Being better informed: August 2016

July was a busy month, as regulators tried to clear their desks in the usual rush before the summer holidays.

The FPC took action after identifying in its Financial Stability Report that certain risks to UK financial stability which emerged prior to the referendum are beginning to crystallise. It reduced the UK CCB rate from 0.5% to 0% of banks’ UK exposures. This means that three quarters of UK banks will immediately have greater flexibility to supply credit to UK households and firms.

Staying with the prudential sector, the EBA issued its interim report on the implementation of MREL. The report is intended to inform the EC which is tasked with translating both TLAC, a similar requirement that applies to G-SIBs, and the EBA's review of MREL, into legislation. The EBA suggests aligning with TLAC where this is practical, a similar approach to that proposed by the BoE in its December 2015 consultation on MREL. But the report shows that important differences remain between countries’ insolvency frameworks. We wait to see if the final report expected before the end of October 2016 will address these issues.

Elsewhere, the FCA is reviewing its rules for the P2P sector, in light of significant market growth. It published a call for input seeking views on whether it should impose additional protections for consumers – such as mandatory risk warnings and improved tests to check investors’ understanding.

Consumer concerns were also high on EIOPA’s agenda. It revealed plans for an EU-wide thematic review of unit-linked life insurance market conduct. EIOPA intends to identify potential sources of consumer detriment resulting from relationships between insurers and providers of asset management services. EIOPA plans to publish findings in early 2017.

Financial services firms are facing tougher cybersecurity requirements, after the NIS Directive was published in the Official Journal. The directive aims to improve the cyber resilience of Member States and operators of essential services – which includes banking and credit institutions, and FMIs. Member States must comply with the directive by 9 May 2018.

Our feature articles this month focus on the impact of Brexit on financial services regulation. The first looks at what effect the potential loss of EEA passporting rights for banks, insurers and asset managers might have. The second article explores the separate, but related topic of regulatory equivalence. 

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