March 2015

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has announced that its MEPs have voted in favour of a draft report on the proposed Regulation on securities financing transactions (the SFT Regulation).

In particular the press release notes that MEPs have:

  • added a provision that not only investment funds but also listed companies and banks would have to disclose their use of SFTs and reuse of collateral in their annual financial reports; and
  • extended the conditions that must be fulfilled when financial instruments received as collateral are being re-used. The providing party should be informed about risks and consequences involved in granting a right to use collateral and transferring title to it in the event of the default of the receiving party.

The Payment Systems Regulator (PSR) will become fully operational on 1 April 2015.

The PSR has published its Annual Plan for 2015/16. In its Annual Plan the PSR outlines its activities to advance its objectives to promote competition, innovation and the interests of service-users as well as its work to continue to build and refine the organisation.

The Annual Plan notes that the PSR will carry out two significant market reviews over the coming year. One review will look at the supply of indirect access to payment systems. The second review looks into the ownership and competitiveness of infrastructure provision to support payment systems.

The European Securities and Markets Authority (ESMA) has published a revised Regulatory Work Programme (RWP) for 2015. The RWP provides more detail on ESMA’s single rulebook as set out in ESMA’s Annual Work Programme for 2015.

As to be expected, ESMA’s agenda is dominated by the implementing measures for MiFID II and MiFIR, MAR and CSDR, much of which are in-process.

The RWP does, however, contain a few surprises:

A recent article in the Globe and Mail suggested that the banking industry is about to suffer a huge upheaval from the impact of digital technology.  In part, this upheaval is to come from the rapid grow of mobile payments apps.  At the same time, it is anticipated that, sometime later this year, amendments to the Canadian Payments Act will come into effect which will significantly change the manner in which the Canadian Payments Association (CPA) is governed. Today, the CPA is an association created by statute and operated by its members, which has the mandate of running a national payment clearing and settlement system. At present, the payment systems run by the CPA clear and settle the vast majority of payment items in Canada.

When the CPA amendments come into force, the governance structure of the CPA will be substantially altered. Until now, the CPA has been governed by a board of directors the majority of whom are representatives of its members. Under the new governance structure, the members will continue to elect directors, but a majority of the directors will be required to be independent of the CPA and its members. The principal objective of the CPA will remain the same – namely, to operate a national payment clearing and settlement system – but these governance changes are likely to result in the board’s membership becoming significantly more diverse.

How these governance changes will ultimately affect the future of Canada’s payment clearing and settlement systems, of course, remains to be seen. However, it is clear that a new era of clearing and settlement system governance has been ushered in.

The Financial Conduct Authority (FCA) has published its business plan for 2015/16. The business plan sets out the conduct regulator’s priorities for the year ahead and identifies emerging risks. Among the specific areas of FCA focus for the insurance market will be the use of big data and access to technology and the role of Appointed Representatives (ARs). In December last year, the FCA changed its strategic approach in order to place greater emphasis on sector analysis in order to address emerging issues with greater prioritisation.

On 25 March 2015, the Financial Conduct Authority (FCA) published its proposed remedies following a market study into general insurance ‘add-ons’. The market study was the first undertaken under the competition mandate given to the FCA. The study found that competition for add-on sales is not effective and has an adverse impact on consumer behaviour and that selling products as add-ons provides the primary product provider with a clear point of sale advantage that can restrict choice and competition for consumers. The FCA study found that opt-out sales resulted in consumers purchasing products that they would not otherwise buy.

There has been published on the legislation.gov.uk website the Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2015 (the Order) together with an explanatory memorandum and impact assessment.

The Order makes amendments to provisions in the Financial Services and Markets Act 2000, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, to resolve issues identified by the FCA in the course of their review of applications for authorisation relating to consumer credit activities. Additionally, the Order makes minor drafting amendments relating to the transfer of consumer credit regulation from the Office of Fair Trading to the FCA.

HM Treasury has published its fourth annual anti-money laundering and counter financing of terrorism (AML/CFT) supervision report.

HM Treasury is responsible for appointing AML/CFT supervisors and for the Regulations which set out the role of the supervisors and gives them powers to effectively monitor their respective sectors. The supervisors that HM Treasury has appointed are a diverse group including large global professional bodies, smaller professional bodies and a number of public sector organisations.

The report that HM Treasury has published follows a similar framework to previous reports, placing a focus on providing both quantitative and qualitative data. The report also provides a number of case studies of good practice by individual supervisors as they rise to the challenges set by the Financial Action Task Force (FATF) to better focus their efforts on demonstrating that they supervise in accordance with a risk-based approach and that this supervision is effective and proportionate.