRR Amending Regulation

On 30 June 2020, the PRA published a statement on Regulation (EU) 2020/873, which amends

the Capital Requirements Regulation (CRR) and CRR II as regards certain adjustments in

response to COVID-19 (CRR Amending Regulation or "CRR Quick Fix").

The statement sets out the PRA's initial views on the following measures included in the

package:

• transitional arrangements for capital impact of IFRS 9 Expected Credit Loss (ECL)

accounting;

• acceleration of the date of application of certain CRR II measures that had been due to

apply from 28 June 2021:

o a revised small and medium-sized enterprises (SME) support factor;

o an infrastructure support factor; and

o non-deduction of certain software assets from Common Equity Tier 1 (CET1)

capital; and

• discretion to apply a temporary prudential filter to certain unrealised gains or losses

measured at fair value through other comprehensive income.

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SSM banks: ECB consults on supervisory approach to consolidation

The European Central Bank (ECB) is consulting on a draft guide on its supervisory approach to

consolidation for banks in the single supervisory mechanism (SSM), together with a related blog.

The purpose of the guide is to clarify the prudential supervisory approach that the ECB follows

when determining whether the arrangements implemented by a bank resulting from a

consolidation ensure the sound management and coverage of its risks.

The deadline for responses is 1 October 2020.

CRR: EBA final guidelines on treatment of structural FX

The European Banking Authority (EBA) has published its final guidelines on the treatment of

structural foreign exchange (FX) positions under Article 352(2) of the CRR. The aim of these

guidelines is to establish a harmonised framework for the application of the structural FX

waiver.

The structural FX provision allows competent authorities to authorise, on an ad hoc basis, the

exclusion of FX-risk positions deliberately taken by firms to hedge against the adverse effect of

exchange rates on capital ratios from the calculation of the net open currency positions where

those positions are of a structural nature. Considering that the application of the waiver can have

a significant impact on capital requirements, these guidelines identify objective criteria to assist

competent authorities in their assessment of the structural nature of an FX position and to

understand whether such position has been deliberately taken for hedging the capital ratio.

The EBA notes that the guidelines have been developed considering also changes to the market

risk framework introduced by CRR II and the new structural FX treatment envisaged in the

Fundamental Review of the Trading Book (FRTB) standards. As a result, these guidelines have

been designed in a way that institutions will not be required to ask for a new permission once

they switch to the FRTB framework for computing the own funds requirements for market risk.

The guidelines apply from 1 January 2022, one year later than originally envisaged to ensure that

institutions have time to prepare for the introduction of the requirements.

BRRD early intervention measures: EBA discussion paper

The EBA has published a discussion paper on the application of early intervention measures

(EIMs) in the EU under Articles 27-29 of the Bank Recovery and Resolution Directive (BRRD).

The EBA has found that there has been limited application of EIMs since the BRRD entered into

force and that almost half of the NCAs decided to apply supervisory measures instead of EIMs in

cases where early intervention conditions were met. Also, in a relatively large number of cases

where the early intervention triggers were breached, the NCAs subsequently concluded that the

firm in question had not actually met the conditions for EIMs. The EBA considers the key

challenges faced by supervisors in the application of the current regulatory framework on the

EIMs and various options for addressing them.

The consultation period ends on 25 September 2020.

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AML and CTF: BCBS updates guidelines on management of risks

The Basel Committee on Banking Supervision (BCBS) has updated its guidelines on sound

management of risks related to money laundering and financing of terrorism, with guides on the

interaction and cooperation between prudential and AML/CFT supervisors.

The revisions set out principles and recommendations for information exchange and cooperation

in relation to:

• authorisation related procedures of a bank;

• ongoing supervision; and

• enforcement actions.

In addition, possible mechanisms to facilitate such cooperation in the jurisdictional and

international context are provided.

Too-big-to-fail reforms for systemically important banks: FSB evaluation

The Financial Stability Board (FSB) has published a consultation report that sets out the

preliminary results of its evaluation of the effects of the too-big-to-fail reforms for systemically

important banks (SIBs). A summary and related information are available on the FSB webpage.

