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Being better informed

FS regulatory, accounting and audit bulletin

PwC FS Risk and Regulation Centre of Excellence April 2019

In this month’s edition: • Insurance: Changes to Solvency II standard formula SCR finalised

• Banking: PRA proposes changes to Pillar 2 capital framework

• Conduct: FCA reveals investment platforms study findings

• Analysis: The evolving regulatory landscape for sustainable finance

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

1 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Executive summary

Welcome to this edition of ‘Being better informed’, our monthly FS regulatory, accounting and audit bulletin, which aims to keep you up to speed with significant developments and their implications across all the financial services sectors.

March brought a number of important regulatory developments, particularly on insurance, operational resilience and the Pillar 2 capital framework.

Starting with the insurance sector, the EC adopted amendments to Solvency II, which will change the design and/or calibration of elements of the standard formula SCR. It’s largely taking forward changes as consulted on in November 2018, with some amendments in

response to feedback. The changes are now subject to scrutiny by the EP and Council before coming into force, which may not be completed before the EP elections in May. Firms that use the standard formula to calculate their SCR should familiarise themselves with the changes to ensure they comply.

Insurers should also review a draft supervisory statement issued by the PRA on liquidity risk management. It sets out the PRA’s expectations on areas such as the design and conduct of a stress testing programme, effective liquidity contingency planning, and consideration of material sources of liquidity risk to which an insurer may be exposed. The proposals could have far-reaching implications, potentially raising governance, organisational and operational considerations for firms.

Elsewhere, EU legislators finalised negotiations on the proposed EMIR Refit. This amends the 2012 EMIR by simplifying certain requirements and reducing costs for smaller counterparties to OTC derivatives trades, with the aim of improving access to clearing. The changes represent good news for small financial firms, non-financial firms, and pension scheme arrangements. On the other hand, financial firms are likely to bear more responsibility, particularly around trade reporting and compliance with fair, reasonable,

non-discriminatory and transparent commercial terms.

In the retail conduct space, the FCA published the findings of its investment platforms market study. It proposes new rules to help consumers shop around and switch platforms, and concludes that exit fees are a barrier to switching and add complexity to charges. The regulator has opened a discussion on the appropriate intervention to make on exit fees (e.g. a ban or a cap), which is likely to apply to a wider cohort of ‘comparable firms’ such as asset managers. Platforms should assess the operational changes required to implement the proposed rules on transfers, while all firms that compete with platforms in the retail distribution market should consider the implications of a possible intervention on exit charges.

Turning to banking, the PRA consulted on changes to the Pillar 2 capital framework, which have the potential to materially impact how much capital firms need to maintain their PRA buffer. The regulator proposes three key clarifications on how firms should seek to estimate their PRA buffers as part of the Pillar 2B assessment of the ICAAP. It intends to implement the new policy from 1 October 2019.

Operational resilience continues to be an area of focus for regulators. Last month, the BoE’s FPC shared further details of the first stress test to be undertaken relating to cyber

incidents. It revealed the test will focus on the availability of payment services within firms and interdepencies between parts of the system. The Bank will explore the use of impact tolerances and their implications for managing a cyber incident. The stress testing exercise is due to launch in summer 2019 – all firms should take note of the findings when published, and incorporate them into future operational planning.

In our feature article this month, we take a close look at the regulators’ sustainable finance agenda. As sustainable finance attracts increasing attention both politically and in the financial services industry, we consider how the regulatory landscape is evolving and what it means for firms.

We hope you enjoy reading this month’s articles.

Amanda Rowland Partner, FS Risk and Regulation Centre of Excellence M: +44 (0) 7702 678480 E: amanda.rowland@pwc.com

Amanda RowlandPartner, FS Risk and Regulation Centre of Excellence

amanda.rowland@pwc.com

Executive summary Sustainable finance

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Banking and capital markets

Asset management Insurance Monthly calendar Glossary

2 • PwC | FS regulatory, accounting and audit bulletin | April 2019

How to read this bulletin?

Review the Table of Contents and the relevant Sector sections to identify the news of interest. We recommend you go directly to the topic/article of interest by clicking in the active links within the table of contents.

Contents Executive summary 1

Sustainable finance agenda builds momentum 3

Cross sector announcements 6

Banking and capital markets 16

Asset management 22

Insurance 24

Monthly calendar 27

Glossary 30

Contacts 36

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Sustainable finance agenda builds momentum

As sustainable finance continues to climb both the political and regulatory agenda, it looks set to have wide-reaching implications for firms across the financial services sector.

This agenda has been driven by wider long-term climate change targets, including those in the UN 2030 Agenda and Sustainable Development Goals and the Paris Climate Agreement. Policymakers have been quick to acknowledge the important role that the financial services sector can play in tackling climate change, by helping to channel investments towards more sustainable companies and projects, plugging an estimated investment gap of €180bn per year and contributing towards the creation of a lower-carbon economy.

It is therefore unsurprising that UK and EU regulators are driving a range of initiatives to advance sustainable finance, including on investments disclosures, risk management and benchmarks. In an update to our July 2018 article, here we consider the current regulatory landscape for sustainable finance, how this is evolving, and what it means for firms as they begin to grapple with these new initiatives.

Progressing the ambitious ESG investments agenda

The EU has taken a leading role in advancing the sustainable finance agenda, defined as the provision of finance to investments, taking into

account environmental, social and governance (ESG) considerations. In May 2018, the EC set out its strategy for this through its Sustainable Finance Action Plan. The EC also considers that sustainable finance encompasses increasing awareness of the climate and environmental risks that could have an impact on financial stability.

Alongside the launch of its Action Plan, the EC published three core legislative proposals aimed at embedding ESG considerations into financial markets. These proposals will have consequences for a range of firms, including asset managers, other institutional investors such as insurers and benchmarks administrators. They include a proposed Regulation on the establishment of a framework to facilitate sustainable investment, known as the ‘taxonomy’. It aims to create uniform criteria for determining whether an economic activity is environmentally sustainable, and underpins all other aspects of the EC’s agenda.

The second proposal is for a Regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341. This would introduce disclosure obligations on how institutional investors, including asset managers, integrate ESG factors into their investment decision-making and advisory processes. In practice, this means considering how much ESG risks

might impact on the profitability of the investment and disclosing this. Where firms claim to be pursuing an ESG strategy, they must also disclose information on how this strategy is implemented and the sustainability or climate impact of their products and portfolios.

These ESG integration measures are supplemented by a package of more granular proposals from ESMA, published in December 2018, to amend Level 2 frameworks for MiFID II, AIFMD, UCITS Directive and the CRA Regulation:

• MiFID II: Investment firms would be expected to include ESG considerations within their general processes, systems and controls, and have in place appropriate arrangements to ensure their inclusion does not conflict with the interests of the client. They would also take into account ESG considerations while identifying the target markets for the financial instruments they manufacture or distribute.

• AIFMD and UCITS Directive: Asset managers would need to consider sustainability risks, among other factors, when selecting and monitoring investments, and designing written policies and procedures on due diligence. They would also need to consider the required

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4 • PwC | FS regulatory, accounting and audit bulletin | April 2019

resources and expertise for the integration of sustainability risks.

• CRA Regulation: CRAs would need to disclose the extent to which sustainability factors have been considered as part of a credit rating in press releases they issue.

ESG integration is also a key consideration for institutional investors as part of the incoming Shareholder Rights Directive II (SRD II), which takes effect in June 2019. SRD II will, among other things, require institutional investors to disclose how their investment approach contributes to the creation of sustainable value for end investors, the economy and society. SRD II also has a strong corporate governance component, and will require institutional investors to be clear on how they engage with the companies they invest in, exercise voting rights and cooperate with other shareholders.

The EC’s other main proposal is for a regulation amending the benchmark regulation. This would create a new category of benchmarks comprising low carbon and positive carbon impact benchmarks, to provide investors with better information on the carbon footprint of their investments. This would see benchmark administrators having to publish their methodologies for creating such benchmarks to help enhance their value, reliability and ultimately enable better decision-making. Administrators would also be required to disclose any changes to the benchmark methodology, and explain how any changes are consistent with the benchmark’s objectives.

