Being better informed

FS regulatory bulletin

FS Regulatory Insights

December 2020

In this month’s edition:

• LIBOR: FCA consults on tough legacy powers

• Conduct: FCA updates COVID-19 guidance

• General insurance: PRA issues Dear CRO letter

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

2 • PwC | FS regulatory bulletin | December 2020

Executive summary

Welcome to this edition of ‘Being better informed’, our monthly FS regulatory bulletin, which aims to keep you up to speed with significant developments and their implication across all the financial services sectors.

The past month brought developments on a

range of issues, from preparations for the end

of the transition period, to continuing support

for consumers impacted by COVID-19, and

ongoing regulatory priorities such as LIBOR

transition.

Starting with LIBOR, the FCA published a

consultation on the new powers proposed

under the Financial Services Bill to allow it to

deal with so-called ‘tough legacy contracts’

under the transition. The Bill enables the FCA

to ‘designate’ an unrepresentative benchmark.

This means that it can change the rules, code

of conduct and methodology of a critical

benchmark in a way that it is no longer reliant

on panel bank submissions. The FCA is

seeking views on how it will require continued

publication of critical benchmarks on the basis

of a changed methodology, and in what

circumstances a benchmark will be

designated. Read our At a glance briefing

for more information.

Elsewhere, the FCA finalised its updated

COVID-19 guidance for both mortgages and

consumer credit products, and in doing so

adopted a new approach. The conduct

regulator has split out payment deferral

guidance from the guidance relating to support,

highlighting the importance of getting tailored

support for customers right. Payment deferrals

can now be started for a customer until 31

March 2021 (for up to six months). But all

deferrals must end on 31 July 2021. See our

At a glance briefing on the mortgage guidance

for more detail.

On the prudential side, the PRA issued a

Dear CRO letter for general insurance firms.

The letter raises concerns around reserve

adequacy and weakening case reserve

estimates across financial lines and general

liability classes of business. In addition, the

PRA expects firms to consider the impact of

COVID-19 when setting their year-end

reserves. The PRA notes that exposure

management frameworks for non-property

classes of business are less mature than for

property classes, and therefore urges firms to

continue to develop exposure management

frameworks in the light of the evolving nature of

man-made perils. Read our At a glance briefing

for more information.

Final preparations for the end of the Brexit

transition period have been a priority for

regulators in recent weeks. Chancellor Rishi

Sunak announced that the UK will grant the EU

equivalence in a number of areas on a

unilateral basis (including EMIR, CRR,

Solvency II and CSDR). See our At a glance

briefing for more information. In addition,

Sunak outlined HMT’s plans for the UK

financial services industry, with a particular

focus on the green finance agenda – you can

read more about this speech and its

implications here.

In last month’s edition, we took an in-depth

look at the post-Brexit regulatory framework. If

you’d like to find out more about how the future

framework is taking shape, and the benefits

and challenges it might pose for firms and

regulators, please listen to our latest podcast

episode, featuring Lee O’Rourke, Senior Policy

Adviser for the Future Regulatory Framework

at HMT.

Finally, thoughts are turning to the coming year

which is set to be a busy one for regulatory

change. HMT, the PRA and FCA announced a

six-month delay to the implementation date of

the UK’s Investment Firms Prudential Regime

(IFPR) and version of CRR II, until 1 January

2022, following feedback on the volume of

regulatory change due in 2021. The regulators

are expected to publish consultations on their

implementation of the IFPR and CRR II in the

coming months. For more detail, see our At a

glance briefing.

You may notice that from this edition onwards,

we will be linking to more of our website

content, which provides in-depth analysis of

the most significant developments. As such,

we will be including a feature article in

occasional editions of Being better informed,

rather than every month. Our next feature

article will be in our January edition, which will

look at the regulatory agenda for the year

ahead. We hope you have a restful Christmas

break in the meantime.

Hannah Swain

Director, FS Regulatory Insights

M: +44 (0) 7803 590553

E: swain.hannah@pwc.com

Hannah SwainDirector, FS Regulatory Insights

swain.hannah@pwc.com

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3 • PwC | FS regulatory bulletin | December 2020

How to read this bulletin?

Review the Table of Contents and the relevant

Sector sections to identify the news of interest.

We recommend you go directly to the

topic/article of interest by clicking in the

active links within the table of contents.

Contents

Executive summary 2

Cross sector announcements 4

Banking and capital markets 10

Asset management 13

Insurance 15

Monthly calendar 18

Glossary 20

Contacts 26

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

4 • PwC | FS regulatory bulletin | December 2020

Cross sector announcements

In this section:

Benchmarks 4

Capital and liquidity 5

Conduct 5

Data 5

Finance 6

Financial crime 6

Market infrastructure 6

Operational resilience 6

Reporting 6

Supervision 6

Sustainability 7

Wholesale products 9

Hannah SwainFS Regulatory Insights

swain.hannah@pwc.com

Benchmarks

FCA consults on tough legacy powers

The FCA published a consultation and

accompanying statement, on 18 November

2020, on the new powers proposed under the

Financial Services Bill (2020). The draft

legislation gives the FCA tools to deal with so-

called ‘tough legacy contracts’ that have no

genuine alternatives to LIBOR and no realistic

ability to be renegotiated or amended.

On the same day, IBA announced that it will

soon consult on its intention to cease the

publication of certain widely-used LIBOR

settings after 31 December 2021.

The draft FS Bill enables the FCA to

‘designate’ an unrepresentative benchmark.

This means that it can change the rules, code

of conduct and methodology of a critical

benchmark in a way that it is no longer reliant

on panel bank submissions. The FCA now

seeks views on how it will require continued

publication of critical benchmarks on the basis

of a changed methodology. And separately, in

what circumstances a benchmark will be

designated.

The consultation runs until 18 January 2021.

See our At a glance briefing for more

information.

FSB sets out LIBOR transition progress

The FSB published a progress report on

implementation of reforms to major interest

rate benchmarks, relating to LIBOR transition,

on 20 November 2020. It includes a

roadmap, setting out a timetable of actions for

financial and non-financial sector firms to take

in order to ensure a smooth LIBOR transition

by end-2021.

IBA consults on end of USD LIBOR

The IBA, LIBOR’s administrator, published a

statement on LIBOR’s cessation timings on

30 November 2020. It will soon consult on its

intention to:

• cease the publication of all tenors of

GBP, EUR, CHF and JPY LIBOR after

31 December 2021

• cease the publication of one-week and two-

month tenors of USD LIBOR after

31 December 2021

• continue to publish all remaining tenors of

USD LIBOR until 30 June 2023.

IBA will soon issue a consultation covering all

currencies, with comments expected by the

end of January 2021.

The FCA published a statement of support on

the IBA’s plans to consult. The FCA expects

the development to incentivise swift transition,

while allowing time to address a significant

proportion of the legacy contracts that

reference USD LIBOR.

It also gives a reminder that the draft Financial

Services Bill amends the UK BMR to give the

FCA new powers to prohibit some or all new

use of a critical benchmark (such as LIBOR

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currency-tenor settings) where a benchmark

administrator has confirmed its intention that

the benchmark will cease. The FCA previously

announced that it will consult on its proposed

policy approach in Q2 2021.

For more detailed analysis, see our LIBOR

Transition Market Update.

Euro working group consults on EURIBOR fallbacks

The Working Group on Euro RFRs published

two consultations on EURIBOR fallback trigger

events and on €STR-based EURIBOR fallback

rates, on 23 November 2020. Comments are

requested by 15 January 2021, with final

recommendations expected to be published by

the end of Q1 2021. Read more in our LIBOR

Transition Market Update.

EU agrees on BMR amendments

The EC announced that the EP and Council

had reached initial agreement on BMR

amendments, on 30 November 2020. The

amendments will facilitate a statutory

replacement of a discontinued benchmark,

such as LIBOR, in contracts containing no or

inadequate fallback language.

Capital and liquidity

Timeline revised for investment firm prudential rules

The FCA, PRA and HMT issued a statement

on 16 November 2020, confirming a revised

target implementation date for the UK versions

of the Investment Firms Prudential Regime

(IFPR) and CRR II rules.

Due to feedback from industry, the UK

authorities have decided to change the target

implementation date to 1 January 2022,

delayed from June 2021. The EU initiatives will

still be implemented by 26 June 2021. See our

recent blog for more detail on what this means

for firms.