Despite the progress made in many areas, the FSB finds that there are still gaps that need to be

addressed. For example, improvements to the resolvability of SIBs could be made, public funds

continue to be used to support small or medium-sized banks, even in jurisdictions with well-

developed resolution frameworks, and the application of the reforms to domestic SIBs (D-SIBs)

needs monitoring further.

The FSB has extended the consultation period to 30 September 2020 to give respondents more

time to provide feedback. It expects to publish the final report in early 2021.

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Consumer Finance COVID-19: FCA further measures to support credit card, overdraft and personal loan customers

Following a short consultation, on 1 July 2020 the UK Financial Conduct Authority (FCA)

published the following updated guidance on credit cards, overdraft and personal loans to

further support consumer credit customers if they are still experiencing temporary payment

difficulties due to COVID-19:

• Credit cards (including retail revolving credit) and coronavirus: updated temporary

guidance for firms;

• Overdrafts and coronavirus: updated temporary guidance for firms; and

• Personal loans and coronavirus: updated temporary guidance for firms.

It has also published a feedback statement, FS20/9, in response to its consultation.

Although there is a great deal of continuity from the measures introduced in April, there are

changes as well as shifts in emphasis. Given the potentially serious knock-on consequences for

firms after COVID-19 passes, firms should act swiftly but judiciously in implementing the

necessary changes to documentation and processes.

Read the key points from the updated guidance in our briefing: COVID-19 - Further support for

consumer credit customers: the FCA's updated guidance.

The guidance came into effect on 3 July 2020 and, unless renewed or updated, expires on 31

October 2020, except for those aspects that remain in force after 31 October to enable firms to

address residual issues for those customers coming to the end of payment deferrals after that

time.

Banks' overdraft pricing decisions and plans to support consumers: FCA update

The FCA has published a statement giving an update on its work relating to banks' overdraft

pricing decisions and plans to support consumers. The statement follows on from the FCA's

January 2020 letter, in which it asked banks to explain how they had reached their new

overdraft rates ahead of the entry into force of the FCA's new rules on overdraft pricing in April

2020.

The FCA states that it has now analysed the strategic, competitive and financial drivers of banks'

overdraft pricing decisions based on their responses to its letter. Having reviewed the evidence

obtained, the FCA indicates that it does not intend to open a formal investigation at this stage.

The FCA notes that, while many of the banks' new rates were similar, it has seen a range of

pricing structures and price points. It has also seen some challenger firms already offering lower

overdraft rates. Overdraft charges are still higher than other mainstream borrowing products

like credit cards and personal loans, but the FCA expects these forms of credit to create more

competitive pressure on overdraft charges as consumers respond to the pricing changes and

greater transparency.

The FCA intends to watch how prices develop, particularly during and after the coronavirus

pandemic. It requires firms to publish information on their overdraft pricing alongside the

information they already publish about current account services. This information is due to be

published for the first time in August 2020 and will cover the quarter from 1 April to 30 June

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2020. The FCA also plans to carry out a post-implementation evaluation of its overall package of

overdraft remedies after April 2021.

Despite temporary measures introduced in light of COVID-19, the FCA states that it expects

firms to continue with the support programmes they have put in place to manage the impact of

their previously announced pricing changes and will monitor closely how they implement this

support.

Consumer Credit Directive review: European Commission consultation

The European Commission has launched a single consultation to gather views on the following

four initiatives that it plans to propose in 2020 and 2021 under its New Consumer Agenda

framework:

• a Communication on a New Consumer Agenda;

• empowering the consumer for the green transition;

• review of the Consumer Credit Directive (CCD); and

• review of the General Product Safety Directive.

Last week we reported that the Commission had published an inception impact assessment

following its evaluation of the Consumer Credit Directive (CCD). It is due to publish its findings

in summer 2020.

In this consultation, there are four sections, one of which is dedicated to the review of the CCD.

The Commission seeks views on issues identified during its evaluation, in particular, on scope,

information provision, creditworthiness assessment and the impact of COVID-19 on the credit

market and on consumers.

