CUBE RegNews: 11th March

Posted: 2024-03-11

UK Government set to launch National Payments Vision        

The HM Treasury has provided an update on the UK Government’s upcoming initiative regarding the future of payments, confirming that it will work on the National Payments Vision, a clear strategy for the payments landscape in the UK.  

Background  

The National Payments Vision is being launched based on a recommendation made in the Future of Payments Review report published on 22 November 2023.  

The report examined the most significant consumer retail payment journeys both presently and in the next five years. It also compared the consumer experience in the UK, for individuals and businesses, with that of other leading countries. The report concluded that the payment landscape in the UK is congested and would benefit from a clear strategy. Consequently, it recommended the development of a national payments vision and strategy.  

Objectives  

The aim is to provide guidance to the industry and regulatory bodies, outlining the desired outcomes that the Government aims to achieve and ensuring the establishment of a world-leading payments ecosystem. This vision will heavily build upon the extensive work and engagement undertaken to produce the Future of Payments Review, including the preceding public call for input. The Government plans to conduct a comprehensive program of engagement on key issues and collaborate closely with trade associations and membership bodies to gather diverse perspectives.  

Next steps  

To ensure that the National Payments Vision incorporates the views expressed in the Future of Payments Review, Joe Garner, who conducted the work to produce the report, has been appointed as an advisor on this project. The Government aims to publish the National Payments Vision as soon as possible later this year.  

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FCA publishes latest whistleblowing report        

The Financial Conduct Authority (FCA) has published its whistleblowing data for Q4 2023. This data reveals the number of new whistleblowing reports received between October and December 2023 and the methods through which these reports were received. It’s important to note that the report does not include specific details about individual cases.  

Number of whistleblowing declined slightly in Q4 2023  

In Q4 2023, the FCA received 249 new whistleblowing reports. This number represents a slight decrease from the 276 reports received during the same period in 2022 and the 280 received in Q3 2023. Among these 249 reports, 649 allegations were made.  

Consumer Duty among top 5 themes  

The top five themes that emerged during this quarter were Compliance, accounting for 22.94% of the reports, followed by Fitness Propriety at 18.17%, Culture of Organisation at 12.48%, Consumer Detriment at 10.64%, and Consumer Duty, which replaced Treating Customers Fairly allegation in August 2023 and accounted for 8.99% of the allegations, totalling 49 reports.  

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EBA publishes guidelines for orderly redemption of asset-referenced and e-money tokens under MiCAR         

The European Banking Authority (EBA) has released a consultation paper on guidelines for the orderly redemption of asset-referenced or e-money tokens in the event that the issuer fails to fulfil its obligations under the Markets in Crypto Assets Regulation (MiCAR).   

These guidelines outline the content of the redemption plan, the timeframe for review, and the triggers for its implementation.  

Background   

Under MiCAR, holders of asset-referenced tokens (ART) and e-money tokens (EMT) are entitled to redeem their tokens from the issuer at any time.   

In case the issuer can no longer meet its obligations, the competent authority can trigger the implementation of the redemption plan developed by the issuer to ensure the equitable redemption of all tokens in a timely manner without causing any economic harm to the token holders or the stability of the markets.  

Key points  

The draft guidelines:   

• Provide clarity on the main principles governing the redemption plan, such as the equitable treatment of token holders.  
• Outline the necessary steps for the orderly and timely implementation of the plan.  
• Cover the case of pooled issuance, where multiple issuers issue the same token,  
• Specify the triggers for activation of the plan by the competent authority, as well as the cooperation required with prudential and resolution authorities  

The guidelines are addressed to issuers of ART and EMT and to competent authorities under MiCAR.   

Next steps   

The consultation closes on 10 June 2024.  

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FINRA to issue new US Treasury securities data products       

FINRA (Financial Industry Regulatory Authority) has adopted amendments to enhance transparency in the US Treasury securities market by disseminating end-of-day and historic data products for individual transactions in US Treasury securities that are on-the-run nominal coupons.  

Content  

The End-of-Day TRACE transaction file will be disseminated from 25 March 2024. Transactions will be subject to size caps, at or over which the actual size of the trade will not be included. The caps will be based on the maturity of the on-the-run nominal coupon at issuance.  

The Historic TRACE Data Set will be disseminated from 1 April 2024. It will include the transactions contained in the End-of-Day TRACE transaction file on a six-month delayed basis. The new Historic TRACE data set will include information for transactions from Q1 2019 through Q3 2023. Subsequent historic data sets will be available quarterly.  

Fee and access  

Transaction-level information will be publicly available and free of charge on FINRA’s website on a next-day basis for personal, non-commercial purposes. Members and other professionals will need to subscribe for a fee to access FINRA’s end-of-day and historic TRACE data products.  