Conduct

FCA halts certain initiatives due to COVID-19

The FCA issued a statement on 13 November

2020, announcing plans to stop or postpone

several pieces of work, to allow it to focus on

the most urgent work in light of the ongoing

impact of COVID-19.

Firstly, the regulator is stopping work on

introducing a Single Easy Access Rate, which

had been intended to improve competition in

the cash savings market. Given the current low

interest rate environment, the FCA says

introducing this initiative would not be

proportionate to the level of harm in this

market. It is also cancelling a consultation

paper on restricting platform exit fees, which

had been planned for spring 2021. The FCA

says there has been a shift in the market away

from exit fees, since it expressed concerns in

its Investment Platforms Market Study.

Finally, the FCA has delayed publication of a

consultation paper on options to strengthen

firms’ duty of care to consumers. The paper

has been postponed from Q4 2020 to Q1 2021.

FCA calls for improvements to corporate governance disclosures

The FCA published output from a review of

corporate governance disclosures made by

listed issuers on 11 November 2020. Based on

a sample of disclosures made by a sample of

issuers across different listing segments, it

found a number of areas where disclosures

could be improved, including moving away

from the use of ‘boilerplate’ disclosures, and

making those disclosures more meaningful by

using examples and/or cross-references to

information in annual report evidence good

corporate governance.

The regulator highlights that issuers should

ensure the quality of their disclosures aids

compliance with the relevant FCA rules, but

also helps to achieve the purpose of those

rules. The purpose is for shareholders to be

able to effectively assess the quality of the

company’s governance arrangements, and the

board’s activities and contributions.

ESMA publishes new product governance Q&As

ESMA revised its MiFID II investor protection

Q&As on 6 November 2020, providing further

clarity on the product governance

requirements. These cover how firms

manufacturing financial instruments should

ensure that the costs and charges of those

instruments are compatible with the needs,

objectives and characteristics of the identified

target market. ESMA also clarifies how

manufacturers should ensure that costs and

charges of an instrument do not undermine the

expected return, and that the charging

structure of an instrument is appropriately

transparent for the target market.

ESMA consults on MiFIR/MiFID II market data obligations

ESMA consulted on draft guidelines on

MiFIR/MiFID II market data obligations on 6

November 2020, to provide more clarity and

ensure a consistent application of the

requirements across the market. ESMA also

recommends that the EC revises the Level 1

provisions to include a requirement for trading

venues, Approved Publication Arrangements,

SIs and consolidated tape providers to share

information with NCAs and ESMA on the costs

for producing and disseminating market data

and on the actual included margins. The

consultation closes on 11 January 2021.

FCA sets out timeline for funeral plans regulation

The FCA issued a statement on 26 November

2020, following the Government’s laying of

legislation setting out a timetable for bringing

the regulation of pre-paid funeral plans within

the FCA’s remit. The regulator plans to consult

in spring 2021 on its plans for regulating the

sector and finalise rules later in 2021. It

expects to take over regulation of the sector in

summer 2022.

Data

ESMA issues plan to maintain data functioning without UK

ESMA published its Data Operational Plan on

10 November 2020, setting out how it will

prepare its IT systems and databases to

continue functioning for the EU-27 countries

without UK data following the end of the Brexit

transition period. ESMA will need to perform

several actions which may impact the

submission or reporting of data. The document

therefore provides information and instructions,

where needed, to market participants on

operations just after 31 December 2020.

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Finance

HMT launches review of the UK Listings Regime

HMT published a Call for Evidence as part of

its review of the UK Listings Regime on

19 November 2020. The review, which is being

led by Lord Hill, is focused on the possible

changes that can be made to attract innovative

and successful companies to raise finance in

the UK’s capital markets.

The areas on which HMT is requesting

feedback are the free float requirements, dual

class share structures, track record

requirements, prospectus rules, and dual and

secondary listings. It also seeks views on

whether there are other areas that the

Government or regulators should focus on to

remove impediments to companies listing in

the UK. HMT makes clear that it wants to

maintain the highest standards, but that it will

use the review to explore how the regime can

be made more flexible and proportionate so

that it can support innovation and growth.

The Call for Evidence closes on

5 January 2021.

Regulators outline plans for productive finance

The Treasury, the BoE and the FCA

announced they will be convening an industry

working group to facilitate investment in

productive finance on 20 November 2020.

The working group will explore options to help

facilitate investment in long-term assets by a

wide range of investors, such as the

construction of a long-term asset fund.

The FCA states that further details will be

announced before the end of the year.

Financial crime

FCA reveals findings on delayed disclosure of inside information

The FCA published the findings of a review of

delayed disclosure of inside information (DDII)

on 11 November 2020. The FCA identifies a

number of areas where it will be increasing its

oversight. These activities will be primarily

aimed at raising awareness of the DDII

notification requirements and the market abuse

regulation in general.

Market infrastructure

FSB issues guidance on CCP resolution

The FSB published guidance on financial

resources to support CCP resolution, and on

the treatment of CCP equity in resolution, on

16 November 2020. The guidance supports

resolution authorities and crisis management

groups in assessing the adequacy of financial

resources for CCP resolution. It provides

approaches to the treatment of CCP equity in

resolution. The FSB also published an

overview of consultation responses.

Operational resilience

FSB consults on outsourcing and third-party relationships

The FSB published a consultation paper on

regulatory issues relating to outsourcing and

third party relationships on 9 November 2020.

Rather than adding new standards to this hot

topic, it compares the current approaches

around the globe and looks at common

challenges faced in managing the risks,

including possible ways to address them.

The consultation runs until 8 January 2021.

Reporting

ESMA clarifies Brexit-related SFTR and EMIR reporting issues

ESMA published a statement on

10 November 2020 related to EMIR and SFTR

reporting after the end of the Brexit transition

period. This covers issues affecting reporting,

recordkeeping, reconciliation, data access,

portability and aggregation of derivatives under

Article 9 EMIR, and of SFTs reported under

Article 4 of SFTR. The statement has been

updated from an earlier version published in

February 2019.

FCA delays Single Electronic Format

The FCA published PS20/14: Delay to the

European Single Electronic Format (ESEF) on

5 November 2020. The FCA is delaying the

implementation of the ESEF by one year in

light of the coronavirus pandemic. Firms will

need to use the new format for financial years

starting on or after 1 January 2021.

FCA announces Gabriel replacement

The FCA announced a new data collection

platform ‘RegData’ on 24 November 2020

which will replace Gabriel. The FCA has used

feedback to inform a better user experience,

most notably in terms of response times and

support, a more intuitive layout and

improvement to guidelines and validation

features. Firms will be migrated to the new

system in groups aligned to their

reporting schedules.

FCA issues statement on UK SFTR

The FCA issued a statement on the UK

Securities Financing Transactions Regulation

(UK SFTR), on 25 November 2020. It explains

what TRs and UK counterparties should do

to ensure compliance with the UK SFTR

reporting obligations from the end of the

transition period.

Supervision

Chancellor outlines ambition for UK financial services

Rishi Sunak, Chancellor of the Exchequer,

gave a speech outlining HMT’s plans for the

UK financial services industry on

9 November 2020, with a heavy focus on

the green finance agenda.

As part of the wider regulatory drive for net-

zero carbon emissions by 2050, HMT

published a roadmap for fully mandating

TCFD-aligned disclosures by 2025, with most

of the regulatory measures expected to enter

into force by 2023. The UK will also implement

a ‘green taxonomy’, based on the scientific

metrics established by the EU taxonomy.

The UK Green Technical Advisory Group will

be responsible for ensuring the metrics are

appropriate for the UK market.

The Chancellor also set out initiatives to

maintain a competitive post-Brexit financial

services sector, including a review of the UK

Listing Regime and a new regulatory approach

for stablecoin initiatives, which will explore how

these currencies can meet the same regulatory

standards as other payment methods.

In addition, HMT signposted a number of

initiatives which are intended to maintain the

position of the UK asset management industry.

The Government intends to publish a Call for

Evidence on the UK’s overseas regime, as well

as a consultation on reforming the UK funds

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regime. It also announced its commitment to

have the UK’s first Long-term Asset Fund

within a year, to encourage longer term

investment in assets such as infrastructure and

venture capital.

See our At a glance briefing for more

information.

UK grants EU equivalence in a number of areas

HMT announced in a policy paper on 9

November 2020 that the UK will grant the EU

equivalence in a number of areas on a

unilateral basis. Effective from 1 January 2021,

the UK will grant the EU equivalence in a

number of areas in the following regulations:

• EMIR

• CRR

• Solvency II

• CSDR

• CRAs

• Benchmarks Regulation

• Short Selling Regulation.

