Being better informed: financial regulatory, accounting and audit bulletin: November 2015

The clocks have gone back, Halloween is a distant memory and the bonfires are now being extinguished after Bonfire Night. All of which means we are now approaching the end of the year and a rush from regulators to publish all the consultations and final rules they promised to publish this year. It’s also now a time to reflect on the year gone by and what next year might have in store. We plan to return to this issue next month and provide an update on what we can expect from 2016 and an update on the current position for a number of outstanding EU regulatory developments – such as the Securities Financing Transactions Regulation, Regulation on Money Market Funds and Insurance Distribution Directive.

In the EU and UK much of the October focus was on banks. The Bank of England set out its stress testing approach – both in relation to its annual tests for UK banks and building societies and its plans to introduce a bi-annual exploratory stress test to examine the resilience of the UK banking system as a whole. Further, it would also like to widen the scope of its stress testing work to capture the whole financial system. This could see asset managers, hedge funds, insurers, pension funds, central counterparties and foreign investment banks potentially brought into the scope of stress testing so inter-linkages in the financial system can be assessed. Related to this, two reports were published in the EU (alongside an ECON report on the Single Supervisory Mechanism – a year later) to examine how Eurozone banks are progressing in making-up their capital shortfalls which were identified in last year’s EU stress tests. The news is promising – but the reports also suggest that different stress testing might have produced different results. So the capital situation for all Eurozone banks might not be as good as last year’s results suggested.

Sticking with the UK the Senior Manager and Certification Regime (SM&CR) also saw some important changes announced in October. The news that it will be extended to capture all UK financial services firms probably didn’t come as a shock to most, though the additional guidance from the House of Lords that the “reverse burden of proof” should be removed probably was a shock – but a good shock for most. 

This month’s feature article focuses on the recent Capital Markets Union (CMU) action plan. The CMU project is likely to drive much of the big European regulatory change that we see over the next 3-5 years. We focus on the different priorities, what new Regulations and Directives have been announced and the next steps.

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