Integrating sustainability into risk management

Other initiatives forming part of the EC Action Plan include moves to integrate sustainability into risk management and enhance transparency in corporate reporting. This means ensuring that firms have a sound understanding of the material climate-related risks they face and their financial implications. These proposals will have consequences for all financial services firms, as they are grounded in sound risk management practice. The EC is also considering introducing a 'green supporting factor' in the EU prudential rules for banks and insurance companies to support financial institutions that contribute to fund sustainable projects.

Climate change creates physical risks, in the form of damaging property or disrupting trade, and transition risks in adjusting towards a lower-carbon economy. The nature of such risks makes them difficult to assess and emphasises the importance of focusing on the resilience of a firm's strategy. Existing regulations compel companies with public debt or equity to disclose all material risks in their financial filings. Research by the FSB’s Task Force on Climate-related Disclosures (TFCD) shows that, historically, financial and non-financial sector firms have published little information on climate-related risks, in particular omitting the financial impact of such risks. There are signs that this picture is improving as more firms show their public commitment to the TFCD recommendations.

What’s next?

The EC’s current legislative package on ESG investments is now at a relatively advanced stage in negotiations. The proposals on low carbon benchmarks and ESG integration reached political agreement in February 2019 and March 2019, respectively and will come into force by autumn 2019. There is more work to do on agreeing the taxonomy, and as such it is expected to come into force in 2020.

Consultations from ESMA on Level 2 amendments to MiFID II, AIFMD, UCITS Directive, and CRA Regulation closed in February 2019. The EC requested ESMA to provide technical advice on the integration of ESG factors in the UCITS Directive, AIFMD and MiFID II by 30 April 2019. ESMA’s final advice on credit ratings is expected by the end of July 2019.

Alongside its formal legislative proposals, various other initiatives are being taken forward to advance the EC’s Action Plan. The EC’s Technical Expert Group on Sustainable Finance published an interim report on an EU Green Bond Standard (GBS) in March 2019, as part of a broader piece of work creating EU standards and labels for green financial products. The interim report proposes a voluntary standard with a verification and an accreditation structure, with a view to establishing a Green Bond label and ultimately channelling more investment towards green activities. The Technical Expert Group envisages that investment banks managing Green Bond issuances and institutional investors would adopt the standards and play

an active role in developing the market. In particular, the GBS would include a tailored ‘comply or explain’ regime for institutional investors to disclose investments in Green Bonds, and for investment banks to disclose the portion of GBS-labelled Green Bonds managed and underwritten compared to other Green Bonds. Final recommendations are expected in June 2019.

Meanwhile, UK regulators are starting to define their own expectations of firms’ handling of climate-related risks. The PRA is finalising its supervisory statement off the back of consultation paper 23/18, and will soon start a programme of stress testing driven by climate change factors, starting with insurers.

The FCA is currently reviewing responses to discussion paper 18/8, which covered many of the same themes as the EC Action Plan and the wider topic of the impact of climate change within financial services. The PRA and FCA have set up a joint Climate Financial Risk Forum, intending to build capacity and share best practice across financial regulators and industry.

What do firms need to do?

The volume of regulatory initiatives in this area is a clear indication of policymakers’ intention to place sustainability considerations at the heart of financial services. It is essential that firms engage with this far-reaching agenda, both in terms of preparing themselves for the new regulatory environment and exploring strategic business opportunities which may

Executive summary Sustainable finance

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arise. There are a number of practical steps that firms should consider taking.

On the ESG investments agenda, affected firms should:

• Review their internal processes and governance to ensure that ESG considerations are fully integrated into their risk and investment decision-making processes.

• Review current investor disclosures, and the underlying procedures, in the context of the new SRD II obligations and the EC’s ESG proposals, and update them if necessary.

• Consider whether there are new opportunities to adapt their product offering around ESG investments, given the growing demand from investors. If firms are not agile in response to these shifting consumer attitudes, they could lose market share.

In addition, benchmark administrators offering low-carbon indices should consider whether they are likely to meet the proposed criteria, and how to manage any commercial implications of publishing their methodologies.

There are also a range of steps firms should be taking in response to the regulatory agenda on the integration of sustainability into risk management. Affected firms should:

• Consider escalating the threat of both physical risks and transition risks. After all, in January 2019 we saw the first climate change bankruptcy, as energy company

PG&E was unable to meet its liabilities after sustained wildfires in California over the last couple of years.

• Evaluate the effectiveness of their current governance and risk management frameworks in managing climate-related risks. Evidence suggests that many will need to make improvements to meet evolving regulatory expectations.

• Consider the appropriate senior management function to be responsible for identifying and managing climate-related risks, in line with the PRA’s current proposal.

• Work with suppliers to ensure they have accounted for climate threats in their risk management frameworks.

• Consider whether their existing planning cycle supports appropriate analysis of the nature of climate risks and the long timeframe before the impact of climate policies are felt.

• Incorporate climate-related scenarios in stress testing. Best practice examples on scenarios will form part of a TFCD report to a G20 summit in June 2019.

So, the proper integration of ESG and climate risk into internal risk and governance processes, as well as strategic decision-making, should be a priority for firms.

The more forward-thinking firms will appreciate the scale of change that is on its way, and will already be on the front foot rather than sitting back and waiting for concrete regulatory

obligations. It seems clear that sustainable finance is here to stay.

Executive summary Sustainable finance

agenda builds momentum

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Banking and capital markets

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6 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Cross sector announcementsIn this section:

Regulation 6 Benchmarks 6 Brexit 7 Debt management 7 Governance 7 Market infrastructure 7 Retail products 8 Pensions 8 Wholesale markets 9 Accounting 9 IFRS 8 9 Our publications 9 Also this month 9 A brief roundup of other regulatory developments

Regulation

Benchmarks Market conventions for term SONIA products

The RFRWG issued Discussion Paper: Conventions for referencing SONIA in new contracts on 19 March 2019. The paper summarises the conventions that already exist in SONIA-referencing markets, and highlights their benefits and drawbacks. In particular, it presents the options to calculate the interest payable at term and the options to achieve cashflow certainty before an interest payment is due. The working group also provides considerations for new products referencing SONIA, and questions for suggested feedback from market participants and infrastructure providers. The paper is separate to the discussion and consultation on term SONIA rates. Feedback is due by 30 April 2019.

Further progress on EONIA-€STR transition

EMMI released a Consultation paper on the recommendation for EONIA of the Working Group on euro RFRs (with a questionnaire) on 20 March 2019.

Due to the dependencies between the recalibration of EONIA methodology and the ECB’s production plans for €STR, the market and other users of EONIA will have to adapt to a move in the publication time of EONIA from T to T+1 in a short timeframe. As a result, EMMI

is seeking feedback on various issues, with a focus on the preparation and implementation of changes in IT or valuation systems prior to the first publication of revised EONIA on 2 October 2019. EONIA is expected to be published until 3 January 2022. Any feedback should be submitted by 15 April 2019.

The consultation came in response to a recommendation from the working group on euro RFRs on 14 March 2019, to recalibrate EONIA methodology to become €STR plus a fixed spread until end-2021. The ECB will calculate the one-off spread based on public pre-€STR and EONIA data. At the same time, the ECB announced that €STR will start to be published from 2 October 2019.

Draft equivalence decisions under BMR

The EC issued for consultation two draft Implementing Decisions under BMR on 19 March 2019. The decisions consider that the legal and supervisory benchmark frameworks of Australia and Singapore are equivalent to BMR. If the decisions are adopted, then benchmark administrators established in Australia and Singapore will be allowed to provide their benchmarks in the EU, without having to apply for recognition or endorsement. The consultations close on 16 April 2019.

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

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7 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Brexit Further EU exit SIs passed in Parliament

March saw further EU exit statutory instruments (SIs) passed by Parliament, which will bring EU regulations into UK law if there is no Brexit transitional period. The SIs will create a UK regulatory framework from exit day if EU regulations no longer apply.