Firms will need to seek approval or recognition

from the UK regulators to be able to take

advantage of some of HMT’s determinations.

The FCA issued a statement setting out the

actions firms need to take to benefit from the

equivalence provisions in areas where it is the

lead regulator.

HMT has not chosen to grant the EU

equivalence in other areas such as for EU

investment firms under MiFID II. However, it

has not ruled out making further

determinations. Other than granting the UK

temporary equivalence for CCPs, the EU has

not yet made any equivalence determinations

on the UK.

On the same day, HMT published its

overarching approach to equivalence in a

guidance document for the UK’s equivalence

framework for financial services. HMT states it

will apply a technical outcomes-based

approach that prioritises stability, openness

and transparency. It also announced plans to

launch a call for evidence on the UK’s regime

for overseas firms. Through this, it aims to

provide clarity to trading partners about how

the UK intends to use the overseas regime,

with a focus on openness, transparency and

predictability.

For more detail on these announcements, see

our At a glance briefing.

EU grants temporary equivalence on CSDs

The EC decided on 25 November 2020 that the

UK’s regulatory framework applicable to CSDs

is equivalent. The decision applies from 1

January 2021 and expires on 30 June 2021.

ESMA updates Brexit statements

ESMA updated three statements on

10 November 2020, addressing various Brexit-

related issues under EMIR, SFTR and MiFID II,

after the end of the Brexit transition period. The

statements cover issues including reporting,

recordkeeping, and data access under Article 9

of EMIR and Article 4 of STFR, as well as the

use of UK data in ESMA databases and the

performance of MiFID II calculations. ESMA

also updates its statement on its Data

Operational Plan, covering actions related to

various reporting systems, registers and data.

FCA proposes fee changes

The FCA set out proposed changes to the way

it will raise regulatory fees and levies from

2021/22, in CP20/22: Regulatory fees and

levies on 19 November 2020. The consultation

closes on 22 January 2021, and the FCA plans

to publish final rules in its Handbook Notice in

March 2021.

Sustainability

ESMA releases consultation on taxonomy KPI reporting

ESMA published a consultation paper with

draft advice to the EC on Article 8 of the

Taxonomy Regulation on 5 November 2020.

This outlines ESMA’s views on the key

performance indicators (KPIs) to be used by

firms subject to the Non-Financial Reporting

Directive (NFRD) to measure how their

activities relate to those that are deemed

environmentally sustainable in line with the

definitions under the Taxonomy Regulation.

The advice covers three KPIs to be used by

non-financial organisations (proportion of

turnover, capital expenditure and operating

expenditure related to environmentally

sustainable activities), and highlights specific

considerations relating to the methodology for

their preparation and presentation.

In addition, ESMA proposes that a ratio of

taxonomy-aligned eligible investments should

be used as a KPI for asset managers subject

to NFRD. The proposal includes the content of

the KPI and the methodology for preparing it.

In addition, ESMA outlines how the KPI should

be presented to facilitate uniform disclosure on

how activities are directed at funding

environmentally sustainable economic

activities.

ESMA will consider feedback received in

relation to the consultation until 4 December

2020. It will deliver its finalised advice to the

EC by the end of February 2021.

FRC raises bar on climate reporting

The FRC published findings from its thematic

review on climate-related reporting on 10

November 2020. The report highlights the need

for corporate reporting to improve in order to

meet the expectations of investors and other

users on climate change. In addition, the FRC

published accompanying reports on each of

the review’s core areas of focus, namely

governance, corporate reporting, audit,

professional oversight and investor reporting,

which set out the findings in more detail.

The FRC found that the integration of climate

risk issues into governance frameworks was

not always feeding through into decisions on

business models and company strategy. In

addition, while some companies were

embedding strategic goals (e.g. net zero

commitments) into their reporting, it was less

clear how those goals would be monitored and

achieved.

The FRC says it supports the introduction of

global standards on non-financial reporting.

The report suggests that firms should report

against the TCFD’s recommendations as an

interim step, as well as the Sustainability

Accounting Standards Board metrics for their

sector.

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Government charts course for mandatory TCFD disclosures

HMT’s TCFD taskforce published an interim

report and roadmap on mandating disclosures

in line with TCFD recommendations on 9

November 2020. The UK intends to make

TCFD-aligned disclosures mandatory across

the economy by 2025, with a significant portion

of requirements in place by 2023. The

roadmap sets out implementation strategies

and timelines for seven categories of firms,

including listed and UK-registered companies,

banks, insurers, asset managers and pension

schemes.

EBA seeks views on ESG risk management

The EBA published a discussion paper on the

management and supervision of ESG risks for

credit institutions and investment firms on 3

November 2020. The paper sets out common

definitions of ESG risks, as well as

recommendations for the incorporation of ESG

risks into business strategies, governance and

risk management. The consultation will run

until 3 February 2021.

Policymakers outlines green ambition for UK financial services sector

Rishi Sunak, Chancellor of the Exchequer,

gave a speech outlining HMT’s plans for the

UK financial services industry on 9 November

2020, with a heavy focus on the green finance

agenda.

As part of the wider regulatory drive for net-

zero carbon emissions by 2050, HMT

published a roadmap for fully mandating TCFD

disclosures by 2025, with most of the

regulatory measures expected to enter into

force by 2023. The FCA intends to consult on

potential TCFD-aligned disclosure rules for UK-

authorised asset managers, life insurers and

FCA-regulated pension providers in the first

half of 2021. The PRA will perform a review of

banks, building societies and insurance

companies’ disclosures in 2022, which it will

use to inform its decision whether to introduce

further measures to improve quantity, quality or

consistency. If such measures are required the

PRA would expect to consult.

The UK will implement a ‘green taxonomy’,

based on the scientific metrics established by

the EU taxonomy. The UK Green Technical

Advisory Group will be responsible for ensuring

the metrics are appropriate for the UK market.

The FCA and BoE also explored the role of the

financial services sector in supporting climate

transition in two speeches given on

9 November 2020.

The FCA confirmed its intention to introduce its

‘comply or explain’ regime for premium-listed

companies to report in line with the TCFD

recommendations for reporting periods

beginning 1 January 2021. In addition, the

regulator has developed a set of principles to

help firms mitigate greenwashing. The

principles are intended to help firms interpret

existing rules requiring that disclosures are

‘fair, clear and not misleading’, including when

new products are submitted for authorisation.

The FCA aims to finalise its principles for

mitigating greenwashing in the new year.

In addition, the BoE announced that the

Climate Biennial Exploratory Scenario (BES)

will be launched in June 2021. The BES will

explore three different climate scenarios,

testing different combinations of physical and

transition risks over a 30-year period.

See our At a glance briefing for more

information.

FCA highlights options for ESG guiding principles

Richard Monks, the FCA's Director of Strategy,

gave a speech on 23 November 2020 on the

sustainable investment landscape. The

regulator is seeking to promote an

understandable, comparable and transparent

market for ESG products, by establishing a

regulatory framework which mitigates the risk

of greenwashing and helps consumers to make

informed choices about these products.

The speech explores a number of recurrent

themes that will be key areas of focus for the

regulator in the ESG space, namely data and

information, product design and disclosure and

ongoing performance reporting. In addition,

Monks outlined options for a set of principles to

help firms understand their ESG-related

product governance and disclosure obligations.

The regulator is currently considering five

potential principles:

• Consistency in messaging and approach –

ensuring a product’s ESG focus is clearly

stated in its name, and reflected

consistently across its objectives,

investment strategy and holdings. This

principle is intended to address risks

around greenwashing and ensure products

meet consumers’ expectations.

• Reflecting ESG focus in product objectives

– establishing clear and measurable

objectives for products which are held out

as having certain sustainability

characteristics or impact.

• Ensuring documented investment

strategies set out how sustainability

objectives are met – including clear

descriptions on any investment constraints,

screening criteria and anticipated portfolio

holdings, as well as the fund’s approach to

engagement.

• Ongoing reporting of performance against

sustainability objectives.

• Gathering sufficient high quality ESG data

and providing assurance over where this

data is sourced and how it is used.

The FCA intends to engage with industry on

the principles with a view to finalising them in

the new year. In addition, the regulator is

aiming to conduct consumer behaviour

experiments this year to test consumer

understanding and expectations of key ESG

terms, as well as how the presentation and

content of product information might influence

decision-making. The FCA is looking to publish

the results of the experiments next year, which

will help to inform whether additional guidance

or rules are needed.

