Greg Kilminster
Head of Product - Content
The RegNews team will be back on Tuesday 26th November.
FCA proposes extension for motor finance complaint handling
As previously covered, the Financial Conduct Authority (FCA) has published Consultation Paper 24/22 proposing extending the timeframe for firms to handle complaints related to motor finance commission arrangements. This move comes in response to the Court of Appeal's recent judgment on the legality of such arrangements.
Some context
The Court of Appeal ruled that car dealers must disclose and obtain informed consent from customers regarding any commission received from lenders providing motor finance. This judgment has significant implications for the industry and could lead to a surge in consumer complaints.
Key takeaways
- Proposed extension: The FCA is considering two options for extending the deadline for final responses to motor finance complaints:
- Until 31 May 2025, aligning with the potential Supreme Court appeal timeframe.
- Until 4 December 2025, matching the current deadline for discretionary commission arrangements (DCA)related complaints.
- Consumer rights: Consumers who believe they may have been affected by undisclosed commission arrangements are encouraged to file complaints. The FCA has updated its consumer information to provide guidance on this process.
- Industry impact: Firms will need to allocate sufficient resources to handle the expected increase in complaints. They should also consider making necessary financial provisions.
- FCA's role: The FCA is closely monitoring the situation and will provide further updates, including on the impact of the Court of Appeal's judgment on its ongoing review of historical DCAs in motor finance.
Next steps
The FCA is seeking feedback on its proposed extension and will consider the implications of the Court of Appeal's judgment on its future actions. The swift consultation closes on 5 December 2024.
Click here to read the full RegInsight on CUBE's RegPlatform.
APRA’s Beverley-Smith calls for resilience and accountability in superannuation
In a speech at the Australian Financial Services Authority (ASFA) Conference 2024, Carmen Beverley-Smith, APRA’s Executive Director, outlined the pressing need for superannuation funds to enhance financial and operational resilience while remaining accountable to their members. She stressed that funds must uphold their duty to act in members’ best financial interests as the industry faces growing scrutiny and complexity.
Building resilience
Beverley-Smith highlighted the superannuation industry’s significant role in Australia’s financial system, noting its "privilege, the responsibility, and the accountability to safeguard and grow members’ retirement savings." With super funds now holding more than AUS$2.7 trillion in assets, she emphasised their interconnectedness with global and domestic markets, pointing out that funds own more than 25% of bank shares and a third of short-term bank debt in Australia.
Acknowledging this systemic importance, she announced that APRA will conduct its first system-wide financial stress test in 2025, involving banks and major super funds. Unlike prior sector-specific tests, the focus will be on understanding "the potential risks that might arise across the system in times of stress" and how these could affect the financial system as a whole.
On operational resilience, Beverley-Smith stressed the importance of preparation for the cross-industry prudential standard CPS 230, effective from July 2025, which addresses risks such as cyber incidents and third-party failures. “Should you outsource a critical operation, and the service provider fails in their delivery of the service to your members, you will be accountable,” she warned.
Addressing industry challenges
Investment governance remains a priority area for APRA. Beverley-Smith expressed concern over gaps in the valuation of unlisted assets, such as private equity and infrastructure, following a recent survey. She revealed that APRA is completing a deep-dive review into valuation and liquidity management practices, with findings to be shared soon.
Expenditure oversight is also under sharper review. APRA’s recent publication of fund-level expenditure data revealed discrepancies in spending categories such as travel, entertainment, and conferences. “Where an expenditure is reviewed, you can expect that we will seek information from you that demonstrates the expense was made in the best financial interests of your members,” she stated. Trustees will need to provide metrics to assess whether their spending delivers tangible member benefits.
On product performance, APRA is increasing scrutiny of the choice investment sector, where 37 of 590 trustee-directed products failed this year’s performance test. Beverley-Smith noted the need for trustees to address underperformance promptly, whether through improvements or exiting products.
Supporting members in retirement
Beverley-Smith voiced concern over trustees’ slow progress in implementing the Retirement Income Covenant, which requires strategies to support members transitioning to retirement. She noted improvements since a joint thematic review by APRA and ASIC but lamented the lack of focus on measuring the success of these strategies. “Expect APRA and ASIC to keep pushing hard on trustees to improve the support they provide to members in or approaching retirement,” she warned.
In concluding her address, Beverley-Smith reinforced the critical importance of superannuation trustees’ accountability. “APRA can provide the prudential settings, supervise and enforce, but, ultimately, you have accountability for ensuring your funds are strong, resilient, and operating in the best financial interests of your members.” As the industry grows in size and significance, she urged trustees to seize the opportunity to strengthen their operations and deliver better outcomes for members.
Click here to read the full RegInsight on CUBE's RegPlatform.
EIOPA chair warns of evolving risks and regulatory challenges
In a speech at the German regulator BaFin’s Annual Conference, Petra Hielkema, Chair of the European Insurance and Occupational Pensions Authority (EIOPA), reflected on geopolitical, economic, and environmental challenges reshaping the insurance landscape. She stressed too the importance of adapting regulatory frameworks to ensure resilience, consumer protection, and sustainable growth within the insurance sector.
Hielkema addressed a period marked by uncertainty, noting that risks are "increasingly interconnected, complex, and fast-evolving," requiring a shift from national approaches to an EU-wide perspective. Highlighting the revised Solvency II framework and the global Insurance Capital Standard (ICS), she praised recent regulatory advancements but stressed the need for further harmonisation to strengthen consumer protection and cross-border supervision.
Key takeaways
- Solvency II revisions: The updated Solvency II framework, effective January 2025, introduces key measures including the Insurance Recovery and Resolution Directive and a macroprudential perspective to address systemic risks. Additionally, sustainable finance mandates recommend higher capital charges for fossil fuel-related assets. However, Hielkema raised concerns about a significant reduction in capital requirements, warning that "less capital available for shocks" could undermine resilience during turbulent times.