The aim of the draft SIs is to provide continuity in financial services regulation in the event of a no-deal Brexit, while correcting aspects of EU law that will not work in a UK context – for example, where an EU authority currently has a role in the regulations.

Among the new EU exit SIs made in March, the key financial services titles include:

• the equivalence determinations for financial services and miscellaneous provisions (amendment EU exit) regulations

• the transparency of securities financing transactions and reuse (amendment EU exit) regulations

• the benchmarks (amendment and transitional provision) (EU exit) regulations

• the insurance distribution (amendment EU exit) regulations

• the investment exchanges, clearing houses and central securities depositories (amendment EU exit) regulations.

Previously published SIs continue the legislative process and will be made prior to the UK’s exit from the EU. They will come into force on exit day. A full list of EU exit SIs can

be found at the Government website along with further explanatory information and details of what stage they are at in the legislative process.

FCA confirms no deal Brexit rules

The FCA announced in a press release on 29 March 2019 the publication of its final no deal Brexit rules. This follows its February 2019, PS19/5 – Brexit policy statement: feedback on CP18/28, CP18/29, CP18/34, CP18/36 and CP19/2, that included the ‘near final’ rules that are due to apply in the event of a no deal Brexit. The most significant change is that the instruments implementing the rules now commence on ‘exit day’, rather than 11pm on 29 March 2019, reflecting the extension of the Article 50 process

Debt management Debt management: FCA finds room for improvement

The FCA published findings from its review into the debt management sector in TR19/1: Debt management sector thematic review, on 15 March 2019. The FCA found debt managers had made positive changes since the last sector review in 2014/15, but areas for significant improvement remain.

Overall, the FCA is pleased with the positive changes firms have made to culture, evidenced by intended customer outcomes in policies being implemented in the advice and servicing provided to customers. The quality of advice had generally improved across firms as well, but the FCA found inconsistencies in the advice and suitability reviews for existing or

acquired customers. Further inconsistencies were found with regards to customers who seek help together (joint debt management plans) and the way firms identify vulnerable customers. The regulator found evidence of harm in both of these cases. Lastly, the FCA highlights that where customers seek help together, or are on existing joint plans, firms must consider and discuss options for each customer individually. Otherwise they risk breaching rules.

In light of the findings, firms must improve how they identify and record vulnerabilities, including the severity of vulnerabilities. They must also consider how this may affect a customer’s ability to receive advice. In addition, firms should improve their understanding of how a change in personal circumstances may affect a customer's ability to repay when advising on plans.

The FCA will continue to monitor debt management firms and has written to firms where it identified significant failings.

Governance Finalising guidance on extended SM&CR

The FCA published FG19/2 SM&CR: Guidance on statements of responsibilities and responsibilities maps for FCA firms on 8 March 2019. It also issued a Summary of feedback to the earlier guidance consultation. The regulator hopes the guidance will provide practical assistance to solo-regulated firms due to be brought into the SM&CR on 9 December 2019. The guidance provides some questions for firms to ask themselves, and examples of good

and poor practice, which firms should incorporate into their plans for the extension of the SM&CR.

On the same day, the FCA announced final rules for a new public register of key individuals working in financial services, in PS19/7: The directory. The directory will enable users to search for information on all directors and senior managers, all staff certified as fit and proper by their firm, and other individuals who undertake business with clients and require a qualification to do so. The FCA requires firms to report timely and accurate information about their relevant staff. Banks and insurers can start submitting data from September 2019, and all other solo-regulated firms from 9 December 2019. The FCA expects the directory to go live in March 2020.

Market infrastructure Finalisation of EMIR Refit

EU legislators finalised the negotiations on the proposed EMIR Refit on 1 March 2019. EMIR Refit amends the 2012 EMIR by simplifying certain requirements and reducing costs for smaller counterparties to OTC derivatives trades, with the aim of improving access to clearing.

The changes represent good news for small financial firms, non-financial firms, and pension scheme arrangements. On the other hand, financial firms are likely to bear more responsibility, in particular around trade reporting and compliance with fair, reasonable, non-discriminatory and transparent commercial terms.

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agenda builds momentum

Cross sector announcements

Banking and capital markets

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8 • PwC | FS regulatory, accounting and audit bulletin | April 2019

If the UK leaves the EU with a transitional period in place, UK firms are expected to comply with the revised EMIR rules.

EU agrees enhanced supervision and recognition of CCPs

The EP and the Council reached final agreement on 13 March 2019 on how EU and third-country CCPs should be supervised. A new CCP Supervisory Committee within ESMA will be created with specific duties over EU CCPs and third-country CCPs. ESMA will receive enhanced powers, as follows:

• it will assess the application for recognition of third-country CCPs, and supervise them once recognised

• where the EC has recognised a third-country CCP, ESMA will monitor the regulatory and supervisory developments in that third country to ensure it continues to meet the EMIR equivalence criteria

• ESMA will be allowed to conduct investigations and on-site inspections of Tier 2 CCPs, and impose fines or periodic penalty payments on both Tier 1 and Tier 2 CCPs.

The central banks of issue will also be consulted about the recognition, supervision, review of or withdrawal of recognition, on aspects affecting their monetary policy tasks or the operation of payment systems in relation to EU currencies-denominated financial instruments cleared by third-country CCPs.

Third-country CCPs will be classified as either not systemically important (Tier 1) or

systemically important (Tier 2). For recognition purposes, Tier 1 CCPs will need to comply with the existing recognition conditions in EMIR, while Tier 2 CCPs will need to comply with stricter prudential requirements set out in this reformed EMIR or with any temporary requirements imposed by the central bank of issue.

However, where ESMA considers that compliance with those stricter requirements is insufficient to address financial stability concerns, it can recommend to the EC not to recognise a third-country CCP or some of its clearing services. In that case, the EC would require that CCP to establish itself in the EU to service its EU clearing members and trading venues.

The provisions for EU CCPs are mainly centred around the functioning of the CCP supervisory colleges.

Guidance on EMIR Refit clearing obligation

ESMA issued a statement addressed to all financial and non-financial counterparties subject to the clearing obligation on 28 March 2019, to help them know whether they are subject to the clearing obligation under the new EMIR Refit regime.

Non-financial counterparties will be subject to the clearing obligation only for those asset classes where the notional value of their OTC derivatives contracts (used for non-hedging purposes only) exceeds the relevant clearing thresholds. In contrast, financial counterparties will need to include all their OTC derivatives

(used for hedging and non-hedging) when calculating their positions.

Counterparties that decide to conduct the calculation will have to collect the necessary OTC derivatives data as soon as possible to be ready for the calculation of their positions on the day EMIR enters into force (expected around the end of May 2019). Counterparties subject to the clearing obligation need to notify their NCA and ESMA of their obligation on the day EMIR Refit enters into force.

Retail products FCA bans retail binary options permanently

The FCA confirmed a permanent ban on the sale of binary options to retail consumers, on 29 March 2019. The new rules are in response to concerns about the risks of these products, and the poor conduct of the firms selling them. Their sale has harmed consumers in the UK and internationally through large and unexpected trading losses. The rules will directly affect:

• retail consumers investing in binary options, or thinking about investing in them

• UK and EEA MiFID investment firms

• CRD credit institutions marketing, distributing or selling binary options to retail clients

• UK branches of third-country investment firms marketing, distributing or selling binary options to retail clients.

The rules are permanent and apply from 2 April 2019.

ESMA also decided to renew the temporary prohibition on the marketing, distribution or sale of binary options to retail clients on 27 March 2019. The decision applies from 2 April 2019 for three months.

The two sets of rules are similar in substance. However, the FCA’s rules also apply to the securitised binary options, which were excluded from ESMA’s prohibition, to prevent a market developing for these products.