The Commission intends to use the results of the consultation to help it draft a legislative

proposal to amend the CCD. It anticipates that it will publish this in Q2 2021.

The consultation runs until 6 October 2020.

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Payments COVID-19: FCA and PSR update on mapping access to cash

The UK Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) have

published a joint statement on their work to map access to cash in light of COVID-19 and how

this will shape their future work in this area. The statement follows the regulators' previous

statement of 16 June 2020 on their approach to access to cash issues.

Throughout the pandemic, the PSR, the FCA, other regulators and the industry have

collaborated to create a single database of the UK's cash access points. This means that the FCA

and the PSR can monitor where access to cash "cold spots" are emerging and coordinate the

industry response to ensure that vulnerable and self-isolating groups can continue to access

cash. The database does not include cashback, which is an additional source of cash for

customers.

Following the FCA and the PSR's work, the PSR has published:

• a webpage providing information on the coverage of access to cash across the UK. It

describes in more detail the work the FCA and the PSR are conducting to map access to

cash coverage, and how this will feed into their longer-term activities on access to cash;

and

• a webpage explaining the FCA and PSR's work monitoring access to cash cold spots. The

regulators collected information on approximately 19,000 banks, building societies and

post office branches and approximately 60,000 ATMs.

Ensuring access to cash is a priority for the FCA and the PSR. They will continue to work

together to, among other things, maintain widespread access to free ATMs in the short term and

monitor the impact of bank branch closures on consumers' ability to access cash. They will also

explore with the industry how it can develop a sustainable and appropriate solution, which

allows the industry to meet the cash needs of consumers and businesses in the longer term

through a range of channels.

In addition, the regulators are working on a project with the University of Bristol to build on the

COVID-19 mapping work. The project aims to develop a comprehensive set of socio-economic

factors and consumer characteristics that are relevant to understanding consumer cash needs

and the availability of access to cash at a national and local level. They intend to publish a final

report from the project later on in 2020.

Interchange Fee Regulation: Commission review report

The European Commission has published a report on the impact of Regulation 2015/751 on

interchange fees for card-based payment transactions (Interchange Fee Regulation).

The Regulation, which came into effect in 2015, was intended to help create a single market for

card payments across the EU and to create a level playing field. It set a cap on interchange fees

for consumer credit and debit card transactions and introduced several provisions aimed at

enhancing market transparency, competition, and the functioning of the EU single market. The

Commission is required under Article 17 of the Regulation to report by mid-2020 on its

operation and on whether the maximum cap for interchange fees should be adjusted. The

Commission has previously published a study on the application of the Regulation which has

helped inform its review, together with input from stakeholders.

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The report concludes that the main objectives of the Regulation have been achieved, as

interchange fees for consumer cards have decreased, leading to reduced merchants' charges for

card payments, and ultimately resulting in improved services to consumers and lower consumer

prices. In addition, market integration has improved through the increased use by merchants of

acquirers (banks servicing merchants) located in other member states (cross-border acquiring

services) and more cross-border card transactions.

However, the Commission states that further monitoring and reinforced data gathering is

necessary in some areas, including those where only limited time has elapsed since the

Regulation entered into force.

Given its positive impact and the need for more time to see the full effects of the Regulation, the

Commission concludes that it would not be appropriate to propose any revision of the

Regulation at this time.

As a follow-up to the report, the Commission is planning a public hearing with stakeholders on 7

December 2020.

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Securities and Markets Brexit: BoE statement on recognition applications for EEA CSDs

The Bank of England (BoE) has updated its webpage on the effect of the UK's withdrawal from

the EU on financial market infrastructure supervision to reflect the publication of the draft

Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations

2020 which supplement existing legislation that provides for equivalence and recognition

decisions after the end of the Brexit transition period.

Among other things, the Regulations provide a mechanism for EEA firms to apply for

recognition from the FCA or the BoE before the end of the transition period, once HM Treasury

has made an equivalence determination relating to the legislative framework under which they

operate.

