CUBE RegNews: 2nd April

Eva Dauberton

Eva Dauberton

News Editor

PRA sets FSCS management expenses levy limit for 2024/25  

The Prudential Regulation Authority (PRA) has released Policy Statement (PS) 6/24, which outlines the final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for the fiscal year 2024/25. 


The PS sets the MELL for 2024/25 at £108.1 million. This amount includes: 


  • Management expenses budget of £103.1 million to cover various operating costs such as staff salaries, facility expenses, claims handling, legal and professional services, as well as provisions for the FSCS to transition to a new claims handling model. 
  • An unlevied reserve of £5 million allowing the FSCS to raise additional funds at short notice to cover unforeseen costs without requiring further consultation or rulemaking by the PRA and FCA. 


The new MELL applies from 1 April 2024, marking the beginning of the FSCS’s financial year, until 31 March 2025. 

 

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FDIC issues list of February enforcement actions 

The Federal Deposit Insurance Corporation (FDIC) has released a list of administrative enforcement actions taken against banks and individuals in February 2024. 


Six orders were issued, including one order to pay a civil money penalty (CMP), two consent orders, one prohibition order, one combined prohibition order with an accompanying CMP, and one order terminating a consent order. It is worth noting that no major fines were imposed, with the maximum penalty set at $80,500. 


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MAS doubles down on AML initiatives 

The Monetary Authority of Singapore (MAS) has announced its new COSMIC (Collaborative Sharing of Money Laundering /Terrorist Financing Information & Cases) initiative which is a centralised digital platform to facilitate the sharing of customer information amongst participating entities. 


Six banks, including Citibank, HSBC, and Standard Chartered Bank, are currently participating in the initiative. These and others will be able to share information on three key financial crime risks in commercial banking, namely: misuse of legal persons, misuse of trade finance for illicit purposes, and proliferation financing.


In a further anti-money laundering development, MAS has also announced amendments to the Payment Services Act (PS Act) and its subsidiary legislation to expand the scope of payment services it regulates, and to impose user protection and financial stability-related requirements on digital payment token (DPT) service providers. The amendments give MAS powers to impose requirements relating to anti-money laundering and countering the financing of terrorism, user protection and financial stability on DPT service providers and take effect from 4 April 2024. 


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Hong Kong regulators propose OTC derivatives reporting regime enhancements 

The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) have jointly issued a consultation on enhancing the OTC derivatives reporting regime in Hong Kong. The consultation proposes mandating the use of Unique Transaction Identifier (UTI), Unique Product Identifier (UPI), and reporting of Critical Data Elements (CDE).


In the consultation paper, the regulators also confirm that the current list of designated jurisdictions for masking relief remains unchanged.  


Some context  

The Committee on Payments and Market Infrastructures and the International Organisation of Securities Commissions published technical guidance covering the harmonisation of UTI, UPI, and three versions of technical guidance on CDE harmonisation.  


To align with these global developments, the HKMA and SFC released a joint consultation paper in April 2019 on mandating the use of UTI in Hong Kong and other proposals. This prompted discussions on how UTI should be implemented both in Hong Kong and globally.  


Key takeaways  

The aim of this consultation is to conclude and further consult on the UTI framework, propose mandating the use of UPI, reporting of CDE, and the adoption of the International Organisation for Standardisation (ISO) 20022 standard.

The proposed enhancements largely align with requirements imposed in other major jurisdictions.  


The proposals would apply from 29 September 2025.  


Next steps 

The deadline for comments is 17 May 2024. 


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Japan’s Financial Services Agency releases final guidelines on impact investment 

Japan’s Financial Services Agency (FSA) has released the final “Basic Guidelines on Impact Investment” developed by the Working Group on Impact Investment. This group was established in October 2022 to discuss the role of impact investment and propose measures to promote it. 

The final report follows a consultation issued in June 2023. 

 

Some context 

These guidelines aim to establish a common understanding of fundamental concepts and processes related to impact investing. 

They should serve as a reference for fundraisers, fund providers, and other participants in impact investment markets when structuring, financing, and promoting collaboration for investment projects. 


It is important to note that these guidelines do not aim to regulate the various approaches of market participants or provide a comprehensive outline of the practical conditions required to qualify as an “impact investment.” 

 

Key takeaways 

The guidelines outline four elements to consider:  

 

  • Element 1 (intention): Market participants should clearly state their intentions regarding the impact they aim to achieve through their investments 
  • Element 2 (contribution): Market participants should assess how the businesses of the investees will develop within the market and contribute to the intended social or environmental impact. This assessment should also consider the long-term prospects of these businesses. 
  • Element 3 (identification, measurement, and management): At the individual investment or investment fund level, market participants should identify the expected outcomes and how the investee’s business will materialise. They should also establish quantitative or qualitative indicators to measure these impacts and continue to manage them after the investment and engagement. 
  • Element 4 (innovation/transformation/acceleration): Market participants should actively identify and support innovation that can accelerate the transformation of investee companies, enabling them to generate tangible social or environmental impacts alongside financial returns. 

 

Next steps 

Since investment practices in this field are still evolving, the FSA plans to update the elements periodically. Further discussions will take place within the Japan’s Impact Consortium. This consortium serves as a platform for diverse stakeholders, such as investors, financial institutions, companies, and local governments, to engage in ongoing discussions on various practical issues related to impact investment. 

 

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