EU publishes Taxonomy screening criteria

The EC published a draft delegated act

containing the technical screening criteria for

the climate change mitigation and climate

change adaptation environmental objectives

under the EU Taxonomy Regulation on 20

November 2020.

The draft delegated act broadly reflects the

recommendations set out in the Technical

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Expert Group (TEG) report on the Taxonomy

published in March 2020, as well as feedback

from the EC’s inception impact assessment.

However, some market commentators have

expressed concern that the draft criteria

appear to have weakened the provisions for a

number of sectors and activities (including the

emissions thresholds for manufacturing,

construction, agriculture, forestry and

bioenergy), which could increase the potential

for greenwashing.

The consultation closes on 18 December 2020.

The EC will review the feedback received

before finalising the adoption of the delegated

act by 31 December 2020. The final draft

delegated regulation will then be subject to a

four-month objection period by the EP and

Member States, which can be extended by two

months at their request. The technical

screening criteria for climate change

mitigation and adaptation will enter into force

on 1 January 2022.

The criteria for the four remaining

environmental objectives under the Taxonomy

Regulation (water, circular economy, pollution

control and biodiversity) will be developed by

the Platform on Sustainable Finance (which

has replaced the TEG), with a view to adopting

criteria for these objectives by the end of 2021

before entering into force on 1 January 2023.

FSB explores financial stability implications of climate change

The FSB published a report examining the

potential implications of climate change for

financial stability on 23 November 2020.

The report assesses how climate-related risks

might be transmitted across, and amplified by,

the financial system, including across borders,

and sets out next steps for the FSB’s work in

this area. The FSB will conduct further work to

assess the availability of data through which

climate-related risks to financial stability could

be monitored, as well as any data gaps.

Wholesale products

FCA sets out approach to Share Trading Obligation

The FCA confirmed, on 4 November 2020, its

approach to the Share Trading Obligation

(STO) at the end of the transition period in the

event that mutual equivalence is not agreed.

The regulator would use the Temporary

Transition Power to allow UK firms to continue

trading all shares on EU trading venues and

systematic internalisers. This would minimise

disruption at the end of the transition period

and ensure that asset managers and other

investors in the UK are able to find the best

trading terms and outcomes for their clients.

ESAs adapt EMIR implementation timelines

The ESAs published a report proposing to

amend the EMIR implementation timelines for

intragroup transactions, equity options and

novations to EU counterparties, on 23

November 2020. The accompanying draft RTS

allows UK counterparties to be replaced with

EU counterparties without triggering the

bilateral margin and clearing obligation

requirements under certain conditions.

ESMA clarifies DTO post-Brexit

ESMA published a statement on 25 November

2020 confirming that the EU’s derivatives

trading obligation (DTO) will continue applying

without changes after the end of the Brexit

transition period. The EU regulator recognises

that this approach could create challenges for

UK branches of EU investment firms but

considers that those firms can meet their

obligations by trading on EU trading venues or

eligible trading venues in third countries. ESMA

will keep under review whether markets would

be sufficiently liquid for the purpose of the DTO

after the end of the transition period.

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

10 • PwC | FS regulatory bulletin | December 2020

Banking and capital markets

In this section:

Capital and liquidity 10

Conduct 11

Financial crime 12

Payments 12

Sustainability 12

Capital and liquidity

PRA confirms updates on market risk

The PRA published PS23/20: Market risk:

Calculation of risks not in value at risk, and

stressed value at risk on 26 November 2020.

The Policy Statement provides feedback to the

recent consultation CP15/20: Market risk:

Calculation of risks not in value at risk, and

stressed value at risk. It also contains the

PRA’s final policy in the updated SS13/13:

Market Risk.

CP15/20 set out updated regulatory

expectations regarding:

• the measurement of risks not in value at

risk (RNIV)

• the meaning of 'period of significant

financial stress relevant to the

institution's portfolio' for stressed value at

risk (sVaR) calculation.

On the basis of responses, the PRA has

changed the draft policy to expect that RNIV

own funds requirements should be calculated

as the average across the preceding three

month period, of an RNIV measure calculated

at least monthly (rather than weekly, as

proposed in CP15/20).

Firms should still consider whether

more frequent calculation is appropriate for

more material, or more variable, RNIV

positions. The PRA also expects that the

relevant RNIV measure for at least 90% of

RNIV own funds requirements should be

calculated at least monthly. This means that

the RNIV measure for up to 10% of RNIV own

funds requirements may be calculated less

frequently than monthly.

The changes to SS13/13 became effective on

26 November 2020.

The PRA expects actions on CRR I

The PRA published a Dear CFO letter, from

Sarah Breeden, Executive Director for UK

Deposit Takers Supervision, on 16 November

2020. The letter asks firms to take action on

the treatment of legacy capital instruments

before the CRR I transition period ends, on

31 December 2021.

Firms are required to share an action plan with

the regulator by 31 March 2021. Those firms

which intend to keep affected legacy

instruments as non-regulatory capital and non-

eligible liability instruments beyond the end of

2021, should include a prudential risk analysis,

concerns for resolvability or insolvency and

mitigating actions.

The letter raises concerns on two main issues:

subordination provisions and flexibility of

distribution payments which create risks to the

eligibility of firms’ own funds and eligible

liabilities instruments. The PRA expects firms

to avoid complex features and capital

structures which can complicate prudential

assessment and undermine capital

Luke Nelson FS Regulatory Insights

luke.a.nelson@pwc.com

Executive summary Cross sector announcements

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11 • PwC | FS regulatory bulletin | December 2020

instruments’ loss-absorbing properties and

CRR compliance.

The BoE’s MREL policy sets out that firms

need to consider whether non-CET1 own funds

instruments, which do not meet the relevant

eligibility criteria for MREL resources, could

create difficulties for resolution. The BoE

considers the challenges to resolvability

presented by such instruments as part of

assessing firms’ resolvability.

The PRA’s letter follows the EBA’s opinion on

the prudential treatment of legacy instruments,

on 21 October 2020.

PRA issues statement on CRD V and BRRD II

The PRA published a statement on CRD V and

BRRD II derived legislation, on 13 November

2020. The statement confirms that the PRA

does not intend further uses of the transitional

power, which can delay the implementation of

measures, in the context of onshoring CRD V

and BRRD II.

Basel Committee reports on Basel III implementation

The Basel Committee published a report for

the G20 leaders on 3 November 2020. The

report is an update on the implementation of

Basel III regulatory reforms and the framework-

related measures taken by Basel Committee

members in response to COVID-19. The report

was published ahead of the G20 leaders

summit in Riyadh on 21-22 November 2020.

Basel Committee amends capital requirements

The Basel Committee published a technical

amendment on the capital treatment of

securitisations of non-performing loans, on 26

November 2020. The rule closes a gap in the

Basel framework by setting out prudent and

risk sensitive capital requirements for non-

performing loan securitisations.

Conduct

FCA takes new approach to COVID-19 mortgage guidance

The FCA finalised its Mortgages and

Coronavirus: Payment Deferral Guidance and

Tailored Support Guidance on 17 November

2020, to support users of mortgage products

who continue to face financial difficulty as a

result of the coronavirus (COVID-19)

pandemic. The guidance came into force on

20 November 2020.

The FCA is changing its approach by splitting

out payment deferral (holiday) guidance from

the guidance relating to support, highlighting

the importance of getting tailored support for

customers right. Under the guidance:

• Payment deferrals can be started for a

customer up until 31 March 2021 (for up to

six months). But all deferrals must end on

31 July 2021.

• Firms must give tailored support to

customers coming to the end of a payment

deferral and who are unable to resume

normal payments. A ‘one size fits all’

approach will not comply with this

guidance.

• Repossessions will be allowed to

commence after 31 January 2021. But they

should not be sought where the only

arrears on an account were accrued from

COVID-19-related payment holidays (‘the

deferral shortfall’).

• Firms need to include specific wording on

the treatment of payment shortfalls arising

from holidays in their arrears and

repossession policies.

In addition, as both pieces of guidance came

into force on 20 November 2020, and previous

guidance ceased on 31 October 2020, firms

need to review the outcome received by

customers who would now be eligible for a

deferral under this guidance. If the outcome

was not as favourable as could be given under

this guidance, the customer must be contacted

and offered additional support. Where a

customer is deemed to have received a less

favourable outcome due to falling between the

FCA guidance periods, adverse credit data

should be updated to reflect the new treatment

strategy.

