FCA published a statement that is relevant for firms preparing for transposition of the revised Bank Recovery and Resolution Directive (BRRD2). HM Treasury laid a statutory instrument before the UK Parliament on October 15, 2020 to transpose BRRD2, which the UK is required to do by December 28, 2020. Certain provisions of this directive will come into effect on December 28, 2020, but then will cease to be effective in the UK on December 31, 2020. Unlike PRA, that has consulted on short-lived rule changes to come into effect on December 28, 2020, FCA has not identified any conflicts between its current requirements and those in the statutory instrument that will implement BRRD2. The statement highlights that FCA will not be addressing those new requirements in BRRD2 that do not apply to FCA solo-regulated firms. Firms should consult the website of HM Treasury and PRA for further information on these changes.
FCA also highlighted the following relevant areas that apply to FCA-regulated firms:
- Article 48(7) on the priority of debts in insolvency—As transposed by HM Treasury, certain changes are made to the priority of debts in insolvency in the case of insolvency proceedings commenced during the four-day period.
- Article 55 on the Contractual Recognition of Bail-in—FCA has requirements in place for firms to include terms in their contracts recognizing that a liability may be “bailed in” (for example the debt may be written-down or converted into equity) by the resolution authority. BRRD2 adds to these with a mechanism for firms to notify the resolution authority in situations where it is “legally or otherwise impracticable” to include the required terms in contractual provisions. These additional requirements do not conflict with existing rules of FCA. Any notifications submitted that have not already been acted upon will automatically lapse on January 01, 2021.
- Other potentially relevant article—Article 44a addresses the sale of subordinated eligible liabilities to retail clients and will be introduced via Handbook rules. FCA is consulting on the introduction of the requirements in this area in its quarterly consultation paper (No. 30), which was published on December 04, 2020.
Related Link: FCA Statement
Keywords: Europe, UK, Banking, Securities, BRRD2, BRRD2 Transition, Resolution Framework, Basel, Bail-In, Brexit Transition, HM Treasury, FCA
Previous ArticleEU Endorses Rules Addressing Cessation of Financial Benchmarks
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.