Global Financial Regulatory Blog

Private Bank Briefing – March 2021

Posted in Benchmark Regulations, Regulatory Reform

By Rob Moulton, Nicola Higgs, Anne Mainwaring, Becky Critchley, and Anna Lewis-Martinez

The latest edition of our Private Bank Briefing provides a roundup of legal and compliance issues impacting private banks and their clients from Q1 2021.

In this edition, we cover some of the key regulatory announcements relating to MiFID II and the impact of COVID-19, the latest on Brexit, the FCA’s announcement on the dates for cessation of LIBOR benchmark settings, and the FCA’s guidance for firms on the fair treatment of vulnerable customers. We feature an update on the UK and EU’s sustainable finance agendas, and the FCA’s aims regarding diversity, as well as other key updates for private banks from the last three months.

We also include our regular features — TechTrends, Lessons from Enforcement, and Global Insights. This edition’s TechTrends provides a useful overview of the Woolard Review and the regulation of buy-now-pay-later products.

View the full briefing.

Previous editions of Private Bank Briefing are also available.

CFTC Takes Action With New Climate Risk Unit

Posted in Derivatives, Environmental, Social and Governance (ESG)

The CFTC continues to demonstrate a commitment to using its regulatory mandate to combat climate change risks to the US financial system.

By Yvette D. Valdez, Douglas K. Yatter, Jean-Philippe Brisson, Paul Davies, Nicola Higgs, and Deric Behar

On March 17, 2021, the Commodity Futures Trading Commission (CFTC) announced the establishment of an interdivisional Climate Risk Unit (CRU) to assess the risks to US financial stability posed by climate change. The CRU aims to be a catalyst for change by highlighting the derivatives markets’ role in understanding, pricing, and addressing climate-related risks, as well as its role in the transition to a low-carbon economy.

The announcement was made by Acting Chairman Rostin Behnam, whose efforts to steer the CFTC’s focus toward climate-related impacts on the financial system led to the publication of a landmark report by the CFTC’s Climate-Related Market Risk Subcommittee of the Market Risk Advisory Committee in September 2020. The report, titled “Managing Climate Risk in the U.S. Financial System” (the Report), makes 53 recommendations to help mitigate climate risk to financial markets. See Latham’s discussion of the report here. Continue Reading

ESG Disclosures Under the EU Taxonomy Regulation and CRR: Latest Developments

Posted in Environmental, Social and Governance (ESG)

ESMA and the EBA advise on KPIs for transparency on institutions’ environmentally sustainable activities, and the EBA consults on prudential disclosures of ESG risks under the CRR.

By Nicola Higgs, Suzana Sava-Montanari, and Axel Schiemann

On 26 February 2021, both the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) issued guidance on Article 8 of the EU Taxonomy Regulation. Firms in scope of the EU Taxonomy Regulation now have all the relevant guidance to start planning their disclosures on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the EU Taxonomy Regulation.

The guidance elaborates on the Key Performance Indicators (KPIs) that institutions should disclose, the scope and methodology for the calculation of those KPIs, and the qualitative information that institutions should provide.

The main KPI proposed is the Green Asset Ratio (GAR), which identifies institutions’ asset financing activities that are environmentally sustainable according to the EU Taxonomy Regulation, including activities consistent with the goals of the European Green Deal and the Paris Agreement. Information on the GAR is supplemented by other KPIs that provide information on the taxonomy-alignment of institutions’ services other than lending and investing. The EBA has integrated proportionality measures that should facilitate institutions’ disclosures, including transitional periods where disclosures in terms of estimates and proxies are allowed. Continue Reading

FCA Confirms Dates for Cessation of LIBOR Benchmarks

Posted in Regulatory Reform

By Becky Critchley and Anna Lewis-Martinez

On 5 March 2021, the UK’s Financial Conduct Authority (FCA) formally announced the dates for the cessation of all London Interbank Offered Rate (LIBOR) benchmark settings currently published by ICE Benchmark Administration (IBA). The FCA also confirmed that where a “synthetic” LIBOR is available after the cessation dates, the synthetic LIBOR will not in any event be considered to be representative as of the cessation dates. This is an important step towards the end of LIBOR, providing market participants with a fixed timeline for LIBOR’s cessation. The announcement also adds pressure on market participants to complete their transition plans by the end of 2021.

The FCA’s announcement follows the IBA’s notification to the FCA — following its consultation and notices of future departure received from the majority of the panel banks for each LIBOR setting — that it intends to cease providing all LIBOR settings for all currencies, subject to any rights of the FCA to compel IBA to continue publication. Continue Reading

Insider Trading in Commodities Markets: An Evolving Enforcement Priority

Posted in Derivatives, Financial Crime, Individual Accountability and Governance, Market Misconduct

The CFTC and the DOJ both now pursue enforcement actions against trading in commodities based on misappropriation of confidential information.

