Being better informed: June 2017

In May we saw important developments on the SM&CR, proposed amendments to EMIR, the BoE’s MREL requirements and the FCA’s planned strategic review of retail banking business models.

Our UK regulators continued to develop the SM&CR. In a policy statement the PRA confirmed plans to create new SMFs and to apply conduct rules to notified non-executive directors. It intends to introduce new SMF roles for head of key business area and chief operations for insurers. Meanwhile the FCA set out its approach to applying its conduct rules to non-executive directors of banking and insurance firms.

In addition, the FCA revealed details of its planned strategic review of retail banking business models, which it first announced in its business plan. The FCA wants to look at retail business models across banks, building societies and credit unions to identify any conduct or competition issues. It will assess the profitability of different product types and parts of the value chain, and the relationship between them. Firms should begin considering the potential impact of the review, and identifying information that evidences their profitability by business line and product.

In the prudential space, the BoE provided indicative data on the level of MREL obligations for affected banks and building societies. This initiative reflects the application of its policy approach to setting MREL, issued in November 2016. Larger banks and building societies (with a size or functions that mean they have a resolution plan involving the use of the BoE’s resolution tools) need to hold additional capital beyond their going-concern resources from 1 January 2020.

Over in Brussels, EU bodies continue to progress major conduct initiatives. The EC published a proposed regulation to amend and update EMIR, officially kicking off the first legislative stage of ‘EMIR II’. The EC is seeking to increase the regulatory responsibilities for TRs, while lightening reporting and clearing obligations for firms with smaller derivatives exposures. We explore the implications for firms in more detail in this month’s first feature article.

The deadlines for other major initiatives are approaching fast. Firms’ MiFID II implementation plans are reaching a crucial stage, with just six months to go until the 3 January 2018 implementation date. In our second feature we look in detail at firms’ plans and the challenges they face in the second half of the year to ensure they’re ready in time.

In the coming weeks and months, we expect to see the FCA’s mortgage market study interim report, a number of FCA policy statements on MiFID II implementation, and EC proposals for changes to the supervision of CCPs. In the meantime, we hope you enjoy reading this month’s updates. 

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Tessa Norman
Senior associate
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