UK REGULATORY DEVELOPMENTS Flashcards
What are the four commitments of the FCA business plan?
Preparing the UK financial markets for the future
Putting consumers needs first
Reducing and preventing financial crime
Strengthening the UK’s position in global markets
THREE THEMES OF THE FCA BUSINESS PLAN
- REDUCING AND PREVENTING SERIOUS HARM
- SETTING AND TESTING HIGHER STANDARDS
- PROMOTING COMPETITION AND POSITIVE CHANGE
PRA BUSINESS PLAN 2023-24
FOUR STRATEGIC GOALS
PRA STRATEGIC GOAL 1
- maintain and build on the safety and soundness of the banking and insurance sectors and ensure continuing resilience
PRA STRATEGIC GOAL 2
- Be at the forefront of identifying new and emerging risks, and developing international policy
PRA STRATEGIC GOAL 3
Support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate
PRA STRATEGIC GOAL 4
Run an inclusive, efficient and modern regulator within the central bank
How will the PRA seek to achieve the outcome of PRA STRATEGIC GOAL 1?
FINANCIAL RESILIENCE IN BANKING
FINANCIAL RESILIENCE FOR INSURERS
OPERATIONAL RISK AND RESILIENCE
GOVERNANCE AND RISK MANAGEMENT
SENIOR MANAGERS AND CERTIFICATION REGIME
- Edinburgh reforms and the call to evidence
DIVERSITY AND INCLUSION
How will the PRA seek to achieve the outcome of PRA Strategic Goal 3?
Develop the PRA’s approach to rulemaking
- new powers to be afforded in the FSMA 2023
Competitiveness
- requirement with the FSMA bill
Developing the PRA’s approach to rule making ‘rule review’
Cost benefit analysis panel
Repealing and replacing direct regulatory requirements in the PRA Rulebook
Strong and simple framework
Ring-fencing regime
How will the PRA seek to achieve the outcome of PRA Strategic Goal 2?
INFLUENCING INTERNATIONAL CHANGE
- banking commission on banking standards
financial stability board
DIGITALISATION
ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING
CRYPTOASSETS
CLIMATE CHANGE
How will the PRA seek to achieve the outcome of PRA Strategic Goal 4?
Operational efficiency on regulatory transactions
Diversity, Equity and Inclusion at the PRA
Data and technology
Supervisory approach
Risks to delivery of business plan
What areas of MiFID II are under Review??
TRADING VENUES
The government believes that the current market structure for trading venues is generally sound, however, it identified several areas where the regime could be simplified, or where requirements have led to unnecessary costs and burdens on firms but has provided benefits in terms of market integrity.
SYSTEMATIC INTERNALISERS
The SI regime was originally determined on a qualitative basis and limited to equity markets. Its objective was to ensure that OTC trading could contribute to price formation. MiFID II expanded the regime to cover non-equity instruments, including bonds and derivatives.
The government is aware that many firms avoid having to undertake the quarterly calculations, on the basis that they have opted into the regime for all instruments that they trade in, thereby removing posttrade reporting requirements for their firm’s clients (ie, buy-side firms). The government therefore believes that the definition is not working well and is disincentivising people from calling themselves SIs.
EQUITIES
MiFID II extended the transparency, market integrity and competitiveness by adding equity like instruments such as DEPOSITARY RECEIPTS and ETFs
The government believes that there is scope to simplify the MiFID II transparency regime by removing restrictions that have not aided in price formation.
FIXED INCOME AND DERIVATIVES MARKETS
MiFID II significantly extended the transparency regime – which originally applied only to shares – to include bonds, exchange-traded commodities, structured finance products, emission allowances and derivatives.
It has had little impact on price formation at a high cost to the industry as the regime is not appropriately calibrated
The government is considering how it can amend the scope of the transparency regime to increase OTC derivatives transparency while removing contracts that do not need to be included.
COMMODITY MARKETS
The government considers MiFID II commodities regime as poorly designed and inefficient
As part of MiFID II, responsibility for position limits was moved from trading venues to local regulators within EU Member States. Therefore, the FCA was required to establish and enforce position limits for all exchange-traded commodity derivative contracts – for around 800 contracts in the UK. Additionally, UK trading venues were required to establish and operate their own position management controls.
The government is proposing to revoke the requirement for position limits to be applied to all exchangetraded contracts, and to transfer the setting of position controls from the FCA to trading venues.
