Greg Kilminster
Head of Product - Content
Chris Hemsley speech on PSR framework for APP scams
Chris Hemsley, the Managing Director of the Payment Systems Regulator (PSR), recently spoke at the Fraud Leaders’ Summit in London, where he raised concerns about the growing threat of Authorised Push Payment (APP) scams. He also outlined the steps taken to tackle this problem, including the recent related PSR policy statements.
In his speech, he emphasised the importance of the reimbursement framework for APP scams, which is set to commence on 7 October 2024. Although he recognised that firms may face challenges in implementing the rules, particularly regarding the necessary technological tools and data sharing, he stressed that every payment firm should be working towards this goal, as “put frankly, nobody can opt-out.”
Hemsley also assured that the PSR stands ready to provide support in making this policy a reality by offering clear guidelines on what the reimbursement policy requires and what it does not.
He also discussed future initiatives, such as:
- Reviewing the framework, including the different incentives, the impacts of any excess deductible, and the consumer standard of caution.
- Considering the use of AI to help payment firms better identify fraudulent payments and accounts before they occur.
- Further work on data transparency to identify which firms are succeeding and which need to improve in preventing APP scams from happening.
In conclusion, Hemsley expressed his confidence that the PSR, in collaboration with Industry, can significantly reduce the amount of fraud in the payments landscape for the benefit of everyone who makes payments.
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ECB’s Elizabeth McCaul on the importance of sound CCR management in financial markets
In a speech at an industry outreach conference on counterparty credit risk management in New York, Elizabeth McCaul, a member of the Supervisory Board of the European Central Bank, provided insight into the evolving landscape of financial services, particularly in the European context. McCaul focused on the critical importance of sound counterparty credit risk (CCR) management in today’s complex and interconnected financial markets.
The importance of sound CCR management
McCaul highlighted the exponential growth of the non-bank financial institution (NBFI) sector and its effect on the broader financial landscape. She commented on the need for a deeper understanding of the risks emanating from the nexus between market risk and credit risk, especially given the limited visibility into potential indirect links between banks and non-banks. Drawing on historical lessons, such as the default of Long-Term Capital Management (LTCM) and, more recently, Greensill Capital and Archegos Capital Management, McCaul stressed the importance of addressing correlation risk and the interconnectedness of financial institutions, noting: “I believe there is great merit in taking an internationally coordinated approach to strengthening the regulatory and reporting framework for non-banks that present potential risks to the banking sector and in bringing greater transparency to the NBFI sector”.
The ECB’s approach to supervising CCR
McCaul provided insight into the ECB’s approach to supervising CCR, including targeted reviews and thematic reviews to identify industry practices and areas for improvement. She emphasised too the importance of:
- customer due diligence procedures for NBFIs,
- early warning indicators, and
- the explicit specification of risk appetite in managing CCR exposures.
McCaul also discusses the ECB’s report on sound practices in CCR governance and management, highlighting 43 sound practices grouped into four categories:
- CCR governance,
- risk control, management and measurement,
- stress testing and wrong-way risk, and
- the watchlist and default management process.
She ended this part of her speech with a direct challenge to banks: “We expect banks’ approaches to be proportionate to the scale and complexity of their business, the products they offer and the nature of their counterparties. Banks should remediate shortcomings without undue delay and, given the uncertain geopolitical situation, avoid complacency”.
What the ECB sees in the market
McCaul then discussed the progress observed in the market regarding CCR management, noting that banks are generally moving towards sound practices outlined by the ECB. However, she identified areas where banks need to improve, particularly stress testing, risk metrics, and preparedness for counterparty default events. McCaul urged the need for continuous monitoring and remediation of deficiencies in credit risk and CCR management frameworks.
Conclusion
In concluding, McCaul reaffirmed the importance of proactive supervision and collaboration in addressing the evolving risks in financial markets. She emphasised the need for continued efforts to enhance transparency, exchange information, and strengthen the regulatory framework to mitigate systemic risks. Noting the commitment to transparency and sharing of insights gained from the ECB’s supervisory activities, she added: “It is now crucial that banks continue to converge towards those standards and embrace the insights on sound practices… supervisors and the banking industry must continue to seek new ways to exchange information that is crucial for assessing the build-up of risks and the interconnectedness of different financial markets”.
McCaul’s speech underscores the ECB’s commitment to promoting sound practices and contributing to global discussions on improving the regulatory framework for managing complex financial risks.
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ASIC issues infringement notice to Melbourne Securities for greenwashing
Melbourne Securities Corporation Limited (Melbourne Securities) has recently paid $13,320 to comply with an infringement notice issued by ASIC for misleading statements made regarding its Bloom Climate Impact Fund (Bloom Fund).
This is just one of the 17 infringement notices that ASIC has issued in relation to alleged ESG misconduct, in line with its sustainable finance enforcement priority.
Additionally, there have been three greenwashing-related civil penalty actions before the Federal Court against Mercer Super, Vanguard Investments Australia, and Active Super.
Background
From March 2022 to June 2023, Melbourne Securities, acting as trustee and responsible entity of the Bloom Fund, made certain statements in the Fund’s Product Disclosure Statement (PDS). It claimed that the Fund would avoid investing in a range of excluded activities, including fossil fuels.
However, despite this, the Bloom Fund used revenue thresholds that allowed it to invest in companies generating up to 33% revenue from excluded activities, such as fossil fuels.
ASIC has alleged that these revenue thresholds were not disclosed to investors and were contrary to the statements made in the PDS.
ASIC has urged firms to refer to information sheet 271: How to avoid greenwashing when offering or promoting sustainability-related products (INFO 271).
This information sheet provides details for responsible entities of managed funds and super fund trustees on how to avoid greenwashing when offering or promoting sustainability-related or ethical products and investments.
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CBI issues its Regulatory and Supervisory Outlook report
The Central Bank of Ireland (CBI) has released its latest Regulatory & Supervisory Outlook report, which outlines the key risks facing entities and their consumers.
The report covers various aspects, including the global macroeconomic environment, major trends and drivers of risk, and the regulatory and supervisory priorities of the CBI for the next two years.
These priorities, which apply across all sectors, cover the following areas:
- Risk management and consumer-centric leadership of firms.
- Resiliency in the challenging macro environment.
- Operating framework deficiencies.
- Change management.
- Climate change and Net Zero transition.
The CBI also aims to enhance its approach to regulation and supervision by improving its authorisation processes and developing a proportionate and responsive regulatory framework. It will also invest in its supervisory approach to be more data-driven, agile, and scalable.
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