FCA updates consumer credit COVID-19 guidance

The FCA updated consumer credit and

coronavirus (COVID-19) guidance on 19

November 2020. Guidance on the treatment of

payment deferrals has been made for credit

cards, motor finance, personal loans, high-cost

short-term credit (HCSTC) and other credit

products. The FCA created separate Tailored

Support Guidance that all firms providing credit

products must adhere to. All the guidance

came into force on 25 November 2020.

Under the payment deferral guidance, the FCA

expects firms to:

• make deferrals available up to a total of

six months for all customers up to

31 March 2021

• the exception to this is for HCSTC

products, where deferrals can only be

given for one month

• customers cannot be given new periods of

payment deferrals after 31 March 2021

• if an existing period of deferrals takes a

customer past 31 March 2021 extensions

can be granted (if eligible), but all deferrals

must cease by 31 July 2021.

For customers coming to the end of a payment

holiday but unable to return to normal

payments, the FCA’s tailored support guidance

expects firms to assess personal

circumstances, including overall indebtedness,

and provide appropriate forbearance.

When implementing the tailored support

guidance, the FCA makes clear that firms need

to take into account the specific needs and

circumstances of each customer. A ‘one size

fits all’ approach to forbearance and payment

arrangements will not comply with this

guidance.

In addition, where a customer is deemed to

have received a less favourable outcome due

to falling between FCA guidance periods – in

this instance between the September guidance

ending and this November guidance coming

into force – adverse credit data should be

updated to reflect the new treatment strategy.

FCA to review unsecured credit market

The FCA published a Call for Input: Review

into change and innovation in the unsecured

credit market on 2 November 2020. The

objective of the review is to better understand

how regulation can support a healthy

Executive summary Cross sector announcements

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12 • PwC | FS regulatory bulletin | December 2020

unsecured credit market. The final report is

expected to be published early in 2021.

The FCA is seeking input across four themes,

supported by evidence where possible. The

first theme is the drivers and use of credit. The

FCA wishes to gather information on how

customers are interacting with and using the

unsecured credit market. This includes

behavioural trends, accessibility, impact of big

data and future changes.

The second theme focuses on innovation in the

supply of credit. The FCA is looking to

understand more about innovative solutions,

new business models, the impact new products

have had on the market and the sequential

impact upon consumers, including any current

or future gaps in supply.

Themes three and four look at the impact of

regulation on the unsecured credit market, and

changes during the COVID-19 pandemic. The

information to be gathered includes views on

the consistency of outcomes consumers are

receiving, whether incentives are correctly

aligned to consumer outcomes and the unique

challenges COVID-19 has presented for firms

and regulators alike.

There is no formal deadline for responses, but

with the advisory group reporting early next

year, responses are encouraged to be

submitted before the end of 2020.

FCA flags issues to credit reference agencies

The FCA published a portfolio letter for Credit

Reference Agencies (CRAs) and Credit

Information Service Providers (CISPs) on 20

November 2020. The letter sets out the FCA’s

views on harms in the sector and supervisory

focus areas.

The FCA sees a number of key drivers of harm

in this sector, including:

• loss or misuse of personal data

• service disruption

• poor resolution of complaints

• lack of transparency in credit broking

activities.

Based on these drivers of harm, and other

practices seen in the sector, the FCA sets out

its focus areas and expectations. Firstly, the

FCA will be closely monitoring firms’ use of

personal data. It expects firms that gather,

maintain and use large amounts of data to not

misuse it for the purposes of unregulated

activities. This may amount to firms no longer

meeting the Threshold Conditions.

A second focus area is complaints handling.

The FCA has seen evidence of customers

whose data is inaccurate or out of date being

passed between CRAs/CISPs and lenders

without resolution. CRAs and CISPs must take

note of the requirements in DISP and should

consider the need to have adequate root cause

analysis and senior management oversight.

Other focus areas include transparency of

broker fees, ensuring orderly wind-downs,

technology resilience and a need to create

better quality products with robust governance.

The FCA intends to follow up with firms on the

actions they are taking to address these

concerns over the next year, so action is

needed.

The FCA also highlights a delay to the Credit

Information Market Study interim report, now

due in 2021.

EBA report on product governance

The EBA published its Second Report on the

Guidelines on Product Oversight and

Governance on 3 November 2020. The EBA’s

findings show a number of firms are not putting

an adequate focus on meeting consumer

needs. A number of good practice examples

are shared in the report and firms are

encouraged to use them.

FCA gives speech on credit firms’ pandemic response

Jonathan Davidson, Executive Director of

Supervision at the FCA, gave a speech on

3 November 2020 at the Credit Festival.

Davidson highlights the importance for credit

firms not to rest on their laurels, despite the

good work done so far during the pandemic.

He also reiterates the need to take customer

vulnerability into account when deciding upon

forbearance measures.

Financial crime

EBA issues opinion on AML/CTF risks

The EBA published an opinion setting out how

prudential supervisors should consider money

laundering and terrorist financing risks in the

context of the supervisory review and

evaluation process on 4 November 2020. The

EBA expects prudential supervisors to

cooperate effectively and in a timely manner

with AML/CTF supervisors to exchange

information and assess the implications of

money laundering and terrorist financing risks

for the safety and soundness of the institution

they supervise.

Payments

FCA creates alternative to eIDAS

The FCA published PS20/13: Amendments to

the open banking identification requirements

(eIDAS certificates) on 3 November 2020.

When the Brexit transition period ends on 31

December 2020, eIDAS certificates (used to

access secure customer account information)

will be revoked for UK third-party providers.

The FCA’s new standards create an alternative

certificate firms can use to interact in a trusted

and secure way.

Sustainability

ECB publishes guidance on climate risks for banks

The ECB published its final and amended

guide on climate-related and environmental

risks on 27 November 2020, following public

consultation. The guide explains how the ECB

expects banks to prudently manage and

transparently disclose such risks under current

prudential rules, and will apply immediately.

The ECB states that it will follow up with banks

on their progress in managing ESG risks in

early 2021, before conducting a full supervisory

review of banks’ practices in 2022.

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

13 • PwC | FS regulatory bulletin | December 2020

Asset management

In this section:

Investment funds 13

Supervision 13

Sustainability 14

Investment funds

ESMA calls for action on fund liquidity management

ESMA reported on investment funds with

significant exposure to corporate debt and real

estate on 13 November 2020. It examines how

prepared funds are to withstand future adverse

liquidity and valuation shocks, and identifies

five areas of focus for regulators and the

industry: ongoing supervision of the alignment

of the funds’ investment strategy, liquidity

profile and redemption policy; ongoing

supervision of liquidity risk assessment; fund

liquidity profile reporting; increase of the

availability and use of Liquidity Management

Tools; and supervision of valuation processes

in a context of valuation uncertainty. ESMA will

follow up with NCAs to take forward these

actions.

ESMA proposes guidelines on cross-border distribution of funds

On 9 November 2020 ESMA proposed draft

guidelines on marketing communications under

the regulation to facilitate the cross-border

distribution of funds. Fund managers need to

ensure that all marketing communications

addressed to investors are identifiable by

describing the risks and rewards of purchasing

units of an AIF or a UCITS in an equally

prominent manner, and that all information

included in marketing communications is fair,

clear and not misleading. The proposed

guidelines, which are being consulted on until 8

February 2021, provide more clarity on each of

these requirements.

IOSCO highlights vulnerabilities in MMFs

IOSCO published a diagnostics report and

findings from its thematic review of MMFs on

23 November 2020. It analyses MMFs during

market turmoil in March 2020, highlighting

areas requiring further consideration to

address potential vulnerabilities, including

behaviour of investors and the regulatory

framework (e.g. requirements on fees and

gates) that may have played a role in

accelerating outflows. Separately, the thematic

review found that most regulators have

implemented the 2012 IOSCO

recommendations for MMFs, e.g. on liquidity

requirements and stress tests.

Supervision

ESMA finalises performance fee guidelines

ESMA formally published the final performance

fee guidelines on 5 November 2020, having

been translated into official EU languages

following the finalisation of the guidelines in

April 2020. The guidelines apply to managers

of UCITS and AIFs marketed to retail investors,

and cover performance fee calculation

methodologies; consistency between

performance fee models and the fund’s

objectives and strategies; frequency for the

crystallisation of performance fees; negative

performance recovery; and disclosure of

performance fee models. The guidelines will

apply from 5 January 2021.