The BoE states that:

• if HM Treasury makes a relevant equivalence decision, the BoE will contact EEA central

securities depositories (CSDs), as appropriate, and notify them of the actions that they

need to take, including the manner in which a recognition application may be made and

the information that must accompany it. The BoE notes that, in any event, EEA CSDs

must submit a formal recognition application within six months of the end of the

transition period; and

• the procedure for non-EEA CSDs remains unchanged. HM Treasury will not make any

equivalence decisions relevant to these CSDs until after the end of the transition period.

REMIT: ACER updates guidance

The Agency for the Cooperation of Energy Regulators (ACER) has published the following

updated guidance documentation relating to the Regulation on wholesale energy market

integrity and transparency (REMIT):

• Q&A on REMIT;

• Transaction reporting user manual (TRUM); and

• FAQs on REMIT transaction reporting.

ACER acknowledges that, due to COVID-19, reporting parties may face difficulties in

implementing the changes introduced by the updated guidance documentation by the end of

2020. However, it advises that reporting parties must work to achieve compliance to the greatest

extent possible.

ESMA Financial Instruments Reference Data System: UK Finance user guidance

UK Finance has published user guidance on the European Securities and Markets Authority's

(ESMA's) Financial Instruments Reference Data System (FIRDS), together with a blog on the

launch of the guidance.

FIRDS is the reference data architecture developed by ESMA and national competent authorities

to provide publication of, and access to, reference data required under the Markets in Financial

Instruments Regulation.

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Insurance COVID-19: FCA expectations on travel insurance, handling of consumer claims and refund requests

On 29 June 2020, the UK Financial Conduct Authority (FCA) updated its webpage on

information for firms in light of COVID-19 with its expectations of insurers when handling

consumer complaints and refund requests.

The FCA reminds insurers that, when handling claims, they must treat customers fairly. In part,

this means providing reasonable guidance to help a policyholder make a claim, not unreasonably

rejecting a claim and settling claims promptly.

The FCA states that this includes insurers taking into account, when dealing with claims, that the

pandemic is a stressful time for customers.

Some customers submitting a travel insurance claim might also have a right to claim the cost of

cancelled travel arrangements from their credit card provider. Where this is the case, the FCA

states that insurers should consider how best to handle the claim to ensure that the customer is

treated fairly and not raise unreasonable barriers to making a claim.

The FCA notes that where consumers have two potentially valid avenues of redress against

regulated firms (for example, from an insurer and credit provider) it is possible for one regulated

firm to settle the claim in full (so long as there is no disadvantage to the consumer in this) and,

where appropriate, seek to claim back from the other regulated firm involved. Firms can also

agree a convention with the other provider as to how these sorts of arrangements might work

efficiently without having a negative impact on consumers. Regulated firms may need to

consider issues such as any limits on recovery, for example, limits on insurance cover in these

arrangements and how those can be addressed to minimise harm to consumers.

The FCA explains that, while this has not been a significant issue for consumers historically,

given the current strain on the travel market, the complexity involved in obtaining a refund has

become clearer. In view of this, it plans to consult in the coming weeks on guidelines to make its

expectations of firms clearer in the future.

The FCA has also updated the travel insurance section of its webpage on insurance and COVID-

19. In particular, it explains that, when selling an insurance policy, firms are required to only

propose cover that is consistent with a customer's demands and needs, and states that it expects

firms to ask customers questions to establish an individual customer's demands and match the

products they are offered to these.

COVID-19: FCA updates expectations of motor insurers

On 30 June 2020, the FCA updated its guidance for insurers on its expectations of firms in light

of COVID-19 to add a section on MOTs.

The FCA notes that the Department of Transport (DoT) has granted a six months extension of

the MOT expiry date for cars, vans and motorcycles where the MOT was due between 30 March

2020 and 31 July 2020. An MOT certificate will not be extended if a vehicle's MOT expires on or

after 1 August 2020, and an MOT must be booked as usual.

Given the DoT's guidance, the FCA expects motor insurers to continue to provide cover for

consumers' car, motorcycle or van insurance due to their temporary situation. This includes at

renewal, to ensure customers are able to shop around for their insurance.

