Being better informed: May 2015

The UK election has been and gone and brought a surprise result. A Conservative majority government for the next five years might be welcomed by most industry participants but does bring with it a potential sting in the tail – Brexit. The next two years, ahead of a likely UK referendum in 2016/2017 on exiting the EU, are likely to be a distraction for many firms and may stem the tide of new entrants to the UK market as they wait and see whether the UK will leave the EU.

In Europe the European Banking Authority and European Insurance and Occupational Pensions Authority published updated work programmes reflecting their new priorities following news last month that their budgets would not be increased. The European Securities and Markets Authority (ESMA) also published a consultation paper on MiFID II, specifically how financial advisers should be judged as having appropriate knowledge and competence to offer advice. Unfortunately for UK advisers, who may have hoped for some respite from the level 4 qualification requirements under retail distribution regime, ESMA has proposed that much of the detailed rules should be set on a country-by-country basis, with no central EU minimum requirements.

In the UK the PRA finalised the new regulatory return that international bank branches must submit, so it can identify the amount of money the UK branch receives and books in the UK. The PRA will then use this information to understand (on an ongoing basis) which branches might be operating critical economic functions, which is a function whose disruption or withdrawal could have an adverse material impact on UK financial stability. The PRA also issued updated rules for Part 2 of its Rulebook changes and consulted on Part 3. It is using these consultations to amend and recreate the FSA’s Handbook and guidance into the policy it wants firms to follow. Eventually PRA firms will need to follow the totality of the PRA Rulebook.

At the FCA much of the focus was on the Client Money sourcebook (CASS). The upcoming deadline for implementing CASS rules in PS on 1 June is fast approaching, and the large fine levied for CASS failings in April reflects that the FCA is still taking a tough stance on any CASS breaches. It also issued new CASS rules that impact asset managers and consumer credit firms which you should review.

This month we have two feature articles. The first looks at the role of the new payments regulator, the Payment Systems Regulator (PSR). The PSR will regulate six interbank payment systems and the two credit card payment systems chosen by HM Treasury because of their potential to cause large scale disruption to the UK financial markets in the event of failure. It will also have powers to examine how competitive the UK payments market is. We consider this issue and the PSR’s priorities in more detail in our feature article.

And the second feature considers whether asset managers and investment funds are systemically important. Banks and insurers already receive such distinction and a number of global regulators are now considering whether asset managers should follow their lead.

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