CUBE RegNews: 25th July

Greg Kilminster

Greg Kilminster

Head of Product - Content

FCA releases final rules for cash access regime 


The Financial Conduct Authority (FCA) has released policy statement (PS) 24/8 which outlines the final rules for the FCA access to cash regime. These rules take effect on 18 September 2024. The FCA has also published research on cash reliance and geographical cash access coverage in the UK for the second quarter of 2023. 

 

Some context 

In August 2023, the Treasury and the FCA each published their own policy statements on cash access, discussing the overall approach in the UK and next steps. 

In December 2023, the FCA released consultation paper (CP)23/29 on the proposed rules under the new powers in the Financial Services and Markets Act 2023. 

In May 2024, the Treasury designated 14 banks and building societies to be subject to the new rules, along with an operator of cash access coordination arrangements. 

 

Key takeaways 

Starting from 18 September, banks and building societies will need to: 

  • Assess cash access and understand if additional services are needed, when changes are being made to local services.   
  • Respond to local residents, community organisations and representative groups, who will be able to request an assessment of whether there are gaps in local cash access. 
  • Deliver reasonable additional cash services, where significant gaps are found. 
  • Keep facilities, including bank branches and ATMs, open until any additional cash services identified are available. 

It is important to note that the FCA has made changes to the initially proposed rules. These changes include extending the assessment period and allowing firms to review identified cash services after two years. 

 

Next steps 

The FCA expects designated firms and coordination bodies to use the time before the implementation date to familiarise themselves with the new rules, establish and publish their cash access assessment procedures, prepare to receive cash access requests, and comply with new reporting requirements. 

The PS provides details on transitional arrangements and sets expectations for firms during the implementation period. 


Click here to read the full RegInsight on CUBE’s RegPlatform 


PSR issues final guidance on extensions and exemptions 


The Payment Systems Regulator (PSR) has released Policy Statement (PS) 24/4 outlining the criteria it will use to determine whether to grant an extension or exemption to parties affected by specific directions or requirements. 


Some context 

In certain situations, the PSR can extend the compliance time or provide exemptions for specific directions and requirements. 

By providing this guidance, the PSR aims to enhance transparency and ensure that regulated parties understand the factors that will be considered when deciding whether to grant an extension or exemption. 

The PSR also wants stakeholders to understand the information regulated parties need to provide when seeking an extension or exemption. 

The PSR sought feedback on the draft guidance between 1 May and 4 June 2024. 


Key takeaways 

The guidance specifies when parties should engage with the PSR when faced with such circumstances. 

It offers clarity on the PSR’s approach, the level of scrutiny that businesses can anticipate, and the conditions under which extension or exemption requests are likely to be accepted or rejected. 

The PSR has made some minor revisions to the proposed guidance for additional clarity. 


Click here to read the full RegInsight on CUBE’s RegPlatform  


ESMA issues opinion on Sustainable Finance Regulatory Framework 


The European Securities and Markets Authority (ESMA) has issued an opinion on the Sustainable Finance Regulatory Framework, proposing potential long-term improvements. 


Some context 

In the opinion, ESMA acknowledges the advanced state of the EU Sustainable Finance Framework but suggests that it should continue to evolve to facilitate investor access and to strengthen the effective operation of the Sustainable Investment Value Chain. The opinion primarily focuses on the investor’s perspective and is based on insights from previous ESMA Reports, as well as the joint opinion of the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and ESMA on the review of the Sustainable Finance Disclosure Regulation (SFDR). 


Key takeaways 

Key points and recommendations for the European Commission’s consideration include: 

  • The EU Taxonomy should serve as the sole, common reference point for the assessment of sustainability and should be incorporated into all Sustainable Finance legislation. 
  • The EU Taxonomy should cover all activities that can significantly contribute to environmental sustainability, and a social taxonomy should be developed. 
  • A clear definition of transition investments should be included in the Framework to provide legal clarity and support the creation of transition-related products. 
  • All financial products should disclose a minimum set of basic sustainability information, encompassing environmental and social characteristics. 
  • A product categorisation system should be introduced to accommodate sustainability and transition, based on a set of explicit eligibility criteria and binding transparency obligations. 
  • ESG data products should be brought under the regulatory scope, ensuring the continued improvement of the consistency of ESG metrics and the reliability of estimates. 
  • Consumer and industry testing should be conducted before implementing policy solutions to ensure their feasibility and suitability for retail investors. 