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Federal Reserve Board adopts final rule on FMU risk management         

The Federal Reserve Board has adopted a final rule to update the risk management requirements for certain systemically important financial market utilities (FMUs) under its supervision. The updated rule clarifies existing requirements in four key areas of operational risk management:  

• Incident management and notification  
• Business continuity management and planning  
• Third-party risk management  
• Review and testing  

Incident management and notification  

Under the final rule, FMUs must immediately inform the Board of material operational incidents following the process established by the Board. The rule also requires a designated FMU to establish criteria and processes for timely communication and responsible disclosure to other relevant parties.  

Business continuity management and planning  

The final rule amends existing requirements on business continuity planning for designated FMUs to highlight the need for cyber resilience capabilities and demonstrate and assess their business continuity abilities. The rule requires a designated FMU’s business continuity plan to establish criteria and processes for restoring availability after a disruption to critical operations or services. The existing requirement for annual testing remains, along with three minimum testing requirements and an additional requirement for annual plan review.  

Third-party risk management  

The final rule mandates that a designated FMU must have effective systems to manage risks associated with third-party relationships. This applies to any entity with which a designated FMU has a business arrangement. Additionally, a designated FMU must regularly conduct risk assessments of third parties and establish information-sharing arrangements for those that provide critical functionality, support, or services to the designated FMU.  

Review and testing  

The final rule mandates a designated FMU to take a comprehensive and risk-based approach to operational risk management. A documented testing framework addressing scope, frequency, participation, interdependencies, and reporting is required. The designated FMU needs to review and remediate deficiencies identified during testing and review as soon as possible.  

Compliance date  

The compliance date for most provisions of the final rule is 180 days following publication in the Federal Register. However, designated FMUs will be expected to comply with the requirement to establish a documented framework for incident management approximately 90 days following publication in the Federal Register.  

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March consultations deadlines         

Below is a selection of the most important regulatory deadlines for the UK, US, EU, Singapore, Australia, and Hong Kong in March 2024.  

• United Kingdom   

CP23/28 Updating the regime for Money Market Funds: Deadline 8 March 2024   

This consultation sets out proposals to enhance the resilience of Money Market Funds (MMFs) domiciled in the UK, addressing vulnerabilities identified in the 2020 ‘dash for cash’ and other times of market stress.   

CP23/24 Capital deduction for redress: personal investment firms: Deadline 20 March 2024   

These proposals would require personal investment firms – often referred to as investment advisers – to calculate their potential redress liabilities at an early stage, set aside enough capital to meet them and report potential redress liabilities to the FCA. Any firm not holding enough capital will be subject to automatic asset retention rules to prevent them from disposing of their assets.   

PRA CP26/23, FCA CP23/30 Operational resilience: Critical third parties to the UK financial sector: Deadline 15 March   

This consultation paper is issued jointly by the Prudential Regulation Authority, the Financial Conduct Authority, and the Bank of England. It sets out the proposed requirements to be established in rules and accompanying expectations for critical third parties (CTPs). For the purpose of this CP, a CTP is an entity that will be designated by HM Treasury by a regulation made in exercise of the power in section 312L(1) of the Financial Services and Markets Act 2000 as amended by the Financial Services and Markets Act 2023.   

CP23/31: Primary markets effectiveness review: Feedback to CP23/10 and detailed proposals for listing rules reforms: Deadline 22 March 2024   

These proposed listing regime reforms aim to encourage a greater range of companies to list and grow on UK markets.  

• United States of America  

Qualifying venture capital funds inflation adjustment: Deadline 22 March 2024  

To implement the requirements of section 504 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA), the Securities and Exchange Commission (SEC) is proposing a rule that would adjust for inflation the dollar threshold used in defining a “qualifying venture capital fund” under section 3(c)(1) of the Investment Company Act of 1940. The proposed rule also would allow the SEC to adjust for inflation this threshold amount by order every five years and specify how those adjustments would be determined.  

Regulatory flexibility agenda: Deadline 11 March 2024  

The SEC is publishing the Chair’s agenda of rulemaking actions pursuant to the Regulatory Flexibility Act (RFA) (Pub. L. 96–354, 94 Stat. 1164) (Sept. 19, 1980). The items listed in the Regulatory Flexibility Agenda for Fall 2023 reflect only the priorities of the Chair of the US Securities and Exchange Commission, and do not necessarily reflect the views and priorities of any individual Commissioner.  