Pensions FCA warning over defined benefit transfers

The FCA sent a Dear CEO letter to pension product providers on 22 March 2019, outlining the steps it expects firms to take to manage the risks of defined benefit to defined contribution transfers. Following a review of providers to identify the key drivers of harm, the FCA sets out what firms need to consider when designing, marketing and providing pension products. It explains its requirements around:

• product design and target market

• the information providers give to distributors

• FCA permissions procedures

• management information

• remuneration structures

• governance and risk management

• documentation and tools.

The regulator says it expects providers to gain assurance that they have appropriately

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implemented and fully comply with all relevant rules.

Wholesale markets Clarifying global OTC margin requirements

The Basel Committee and IOSCO issued a joint statement concerning the final implementation phases of the margin requirements for a non-centrally cleared derivatives framework on 5 March 2019. They clarify that legacy derivative contracts amended solely to address issues with the interest rate benchmark reform won’t trigger margin requirements for the purposes of their framework. But they acknowledge the position could be different under implementing jurisdiction local laws.

They also encourage those firms applying the framework for the first time in 2019 and 2020 to ‘act diligently’ to comply with the relevant documentation, custodial and operational arrangements if they exceed the framework’s €50m initial margin threshold. In a press release on 6 March 2019, ISDA urged the regulators to remove the phase five notional amount average €8bn compliance threshold, leaving the phase four, €75obn threshold, in place. It argues that this ‘will create certainty and reduce operational complexity for smaller firms, without compromising safety and soundness’.

Accounting

IFRS 8 IFRS 8 ‘Operating segments’ – IASB concludes project

The IASB published Project summary: Responses to Exposure Draft – Improvements to IFRS 8 Operating Segments on 28 February 2019. It reports that following feedback, it has decided not to proceed with its exposure draft (published March 2017) on proposed amendments to IFRS 8, 'Operating segments'.

Our publications IFRS Talks – PwC podcasts

In March 2019 we released the following new episodes of our podcast series:

• Episode 45 – Financial instruments with characteristics of equity

• Episode 46 – Selling well

• Episode 47 – IFRS & Brexit.

In this series PwC professionals consider new IFRS developments and share perspectives on an increasingly complex financial reporting environment.

IFRS update

Our IFRS news March 2019 considers:

• Does your contract manufacturing arrangement contain an embedded lease?

• The latest on IFRS 17 implementation

• The new definition of a business promises to impact the pharmaceutical industry

• Word on the Wharf.

Our In depth: New IFRSs for 2019 summarises amendments to IFRS plus those standards, amendments and IFRICs issued previously that are effective from 1 January 2019. It

includes a quick reference table of each standard/amendment/interpretation categorised by the effective date, whether early adoption is permitted and the EU endorsement status as of 1 March 2019.

March accounting reminders

Our March accounting reminders – IFRS and UK GAAP outline IFRS and UK GAAP reporting requirements as at 31 March 2019. The reminders include the standards, interpretations and other guidance that apply at this date; and the standards that are published but effective at later dates and hence required to be disclosed plus a summary of the latest topical issues.

Similarly, our March year-end accounting reminders – IFRS outlines the IFRS reporting requirements as at 31 March 2019.

Also this month

BIS The BIS published a paper on Central bank digital currencies, on 13 March 2019. It gives a definition of a central bank digital currency, outlines payment applications and key feasibility challenges and shares its view on monetary policy implications.

Council • The Council published its decision to reject

the list of high risk third countries proposed by the EC, on 7 March 2019. The Council states the main reason for rejection being a nontransparent process, in which the countries listed were not given a chance to

be heard. The Council has asked the EC to propose a new list taking into account Member States’ concerns.

• The Council announced its plans on 13 March 2019 to pool and network cybersecurity expertise across the EU. In 2021 it plans to launch a new European Cybersecurity Industrial, Technology and Research Centre to pool investment in cybersecurity research, technology and industrial development. This will be complemented by a Network of National Coordination Centres to support the sharing of expertise across Member States.

• In a press release on 21 March 2019, the Council announced it’s reached provisional agreement with the EP on reforms to the way the ESAs and the ESRB function. The changes include strengthening the role and powers of the EBA concerning the supervision of AML and terrorist financing, and giving ESMA direct supervision powers over third country critical benchmark administrators and large data reporting service providers. The provisional agreement will now be submitted to EU ambassadors for endorsement.

Council and EP • The Council and EP reached an agreement

on the EU proposals to introduce requirements for institutional investors to integrate Environmental, Social and Governance (ESG) considerations into their risk processes and decision making, and to disclose their approach to end-

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10 • PwC | FS regulatory, accounting and audit bulletin | April 2019

investors. The EC originally published its proposal in May 2018 as part of a package of measures linked to its action plan on financing sustainable growth, aimed at embedding sustainability into the financial system.

• The Council and EP reached a provisional political agreement on a key proposal under the CMU agenda on 6 March 2019, which came just one week after the Council agreed its position. This relates to targeted amendments to the market abuse and prospectus regulations aimed at making it easier for SMEs to access finance through capital markets. Further technical work will follow so that the Council and EP can formally adopt the final texts, with a view to doing so before the EP elections.

• The EP and the Council reached final agreement on 19 March 2019 over the proposed amendment to Article 22 of the Statute of the ESCB and the ECB regarding the extension of the ECB’s competence over clearing and payment systems to CCPs. But, the ECB decided to withdraw that recommendation on 20 March because the final agreement didn’t meet the ECB’s objectives.

EBA The EBA has agreed with the PRA and FCA a template for the memorandum of understanding (MoU) outlining the approach towards supervisory cooperation and information exchange in the event of a no-deal

Brexit, it was announced on 20 March 2019. The template will serve as the basis for bilateral MoUs that are being negotiated and signed by the relevant EU competent authorities and the UK authorities.

EC • The EC’s Technical Expert Group on

Sustainable Finance (TEG) published its interim report on the development of an EU Green Bond Standard on 6 March 2019. The TEG proposes a voluntary standard with a verification and an accreditation structure, with a view to establishing a Green Bond label and ultimately channeling more investment towards green activities. Final recommendations are expected in June 2019, following stakeholder feedback on the interim report.

• The EC published a final draft delegated regulation to supplement the Prospectus Regulation on 14 March 2019. This sets out a range of detailed requirements, including on the minimum information to be included in prospectuses, the format of prospectuses, and the content of the EU Growth prospectus.

• Two Commission Delegated Regulations under EMIR were published in the Official Journal on 13 March 2019. One delegated regulation amended three RTS on the clearing obligation for certain types of derivatives contracts. The other delegated regulation amended the RTS on risk mitigation techniques for uncleared OTC derivative contracts.

• The EC issued a series of communications on 15 March 2019 updating on the progress achieved in building a CMU: a report, a factsheet, Q&As, and a statement. Out of the 13 key legislative proposals, ten have been agreed, as well as two out of the three sustainability finance initiatives. The proposals not yet agreed are those related to crowdfunding, third-party effects on assignment of claims, the ESAs review including AML rules, and the taxonomy for sustainable finance.

• The EC confirmed political agreement had been reached on its proposal to strengthen the role of the ESAs, on 21 March 2019. The reform will help to promote supervisory convergence and uniform enforcement across the EU. It also centralises oversight for money laundering risks within the EBA.

• The EC adopted two Commission Delegated Regulations (CDR) under EMIR in preparation for a no-deal Brexit on 28 March 2019. A CDR amends the RTS on risk mitigation techniques for uncleared OTC derivative contracts, while the other CDR amends the RTS on the clearing obligation to extend the dates of deferred application of the obligation for certain OTC derivatives contracts. The amendments were necessary in light of the extension of Article 50.

EIOPA • EIOPA published a Report on other

information to be provided to prospective and current members: guidance and

principles under the implementation of the IORP II Directive on 26 March 2019. It sets out guidance for workplace pension providers on issues such as: how to calculate and present past performance information, how to present information on retirement options, and when and how to communicate with members.

• EIOPA published a paper on Outsourcing to the cloud on 27 March 2019, revealing that it plans to prepare guidelines on the subject in the first half of 2019, and finalise them by the end of the year. The guidelines align with the EBA recommendations with minor amendments to reflect the (re)insurance specificities highlighted by the analysis carried out. EIOPA has also agreed with the other two ESAs to start a joint market monitoring activity for further policy development on cloud outsourcing.

