Greg Kilminster
Head of Product - Content
AFME calls for strategic digital finance reforms in the EU
The Association for Financial Markets in Europe (AFME) has published a new report: “Digital Finance in the EU – Priorities for fostering resilient, innovative and competitive financial markets" which makes several recommendations to enhance the efficiency and growth of capital markets, offering new opportunities for accessing finance
Unlocking the benefits of tokenisation in capital markets
AFME notes that while the adoption of Distributed Ledger Technology (DLT) is on the rise, its broader implementation is essential for realising its full benefits. This can be achieved by ensuring all market participants move in tandem. The report suggests that large issuers, particularly those in the public sector, play a crucial role by deploying DLT solutions in their issuances. Additionally, policymakers are urged to create a harmonised, technology-neutral, and risk-focused regulatory framework to facilitate this transition.
Supporting a more effective data ecosystem
The EU’s proposed Financial Data Access (FiDA) framework is identified in the report as a key element in encouraging innovation and operational efficiency within banks. The report outlines essential principles for a robust Open Finance Framework, including a clear definition of customer data, maintaining a level playing field across sectors, and establishing fair compensation frameworks. A phased implementation approach and clear liability provisions are also recommended to ensure legal clarity and efficient data management.
Promoting a secure and resilient EU digital financial sector
The implementation of the Digital Operational Resilience Act (DORA) is highlighted as a critical step towards a harmonised and secure EU digital financial sector. AFME emphasises the importance of developing best practice industry guidance on handling operational and cyber incidents, ensuring coherence in regulatory frameworks to avoid overlaps, and opposing sovereignty or localisation requirements that could hinder the effectiveness of EU frameworks.
Leveraging the opportunities from the use of artificial intelligence
The report acknowledges the transformative potential of artificial intelligence (AI) in financial services and capital markets, noting that AI can enhance safety, efficiency, and accessibility. However, it also underscores the need for careful consideration of the new risks and challenges posed by increased AI usage.
Building a digital capital markets union
The report also discusses the potential of digitalisation and new technologies to support the Capital Markets Union (CMU). It argues that by improving efficiency, reducing costs, and increasing transparency, digital technologies can help remove market barriers, promote cross-border services, and facilitate greater access to capital markets for both entrepreneurs and investors.
The AFME's recommendations aim to guide the EU in harnessing digital finance innovations to build a more resilient, innovative, and competitive financial market landscape.
Click here to read the full RegInsight on CUBE’s RegPlatform
PSR issues factsheet on APP consumer communication
The Payment Systems Regulator (PSR) has issued a factsheet for payment service providers (PSPs) regarding Authorized Push Payment (APP) consumer communications, especially targeting PSPs under Specific Direction (SD20) issued in July 2024. The aim is to assist PSPs in communicating with both existing and potential customers about their rights under the APP scams reimbursement requirement.
Some context
Under section 5 of SD20, directed PSPs must inform their customers about their rights under the reimbursement requirement and reimbursement rules, as well as any upcoming changes to their contractual terms and conditions (no later than 9 April 2025). Existing customers must be notified of their rights by 7 October 2024, and arrangements must be in place to inform new customers of their rights at the time of service. Customers must be informed in the same manner in which the PSP would notify their customers of other changes to the way in which they provide their services.
Key takeaways
The factsheet provides suggestions of the type of information directed PSPs may consider providing in relation to the reimbursement requirement and rules. The suggested content is presented under three categories: the scope of the policy, the exclusions, and what consumers can expect when making a claim. The PSR has also provided suggestions for other helpful information PSPs may consider providing to their customers. The
PSPs should also have regard to FCA Consumer Duty requirements and any other relevant regulatory obligations.
Click here to read the full RegInsight on CUBE’s RegPlatform
ASX publishes T+1 white paper feedback and CHESS consultation
The Australian Securities Exchange (ASX) has provided feedback on an industry whitepaper released in April 2024 regarding the potential transition from T+2 to T+1 settlement in Australia. ASX has also issued a consultation paper on the scope and implementation of the Clearing House Electronic Subregister System) CHESS replacement Release 2.
Some context
Several countries, including the USA, Canada, Mexico, and India, are either transitioning or have already transitioned to T+1 settlement cycles. The initial whitepaper pointed out the unique characteristics of the Australian market that necessitate careful consideration of the risks, benefits, and costs associated with transitioning to T+1 settlement.
The move to T+1 settlement is closely linked with the CHESS system, which plays a critical role in clearing, settlement, and post-trade services for the Australian cash equities market. Confidence in the continued performance and compliance of the CHESS system, including its ability to meet Financial Stability Standards (FSS), is essential for ASX, its customers, and regulatory agencies.
