FCA Issues Further Prudential Guidance for Payment Firms Amid Crisis
FCA published a short consultation that sets out additional temporary guidance to strengthen payment firms’ prudential risk management and arrangements for safeguarding customer funds, in light of the exceptional circumstances of the COVID-19 pandemic. The proposed guidance also outlines how firms can put in place more robust plans for winding down. Comments are requested by June 05, 2020.
The proposed guidance on managing prudential risk covers the following key areas:
- Governance and controls—Authorized payment institutions and e-money institutions should ensure they have robust governance arrangements, effective procedures, and adequate internal control mechanisms, in accordance with their conditions of authorization.
- Capital adequacy—It is essential that firms accurately calculate their capital requirements and resources on an ongoing basis and report these correctly to FCA in regulatory returns as well as on request from FCA. A firm’s senior management should ensure that its capital resources are reviewed regularly.
- Liquidity and capital stress testing—Firms should carry out liquidity and capital stress testing to analyze their exposure to severe business disruptions and assess their potential impact, using internal and/or external data and scenario analysis. Firms should use the results of these tests to help ensure they can continue to meet their conditions of authorization and own funds requirements.
- Risk management arrangements—As part of the liquidity risk management procedures, FCA expects firms to consider their own liquid resources and available funding options to meet their liabilities as they fall due and whether they need access to committed credit lines to manage their exposures. To reduce exposure to intra-group risk, FCA considers it best practice for firms not to include any uncommitted intra-group liquidity facilities when assessing whether they have adequate resources in place to cover the liquidity risk to which they are exposed.
In addition, FCA published finalized rules and guidance for insurance and premium finance firms on fair treatment of customers in temporary financial difficulty as a result of COVID-19. FCA also published its feedback statement that includes summary of the feedback received on the proposed measures. This guidance applies to all non-investment insurance contracts—that is, general insurance and protection contracts—but not to re-insurance products.
Related Links
- Proposed Guidance for Payment Firms
- Guidance for Insurance and Premium Finance Firms
- Feedback Statement
Keywords: Europe, UK, Banking, Insurance, COVID-19, Payment Service Providers, Governance, Regulatory Capital, Stress Testing, Liquidity Risk, FCA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Previous Article
RBI Publishes Guidance on Regulatory Measures to Ease COVID ImpactRelated Articles
UK Government to Set Out Rules on Wind-down of Critical Benchmarks
HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.
EIOPA Launches Stress Test for Insurance Sector in EU
EIOPA launched the 2021 stress test for the insurance sector in EU.
UK Authorities Publish Third Edition of Regulatory Initiatives Grid
UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.
EC Consults on Regulation on Non-Financial Sustainability Disclosures
EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.
OSFI Outlines Prudential Policy Priorities for Coming Months
OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.
BIS Announces TechSprint on Innovative Green Finance Solutions
Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.
ACPR Publishes Version 1.0.0 of RUBA Taxonomy
ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.
EBA Proposed Regulatory Standards for Central Database on AML/CFT
EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.
ECB Responds to EC Consultation on Crisis Management Framework
ECB published its response to the targeted EC consultation on the review of the bank crisis management and deposit insurance framework in EU.
BCBS, CPMI, and IOSCO to Survey Market Participants on Margin Calls
BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls.
