Greg Kilminster
Head of Product - Content
UK and Singapore discuss opportunities for collaboration
During the 9th UK-Singapore Financial Dialogue, held in Singapore, the UK and Singapore discussed various opportunities for collaboration in key areas such as sustainable finance, FinTech and innovation, non-bank financial intermediation (NBFI), and cross-border payment connectivity. Both countries expressed their intention to continue their collaborative efforts through international organisations and groups.
On sustainable finance, they covered topics such as transition planning, disclosure standards, ESG ratings and data products, as well as sustainable infrastructure and investment. They recognised the necessity of globally comparable and robust transition plans and committed to implementing the standards set by the International Sustainability Standards Board (ISSB).
On FinTech and innovation, they covered a range of subjects, including Artificial Intelligence (AI), cryptoassets, Central Bank Digital Currency (CBDC), tokenisation, and distributed ledger technology (DLT). They acknowledged the benefits of asset and fund tokenisation and DLT and shared information about their respective projects and initiatives. They aim to advance conversations on the regulatory treatment of digital assets as part of the policymaker group within the Singapore Project Guardian.
On the NBFI sector and cross-border payment connectivity, both countries emphasised the importance of strengthening authorities’ ability to monitor risks in NBFIs through improved data gathering and sharing. They agreed on the significance of finalising ongoing international policy work on margining practices and NBFI leverage and subsequently implementing agreed-upon NBFI policies at the domestic level.
The two countries reaffirmed their commitment to continued engagement beyond the Dialogue. They plan to explore further cooperation on these topics through a series of roadmap engagements leading up to the next Financial Dialogue in 2025, which will take place in the UK.
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PSR issues CP 24/8 on reimbursement of victims of APP scams in the CHAPS system
The UK Payment Systems Regulator (PSR) has released a consultation paper (CP) 24/8 on the reimbursement of victims of authorised push payment (APP) scams in the CHAPS system. Under the proposal, all Payment Service Providers (PSPs) operating CHAPS and FPS systems will be subject to consistent minimum standards for reimbursing victims of APP fraud.
Some context
In June 2023, the PSR published a policy that required payment firms to reimburse APP scam victims who have lost money through transactions over the Faster Payment System (FPS). In December 2023, the PSR announced its support for the Bank of England to introduce similar requirements for CHAPS.
Key takeaways
The proposed rules will come into effect on the same date as FPS (7 October 2024). This ensures that APP scam victims will receive the same protection across both payment systems.
The consultation includes a draft CHAPS Compliance Data Reporting Standard (CCDRS). The CCDRS specifies the data and information that all PSPs will be required to collate and retain for the Bank to monitor compliance effectively. It also outlines notable differences between the two regimes.
Next steps
The consultation is open until 31 May 2024.
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MAS issues notices on technology risk management and cyber hygiene
The Monetary Authority of Singapore (MAS) has issued several notices regarding technology risk management and cyber hygiene.
These notices are addressed to financial institutions and will be applicable from 10 May 2024.
The cyber hygiene notices outline cybersecurity requirements, including securing administrative accounts, applying security patching, establishing baseline security standards, deploying network security devices, implementing anti-malware measures, and strengthening user authentication.
The technology risk management notices outline requirements for a high level of reliability, availability, and recoverability of critical IT systems, as well as the implementation of IT controls to protect customer information from unauthorised access or disclosure.
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ESMA publishes Spotlight newsletter
The European Securities and Markets Authority (ESMA) has published its latest edition of the Spotlight on Markets Newsletter.
The latest issue includes a number of articles on the Digital Operational Resilience Act (DORA) as well as the following:
- Cryptoassets: market structures and EU relevance.
- ESMA proposes changes to ELTIF technical standards.
- ESMA publishes first overview of EU securities financing transactions market.
The newsletter also includes forthcoming speaking engagements and current consultation deadlines:
- ESAs consultation on RTS on joint examination teams under DORA: 18 May 2024.
- Consultation on European Green Bond Regulation: 14 June 2024.
- Consultation on possible amendments to the Credit Rating Agencies Regulatory Framework 21 June 2024.
- Consultation on the Technical Standards specifying certain requirements of MiCA (3rd package) 25 June 2024.
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JP Morgan Securities fined AU$775,000 penalty for market gatekeeper failures
The Australian Securities and Investments Commission has fined JP Morgan Securities Australia Limited (JPMSAL) AU$775,000 for permitting suspicious client orders to be placed on the Australian futures market, ASX 24.
Between January and March 2022, 36 orders were placed by a client with the intention of creating a false or misleading appearance with respect to the market for, or the price of, the Eastern Australia Wheat futures January 2023 contracts.
The Markets Disciplinary Panel said that JPMSAL's failure to identify suspicious trading was 'careless' and that JPSMAL should have been suspicious of the orders for a number of reasons, including:
- A significant portion of orders were placed late in the trading session, even seconds before market close.