By Douglas K. Yatter, Sohom Datta, and Cameron J. Sinsheimer

Among the many changes resulting from the Dodd-Frank Act, one that has been slow to develop, but broad in its significance, is the assertion of authority by the CFTC to police insider trading in commodities markets. Starting in 2015, the agency began bringing enforcement actions against individuals and companies for trading based on misappropriation of confidential information. Since then, the CFTC has brought a series of actions that provide insight on the scope of its new authority, and it has devoted substantial resources to pursuing new cases. The DOJ is now focusing on this topic as well.

This Client Alert provides an overview of this evolving area of enforcement, summarizes recent cases, and highlights key developments, including the advent of “tipper-tippee” cases, the use of data analytics to identify potential misconduct, and the emergence of parallel criminal enforcement actions.

Independent Review Provides Recommendations for Improving UK Listing Regime

Posted in Regulatory Reform

The recommended reforms aim to make the UK’s listing regime more competitive while maintaining high standards of corporate governance, shareholder rights, and transparency.

By Chris Horton, James Inness, and Anna Ngo

A new independent review (the Review), led by Lord Hill, has been released that provides recommendations on how the UK can improve its listings regime. Published on 3 March 2021, the Review aims to impart recommendations that will improve the process of raising equity capital on the UK public markets, whilst also maintaining high standards of corporate governance, shareholder rights, and transparency. Continue Reading

FCA Publishes Review of Asset Managers’ Implementation of MiFID II Product Governance Rules

Posted in Regulatory Reform

FCA found instances of non-compliance with the product governance rules which, in its view, increases the risk of investor harm.

By Nicola Higgs, Anne Mainwaring, and Jonathan Ritson-Candler


On 26 February 2021, the FCA published a webpage setting out eight asset management firms’ implementation of the UK MiFID II product governance requirements. The sample reviewed consisted of asset managers with group assets under management ranging from £2 billion to over £100 billion, and looked at product governance compliance across the life cycle of one case study product at each firm. The products reviewed either launched after January 2018 (when the UK MiFID II product governance rules came into effect) or before this date but had subsequently undergone significant changes (which would also trigger compliance with the rules). Continue Reading

Implementing Technology Change — Successes and Pitfalls in Financial Services

Posted in Fintech and Cryptocurrency

An FCA report evaluates the chequered implementation of technology change and identifies risks and best practices to help firms better navigate this change.

By Andrew C. Moyle, Alain Traill, and Jagveen S. Tyndall

Of the nearly 1,000 “material incidents” reported to the UK’s Financial Conduct Authority (FCA) in 2019, 17% were caused by change-related activity. It was against this backdrop that, on 5 February 2021, the FCA set out the findings of its review entitled Implementing Technology Change regarding the execution of technology change within the financial services sector (the Report). While the Report focuses on the UK, its findings apply equally to financial services organisations implementing technology change across all geographies. Continue Reading

UK to Regulate Buy-Now-Pay-Later Market

Posted in Payments, Regulatory Reform

The Woolard Review emphasises the urgency to bring all BNPL products under FCA supervision and sets out recommendations for the unsecured credit market.

By Stuart Davis, Becky Critchley, and Anna Lewis-Martinez

The UK government has announced that interest-free buy-now-pay-later (BNPL) credit agreements will be regulated by the FCA. Currently, the BNPL market operates under an exemption from regulations for consumer credit lending.

The announcement comes as a review of the unsecured credit market, led by Christopher Woolard, unexpectedly urgently recommends regulating all BNPL products.

The Woolard Review (Review) sets out 26 recommendations for the FCA, UK government, and other bodies to reform the unsecured credit market. The recommendations take into account the impact of the COVID-19 pandemic, changing business models, and new developments in unregulated BNPL unsecured lending. Continue Reading

UK Independent Anti-Slavery Commissioner Publishes Recommendations for the Financial Industry

Posted in Environmental, Social and Governance (ESG)

The report’s recommendations cover a number of areas, including culture and strategy, monitoring and reporting, investor engagement, policy formation and employee training, and philanthropy.  

By Paul A. Davies and Michael D. Green

A new report from the UK Independent Anti-Slavery Commissioner draws attention to how the financial services industry can help address the issue of modern slavery. The report, “Preventing Modern Slavery & Human Trafficking: An Agenda for Action across the Financial Services Sector” (the Report), aims to sound “a call to action for the industry”. The Report, which was released on 18 January 2021, is the result of a research and outreach project led by Themis in partnership with the Independent Anti-Slavery Commissioner’s Office and TRIBE Freedom Foundation.

As the Report notes, in relation to financial services, modern slavery is less overt and usually refers to employment of low skilled contract workers such as cleaning or catering workers. Continue Reading