EP • The EP finalised its compromise text on the

EC proposal amending BMR on low carbon benchmarks and positive carbon impact benchmarks on 27 March 2019. The trilogue negotiations with the Council and the EC will follow in order to reach agreement on the final rules governing the provision of these benchmarks.

• The EP finalised its position on the proposed EU framework for CCP recovery and resolution on 28 March 2019. Once the Council finalises its position, the trilogue discussions will follow with a view to agreeing and adopting the final text.

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• The EP adopted its position on the EU Crowdfunding Regulation on 27 March 2019. It aims to ensure that crowdfunding services function smoothly and wants to foster cross-border business funding in the EU. The EP supports the Council’s position to increase the threshold for each crowdfunding offer from €1m, as originally proposed by the EC, to €8m.

• The EP adopted its position on the EU proposals for a sustainable finance taxonomy on 28 March 2019. The taxonomy sets out uniform criteria for determining whether an economic activity is environmentally sustainable, with the aim of providing economic actors and investors with clarity on which activities are considered sustainable, thereby allowing investors to take more informed decisions.

ESMA • ESMA published the results of various

annual MiFID II transparency calculations for equity and equity-like instruments on 1 March 2019. The calculations include: the determination of the average daily number of transactions on the most relevant market in terms of liquidity relevant for the determination of the tick-size regime, and the determination of the average daily turnover relevant for the determination of the pre-trade and post-trade ‘large in scale’ thresholds.

• ESMA published a statement on 7 March 2019, relating to the application of key MiFID II/MiFIR and BMR requirements in

the event of a no-deal Brexit. The statement sets out details on a range of issues on MiFID II/MiFIR, including the exemption for certain derivatives from the definition of a financial instrument, and ESMA opinions on post-trade transparency and position limits. On BMR, the statement addresses ESMA’s approach to the ESMA register for administrators and third country benchmarks.

• ESMA updated its public register with the latest double volume cap (DVC) data under MiFID II on 7 March 2019. This included DVC data for the period of 1 February 2018 to 31 January 2019, together with updates to historic data which had already been published. The data suggests there have been 34 breaches in equities at the 8% cap, applicable to all trading venues, and eight breaches in equities at the 4% cap that applies to individual trading venues.

• ESMA published a statement in relation to the impact of a no-deal Brexit on its databases and IT systems on 19 March 2019. It covers the actions related to the Financial Instruments Reference Data System, the Financial Instrument Transparency System, the Double Volume Cap System, the Transaction reporting systems, and ESMA’s registers and data. This supplements a previous Brexit-related statement on the use of UK data in ESMA’s databases and performance of MiFID II calculations, published on 5 February 2019.

• ESMA published the results of some of the annual calculations required under MiFID II on 18 March 2019. These relate to the ‘large in scale’ (LIS) and ‘size specific to the instruments’ (SSTI) thresholds for bonds. The transparency requirements based on the results of the annual calculations of the LIS and SSTI thresholds for bonds shall apply from 1 June 2019 until 31 May 2020.

• ESMA published its updated Interactive Single Rulebook on 14 March 2019. This rulebook is an online tool allowing easy access to all Level 2 and 3 measures adopted in relation to a Level 1 text. The latest revision reflects all measures in relation to MiFID II and MiFIR.

• ESMA published a series of opinions related to the MiFID II/MiFIR requirements on commodity derivative position limits on 20 March 2019. These opinions propose new position limits across six commodity derivative contracts, each of which have been determined by ESMA as consistent with the original objectives for the MiFID II requirements and the methodology for setting those limits.

• ESMA updated the public register of derivatives contracts subject to the MiFIR trading obligation on 21 March 2019. The register provides clarity to market participants on the application of the trading obligation under MiFIR, including on the classes of derivatives subject to the trading obligation, the trading venues on which those derivatives can be traded, and

the dates on which the obligation takes effect per category of counterparties.

• ESMA published a statement on 15 March 2019, setting out the implications of a possible no-deal Brexit on CRAs based in the UK. The statement lists conditions for endorsement by CRAs which are located in an EU Member State (‘EU-27 CRAs’). It clarifies that the decision to endorse some or all of the credit ratings issued by UK-based CRAs lies exclusively with the EU-27 CRAs.

• ESMA summarised its perspective on RegTech and Supervisory Technology in its report on trends, risks and vulnerabilities on 14 March 2019. The focus thus far has been on the use of cloud computing, application programming interfaces, and the fields of artificial intelligence and machine learning on big data. While these technologies have the potential to reshape the relationship between regulators and market participants, the article highlights the operational risks that need to be managed.

• ESMA decided on 27 March 2019 to renew the restrictions on the marketing, distribution or sale of contracts for differences to retail clients from 1 May 2019 for another three months.

• ESMA updated its Q&As on MiFID II and MiFIR investor protection and intermediaries topics on 28 March 2019. It gives new answers on issues related to the provision of investment services and

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activities by third-country firms, product governance, suitability report, costs and charges, ex-ante information, taxes and best execution. It also updates two Q&As on the suitability report, and costs and charges.

• ESMA updated its Q&As on MiFID II and MiFIR commodity derivatives topics on 27 March 2019. It clarifies that a firm that wants to be exempted from the ancillary activity needs to notify its NCA by 1 April of the year for which the exemption applies. It also confirms that a third-country firm dealing on an EU trading venue in commodity derivatives or emission allowances or derivatives isn’t in scope of the ancillary activity test and so doesn’t have to notify its NCA or ESMA that it makes use of the exemption.

• ESMA published its first Q&As related to the Prospectus Regulation on 27 March 2019, providing clarification on: the scope of grandfathering prospectuses, the applicability of existing ESMA guidance on the Prospectus Directive, and the process for updating information in registration documents previously approved under the Prospectus Directive. While a small number of provisions under the Prospectus Regulation took effect in July 2017, the majority will apply from July 2019.

• ESMA published its final guidelines on how NCAs should review the disclosure of risk factors by issuers of securities required under the Prospectus Regulation on 29 March 2019. Risk factors are intended to

ensure that investors can assess the risks associated with an issuer and its securities. The guidelines seek to encourage risk factor disclosures to be presented in a simple and concise form.

• ESMA published technical advice to the EC on the disclosure that would need to be made in relation to takeovers, mergers or divisions on 29 March 2019. Under the Prospectus Regulation, issuers are permitted to offer securities in connection with these transactions without publishing a prospectus, provided an alternative document is made available to investors describing the transaction and its impact on the issuer. The technical advice, which will form the basis of further Level 2 work on the Prospectus Regulation, sets out minimum information that would need to be included in these documents.

• ESMA published its report, Enforcement and regulatory activities of European accounting enforcers in 2018 on 27 March 2019. This includes disclosure of the expected impact of the implementation of IFRS 9 by credit institutions. ESMA says IFRS 9 implementation will remain a priority in 2019.

• ESMA published an updated questions and answers document regarding the implementation of MAR on 29 March 2019. The purpose of the document is to promote common supervisory approaches and practices in the application of the Regulation. The update clarifies the scope of firms subject to MAR provision to detect

and report suspicious orders and transactions, as well as new detailed answers on: the meaning of parent and related undertakings; and disclosure of inside information concerning emission allowances.

• ESMA issued Technical Guidance for Settlement Internalisers – Report Validation Rules on 28 March 2019. The report describes the overall process for internalised settlement reporting, the common technical format for data submission and the common set of data quality reports to be applied to internalised settlement reports. If a file is submitted by a settlement internaliser to its NCA in line with these validation rules, that file is expected to be accepted by the NCA.

FCA • The FCA announced that its new Financial

Instruments Reference Data system opened on 8 March 2019. In the event of a no-deal Brexit, firms and trading venues should submit reference data to the new FCA system rather than ESMA’s existing system.

