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

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596