- Many orders were small volume, with lot sizes of five or less.
- Some sell orders potentially decreased the daily settlement price of WMF3 contracts.
- The orders deviated from typical trading patterns observed in the market for WMF3 contracts.
ASIC Deputy Chair Sarah Court said, “There are real world consequences for this sort of behaviour which is why tackling manipulation in energy and commodities derivatives markets has been an ASIC priority.”
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ECB Frank Elderson issues stark warning to banks yet to align with C&E risk
In a blog published on the European Central Bank (ECB) website, Frank Elderson, a Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, has written about the importance of materiality assessments in managing climate and environmental (C&E) risks within the banking sector and the actions the ECB will take for those banks that do not comply.
In the blog, Elderson emphasises that materiality assessments are not just optional but essential for addressing risks effectively. Banks need to understand their risks thoroughly to manage them efficiently. While most banks have developed materiality assessments aligned with supervisory expectations outlined in 2020, this is merely the beginning of a more extensive process.
Over the past five years, there has been significant progress in integrating C&E risks into banks' strategies, governance, and risk management. However, challenges persist, with many banks still not fully aligned with supervisory expectations. Elderson stressed that 2024 is a critical year for banks to enhance their resilience to C&E risks, adding that deadlines will be enforced.
The ECB, noted Elderson, has been proactive in addressing C&E risks, issuing clear guidance to banks on integrating these risks into their operations. Supervisory exercises have highlighted areas where banks need to improve, which has resulted in the establishment of interim deadlines and enforcement measures to ensure compliance.
Areas of improvement
While banks have made progress, there are still shortcomings in some materiality assessments. These include overlooking certain risk categories (for example, omitting physical risks), adopting a net approach instead of a gross approach, and relying solely on historical data rather than forward-looking information.
Beyond climate change, banks must also address broader nature-related risks, such as biodiversity loss and water scarcity. Elderson highlighted the importance of quantifying these risks and integrating them into risk management frameworks.
The blog ends with Elderson reiterating the ECB's expectations for banks to fully align with supervisory requirements by the end of 2024. This includes incorporating C&E risks into stress-testing frameworks and reflecting them in baseline and adverse scenarios. The ECB will closely monitor banks' progress and “will use all the measures in our toolkit to ensure the sound management of C&E risks” to ensure compliance. This will include imposing penalty payments and setting Pillar 2 capital requirements as part of the annual Supervisory Review and Evaluation Process.
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ASIC calls on super trustees to improve gatekeeping of member savings
ASIC has issued a notice urging superannuation trustees to take further action in safeguarding their members from unscrupulous operators, as evidence reveals inadequate oversight of advice fee deductions.
Some context
In a recently released report, ASIC highlights the key findings from their review of the progress made by superannuation trustees in addressing deficiencies in monitoring fee deductions for financial advice. The review identified ongoing deficiencies that continue to pose risks and harm members.
The report, based on a sample of 10 superannuation trustees representing approximately eight million members and managing a combined AU$923 billion in assets as of 30 June 2023, uncovered several concerning findings.
- Over a 12-month period, more than AU$990 million in advice fees were charged across 476,000 member accounts.
- Three trustees reported not conducting any risk or random checks on advice documents.
- Fee caps as high as AU$20,000 or 5% of a member’s balance were in place, with few trustees implementing measures to protect members with low balances.
- 70% of trustees had members with advice fee deductions exceeding AU$15,000.
- There was variability in onboarding and monitoring processes for financial advisers, including some trustees conducting limited checks on ASIC registers.
Key takeaways
In light of these findings, ASIC urges superannuation trustees to reevaluate their oversight processes and take specific steps to strengthen member protections. These steps include:
- Reviewing the ways financial advice documents are sampled to identify unscrupulous advisers providing harmful advice.
- Objectively considering the caps on advice fee deductions, including using objective criteria to assess the cost of advice, to help trustees determine appropriate fee caps.
- Enhancing adviser onboarding practices, including by vigilantly monitoring for financial advisers involved with cold calling businesses and using fact finds of advice licensees.
- Regularly checking ASIC’s Financial Adviser Register for unexpected adviser movements that might indicate a problem, maintaining watchlists and monitoring patterns or irregularities in advice fee deductions, withdrawals of member consent and rollovers into the fund.
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EC requests EIOPA technical advice on Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) has published a letter from the European Commission requesting EIOPA's technical advice on specific items related to the Solvency II Delegated Regulation.
The specific items include the following:
- The methodology that should be used when classifying undertakings as small and non-complex and the conditions for granting or withdrawing supervisory approval for proportionality measures to be used by undertakings not classified as small and non-complex undertakings (by 31 January 2025).
- The standard formula capital requirements for exposures to central counterparties (CCP) when they become direct clearing members (by 31 January 2025).
- The standard formula capital requirements for investments in cryptoassets (by 30 June 2025).
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