Being better informed: July 2018

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The regulatory agenda remains full of activity as we approach the summer holidays, with a particular focus on operational resilience and banking resolution.

As expected, UK and EU regulators increased their emphasis on operational resilience in recent weeks. The BoE, PRA and FCA published a discussion paper setting out a new framework for improving the operational resilience of all financial institutions in the UK. A key focus of the paper is the suggestion that firms establish impact tolerances for disruption to the provision of important business functions. The regulators also emphasise the importance of governance and individual accountability. Meanwhile the EBA published draft guidelines on outsourcing arrangements, which highlight a number of risk areas on which firms should focus. These developments mark a step change in the way regulators supervise operational resilience, and firms should begin preparing to meet these higher expectations.

The BoE and FSB also focused on banking resolution last month. As part of its agenda to ensure banks take resolution seriously, the BoE issued its final statement of policy on valuation capabilities to support resolvability. It expects banks to have in place data, systems and processes to value their assets, liabilities and equity, and support timely and robust resolution valuations. The BoE also announced that it intends to consult later this year on a reporting and assurance framework, under which banks will be required to conduct a self-assessment of their resolvability for review and partial publication by the BoE. Further to this, the BoE issued policy statements on internal MREL and its approach to setting MREL, while the PRA issued a policy statement on resolution planning and MREL reporting. In addition, the FSB issued guidance on bail-in execution and resolution funding to promote G-SIB resolvability.

Meanwhile financial crime prevention remains a priority for the FCA. The conduct regulator issued a Dear CEO letter on cryptoassets, warning banks of the potential for cryptoassets to facilitate criminal activity, and advising firms to take steps to mitigate this risk.

Sustainable finance is another hot topic, particularly for EU regulators. In our feature article this month, we consider how the EC’s ambitious sustainable finance agenda is set to impact firms, resulting in new compliance obligations and forcing changes to the way they do business.  

Download the July 2018 edition of Being better informed to find out more about these and other developments.

 

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