Click here to read the full RegInsight on CUBE’s RegPlatform 


ECB launches consultation on governance and risk culture 


The European Central Bank (ECB) has commenced a public consultation on its draft Guide on governance and risk culture, aiming to strengthen governance standards among banks. This Guide supersedes the 2016 supervisory statement, offering clearer supervisory expectations and practical examples for improving internal governance. 


Some context 

The new Guide supersedes the 2016 supervisory statement which was produced to support and guide institutions towards the implementation of international best practices. The new Guide is intended to set out key ECB supervisory expectations when assessing the governance and risk culture of supervised entities based on the ECB’s interpretation of the current regulatory framework. The Guide does not lay down legally binding requirements and it does not replace the relevant legal requirements in either Union or national law, nor should it be construed as introducing new rules or requirements compared to current Union and national law.  


Key takeaways 

The new Guide underscores the importance of diverse and effective management bodies, a supervisory priority for the Single Supervisory Mechanism (SSM). It provides detailed guidance on the composition and functioning of management bodies and committees, delineates the roles of internal control functions, highlights the significance of risk culture, and outlines expectations for banks' risk appetite frameworks. The Guide incorporates recent standards from the European Banking Authority (EBA) and includes best practices gathered by the ECB. 


Historical banking crises have demonstrated that weak governance and risk culture can precipitate significant problems. The ECB stresses the need for banks to continue enhancing governance standards and commits to rigorous supervision to ensure tangible improvements. 


Next steps 

The consultation period runs until 16 October 2024. 

The ECB will review the feedback from the public consultation and publish the comments alongside a feedback statement and the final Guide. The consultation process also includes a stakeholder meeting on 26 September 2024, which will bring together experts from supervised institutions and other interested parties. 


Click here to read the full RegInsight on CUBE’s RegPlatform 


EC proposes to delay Basel III market risk requirements by one year 


The European Commission has adopted a delegated act to postpone the implementation of the Fundamental Review of the Trading Book (FRTB) under Basel III standards in the EU by one year, now effective from 1 January 2026. 


Some context 

The Commission's commitment to timely Basel III implementation remains strong, as evidenced by the recent entry into force of the Banking Package on 9 July and the new Basel requirements set to apply from 1 January 2025. However, to ensure global consistency, the Commission has decided to delay the FRTB's implementation due to major jurisdictions' delays in finalising their rules. This postponement aims to maintain a level playing field for EU banks and uphold global financial stability. 


The FRTB aims to align capital charges with actual risks in banks' capital market activities through sophisticated risk measurement techniques. 


Key takeaways 

The FRTB aims to align capital charges with actual risks in banks' capital market activities through sophisticated risk measurement techniques. Firms will now have an additional 12 months to prepare for the market risk prudential requirements as some major jurisdictions have yet to finalise their rules or communicate on their timelines for implementation. 


Next steps 

The one-year delay for the FRTB rules will allow the Commission to monitor international developments and plan subsequent steps. The delegated act is now under scrutiny by the European Parliament and Council for three months. The Banking Package’s implementation underscores the EU's commitment to Basel standards, aiming for convergence in prudential rules to avoid market distortions and ensure fair competition in capital market activities. 


Click here to read the full RegInsight on CUBE’s RegPlatform 


HKMA's Complaints Watch highlights decrease in fraud cases, surge in account operation issues 


The Hong Kong Monetary Authority (HKMA) has released the latest issue of its semi-annual Complaints Watch, detailing trends in banking complaints and suggesting good practices for authorised institutions (AIs). 

In the first half of 2024, the HKMA received 1,425 complaints, an 8% decrease from the same period last year. Fraud-related complaints fell sharply by 45% to 350 cases, while complaints about the operation of banking accounts rose by 78% to 390 cases, largely due to account reviews by several retail banks requiring additional information from account holders. The HKMA is working with these banks to improve their processes and reduce customer dissatisfaction. 