• The FCA gave details in a press release about the new UK Benchmarks Register on 22 March 2019. In the event of a no-deal Brexit, the new Register will replace the ESMA Register for UK supervised users, and UK and third-country benchmark administrators that want their benchmarks to be used in the UK. It will include

benchmark administrators and third-country benchmarks.

• The FCA published CP19/13: Recovering the costs of the Office for Professional Body Anti-Money laundering Supervision (OPBAS) on 14 March 2019. This is the second phase of the consultation on OPBAS funding where the FCA is now inviting views on removing the minimum threshold from its fees model. The consultation closes on 26 April 2019.

• The FCA published a report, Cyber security – industry insights, on 8 March 2019, bringing together industry insights on how firms are improving their cyber resilience. All firms are encouraged to review the report and consider how the examples may inform their own approach. Looking ahead, the FCA is trying to increase the representation of trading venues and benchmark administrators, and brokers and principal trading firms at its Cyber Coordination Groups.

• The FCA published a Dear CEO letter related to crowd funding on 7 March 2019. The letter calls on firms to review their arrangements to cater for the event that their platform ceases to operate, referred to as their ‘wind-down’ arrangements. The regulator stresses that wind-down arrangements are important safeguards for consumers, and that it has found several examples of where existing approaches fall short of its expectations.

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• The FCA confirmed changes to the FOS in PS19/8: Increasing the award limit for the FOS on 8 March 2019. From 1 April 2019, the complaint compensation limit will rise from £150,000 to £350,000. At the same time, the service’s jurisdiction will be extended so that an additional 210,000 SMEs are eligible to make complaints.

• The FCA published its research Cryptoassets: ownership and attitudes in the UK, on 7 March 2019. The findings show that harm from cryptoassets may not be as widespread as previously thought, given only 3% of those surveyed have ever traded them. The research also includes data on purchasing behaviour, reasons for buying and general attitudes towards cryptoassets.

• The FCA published a statement on 14 March 2019 relating to the operation of the MiFID II transparency regime in the event of a no-deal Brexit. As it stands, ESMA validates EU-wide trading data and performs various calculations to set thresholds. The regulator’s statement sets out how it expects to use its powers under the onshored UK regime to fulfil the role currently performed by ESMA, taking account of the statement ESMA issued on 5 February 2019, and building on the FCA’s statement on this issue on 4 March 2019.

• ESMA and the FCA published statements on 19 March 2019, relating to the share trading obligations (STOs) under MiFID II in the event of a no-deal Brexit. Through its

statement, ESMA intends to provide additional clarity and certainty on the application of the STO in the absence of an equivalence decision by the EC. While the FCA’s response acknowledges that ESMA’s clarifications will help to provide certainty for the market, a more comprehensive and coordinated approach is still necessary.

• The FCA published a statement on 13 March 2019, relating to an earlier ESMA statement on the application of key MiFID II/MiFIR and BMR requirements in the event of a no-deal Brexit. The FCA clarifies its intended approaches on MiFID II/MiFIR issues such as the exemption for certain derivatives from the definition of a financial instrument, as well as post-trade transparency requirements and position limits. On BMR, the FCA confirms that it will be setting up a UK public register of benchmarks and administrators authorised in the UK.

• The FCA published the list of third-country jurisdictions meeting the conditions for endorsement of credit ratings into the UK on 15 March 2019. The FCA reminds UK-registered CRAs wishing to endorse ratings issued in these jurisdictions that they must ensure the credit rating activities of the third country CRA meet all the requirements of 'Article 4(3) of the CRA Regulation', as amended by 'the CRA (EU Exit) Regulations 2019'.

• The FCA published a statement on the reporting of derivatives under the UK EMIR

regime in a no-deal Brexit scenario on 11 March 2019. The statement explains what TRs, and UK counterparties that use them, should do to make sure they are compliant with their EMIR reporting obligations in the event of a no-deal Brexit. The FCA advises all stakeholders to familiarise themselves with EMIR legislation and relevant communications.

• The FCA summarised recent changes to its Handbook, in Handbook Notice No 64 on 29 March 2019. These include amendments relating to the rent-to-own price cap and the FOS award limit.

• The FCA clarified how it will apply the SM&CR to claims management companies (CMCs), in PS19/9: Applying the SM&CR to CMCs on 29 March 2019. CMCs were brought under FCA regulation from 1 April 2019, and must comply with the SM&CR by 9 December 2019.

• The FCA published CP19/11: Securitisation (Amendment) (EU Exit) Regulation 2019 and Securitisation Regulations 2018 (proposed changes to DEPP and EG) on 11 March 2019. It proposes changes to certain enforcement and supervision components of the FCA Handbook in expectation of taking on the responsibility for the authorisation and supervision of securitisation repositories in the UK from ESMA when the UK leaves the EU. The consultation closed on 8 April 2019.

• The FCA published PS19/10 – Recovering the costs of regulating CRAs, TRs and

securitisation repositories after the UK leaves the EU on 29 March 2019. Having established the framework, including application fees, the FCA intends to consult further on periodic fees rates in summer 2019 when it expects to have received the relevant data from firms to enable it to calculate them.

• The FCA issued guidance on 29 March 2019, Brexit: 0ur approach to EU non-legislative materials – relevant in the context of a no-deal Brexit. It expects firms to continue to comply with ESA guidelines and recommendations, unless the FCA has already indicated to the ESAs that it will not comply with specific requirements. As these and other EU non-legislative materials, are not being ‘onshored’ into UK law, the FCA expects firms to interpret them ‘sensibly and purposively’ taking into account how they apply in a UK-only context.

• The FCA set out in guidance on 29 March 2019, Brexit: our approach to non-Handbook guidance where it relates to EU-law or EU-derived law – relevant in the context of a no-deal Brexit. The FCA expects firms to ‘sensibly and purposively’ interpret pre-exit non-Handbook guidance (e.g. Dear CEO letters and case studies) taking into account the UK’s new position outside the EU.

FMSB The FMSB published Conduct Risk in Market Transactions: Statement of Good Practice for

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FICC Market participants on 28 March 2019. This document applies to FICC participants in the execution, management and oversight of market activity. It contains good practice statements to identify and assess conduct risk.

FRC The FRC consulted on its Draft plan and budget 2019/20 on 27 March 2019. The priority sectors of its programme of audit inspections include financial services, with ‘an emphasis on banks, other lenders and insurers’. The consultation closes on 8 May 2019.

FSB The FSB issued a letter to ISDA on 15 March 2019 about derivative contract robustness to risks of interest rate benchmark discontinuation. In it, the FSB makes a series of recommendations for ISDA’s upcoming work, such as to consult on adding other events that would trigger a move to the spread-adjusted fallback rate for IBOR-linked derivatives, and to issue a dedicated consultation on USD LIBOR, EURIBOR and EUR LIBOR.

IBA IBA published the results to its survey on the use of LIBOR on 1 March 2019. The survey was needed to inform IBA’s plans to offer contract continuity to those users with outstanding LIBOR contracts that are impossible/impractical to modify. Acknowledging there is no guarantee that LIBOR will continue being published beyond end-2021, IBA advises users not to rely on the

publication of any LIBOR settings in their transition plans.

IOSCO IOSCO published its first annual work programme on 25 March 2019. This set out its main priorities for its work in 2019, which focus on cryptoassets, the use of artificial intelligence and machine learning by market intermediaries (e.g. in order execution, portfolio management and research), fragmentation in securities markets, the rise of passive investing, and the impact of digitalisation on the distribution of financial products to retail investors.

JCESA The JCESA published a proposal to amend the PRIIPs technical standards on 8 March 2019, with an accompanying letter to the EC. The proposal is to take forward the decision by the EU institutions in December 2018 to extend the UCITS exemption by a further two years until 31 December 2021.

JMLSG The JMLSG suggested updates to Section 4: Credit unions and Section 20: Brokerage services to funds of its Guidance on 18 March 2019. The updates seek to refresh the assessment of risks in each sector and how to more readily identify customers. The updates are open for consultation until 18 April 2019.

