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EC proposing change of law to continue non-deliverable forwards

Posted by Mark Daley on 31 July 2020

Last week we saw the UK take action to prevent the onshored Benchmarks Regulation preventing UK regulated entities being able to refer to unauthorised spot FX rates, some of which (such as KRW/USD and TWD/USD) are widely used in non-deliverable forward contracts. Its solution was to delay the current transition period under the BMR until the end of 2025. The EC’s second proposed amendment from last Friday to amend the Benchmarks Regulation concerns the same issue, and proposes amending the BMR to permit the EC to designate certain spot FX rate benchmarks.

ISDA cautions the EU on upcoming cliff edge

Posted by Mark Daley on 31 July 2020

ISDA and some other European trade bodies have updated and re-issued their October 2018 paper, “The impact of Brexit on OTC derivatives” (not yet on its website).  Given the current impasse on a free trade agreement and the absence of completed equivalence declarations, the possibilities of “cliff-edge” disruption to the derivatives market are largely as they were back in 2018, save to the extent that the quantum of affected contracts may have been reduced (if this has indeed happened to a material extent).

EBA’s latest Brexit statement

Posted by Mark Daley on 31 July 2020

The EBA’s latest Brexit statement on Wednesday contained familiar reminders and warnings: passporting will end on 31st December 2020 and if UK firms want to offer services into the EU27, they will need to check they are permitted by the relevant local law and whether or not it permits reverse solicitation nor has an overseas persons exemption, etc), and UK firms should not set up brass plate subsidiaries and then sub-contract everything back to the UK, and instead “ensure that associated management capacity, including appropriate technical risk management capabilities, is effectively in place ahead of time, and is commensurate to the magnitude, scope and complexity of their activities, to allow for effective and efficient management of risks they generate”. 

EC proposals to encourage NPL securitisations and synthetics

Posted by Mark Daley on 31 July 2020

The EC’s unexpected announcements and proposed legislation last Friday, 24 July, to amend the Securitisation Regulation and to amend the CRR (nothing yet about Solvency II) to:

  • promote the securitisation of NPLs
  • create a regime for balance sheet synthetic securitisations
  • make their regulatory capital treatment more benign
  • tweak the rules on the regulatory capital implications of unfunded credit protection

CBILS relaxed to permit lending to small “businesses in difficulty”

Posted by Mark Daley on 31 July 2020

One problem with CBILS is that, to comply with EU state aid rules, the borrower must not have been an “undertaking in difficulty” on 31 December 2019.  The CBILS scheme rules have been relaxed with effect from 30 July for borrowers which “have fewer than 50 employees and a turnover of less than GBP9 million”.

HM Treasury launches consultation on what’s next for UK payments landscape

Posted by Michael McKee and Chris Whittaker on 30 July 2020

On 28 July 2020, HM Treasury published a Call for Evidence on the development of the UK payments landscape. This represents the first stage of a government review to ensure that the UK’s payments landscape is fit-for-purpose.

The government wishes to identify opportunities, gaps and risks that need to be addressed in the future in order to ensure that the UK maintains its status as a country at the cutting edge of payments technology.

FCA publishes draft guidance to firms on maintaining access to cash for customers

Posted by Michael McKee, Chris Whittaker and Erna Soljanin on 29 July 2020

On 16 July 2020, the Financial Conduct Authority (FCA) published draft guidance setting out its expectations for banks, building societies and credit unions when considering closing branches or ATMs, or converting a free to use ATM to pay to use.

UK government consults on financial promotions regime and cryptoassets

Posted by Bryony Widdup, Chris Whittaker and Marina Troullinou on 29 July 2020

On 20 July 2020, HM Treasury published two consultations proposing amendments to the UK regulatory framework for approval of financial promotions and with respect to cryptoasset promotions. Overall, the consultation papers propose important changes to the way that unauthorised persons communicate financial promotions more generally and also specifically in regards to cryptoassets.

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