Andrew StrangeFS Regulatory Insights

andrew .p.strange@pwc.com

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

14 • PwC | FS regulatory bulletin | December 2020

Sustainability

Asset management taskforce calls for more progress on stewardship

The UK Asset Management Taskforce

published a report on investment stewardship

on 25 November 2020, following a request

from the Economic Secretary to the Treasury

for the group to consider how stewardship and

responsible investment could be strengthened

in the UK. The report calls for better escalation

of concerns with investee companies (e.g.

development of model resolutions, with an

initial focus on climate issues), and for new

obligations for pension schemes to explain how

their stewardship activities are in members’

best interests. The Taskforce also

recommends that all investment consultants,

proxy advisers, index providers, credit rating

agencies and data providers become

signatories of the service provider principles in

the UK Stewardship Code.

IA sets out industry stance on climate change

The IA published its position paper on

addressing climate change on 16 November

2020. The paper sets out the industry’s

commitments on the issue, including engaging

with investee companies to facilitate the

transition to Net Zero and supporting asset

managers with their TCFD implementation

programmes. The paper also articulates a

number of asks of Government, including the

extension of TCFD-aligned reporting to large

private companies and the establishment of

sector-specific pathways for climate transition.

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

15 • PwC | FS regulatory bulletin | December 2020

Insurance

In this section:

Capital and liquidity 15

Resolution 16

Supervision 16

Sustainability 17

Capital and liquidity

PRA raises general insurance concerns

The PRA published a Dear CRO letter for

general insurance firms on 13 November 2020.

The letter highlights an increasing risk of

reserve deficiencies particularly for long-tailed

lines of business. The PRA flags the risk of

bias in setting reserve estimates where firms

tend to focus on favourable claims

development despite evidence of worsening

incurred claims experience. The PRA also

notes that reserving assumptions and case

reserve estimates have weakened over time

while firms continue to experience deterioration

in their claims experience.

The PRA expects firms to identify those

policies that are impacted by the pandemic and

reflect any uncertainty in expected losses in

their reserve estimates. It reminds firms to

make sufficient allowance for the uncertainty

related to COVID-19 losses on their case

estimates and incurred but not reported (IBNR)

reserves. In addition, the PRA notes that

historical claims experience may not be a good

guide for estimating future COVID-19 related

losses. The regulator urges firms to apply

alternative approaches such as the use of

benchmarking and exposure-based analyses

alongside more common reserving

methodologies.

The PRA notes that the state of man-made

catastrophe risk assessment remains

significantly behind that of natural catastrophe

risk assessment. Therefore, the PRA expects

firms to review their risk appetites and

exposure management controls for new and

emerging risks, and deploy relevant tools and

techniques to support forward-looking risk

assessments of man-made perils and losses

from cyber and specialty lines. The PRA also

encourages firms to adopt a consistent

approach to exposure management which is

supported by strong data governance and

consistent data capture across lines of

business.

Finally, the letter states that the severity

potential of certain perils (e.g. pandemics)

is not always well understood. As a result,

these events have the potential to expose firms

to unintended and unmonitored aggregations

across several lines of business. Therefore, the

PRA encourages firms to consider whether

their risk and capital management frameworks

and stress testing capabilities take into account

risks due to uncertainty in contract wording and

misalignment of underlying exposures to

coverage under existing reinsurance policies.

See our At a glance briefing for more

information.

IAIS consults on developing liquidity metrics

The IAIS published a public consultation

document on 9 November 2020 on the

development of liquidity metrics which the IAIS

will use to assess insurers’ liquidity exposures.

The liquidity metrics aim to highlight potential

vulnerabilities, risk drivers and trends rather

Melinda Strudwick

Insurance Risk and Regulation Lead

melinda.strudwick@pwc.com

Anirvan Choudhury

FS Regulatory Insights

anirvan.choudhury@pwc.com

Executive summary Cross sector announcements

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16 • PwC | FS regulatory bulletin | December 2020

than being binding requirements. The

consultation closes on 7 February 2021.

IAIS consults on comparability of capital standards

The IAIS launched a public consultation

document on 9 November 2020 regarding

high-level principles that will be used to

develop the criteria to assess whether the

Aggregation Method (AM) for calculating group

capital requirements provides comparable

outcomes to the Insurance Capital Standards

(ICS). If the IAIS finds the AM to be

comparable, then it will be considered an

outcome-equivalent approach for

implementation of the ICS as a prescribed

capital requirement. The consultation closes on

22 January 2021.

Resolution

IAIS consults on resolution powers and planning

The IAIS launched a draft application paper

(AP) on Resolution Powers and Planning on 9

November 2020. The AP provides guidance to

supervisors and resolution authorities on the

practical application of resolution powers, as

well as on cooperation and coordination

between authorities when exercising such

powers. Although the AP does not set new

standards or expectations, it outlines factors

that the group-wide supervisor and resolution

authority should consider in deciding whether

or not a resolution plan is necessary for

Internationally Active Insurance Groups.

Supervision

FCA outlines strategy for Lloyd’s & London Market intermediaries

The FCA published a Dear CEO letter on

3 November 2020 setting out its supervision

strategy for Lloyd’s & London Market

intermediaries and managing general agents.

The FCA states that the common drivers of

customer harm include lack of financial

resilience and orderly wind down plans,

ineffective governance structures, culture and

non-financial misconduct, and business models

which provide poor oversight of distribution

chains.

The conduct regulator expects firms to meet

their regulatory capital requirements and take

appropriate steps to conserve capital, and to

plan for how to meet potential demands on

liquidity. If a firm needs to exit the market, the

FCA expects the firm to plan ahead and

consider how it can achieve this in an orderly

manner. This requires firms to maintain an

up-to-date wind-down plan that takes into

consideration the economic impact of

COVID-19.

The FCA states that in due course, it will

assess how firms have implemented and

embedded the SM&CR. The FCA notes that

firms have until 31 March 2021 to ensure all

staff in certified roles are fit and proper. In

addition, the FCA expects firms to assess and

address the drivers of culture by taking into

consideration leadership, purpose, governance

and the firm’s approach to managing its

employees.

The FCA plans to continue its thematic review

on general insurance distribution chains and

expects firms to address the risk of poor value

products being sold to customers, and to have

robust controls for sales and renewals

arrangements, managing conflicts of interest

and overseeing Appointed Representatives.

The FCA also reminds firms of their

responsibility for assessing customer needs,

maintaining product oversight and governance

and providing appropriate product information

to address the risk of customer harm that may

arise from a hardening market.

Finally, the FCA expects firms to address any

gaps in their cyber and operational risk

frameworks and urges firms to ensure they are

ready for the end of the Brexit transition period.

FCA outlines focus for Lloyd’s & London Market insurers

The FCA published a Dear CEO letter on

23 November 2020 setting out its supervision

strategy for the Lloyd’s & London Market

Insurers portfolio which also includes

reinsurers, run-off firms and protection and

indemnity clubs. The letter states that the

common drivers of customer harm include

ineffective governance and oversight, culture

and non-financial misconduct, and inefficient

and poorly controlled distribution chains.

The FCA states that it will assess how firms

have implemented and embedded the SM&CR,

and plans to take a more interventionist

approach if it sees any failings in the future.

Specifically, for run-off firms, the FCA plans to

carry out an in-depth review to assess run-off

claims handling with a focus on retail/SME

policyholders. Where the FCA finds poor

outcomes, it will use the SM&CR to hold senior

managers accountable. In addition, the FCA

expects firms to assess and address the

drivers of culture by taking into consideration

leadership, purpose, governance and the firm’s

approach to managing its employees.

The FCA says it will continue its thematic

review on general insurance distribution chains

and expects firms to address the risk of poor-

value products being sold to customers. The

FCA expects firms to have robust controls for

sales and renewals arrangements,

management of conflicts of interest and

oversight of distribution arrangements. The

FCA also reminds firms of their responsibility

for assessing customer needs, maintaining

product oversight and governance, and

providing appropriate product information to

address the risk of customer harm that may

arise from a hardening market.

The FCA notes that due to COVID-19 firms do

not have to submit their Employers’ Liability

Register (ELR) compliance return for 2020.

However, the FCA still expects firms to ensure

their ELR is accurate and up to date, and

warns that it will seek to use the full range of

tools – including holding relevant senior

managers accountable under SM&CR – for the

remediation of outstanding issues.