Key takeaways
ASX's consultation paper outlines a proposed plan for Release 2 of the CHESS replacement system, seeking feedback on design, scope, schedule, and transition. ASX aims to respond to the feedback received in Q4 2024 and release detailed timelines and documentation related to the implementation of Release 2.
The deadline for feedback is 13 September 2024.
The market feedback on the whitepaper indicates two key positions: a recommendation to adopt a T+1 settlement cycle to align with global markets and advice against implementing T+1 simultaneously with replacing CHESS due to the substantial industry effort required.
The market responses show a clear prioritisation of the CHESS replacement project in the coming years. Transitioning to T+1 concurrently with CHESS replacement could strain stakeholders due to cost, resource allocation, and project priorities, posing high risks to successful implementation of CHESS replacement, the market’s primary focus.
Market respondents noted a need for ongoing consultation particularly around the solution design. ASX notes that further planning, coordination, communication, and education with stakeholders are fundamental for a successful transition.
Click here to read the full RegInsight on CUBE’s RegPlatform
EBA and ECB release a joint report on payment fraud
The European Banking Authority (EBA) and the European Central Bank (ECB) have jointly published a report on payment fraud data. The report is based on statistical information provided by payment service providers (PSPs) in the EU/EEA over three reference periods: H1 2022, H2 2022, and H1 2023.
Key findings
- The highest fraud rates were observed for card payments, particularly remote transactions. Fraudulent payment orders issued by fraudsters were the primary method of card payment fraud.
- Manipulations of the payer to initiate a payment order played only a minor role in card payment fraud. In contrast, it accounted for more than half of the total value of fraudulent credit transfers during this time.
- Losses due to fraud were distributed differently among liability bearers depending on the payment instrument.
While most payment transactions were domestic, the report emphasises that fraud shares for card payments, in both values and volumes, were significantly higher when the counterparty was located outside the European Economic Area (EEA), indicating the effectiveness of the adopted standards and policy products in reducing fraudulent payments.
The report specifically references:
- The EBA Regulatory Technical Standards (RTS) on Strong customer authentication (SCA) and Common and secure open standards of communication (CSC) under Directive (EU) 2015/2366 on payment services in the internal market (PSD2), especially for transactions conducted within the EEA.
- The (Europay, Mastercard and Visa) EMV standard, especially with regard to the use of counterfeit cards.
Conclusion
The EBA and ECB concluded that the overall outlook for payment fraud appears stable. Despite these positive developments, they emphasise the need for continued vigilance from the industry, regulators, and consumers.
Both the EBA and the ECB will maintain close surveillance of payment fraud trends.
Click here to read the full RegInsight on CUBE’s RegPlatform
PSR publishes APP scams performance report for 2023
The Payment Systems Regulator (PSR) has released its Authorised Push Payment (APP) scams performance report for 2023. The report tracks progress and provides a snapshot of the wider scams landscape. It includes data from the UK’s 14 major banking groups and eleven smaller firms, which are among the top 20 highest receivers of fraud.
Key findings
The PSR notes that, overall, while some improvements have been made, further work is still needed to reduce scams and achieve better outcomes for consumers.
- The value of APP scams has decreased by 12% since 2022, with £341 million lost to APP scams in 2023. However, the volume of APP scam cases reported has increased by 12% since 2022, with 252,626 cases reported in 2023.
- Reimbursement by value has increased from 61% in 2022 to 67% in 2023. These results are largely driven by members of the Contingent Reimbursement Model (CRM), a voluntary code that provides guidelines on how firms reimburse victims of APP scams. CRM members reimbursed 68% of the fraud value back to consumers in 2023. The PSR expects this discrepancy to narrow significantly when the mandatory reimbursement requirements for victims of APP scams come into force on 7 October 2024.
- A small number of firms receive a disproportionately high number of scams relative to their size.
Next steps
The PSR has directed payment firms to publish this information on their websites within 20 days of today’s publication, providing consumers with greater transparency on how they handle APP scams. The PSR will continue working with the FCA to identify areas requiring action and outline plans for payment firms to make necessary improvements. The regulator has also collected data showing where APP scams originate. Later, in 2024, the PSR will publish this data to raise awareness about how fraudsters can target victims, such as through social media platforms.
Click here to read the full RegInsight on CUBE’s RegPlatform
OCC releases July CRA performance evaluation results
The Office of the Comptroller of the Currency (OCC) has published its Community Reinvestment Act (CRA) performance evaluation covering the period from 1 July 2024 to 31 July 2024.
The assessment is part of the federal banking agencies' obligations under the CRA to review an institution’s credit provision to its entire community, including low—to moderate-income (LMI) neighbourhoods while ensuring the institution’s overall safety and soundness.
Of the 27 evaluations made public this month, one is rated substantial noncompliance (The Lemont National Bank), 20 are rated satisfactory, and six are rated outstanding.
Click here to read the full RegInsight on CUBE’s RegPlatform