This issue features articles on handling enquiries about deceased accounts and providing mortgage-related information in property transactions. 


Dealing with deceased accounts 

The report underscores the importance of sensitivity when AIs assist recently bereaved customers. A recent complaint highlighted the need for clear communication about possible subsequent fund flows into a deceased account to avoid complications during the probate process. 


Mortgage information clarity 

A complaint about a property transaction revealed the need for clearer communication from banks regarding all outstanding loans secured by a property. The HKMA is exploring ways to improve information clarity to help buyers make informed decisions. 


Click here to read the full RegInsight on CUBE’s RegPlatform 


New financial reporting and audit obligations for superannuation funds commence 


The Australian Securities and Investments Commission (ASIC) has confirmed changes to the financial reporting requirements for superannuation trustees. 


Some context 

On 1 July 2023, the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 came into force, extending financial reporting and auditing obligations under Chapter 2M of the Corporations Act 2001 to most registrable superannuation entities. This development mandates superannuation trustees to lodge audited financial reports with ASIC within three months of the fund’s financial year-end, with the initial deadline set for 30 September 2024. 


Key takeaways 

Superannuation trustees must now submit comprehensive audited financial reports, including financial statements, directors’ declarations, auditor’s reports, and remuneration disclosures. These reports must be lodged via ASIC’s Regulatory Portal. This move aims to enhance transparency and accountability, ensuring that financial reports are of high quality and contain meaningful information to bolster public trust and confidence in the financial system. 


The amendments also promote transparency by requiring trustees to publish financial reports on their websites and granting ASIC enforcement power over compliance with accounting and auditing standards akin to other economically significant entities. 


ASIC, in collaboration with APRA, has streamlined the reporting process, allowing trustees to lodge compliance reports required under APRA’s prudential standard SPS 310 concurrently with their audited financial reports. These reports will be publicly accessible on ASIC’s website free of charge. 


Next steps 

Trustees will face heightened scrutiny on the quality of their financial reporting and adherence to auditing standards. ASIC’s financial reporting and audit surveillance program will review these reports for the first time this year. Any significant deficiencies or material misstatements will trigger a financial reporting surveillance, subjecting the superannuation fund to further examination. 


To comply, trustees must ensure robust governance, processes, and controls over financial reporting. High-quality financial reporting is imperative for maintaining strong financial discipline, effective management, and public confidence in superannuation funds. Trustees are urged to leverage appropriate expertise and experience to meet these enhanced reporting obligations. 


Click here to read the full RegInsight on CUBE’s RegPlatform 


CFPB warns against whistleblowers intimidation 

 

The Consumer Financial Protection Bureau (CFPB) has issued a circular to inform law enforcement agencies and regulators about the potential illegality of companies requiring employees to sign wide-ranging nondisclosure agreements that could discourage whistleblowing. 

 

This action by the CFPB expands on previous initiatives to confirm the protection of whistleblowers and gather reports of wrongdoing, aligning with broader federal efforts to safeguard whistleblowers and ensure corporate accountability. The circular specifically refers to enforcement actions taken by the Securities and Exchange Commission against companies that violated whistleblower protection regulations by imposing overly restrictive confidentiality agreements on their employees or clients. 

 

Click here to read the full RegInsight on CUBE’s RegPlatform 


FRC issues 2023/2024 annual report 


The Financial Reporting Council (FRC) has released its Annual Report and Accounts for 2023/24. The report details the FRC's efforts to improve audit quality and corporate reporting. 


Key highlights include: 

  • Conducting consultation on the UK Corporate Governance Code. 
  • Initiating a review of the UK Stewardship Code. 
  • Improving audit quality through focused initiatives, such as developing methods to assist smaller audit firms in taking on larger and more complex clients. 
  • Efficiently and proportionately using the organisation's current regulatory tools while advocating for modernised powers and statutory status. 


Click here to read the full RegInsight on CUBE’s RegPlatform