National Cyber Security Centre The Government's National Cyber Security Centre launched its new Board Toolkit on 21 March 2019 to help board members engage with their technical experts on cyber security. It

includes guidance on a range of cyber security topics including understanding the threat, collaborating with suppliers and partners, and planning a response to a cyber incident. The toolkit also provides a series of questions as prompts for board members, second and third lines of defence.

Official Journal • Four Commission Delegated Regulations

(CDR) were published in the Official Journal on 22 March 2019. They exempt the BoE and UK public bodies charged with or intervening in the management of the public debt from: the EMIR clearing and reporting requirements and the requirement to apply risk-mitigation techniques to non-cleared transactions (CDR 2019/460), the scope of MAR (CDR 2019/461), the MiFIR pre- and post-trade transparency requirements (CDR 2019/462), and the scope of SFTR (CDR 2019/463). They will apply from Brexit day when the UK will cease to apply EMIR, MAR, MiFIR and SFTR.

• Two Commission Delegated Regulations under EMIR, five Commission Delegated Regulations under SFTR, and three Commission Implementing Regulations under SFTR were published in the Official Journal on 22 March 2019. They are all relevant to TRs and can be found here.

• Commission Implementing Regulation (EU) 2019/439 was published in the Official Journal on 29 March 2019. The regulation amends Implementing Regulation (EU)

2016/2070 regarding benchmark portfolios, reporting templates and reporting instructions, which specifies institutions’ reporting requirements to the EBA and to NCAs.

PRA • The PRA published policy statement

PS6/19: responses to CP 24/18 occasional consultation paper – chapters 3-7 on 5 March 2019. It makes minor changes to PRA rules and corresponding guidance, including aspects of the implementation of the RFB regime together with deposit protection. The changes took effect from 7 March 2019.

• The PRA confirmed the FSCS Management Expenses Levy Limit (MELL) for 2019/20 will be £79.6m, in PS10/19 FSCS – MELL 2019/20 on 29 March 2019. The MELL is the maximum amount which the FSCS may levy for management expenses in a year, without further consultation.

PRA and FCA The PRA and FCA jointly hosted the first meeting of the Climate Financial Risk Forum on 12 March 2019. The forum, attended by investment banks, asset managers and insurers, has been established to build capacity and share practices across policymakers and industry to progress responses to the financial risks posed by climate change. It will meet three times per year and report to the CEOs of the PRA and FCA.

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World Bank The World Bank published 10 Years of Green Bonds: Creating a Blueprint for Sustainability Across Capital Markets 18 March 2019. This documents the progress made in relation to sustainable finance since the World Bank’s first Green Bond was issued in 2008 and highlights the role capital markets have to play in channelling investment towards projects which have a positive social and environmental impact.

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Banking and capital marketsIn this section:

Regulation 16 Capital and liquidity 16 Innovation 18 Payments 18 Retail products 18 Also this month 19 A brief roundup of other regulatory developments

Regulation

Capital and liquidity BoE outlines 2019 stress test

The BoE published Stress testing the UK banking system: key elements of the 2019 annual cyclical scenario with related guidance on 5 March 2019, setting out its annual cyclical scenario (ACS) for its sixth annual stress test. As in previous years, this exercise is designed to test the resilience of the UK banking sector to a severe macroeconomic shock together with an independent stress of misconduct costs.

The 2019 ACS is a very similar macroeconomic stress scenario to the 2018 exercise, given the FPC’s assessment that the underlying vulnerabilities are broadly unchanged. It reflects an economic downturn more severe than experienced during the 2007/08 global financial crisis. The FPC has also separately judged the banking system to be resilient to a worst-case disorderly Brexit outcome. Overall, the FPC judges the UK economic scenario in the 2019 ACS and the worst-case disorderly Brexit scenario to be of 'similar severity'. The BoE is working on an enduring method to take account of the impact of IFRS 9, the financial instrument accounting standard.

From 2020, the BoE intends to assess the ring-fenced subgroups of existing ACS participant banks on a standalone basis and to include the CYBG PLC group in the stress test for the first time. The BoE plans to publish the results of the 2019 stress test in Q4 2019 as part of its Financial Stability Report.

PRA clarifies Pillar 2 capital framework

The PRA published consultation paper CP5/19 – Pillar 2 capital: updates to the framework on 13 March 2019. The PRA proposes clarifications on how firms should seek to estimate their PRA buffers as part of the Pillar 2B assessment of the ICAAP. It intends to reflect these in updates to its existing statement of policy, the PRA’s methodologies for setting Pillar 2 capital.

The PRA buffer is a firm-specific regulatory capital demand over and above the Total Capital Requirement (TCR) and the more generally prescribed combined buffer (comprising the Capital Conservation Buffer, CCB and any applicable Systemic Risk Buffer [SRB]). The PRA buffer is primarily calibrated based on an individual firm’s resilience to severe but plausible stress scenarios but may be scaled up if the PRA has additional supervisory concerns including with respect to the quality of a firm’s risk management and governance (RMG) arrangements.

Hortense HuezFS Risk and Regulation Centre of Excellence

hortense.huez@pwc.com

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The PRA proposes three clarifications concerning the calibration of the PRA buffer:

• refined TCR projections to inform stress test results – the PRA proposes more granularity in the TCR by assessing each Pillar 2A risk component by a factor intended to reflect their sensitivity to the scenario

• offset against CCB and SRB – it clarifies that the PRA buffer can be offset against the CCB, whilst making clear that offsetting against the SRB risk buffer is not acceptable

• ‘suspended’ RMG scalar – the PRA plans to use a new tool which involves the imposition of an RMG scalar but allows firms time to fix the issues identified before imposing an incremental capital demand.

It intends to apply the updated policy from 1 October 2019. The consultation closes on 13 June 2019.

PRA sets definition of default expectations

The PRA published policy statement PS7/19: Credit risk: the definition of default on 6 March 2019. It implements changes largely in line with its July 2018 proposals in CP17/18, albeit with minor updates to improve clarity for firms. It makes these changes to align its rules and guidance with certain EU developments. This is part of the initiative to reduce unwarranted variability in RWAs as set out in the EBA’s IRB roadmap.

The PRA is removing the exercise of its discretion to allow firms to use the 180 days

instead of 90 days in the ‘days past due’ component of the definition of default currently allowed for certain IRB exposures. These are exposures secured by residential or SME commercial real estate in the retail exposure class as well as exposures to public sector entities. This reflects the EBA’s opinion on 180 day past due. The implementation deadline is 31 December 2020. However, the PRA indicates that firms can agree a transitional period, if appropriate, to meet any increase in capital requirements resulting from moving to 90 days past due.

The CRR specifies that firms should consider a counterparty in default when it is past due by more than 90 days in respect of any material credit obligations. A related RTS, Regulation (EU) 2018/171 specifies the threshold limits at which credit obligations are deemed material. But NCAs have discretion to set the thresholds within those limits for their jurisdiction. The PRA is setting:

• o% relative and zero absolute materiality thresholds for retail exposures

• 1% relative and €500 absolute materiality thresholds for non-retail exposures.

The deadline for the materiality thresholds and more broadly, compliance with the entire IRB roadmap is also the end of 2020. Where firms cannot meet this deadline for all IRB models, the PRA indicates they should discuss this with their supervisors with a view to developing and submitting remediation plans. But the PRA expects firms to prioritise model changes to residential model portfolios and any other

material asset classes. It does not expect to permit firms to extend its implementation for less material exposure classes beyond end-2021.

EBA completes work on IRB variability

The EBA published its final report, Guidelines for the estimation of LGD appropriate for an economic downturn on 6 March 2019. This completes its work on guidelines and RTS aimed at reducing unwarranted variability in RWAs as set out in its IRB roadmap.

These guidelines focus on requirements for the quantification of the calibration target used for downturn LGD estimation. This includes three types of approach whose application depends on the sufficiency of loss data for the identified downturn period. These guidelines amend Guidelines on PD, LGD estimation and treatment of defaulted assets published in November 2017. The guidelines apply from 1 January 2021.

