Being better informed: June 2015

Summer’s started; the UK’s greeted a new princess, BBQ’s are sputtering to life but El Niño is due to put a dampener on our outdoor plans. However, as we head toward holiday season (or strife) and parliamentary recess, there’s no sign that the debate about the UK’s relationship with the EU will be taking a vacation. The government’s confirmed a referendum will take place before 2017 and after hot debate the question is: ‘Should the United Kingdom remain a member of the European Union?

The UK’s relationship with the EU isn’t the only matter up for review. There are signs of an EMIR II on the horizon. As we discuss in this month’s edition, European Commissions for financial stability Jonathan Hill has spoken of the new drive as ‘regulating only where necessary, of being smaller on the small things and bigger on the big things. Of legislating less, of reviewing more.’ With firms already struggling to meet the transaction reporting requirements of EMIR, could there be respite ahead or more complication? Time will tell.

In the UK, the Bank of England launched a consultation on its new resolvability powers for failing institutions. The powers include the ability to direct firms to limit or cease activities, sell assets and change the legal or operational structure of a group. The Bank outlines how it intends to apply these powers and the expectations on firms during such process. The PRA fine-tuned its position on the continuity of service and facilities requirements under ring-fencing arrangements. It issued a policy statement that abstained from setting out the types of subsidiary which can be owned by a ring-fenced bank and set out that it will not stop owners of ring-fenced banks from owning stakes in non-ring fenced entities, amongst other things. The end isn’t quite yet in sight though as the PRA expects to consult again later this year.

On the FCA front, we’ve seen the regulator commence its market study into investment and corporate banking this month. In its terms of reference, the FCA outlines that it’ll be looking at competition in primary market activities (like equities and debt capital markets), but also linked activities such as corporate broking. The FCA’s also reviewed how premium finance is provided to general insurance customers. It found consumers need more information about the true cost of premium finance in household and motor insurance.

This month we have one feature article on stress testing of CCPs – a topic that has been gaining momentum in the first half of 2015. We provide a background to the subject, explain the main issues and reflect how the debate may intensify if it gets caught up with CCP resolution and recovery plans being discussed at an international level.

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