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COVID-19: FCA update on business interruption insurance test case

On 30 June 2020, the FCA updated its webpage on the High Court test case concerning business

interruption insurance. The update summarises the directions on how the case is to proceed

following the second case management conference hearing on 26 June 2020 and provides:

• the draft provisional transcript of the hearing (the FCA will publish the final approved

transcript, as well as the court order, when they are available); and

• the final approved transcript of the first case management conference on 16 June

2020.

UK Solvency II technical provisions: PRA CP5/20

The Prudential Regulation Authority (PRA) has published a consultation paper, CP5/20, on its

proposed approach to the publication of Solvency II technical information after the end of the

Brexit transition period.

Until the end of the transition period, UK insurers are required to use technical information

published by the European Insurance and Occupational Pension Authority (EIOPA) to calculate

their regulatory technical provisions under the Solvency II Directive. However, after that, the

PRA is required to publish technical information for each relevant currency, referred to as "PRA

relevant currencies".

In CP5/20, the PRA proposes:

• its published technical information would be derived by adopting the same technical

methodologies embodied within EIOPA's technical information as at the end of the

transitional period, with some limited exceptions set out in an accompanying draft

Statement of Practice at Appendix 1 to CP5/20;

• the criteria that it would use to determine the PRA relevant currencies to publish

would be based on the relative materiality of technical provisions denominated in

each currency, and the currencies for which firms have volatility adjustment (VA) or

matching adjustment authorisation;

• the PRA's approach to determining the VA reference portfolios (which would inform

the calculation of the VA) in light of the loss of sharing of regulatory returns data

between the PRA and EIOPA; and

• the publication of technical information on its website and, where there is a deviation

in the future from EIOPA's technical methodology, a PRA publication that describes

this deviation.

The consultation ends on 30 September 2020. The proposals would come into effect from the

end of the transition period.

The PRA intends to issue a separate consultation paper later on in 2020 on its proposals with

regard to how LIBOR transition would impact the design and production of technical

information. The PRA may issue another consultation to propose further changes, once the UK's

trading relationship with the EU becomes clearer.

Solvency II 2020 review: European Commission consultation

The European Commission is consulting on the 2020 review of the Solvency II Directive and a

related inception impact assessment. The consultation on the review is split into the following

chapter headings:

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• long-termism and sustainability of insurers' activities and priorities of the EU

framework;

• proportionality of the European framework and transparency towards the public;

• improving trust and deepening the single market in insurance services; and

• new emerging risks and opportunities.

The deadline for responses to the consultation paper is 21 October 2020 and 26 August 2020 for

the inception impact assessment.

The consultation will complement the work currently being undertaken by EIOPA on technical

advice relating to the Solvency II review.

The Commission aims to adopt a legislative proposal in Q2-Q3 2021.

Liquidity risk management: IAIS consultation

The International Association of Insurance Supervisors (IAIS) has published an application

paper on liquidity risk management. It provides guidance on the supervisory material related to

liquidity risk management in the Insurance Core Principles (ICPs) and the Common Framework

for the Supervision of Internationally Active Insurance Groups (ComFrame). In particular, it is

related to the material in ICP Standards 16.8 and 16.9 (ICP 16 Enterprise Risk Management

(ERM) for Solvency Purposes) and ComFrame 16.9.a – 16.9.d.

The paper provides guidance and examples on:

• considerations on applying liquidity risk management measures in a proportionate way

and the ways that supervisors may tailor requirements;

• detailed components of the four elements for “more detailed risk management processes”

contained in ICP Standard 16.9:

o liquidity stress testing;

o maintenance of a portfolio of unencumbered highly liquid assets in appropriate

locations;

o a contingency funding plan; and

o the submission of a liquidity risk management report to the supervisor; and

• integration of liquidity risk into insurers' ERM frameworks.

Alongside the final version of the paper, the IAIS has published a resolutions document that

contains the responses it received to its consultation, together with its comments on those

responses.

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