Welcome to the Financial Regulation Weekly Bulletin. The bulletin provides a weekly update on Major UK and European regulatory developments of interest to banks, insurers and reinsurers, asset managers, and other market participants.
We hope this bulletin will be of interest. Please get in touch if you would like to discuss any of topics from any editions in more detail.
GENERAL
European Banking Authority: Own funds, liquidity requirements, and recovery plans under MiCA - EBA publishes final reports on draft RTS and guidelines - 13 June 2024
The European Banking Authority (EBA) has published final reports on own funds, liquidity requirements and recovery plans under the Regulation on Markets in Cryptoassets ((EU) 2023/1114) (MiCA).
The EBA has also published a final report on draft guidelines on recovery plans, including their format and content (EBA/GL/2024/07).
BANKING AND FINANCE
Mortgage Charter - FCA publishes new webpage - 11 June 2024
The FCA has published a webpage setting out the latest data from firms who have signed up to the Government's Mortgage Charter (the Charter). The Charter was announced in June 2023 to provide additional support measures for residential mortgage holders who are concerned about higher interest rates. The FCA also introduced new rules in the Mortgage Conduct of Business sourcebook (MCOB) enabling firms to allow a customer to make reduced capital payments for up to six months or to reverse a term extension within six months of it taking effect, without undergoing an affordability assessment.
The Charter has 49 signatories, representing around 90% of the mortgage market. The FCA will publish data relating to the Charter quarterly. It will also continue to monitor the mortgage market closely, including through market and consumer level data and firm engagement.
Recent Cases: AF Kopp Limited v HSBC UK Bank PLC, [2024] EWHC 1004 (Ch) - 3 May 2024
Breach of duty - Business banking - Reasonableness test - UCTA
The High Court has dismissed an application to strike out a claim by AF Kopp Limited (the respondent) against HSBC UK Bank PLC (HSBC). The court also dismissed an application for summary judgment on whether a contractual exclusion of indirect and consequential loss “including” loss of profit also excluded losses resulting from the respondent’s liability to its third party clients for their loss of profits.
The respondent had sought damages against HSBC for breach of contract and/or breach of a duty of care after its domestic and foreign currency business accounts were suspended following a safeguarding review. The relationship was governed by HSBC’s business banking terms and conditions, including a clause excluding liability for “indirect or consequential loss (including lost business, data, profits or losses resulting from third party claims) even if it was foreseeable”. HSBC argued that the clause satisfied the reasonableness requirement under the Unfair Contract Terms Act 1977 (UCTA). The judge applied the test in Hadley v Baxendale on the remoteness of damages for breach of contract.
SECURITIES AND MARKETS
BMR and extension of power to adopt delegated acts - European Commission publishes report - 12 June 2024
The European Commission has published a report (COM(2024) 244 final), addressed to the European Parliament and the Council of the EU, on the delegation of power to adopt delegated acts conferred on it under the Benchmarks Regulation ((EU) 2016/1011) (BMR).
The power is conferred on the Commission for a five-year period, which can be extended for further five-year periods unless the Parliament or the Council objects.
The report identifies the delegated acts that the Commission has made under the BMR in exercise of this power, to which neither the Parliament nor the Council objected. It also identifies powers that have not been exercised yet and explains the reasons for this. As a result of this, the Commission considers that there is a need for an extension of the delegation of power for a further five-year period.
MiFIR and OTC derivatives identifying reference data - European Commission launches consultation on draft Delegated Regulation - 12 June 2024
The European Commission has published for consultation a draft Delegated Regulation supplementing the Markets in Financial Instruments Regulation (600/2014) (MiFIR) and identifying reference data to be used for the purposes of transparency requirements for OTC derivatives. A draft Annex has been published separately. Among other things, the draft Delegated Regulation includes a deferred date of application, to allow enough time for revising the ISIN template and implementing the necessary adjustments to IT systems, while taking into consideration the timeline prescribed by the MiFIR review for the launch of the OTC derivatives consolidated tape tender process.
Comments can be made on the draft Delegated Regulation until 12 July 2024.
The draft Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the European Union, and will apply from 1 September 2025.
ASSET MANAGEMENT
Negotiating mandate on retail investment package - agreed by Council of the EU - 12 June 2024
The Council of the European Union has announced that it has agreed its negotiating position on the retail investment package consisting of the proposed Directive on retail investment protection (referred to as an "Omnibus Directive") and the proposed Regulation amending the PRIIPs Regulation (1286/2014).
The main changes proposed by the Council relate to inducements and value for money. In particular, the Council has decided to remove the proposed ban on inducements received for execution-only sales, while strengthening accompanying safeguards. It has also introduced a new concept of “value for money”.
The Council agrees that ESMA and EIOPA should develop EU supervisory benchmarks to help national supervisors identify investment products that fail to offer value for money. The legal texts (dated 7 June 2024) of the Council's negotiating mandate on the proposed Directive and the proposed Regulation have also been published. The Council's agreement paves the way for the start of inter-institutional negotiations.
INSURANCE
Pensions review and 'wealth creation' - Labour launches manifesto - 13 June 2024
In advance of the general election on 4 July 2024, the Labour Party has published its manifesto, ‘Change,’ which sets out a commitment to establish a National Wealth Fund. Labour will also act to increase investment from pension funds in UK markets and undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.