Finally, the FCA expects firms to address any

gaps in their cyber and operational risk

frameworks and urges firms to ensure they are

ready for the end of the Brexit transition period.

FCA sets out priorities for price comparison sites

The FCA published a Dear CEO letter on

16 November 2020 setting out its supervision

strategy for price comparison websites

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

17 • PwC | FS regulatory bulletin | December 2020

(PCWs). The FCA states that the common

drivers of customer harm include consumers

being sold products that do not meet their

needs, consumers unable to access financial

services, ineffective governance arrangements

and poor culture, poor operational controls,

and poorly managed innovation.

The FCA requires PCWs to understand the

products they sell and to distribute them in a

way that meets consumers’ needs and

achieves good outcomes. The FCA expects

PCWs to continue to review their customer

journeys to ensure they are in line with the

FCA’s rules. In addition, the FCA reminds firms

to follow the recent travel insurance

signposting rules to assist consumers.

The FCA notes that firms have until

31 March 2021 to ensure all staff in certified

roles are fit and proper. In addition, the FCA

expects PCWs to prioritise embedding a

healthy, customer-centric culture.

The FCA expects PCWs to establish and

maintain a strong cyber resilience posture and

meet their obligations around operational

resilience and business continuity. Further, the

FCA expects firms to have in place robust data

governance to ensure they manage data

innovations appropriately and securely and

ethically with appropriate consent from

customers.

In light of COVID-19, the FCA expects PCW

firms to take steps to conserve capital, and to

plan how to meet potential demands on

liquidity. If a firm needs to exit the market, the

FCA expects the firm to plan ahead and

consider how it can achieve this in an orderly

manner. This requires firms to maintain an up-

to-date wind-down plan that takes into

consideration the economic impact of

COVID-19.

Finally, the FCA urges PCWs to ensure they

are ready for the end of the Brexit transition

period.

Sustainability

PRA responds to physical climate change report

The PRA published its Response to the

general insurance industry – A framework for

assessing financial impacts of physical climate

change on 16 November 2020. The PRA notes

that the areas deserving prioritisation for

further development are: assessing each

hydro-meteorological region-peril in detail,

assessing how current catastrophe model

calibrations allow for climate change, and

quantifying physical climate change risk on the

liability side of the balance sheet.

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

18 • PwC | FS regulatory bulletin | December 2020

Monthly calendar

Open consultations

Closing date for

responses

Paper Institution

18/12/20 Sustainable finance – EU classification system for green investments EC

05/01/21 Draft opinion on the supervision of the use of climate change risk scenarios in ORSA EIOPA

06/01/21 CP20/21: Breathing Space Regulations: changes to our Handbook FCA

11/01/21 Guidelines on the MiFID II/MiFIR obligations on market data ESMA

12/01/21 Draft Application Paper on the Supervision of Climate-related Risks in the Insurance Sector IAIS

12/01/21 CP16/20 Credit Risk: The approach to overseas Internal Ratings Based (IRB) models PRA

12/01/21 EIOPA consults on insurers’ key performance indicators on sustainability for non-financial reporting EIOPA

18/01/21 Consultation on proposed policy with respect to the designation of benchmarks under new Article 23A FCA

18/01/21 Consultation on proposed policy with respect to the exercise of the FCA’s powers under new Article 23D FCA

19/01/21 Long-term investment funds – review of EU rules EC

22/01/21 CP20/22: Regulatory fees and levies: policy proposals for 2021/22 FCA

25/01/21 CP20/19: General insurance pricing practices market study FCA

29/01/21 Review of EU rules on alternative investment fund managers EC

29/01/21 Draft guidelines on remuneration policies EBA

31/01/21 CP18/20 Bank Recovery and Resolution Directive II PRA

31/01/21 CP19/20 Resolution assessments: Amendments to reporting and disclosure dates PRA

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

19 • PwC | FS regulatory bulletin | December 2020

Closing date for

responses

Paper Institution

31/01/21 CP20/20 Operational continuity in resolution: Updates to the policy PRA

05/02/21 Draft Application Paper on Resolution Powers and Planning IAIS

07/02/21 Draft definition and high-level principles to inform the criteria that will be used to assess whether the Aggregation Method provides comparable

outcomes to the Insurance Capital Standard

IAIS

17/02/21 Statement on supervisory practices and expectations in case of breach of the Solvency Capital Requirement EIOPA

19/02/21 Future Regulatory Framework Review: Consultation HMT

19/02/21 Solvency II Review: Call for evidence HMT

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

20 • PwC | FS regulatory bulletin | December 2020

Glossary

ABI Association of British Insurers

ABS Asset Backed Security

AI Artificial intelligence

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AML Anti-Money Laundering

Basel II Basel II: International Convergence of Capital Measurement and Capital

Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

Basel Committee Basel Committee of Banking Supervision (of the BIS)

BIS Bank for International Settlements

BoE Bank of England

BMR EU Benchmarks Regulation

BRRD Bank Recovery and Resolution Directive 2014/59/EU

BRRD II Bank Recovery and Resolution Directive (EU) 2019/879 amending BRRD

CASS Client Assets sourcebook

CBILS The UK Coronavirus Business Interruption Loan Scheme

CCA Consumer Credit Act 1974 (as amended)

CCB Countercyclical capital buffer

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CET1 Common Equity Tier 1

CFTC Commodities Futures Trading Commission (US)

CGFS Committee on the Global Financial System (of the BIS)

CIS Collective Investment Schemes

CMA Competition and Markets Authority

CMU Capital markets union

COBS FCA conduct of business sourcebook

COCON FCA code of conduct sourcebook

CoCos Contingent convertible securities

ComFrame The Common Framework

CONC FCA consumer credit sourcebook

COREP Standardised European common reporting

Council Generic term representing all ten configurations of the Council of the

European Union

CPMI Committee on Payments and Market Infrastructures

CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009

CRA2 Regulation amending the Credit Rating Agencies Regulation (EU) No

513/2011

CRA3 Proposal to amend the Credit Rating Agencies Regulation and directives

related to credit rating agencies COM(2011) 746 final

CRD ‘Capital Requirements Directive’: collectively refers to Directive

2006/48/EC and Directive 2006/49/EC

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

21 • PwC | FS regulatory bulletin | December 2020

CRD IV Capital Requirements Directive 2013/36/EU

CRD V Capital Requirements Directive (EU) 2019/878 amending CRD IV

CRR Capital Requirement Regulation (EU) No 575/2013 on prudential

requirements for credit institutions and investment firms

CRR II Capital Requirements Regulation (EU) 2019/876 amending CRR

CSD Central Securities Depository

CSDR Central Securities Depositories Regulation (EU) 909/2014

CSMAD Criminal Sanctions Market Abuse Directive 2014/57/EU

CTF Counter Terrorist Financing

DEPP The FCA’s Decision Procedure and Penalties Manual

DG FISMA Directorate-General for Financial Stability, Financial Services and Capital

Markets Union

DGS Deposit Guarantee Scheme

DGSD Deposit Guarantee Schemes Directive 2014/49/EU

DLT Distributed ledger technology

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECL Expected credit loss

ECOFIN Economic and Financial Affairs Council (configuration of the Council of

the European Union dealing with financial and fiscal and

competition issues)

ECON Economic and Monetary Affairs Committee of the European Parliament

ECP Eligible counterparty

EDIS European Deposit Insurance Scheme

EEA European Economic Area

EEC European Economic Community

EIOPA European Insurance and Occupations Pension Authority

ELTIF European long-term investment fund

EMIR Regulation on OTC Derivatives, Central Counterparties and Trade

Repositories (EU) No 648/2012

EP European Parliament

EPC European Payments Council

ESA European Supervisory Authority (i.e. generic term for EBA, EIOPA

and ESMA)

ESCB European System of Central Banks

ESG Environmental, social and governance

ESEF European Single Electronic Format

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

€STR Euro short-term rate

ETC Exchange-traded commodity

ETN Exchange-traded note

EU European Union

EU Securitisation

Regulation

Regulation (EU) 2017/2402 laying down a general

framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC,

2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012

EURIBOR Euro Interbank Offered Rate

Eurosystem System of central banks in the euro area, including the ECB

EuSEF The European social Entrepreneurship Funds Regulation

EuVECA European Venture Capital Funds Regulation (EU) 345/2013

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

22 • PwC | FS regulatory bulletin | December 2020

FAMR Financial Advice Market Review

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

Fiat currency Currency whose value is underpinned by the strength of the issuing

government, e.g. USD, GBP, euro and other major world currencies

FICC Fixed income, currencies and commodities

FiCOD1 Amending Directive 2011/89/EU of 16 November 2011

FiCOD Financial Conglomerates Directive 2002/87/EC

FMI Financial Market Infrastructure

FMLC Financial Markets Law Committee

FMSB FICC Markets Standard Board

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FRTB Basel Committee fundamental review of the trading book market risk

capital requirements

FSB Financial Stability Board

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FTT Financial Transaction Tax

