Featured Product

    FCA Publishes Additional Guidance for Supervised Firms Amid Crisis

    July 15, 2020

    FCA finalized additional guidance to strengthen the prudential risk management of payment and e-money firms and the arrangements for safeguarding customer funds, in light of the impact of COVID-19 on the business models of firms. The guidance provides additional direction for firms to meet their safeguarding requirements and outlines the expectation for firms to put in place more robust plans for winding down. In addition, FCA finalized rules and guidance that set out the expectation that firms should provide, for a temporary period only, exceptional and immediate support to consumers facing payment difficulties due to circumstances arising out of COVID-19. FCA rules and guidance provide support for users of motor finance, buy-now pay-later, rent-to-own, pawnbroking, and high-cost short-term credit products, who continue to face payment difficulties due to COVID-19; the rules and guidance have been in effect from July 17, 2020 and, unless renewed or updated, shall expire on October 31, 2020.

    Guidance on Managing Prudential Risk for Payment Firms

    The key areas covered in the guidance on managing prudential risk include governance and controls, capital adequacy, liquidity, capital stress testing, and risk management arrangements. The finalized guidance on managing prudential risk follows the consultation published on May 22, 2020. FCA has also published a feedback statement (FS20/10) that summarizes the feedback received to the proposed guidance. FCA hopes to conduct a full consultation later in 2020-21 on changes to its approach document. As part of this, FCA is likely to propose incorporating this additional guidance on safeguarding and prudential risk management. This will give stakeholders a second opportunity to comment on any measures that FCA propose to apply permanently, building on this temporary guidance. This guidance on managing prudential risk applies to authorized payment institutions or small payment institutions, e-money institutions or small e-money institutions, and credit institutions and custodians.

    Rules and Guidance to Support COVID-Impacted Customers

    The finalized rules and guidance set out that firms should support, for a temporary period, the users of motor finance, buy-now pay-later, rent-to-own, pawnbroking, and high-cost, short-term credit products, who have been adversely impacted by the COVID crisis. These rules and guidance were part of a consultation that published in July 2020 and FCA has now published a feedback statement (FS20/11) on the comments received to this consultation. The final rules and guidance outline a range of measures, specifying that:

    • Firms should contact customers coming to the end of a first payment freeze to find out if they can resume payments—and if so, agree a plan on how the missed payments could be repaid.
    • Customers that have not yet had a payment freeze or requested an extension of an existing payment freeze can request this up until October 31, 2020.
    • High-cost short-term credit customers can only apply for a payment freeze under the guidance once up to October 31, 2020 in respect of each high-cost short-term credit agreement. For those customers who have had a payment freeze and are still experiencing payment difficulties, firms will provide a range of support—including formal forbearance—in accordance with the FCA Handbook.
    • Where a customer needs further temporary support to bridge the crisis, any payment freezes or partial payment freezes offered under the guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.

    For customers still facing temporary payment difficulties as a result of COVID-19:

    • Firms should provide them with support by freezing or reducing payments to a level they can afford, on their motor finance, buy-now pay-later, or rent-to-own agreements for a further three months. 
    • For buy-now pay-later customers, where a loan is within the promotional period, this will mean offering customers an additional extension to that period.
    • For pawnbroking agreements, where a loan is within the redemption period (irrespective of when the redemption period is due to end), this will mean firms offering a further extension to the redemption period. If the redemption period has already ended, this will mean agreeing not to sell the item during the payment deferral period.

     

    Related Links

    Effective Date: July 17, 2020

    Keywords: Europe, UK, Banking, Securities, COVD-19, Credit Risk, Payment Service Providers, Governance, Regulatory Capital, Stress Testing, Liquidity Risk, FCA

    Featured Experts
    Related Articles
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7875