HM Treasury Publishes Policy Statement Amending Benchmarks Regulation
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament. This Bill includes amendments to the Benchmarks Regulation, which provide FCA with new and enhanced powers to oversee the orderly wind-down of critical benchmarks such as LIBOR. The Treasury also published a Policy Statement that addresses certain amendments to the Benchmarks Regulation to support LIBOR transition. The Policy Statement also emphasizes the importance of continued active transition away from LIBOR, ahead of the expected cessation of LIBOR after the end of 2021. FCA welcomed these developments, highlighting that this will help to maintain high standards and provide greater clarity to firms.
This latest development on LIBOR transition provides an overarching legal framework that equips FCA with new and enhanced powers to manage and direct the orderly wind-down of LIBOR. To cater to the contracts that face insurmountable barriers to transitioning away from LIBOR (tough legacy contracts), this framework includes the option for FCA to direct a change in the methodology of a critical benchmark and extend its publication for a limited time period. In such a scenario, use of that benchmark by UK supervised entities will be prohibited. However, to ensure an orderly wind-down of the benchmark for “tough legacy” contracts, FCA will have discretion to determine specific categories of contracts which will be exempt from this prohibition on use. HM Treasury and FCA are of the view that this exemption is intended for those contracts that genuinely have no realistic ability to be renegotiated or amended to transition to an alternative benchmark. Before exercising certain new powers, FCA will be required to issue statements of policy to inform the market about how it intends implement the legal framework set out under the Benchmarks Regulation. FCA will be able to engage with industry stakeholders and international counterparts, as appropriate, through this process.
The Financial Services Bill will ensure that the regulatory framework of UK continues to function effectively for UK after leaving EU. This Bill is the first step in shaping the post-Brexit regulatory framework for the financial services sector in UK. Measures in the Bill will:
- Enhance the prudential standards and promote financial stability by enabling the implementation of the remaining Basel III standards and a new prudential regime for investment firms and by giving the FCA the powers it needs to oversee an orderly transition away from the LIBOR benchmark
- Promote openness between the UK and international markets by simplifying the process to market overseas investment funds in the UK and delivering a Ministerial commitment to provide long-term access between the UK and Gibraltar for financial services firms
- Maintain an effective financial services regulatory framework and sound capital markets with a number of smaller measures, including measures to improve the functioning of the Packaged Retail and Insurance-based Investment Products Regulation and increase penalties for market abuse
Following its introduction to Parliament, the Bill will be subject to the usual processes of legislative scrutiny in both the House of Commons and the House of Lords. Once both Houses of Parliament have agreed, it will move forward to receive Royal Assent, at which point the Bill will become law. The timing of the Bill’s progression through Parliament is subject to parliamentary scheduling.
Related Links
Keywords: Europe, UK, Banking, Insurance, Securities, Benchmark Regulation, Financial Services Bill, FCA, HM Treasury
Previous Article
FCA Proposes More Measures to Help Insurance Customers Amid CrisisRelated Articles
HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
BoE Sets Out Plan to Transform Data Collection from Financial Sector
BoE has set out a three-phased plan to transform data collection from the UK financial sector over the next decade.
BIS Issues Updates on Technology Initiatives on Cross-Border Payments
BIS recently made a couple of announcements with respect to the planned and ongoing work in the area of financial technology.
ESRB Updates List of Macro-Prudential Measures in February 2021
ESRB updated the list of national macro-prudential measures applied by each member state in the European Economic Area.
BoE Survey Shows Positive COVID Impact on Outsourced Banking Services
BoE has set out results of a survey on the impact of COVID-19 events on the use of machine learning and data science.
ECB Issues Opinion on Proposal to Regulate Crypto-Asset Markets in EU
In response to a request from the European Council and Parliament, ECB published an opinion on the proposed regulation on markets in crypto-assets.
APRA Announces Aggregate Committed Liquidity Facility for Banks
APRA announced the updated aggregate amounts for the 2021 Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to the Liquidity Coverage Ratio (LCR).
ECB and UK Authorities Agree on Post-Brexit Supervisory Cooperation
ECB published supervisory Memorandums of Understanding (MoUs) with UK as well as other European and non-European authorities.
EIOPA Outlines Strategic Supervisory Priorities for Insurance Sector
EIOPA identified business model sustainability and adequate product design as the two EU-wide strategic supervisory priorities.
US Agencies to Revise FFIEC 031, FFIEC 041, and FFIEC 051 Reports
After considering comments received on the November 2020 proposal, US Agencies (FDIC, FED and OCC) are proceeding with the proposed revisions to the reporting forms and instructions for Call Reports FFIEC 031, FFIEC 041, and FFIEC 051.