GDPR General Data Protection Regulation

G-SIBs Global Systemically Important Banks

G-SIIs Global Systemically Important Institutions

HCSTC High Cost Short Term Credit

HMRC Her Majesty’s Revenue and Customs

HMT Her Majesty’s Treasury

IA Investment Association

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

IBA ICE Benchmark Administration

IBOR Interbank Offered Rate

ICAAP Internal Capital Adequacy Assessment Process

ICAS Individual Capital Adequacy Standards

ICO Initial coin offering

ICOBS Insurance: Conduct of Business Sourcebook

ICPs Insurance Core Principles

ICT Information and Communication Technology

IDD The Insurance Distribution Directive (EU) 2016/97

IFR Investment Firms Review, used to refer to the new EU prudential regime

for investment firms consisting of the Regulation (EU) 2019/2033 and

Directive (EU) 2019/2034

IFRS International Financial Reporting Standards

ILAA Internal Liquidity Adequacy Assessment

ILAAP Internal Liquidity Adequacy Assessment Process

ILS Insurance-Linked Securities

IMAP Internal Model Approval Process

IMCO The European Parliament’s Committee on Internal Market and

Consumer Protection

IMD Insurance Mediation Directive 2002/92/EC

IMF International Monetary Fund

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

23 • PwC | FS regulatory bulletin | December 2020

IORP Institutions for Occupational Retirement Provision

IOSCO International Organisation of Securities Commissions

IRB Internal Ratings Based

IRRBB Interest rate risk in the banking book

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

KID Key Information Document

KIID Key Investor Information Document

KYC Know your customer

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

MA Matching Adjustment

MAD Market Abuse Directive 2003/6/EC

MAR Market Abuse Regulation (EU) 596/2014

Material Risk

Takers

Regulation

Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014

supplementing Directive 2013/36/EU of the EP and of the Council with

regard to regulatory technical standards with respect to qualitative and

appropriate quantitative criteria to identify categories of staff whose

professional activities have a material impact on an institution’s risk profile

MCD Mortgage Credit Directive 2014/17/EU

MCOB Mortgages and Home Finance: Conduct of Business sourcebook

MCR Minimum Capital Requirement

Member States Countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

MiFID II Markets in Financial Instruments Directive (recast) 2014/65/EU – also

used to refer to the regime under both this directive and MiFIR

MiFIR Markets in Financial Instruments Regulation (EU) No 600/2014

MLRO Money Laundering Reporting Officer

MMF Money Market Fund

MoJ Ministry of Justice

MoU Memorandum of Understanding

MPC Monetary Policy Committee

MREL Minimum requirements for own funds and eligible liabilities

MTF Multilateral Trading Facility

NBNI G-SIFI Non-bank non-insurer global systemically important financial institution

NCA National competent authority

NDF Non-Directive Firms – firms that do not fall within Solvency II

NFC Non-financial counterparty under EMIR

NIS Directive Proposal for a directive of the EP and Council concerning measures to

ensure a high common level of network and information security across

the EU

NPE Non-performing exposure

NSFR Net Stable Funding Ratio

NST National specific template

NURS Non-UCITS Retail Scheme

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union

OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflect Lisbon Treaty

and new supervisory infrastructure (2014/51/EU). Amends the Prospectus

Directive (Directive 2003/71/EC) and Solvency II (Directive 2009/138/EC)

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

24 • PwC | FS regulatory bulletin | December 2020

ORSA Own Risk Solvency Assessment

O-SIIs Other systemically important institutions

OTC Over-The-Counter

OTF Organised trading facility

PAD Payment Accounts Directive 2014/92/EU

PERG Perimeter Guidance Manual

PPI Payment Protection Insurance

PRA Prudential Regulation Authority

Presidency Member State which takes the leadership for negotiations in the Council:

rotates on 6 monthly basis

PRIIPs Packaged retail and insurance-based investment products

PSD2 The revised Payment Services Directive (EU) 2015/2366

PSP Payment service provider

PSR Payment Systems Regulator

P2P Peer to Peer

QIS Quantitative Impact Study

QRT Quantitative Reporting Template

RAO Financial Services and Markets Act 2000 (Regulated Activities) Order

2001 (SI 2001/544)

RDR Retail Distribution Review

REMIT Regulation on wholesale energy markets integrity and transparency (EU)

1227/2011

RFB Ring-fenced bank

RFQ Request for quote

RFRs Risk-free rates

RFRWG The Working Group on Sterling Risk-Free Reference Rates

RONIA Repurchase Overnight Index Average

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SARON Swiss Average Rate Overnight

SCA Strong Customer Authentication (rules under PSD2)

SCR Solvency Capital Requirement (under Solvency II)

SCV Single customer view

SEC Securities and Exchange Commission (US)

SECR Securitisation Regulation

SEPA Single Euro Payments Area

SFP Structured finance product

SFT Securities financing transaction

SFTR Securities Financing Transactions Regulation (EU) 2015/2365

SFO Serious Fraud Office

SI Systematic internaliser

SIMF Senior Insurer Manager Function

SIMR Senior Insurer Managers Regime

SM&CR Senior Managers and Certification Regime

SME Small and Medium sized Enterprises

SMF Senior Manager Function

SOCA Serious Organised Crime Agency

SOFR Secured Overnight Financing Rate

Solvency II Directive 2009/138/EC

SONIA Sterling Overnight Index Average

SPV Special purpose vehicle

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

25 • PwC | FS regulatory bulletin | December 2020

SREP Supervisory Review and Evaluation Process

SRF Single Resolution Fund

SRM Single Resolution Mechanism

SRMR Single Resolution Mechanism Regulation (EU) No 806/2014

SRMR II Single Resolution Mechanism Regulation (EU) 2019/877

amending SRMR

SSM Single Supervisory Mechanism

SSR Short Selling Regulation (EU) 236/2012

STS Simple Transparent and Standardised (concerning securitisations)

SUP FCA supervision manual

SYSC The part of the FCA handbook titled senior management arrangements,

systems and controls

T2S TARGET2-Securities

TSC Treasury Select Committee

TCFD The FSB Task Force on Climate-related Financial Disclosures

TLAC Total Loss Absorbing Capacity

TMTP Transitional Measure on Technical Provisions

TONA Tokyo Overnight Average Rate

TPR The Pensions Regulator

TR Trade Repository

UCITS Undertakings for Collective Investments in Transferable Securities

UCITS V UCITS V Directive 2014/91/EU

UKLA UK Listing Authority

UTI Unique Trade Identifier

XBRL extensible Business Reporting Language

Executive summary Cross sector announcements

Banking and capital markets Asset management Insurance Monthly calendar Glossary

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Contacts

Hannah Swain

+44 (0) 7803 590553

swain.hannah@pwc.com

Operational resilience and financial crime

Andrew Strange

+44 (0) 7730 146626

andrew.p.strange@pwc.com

Retail distribution, SM&CR, upcoming regulatory change

Anirvan Choudhury

+44 (0) 7843 423721

anirvan.choudhury@pwc.com

Insurance prudential

Tessa Norman

+44 (0) 7826 927070

tessa.norman@pwc.com

Publications and retail distribution

Adam Stage

+44 (0) 7483 422845

adam.stag@pwc.com

Operational resilience

Leo Donnachie

+44 (0) 7483 329595

emilio.donnachie@pwc.com

Cross-sector conduct, asset management

Conor MacManus

+44 (0) 7718 979428

conor.macmanus@pwc.com

Cross-sector regulatory affairs, Brexit and banking prudential

Luke Nelson

+44 (0) 7808 107043 luke.a.nelson@pwc.com

Climate change and banking regulation

Lucas Penfold

+44 (0) 7483 407581

lucas.penfold@pwc.com

Wholesale markets and asset management conduct regulation

Tom Boydell

+44 (0) 7483 399332

tom.boydell@pwc.com

Retail banking, consumer credit and non-bank lending