- Insurance Capital Standards: The agreement on the ICS represents a milestone in global insurance supervision. Hielkema noted that Solvency II has become a "global reference framework" and welcomed the focus on promoting convergence in group capital standards. While acknowledging progress, she urged vigilance, stating that "the adoption of the ICS is just one, yet crucial, step in a long-term project."
- Protection gaps in natural catastrophe insurance: Hielkema highlighted the growing insurance protection gap for natural catastrophes, exacerbated by climate change. With Europe warming faster than other continents, she urged insurers to lead mitigation efforts and called for public-private partnerships to ensure shared resilience. "Nearly 20% of Europe's direct [natural catastrophe] economic losses over the past fifty years have occurred in just the last three years alone," she noted.
- Consumer trust and value for money: Low consumer trust in insurance products remains a challenge, particularly in Germany, where only 41% of consumers believe insurance-based investment products offer value for money. Hielkema called on insurers to improve product design and distribution, echoing BaFin’s emphasis on addressing "value-for-money risks" to strengthen consumer confidence.
Looking ahead, Hielkema outlined priorities for enhancing supervision and competitiveness, including implementing the Digital Operational Resilience Act (DORA) to address cyber risks. She also advocated for harmonised Insurance Guarantee Schemes and stronger cross-border supervisory powers for EIOPA to ensure consistent consumer protection across the EU.
In closing, Hielkema emphasised the importance of bold collective action: "To build a strong and competitive insurance sector on the global stage, we must think boldly, and collectively as Europeans."
Click here to read the full RegInsight on CUBE's RegPlatform.
Australia consults on crypto asset reporting framework
Australia’s Treasury has released a consultation paper on the implementation of the OECD’s Crypto Asset Reporting Framework (CARF) and updates to the Common Reporting Standard (CRS). The CARF aims to enhance global tax transparency in crypto asset transactions, while CRS amendments seek to modernise the framework for broader financial activities.
Some context
The CARF was developed to address tax challenges posed by the rapid growth of the crypto asset market. Crypto assets, which often bypass traditional financial intermediaries, create opportunities for tax evasion. The CARF builds on the CRS to ensure the automatic exchange of information on crypto asset transactions across jurisdictions. As of 2024, 58 countries, including Australia, have committed to adopting the CARF by 2027.
The CRS amendments reflect evolving digital financial products, extending coverage to central bank digital currencies, certain electronic money products, and crypto derivatives. This complements Australia’s ongoing efforts to strengthen tax enforcement.
Key takeaways
- CARF adoption: Australia is evaluating two options:
- Adopting the OECD model with minimal adjustments.
- Developing a bespoke domestic framework tailored to local needs.
The former would align with international standards, while the latter may reduce compliance burdens for certain entities.
- Reporting requirements: Crypto asset service providers (exchanges and wallet providers for example) would report customer and transaction data, including large payments and asset exchanges. Reporting thresholds are set at US$50,000.
- CRS updates: Proposed amendments include new definitions for financial products and integration with CARF reporting to avoid duplication.
- Implementation timeline: CARF reporting is planned to start in 2026, with exchanges between tax authorities beginning in 2027. Adequate lead time will be provided for entities to adapt their systems and processes.
Next steps
The Treasury is seeking industry feedback on implementing CARF and CRS amendments, including compliance costs, due diligence requirements, and the clarity of definitions. Responses will inform legislative development and implementation strategies. Stakeholders are encouraged to provide input by the 24 January 2025 deadline.
Click here to read the full RegInsight on CUBE's RegPlatform.
Swedish retail payments infrastructure set for overhaul
In a new report Sweden's central bank, the Riksbank, has highlighted the need for a significant modernisation of the country's retail payments infrastructure. The report, The way forward for the clearing and settlement of retail payments in Swedish kronor, identifies several key drivers for change:
- Standardisation: The global transition to the ISO 20022 messaging standard will require participants in the Swedish market to adapt their systems and processes. This will facilitate smoother cross-border payments with the European Union (EU).
- Rise of instant payments: Sweden already has a high adoption rate for instant payments via Swish, and the future infrastructure is expected to handle even more instant settlements, both domestically and internationally.
- New entrants: EU regulations are opening up the payments infrastructure to new players, such as payment institutions and e-money institutions.
- Cybersecurity threats: The sharply deteriorating cybersecurity situation necessitates a more resilient infrastructure to combat cyberattacks, money laundering, and fraud.
The Riksbank emphasises the shared responsibility of state and private actors in developing and maintaining the infrastructure. Market participants will be responsible for developing the future clearing infrastructure, with the Riksbank potentially taking a more active role if necessary.
Key priorities for the modernised infrastructure include:
- Compliance with international standards: Aligning with the Nordic Payments Council (NPC) scheme for retail payments and adopting ISO 20022 will be crucial.
- Instant and predetermined settlements: The future system should be able to accommodate both instant and scheduled payments.
- Accommodating new participants: The infrastructure needs to be adaptable to integrate new entrants efficiently and securely.
- Settlement in central bank money: The Riksbank advocates for settling all retail payments, including card payments, in central bank money to enhance stability.
- Resilience: The infrastructure must be robust enough to function during peacetime crises and heightened security situations.
The Riksbank is currently updating its RIX settlement system and emphasises the need for similar modernization efforts in the privately owned clearing infrastructure.
This report provides a roadmap for the transformation of Sweden's retail payments infrastructure, aiming to ensure a future system that is secure, efficient, and adaptable to evolving market demands.
Click here to read the full RegInsight on CUBE's RegPlatform.