Notice of proposed order and request for comment on an application for a capital comparability determination submitted on behalf of nonbank swap dealers subject to capital and financial reporting requirements of the United Kingdom and regulated by the United Kingdom Prudential Regulation Authority: Deadline 24 March 2024  

The Commodity Futures Trading Commission is soliciting public comment on an application submitted by the Institute of International Bankers, International Swaps and Derivatives Association, and Securities Industry and Financial Markets Association requesting that the Commission determine that the capital and financial reporting laws and regulations of the United Kingdom applicable to CFTC-registered swap dealers organized and domiciled in the United Kingdom, which are licensed under the United Kingdom Financial Services and Markets Act 2000 as investment firms and designated for prudential supervision by the United Kingdom Prudential Regulation Authority, provide sufficient bases for an affirmative finding of comparability with respect to the Commission’s swap dealer capital and financial reporting requirements adopted under the Commodity Exchange Act.  

Nonsufficient funds (NSF) fees for instantaneously declined transactions: Deadline 25 March 2024  

The Consumer Financial Protection Bureau proposes to prohibit covered financial institutions from charging nonsufficient funds (NSF) fees on payment transactions that are instantaneously declined because such fees would constitute an abusive practice.  

Proposed agency information collection activities; Comment Request: Deadline 19 March 2024  

The Office of the Comptroller of the Currency, the Federal Reserve System, and the Federal Deposit Insurance Corporation are requesting comment on proposed revisions to the FFIEC 030 report that would incorporate new line items from the FR 2502q, Quarterly Report of Assets and Liabilities of Large Foreign Offices of US Banks (OMB Control No. 7100–0079). The revisions are proposed to take effect as of 30 June 2024, report date.  

• Europe  

Consultation paper draft implementing technical standards on amending Commission Implementing Regulation (EU) 2016/2070 with regard to the benchmarking of internal models: Deadline 27 March 2024  

Article 78 of Directive 2013/36/EU (CRD) requires competent authorities to conduct an annual assessment of the quality of internal approaches used for the calculation of own funds requirements. To assist competent authorities in this assessment, the European Banking Authority (EBA) calculates and distributes benchmark values to CAs that allows a comparison of individual institutions’ risk parameters. This consultation proposes changes to benchmark values.  

Two sets of guidelines on internal policies, procedures and controls to ensure the implementation of Union and national restrictive measures: Deadline 25 March 2024  

Article 23 of Regulation (EU) 2023/1113 mandates the EBA to issue guidelines on the internal policies, procedures and controls payment service providers (PSPs) and crypto-asset service providers (CASPs) need to have in place to ensure compliance with Union and national restrictive measures in the context of transfers of funds and transfers of crypto-assets. Through these guidelines, the EBA creates a common understanding, among PSPs, CASPs and their supervisors, of the steps PSPs and CASPs need to take to be able to comply with restrictive measures when performing transfers of funds and crypto-assets.   

Consultation paper on the securitisation disclosure templates under Article 7 of the Securitisation Regulation: Deadline 15 March 2024  

The consultation paper from European Securities and Markets Authority (ESMA) provides an overview of the background leading to the Commission’s invitation for a review of the disclosure framework and presents several options for the way forward. In summary, the options include:  

• To put on hold the review of the templates until further changes to the Level 1 text.  
• Maintaining the current framework with the introduction of a few amendments.  
• A targeted review aimed at streamlining the disclosure templates and developing a dedicated template for private securitisation.  
• A thorough review of the disclosure templates, aiming at a fundamental simplification of the framework.  

Consultation on the methodology on value for money benchmarks: Deadline 15 March 2024  

The European Insurance and Occupational Pensions Authority (EIOPA) has launched a public consultation on its proposed methodology for setting value-for-money benchmarks for unit-linked and hybrid insurance products. This work is not related to the benchmarks proposed by the European Commission under the Retail Investment Strategy. It is part of the toolkit EIOPA began developing in 2020 to provide supervisors with additional risk-based tools and enhance their ability to identify products in their markets that may not deliver fair value for money.  

Draft guidelines on enforcement of sustainability information: Deadline 15 March 2024  

ESMA has launched a consultation on a set of draft guidelines on enforcement of sustainability information. The main goals of the draft Guidelines are to: ensure that national competent authorities carry out their supervision of listed companies’ sustainability information under the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards and Article 8 of the Taxonomy Regulation in a converged manner; and establish consistency in, and equally robust approaches to, the supervision of listed companies’ sustainability and financial information; this will facilitate increased connectivity between the two types of reporting.   

Consultation on Regulatory Technical Standards on the standardised approach for counterparty credit risk: Deadline 14 March 2024  

The EBA is consulting on amendments to its Regulatory Technical Standards (RTS) on the fundamental review of the trading book (FRTB), and to its RTS on the standardised approach for counterparty credit risk (SA-CCR). Both RTS are part of the roadmap on the Banking Package and aim to align the existing RTS with the Capital Requirements Regulation (CRR3).   

Consultation on Regulatory Technical Standards on profit and loss attribution requirements, risk factor modellability assessment, and the treatment of FX and commodity risk in the banking book (EBA/CP/2023/41): Deadline 14 March 2024  

The EBA is consulting on amendments to its RTS on the FRTB, and to its RTS on the standardised approach for counterparty credit risk (SA-CCR). Both RTS are part of the roadmap on the Banking Package and aim to align the existing RTS with the Capital Requirements Regulation (CRR3).   

Consultation on draft ITS on Pillar 3 disclosure and supervisory reporting: Deadline 14 March 2024  

The EBA is consulting on two draft ITS amending Pillar 3 disclosures and supervisory reporting requirements. These consultation papers are a first step in the implementation of the Banking Package (Capital Requirements Regulation – CRR3 – and Capital Requirements Directive – CRD6). With this publication the EBA wants to support banks in their reporting and disclosure obligations linked to the implementation of the Basel III reforms from the application date, and to ensure that supervisors and market participants have the necessary information.   

Discussion paper on MiFID II investor protection topics linked to digitalisation: Deadline 14 March 2024  

This discussion paper (DP) is to consult stakeholders and consumers, in an open and transparent manner, on the various examples and views expressed towards the topics listed in this DP.   

Consultation paper on the prudential treatment of sustainability risks: Deadline 22 March 2024  

The consultation paper represents the second phase in EIOPA’s step-by-step approach concerning the expected mandate under the Solvency II Directive, which requires EIOPA to assess whether a dedicated prudential treatment of assets or activities associated substantially with environmental or social objectives, or harm to such objectives, would be justified.  

Consultation on the opinion on sustainability claims and greenwashing in the insurance and pensions sectors: Deadline 12 March 2024  

This consultation sets out EIOPA’s draft Opinion on sustainability claims and greenwashing. The principles within the draft Opinion aim to pave the way for a more effective and harmonised supervision of sustainability claims across Europe and thereby limit the risk of greenwashing in the insurance and occupational pensions sectors. The consultation, sets out four principles that should be observed when providers make sustainability claims. To make the proposed principles more concrete and to demonstrate how greenwashing can occur in practice, EIOPA has compiled examples of good and bad practices for each principle.  

• Australia  

CP 375 Proposed changes to the ASIC Derivative Transaction Rules (Reporting): Third consultation: Deadline 28 March 2024  

This consultation paper proposes further amendments to the ASIC Derivative Transaction Rules (Reporting) 2024 in relation to outstanding matters from prior consultations in November 2020 and May 2022. It sets out proposals on simplifying the exclusion of exchange-traded derivatives and the scope of foreign entity reporting, and the removal of the alternative reporting provisions. It also addresses certain additional data elements and other matters that have been raised by industry, and consequential changes to the ASIC Derivative Transaction Rules (Clearing) 2015.  

APRA’s superannuation data transformation: Deadline 31 March 2024  

The Australian Prudential Regulation Authority (APRA) has released a discussion paper to seek deeper insights into the superannuation industry under the latest phase of its superannuation data transformation. The proposed changes would strengthen data collection in areas including trustee board governance, investment liquidity, and valuations.    

New cross-industry standard to centralise existing standards on definitions for ADIs and insurers: Deadline 13 March 2024  

The consultation from the APRA seeks feedback on a new cross-industry standard to centralise APRA’s existing standards on definitions for authorised deposit-taking institutions and general, life and private health insurers. The proposed new prudential standard CPS 001 Defined terms (CPS 001) follows APRA’s strategic initiative to Modernise the Prudential Architecture and aims to remove terms that are no longer in use, address duplication and consolidate existing definitions across different standards into one place.  

• Singapore  

Consultation paper on proposals to simplify requirements and facilitate access to simple and cost-effective insurance products: Deadline 13 March 2024  

This consultation from the Monetary Authority of Singapore (MAS) seeks feedback on proposals to reduce the amount of information collected by financial institutions from their clients for selected insurance policies, when recommendations are made based on the Basic Financial Planning Guide (Guide). The proposals will enable consumers to meet their protection needs more easily through the purchase of simple and cost-effective insurance policies.  

• Hong Kong  

Public consultation on proposal for information sharing among Authorized Institutions to aid in prevention or detection of crime: Deadline 29 March 2024  

The Hong Kong Monetary Authority (HKMA) has issued this consultation to seek views on proposals to facilitate sharing among Authorized Institutions (AIs) of information on customer accounts for the purpose of preventing or detecting crime. The proposal aims to help protect bank customers from losses and the banking system against abuse for fraud, money laundering and terrorist financing (ML/TF).  

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