Updating the Pillar 2 liquidity framework

The PRA published consultation paper CP6/19 Pillar 2 liquidity: Updates to the framework on 19 March 2019. It proposes a number of liquidity reporting amendments and clarifications to its framework.

Following a review of and feedback on its trial interim reporting, the PRA intends various updates to its new PRA 110 liquidity template and reporting instructions. These changes are due to take effect from 1 January 2020. The PRA also plans a short delay to its expectation that firms should be able to survive throughout a granular LCR stress scenario of the cash

flow mismatch risk (CFMR) framework, pending further amendments to the PRA 110 reporting template. It intends to give at least two months’ notice before introducing it and indicates this will not be before 1 January 2020.

In addition, the PRA provides more detail relating to its CFMR enhanced stress tools and further clarification on certain other aspects of its approach to supervising liquidity and funding risk, such as intraday risk. Finally, the PRA is stopping branch level liquidity reporting by UK branches of EEA banks incorporated outside the EU and is replacing it with whole-firm level liquidity reporting. Those changes are due to start from 1 July 2019. The consultation period is one month only and closes on 19 April 2019.

Clarifying credit risk mitigation guarantee eligibility

The PRA published PS8/19 Credit risk mitigation: Eligibility of guarantees as unfunded credit protection on 13 March 2019. This follows its February 2018 consultation, CP6/18. In this consultation the PRA made proposals to clarify its expectations regarding certain eligibility criteria for guarantees that enable firms to reduce the risk weight of credit exposures in their calculation of capital requirements. In response to feedback it makes significant changes.

The PRA has decided not to implement its proposal around the meaning of ‘pay out in a timely manner’. It acknowledges that there may be difficulties in applying a single measure of timeliness to all the different products which

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18 • PwC | FS regulatory, accounting and audit bulletin | April 2019

may be used as guarantees. The PRA considers that its concerns are better addressed through an approach where firms consider risks arising from eligible guarantee arrangements and any residual risks. The PRA also makes more minor changes concerning provisions on the legal effectiveness and enforceability of qualifying guarantees and around qualifying guarantees being clearly defined and incontrovertible. The revised requirements are reflected in supervisory statements SS 17/13 – credit risk mitigation and SS 31/15 – ICAAP and SREP.

These clarifications affect the standardised approach and the foundation IRB approach to credit risk. The advanced IRB approach is outside the scope of these amendments. The changes take effect from 13 September 2019.

Innovation Basel Committee warns of cryptoasset risks

The Basel Committee published a Statement on cryptoassets on 13 March 2019. The Committee recognises the cryptoasset market remains relatively small, but believes continued growth in the market could begin to pose threats to financial stability and increase the risks faced by banks. The statement covers the Committee's prudential expectations for firms with exposures to cryptoassets.

Given cryptoassets present liquidity, credit, operational and money laundering risks, the Committee expects banks to:

• Undertake due diligence – ensuring they have relevant expertise to fully assess the risks.

• Strengthen governance and risk management – a risk management framework for cryptoassets should be integrated into a bank’s overall processes, especially those relating to money laundering. Given the associated risks, senior management should have visibility of the bank’s exposures in a timely fashion.

• Provide disclosures – the Committee expects any material exposures to be reported as part of any regular reporting and to specify the accounting treatment.

• Engage with supervisors – banks should inform their supervisory authorities of planned and actual exposures, including how any risks have been, or will be, mitigated.

The Basel Committee will continue to monitor banks’ exposure to cryptoassets and work closely with the FSB.

Payments Action needed to maintain cash in society

The Access to Cash Review, an independently commissioned review to look at access to cash in the UK, published its Final Report on 6 March 2019. The review warns that the UK is not ready to go cashless and makes an action plan for Government and regulators.

The review finds that, due to a decline in cash transactions, the economics of businesses accepting cash are becoming less viable. It believes that if businesses become increasingly cashless, it will accelerate the trend towards digital payments because cash

would effectively become useless. This raises concerns as the review finds 17% of the UK population (8 million people) would struggle in a cashless society. In order to maintain a cash infrastructure while technology develops, the review gives an action plan for Government, businesses and regulators:

• guarantee customer access to cash

• make the wholesale cash infrastructure more sustainable

• take steps to ensure cash is accepted, especially by monopolies or essential services

• prioritise inclusive design approaches to digital payments

• treat cash as a system, not a commercial problem.

The review urges action to be taken now to ensure the cash infrastructure of the UK remains sustainable, and so that people are not excluded from payments altogether.

Retail products FCA finalises price cap for rent-to-own sector

The FCA published PS19/6: Rent-to-own price cap on 5 March 2019, finalising measures to reduce customer harm in the rent-to-own (RTO) sector. The FCA’s main intervention is a price cap to limit the total cost of credit, along with rules for benchmarking the price of goods to ensure customers benefit from the cap.

The price cap means the total cost of credit for customers is limited to 100% of fixed allowable costs, which includes the price of the

purchased goods, installation and delivery. The price cap rules came into force on 1 April 2019 for any new products introduced to the market for the first time. For products that are already offered, the rules will apply either at the point a price rise occurs or 1 July 2019 (whichever date is sooner). Smaller businesses (micro enterprises) have until 1 October 2019.

In addition, the FCA finalises anti-avoidance rules limiting the price of theft and accidental damage insurance and the cost of arrears charges. Both these measures help to ensure RTO firms do not try to recoup lost interest revenue from customers. The FCA signals it will start a review on the consumer impact of the new rules in April 2020.

FCA eyes motor finance commission reform

The FCA published findings from its motor finance review in Our work on motor finance – final findings, on 4 March 2019. This follows the interim report published in March 2018. The FCA highlights £300m worth of consumer harm as a result of Difference in Charges (DiC) commission arrangements. It has started policy work to address this harm.

The FCA is scrutinising DiC commission models due to the inherent link between the interest charged by a broker and the commission received. This creates a conflict of interest that is currently being poorly managed by both brokers and lenders, the FCA argues. The FCA is particularly disapproving of the DiC model as it believes increased commission should be based on extra work done, not the

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19 • PwC | FS regulatory, accounting and audit bulletin | April 2019

ability of a consumer to negotiate. The other findings from the review include:

• products were not always presented in a clear and balanced way to consumers

• commission disclosures occurred at only 11 of the 122 firms reviewed during the mystery shopping exercise

• lenders were not always monitoring brokers closely enough or mitigating issues when they arose

• the FCA is concerned some firms focused solely on credit risk to the lender when conducting creditworthiness assessments, rather than affordability for the customer.

Both lenders and brokers should start to consider how a ban or restriction on DiC commission models would affect their revenue. They may need to implement alternative models. Lenders should also ensure creditworthiness assessments take into account the affordability implications for consumers. Lenders should review their own processes, scorecards and data quality in light of the FCA’s findings.

The developments in this market should also be closely watched by vehicle manufacturers to consider whether changes to affordability assessments, commission and customer understanding will affect sales volumes and, subsequently, production.

FCA proposes remedies for the mortgage market

The FCA published findings from its review into the mortgage market in MS16/2.3: Mortgages

Market Study, on 26 March 2019. Alongside this, the FCA also published CP19/14: Mortgage customers: changes to responsible lending rules and guidance, which introduces proposals to reduce the barriers some customers face when trying to switch to a more affordable mortgage.

The FCA found much of the mortgage market is working well for consumers. Consumers are taking out suitable, affordable mortgages, commission arrangements are not negatively affecting consumer outcomes, competition on headline rates is present and there are high levels of consumer engagement. In a small number of areas the FCA found the market could work better. It could be easier for consumers to find the right mortgage, to better understand the support (advice) available and to compare between intermediaries more readily.

The consultation paper seeks to introduce a modified affordability assessment for lenders, among other rules. The FCA aims to make assessments more proportionate – removing any unnecessary barriers to switching (faced by ‘mortgage prisoners’). Customers who are up to date with payments, are not borrowing more money and are remaining in their current property will be eligible.

The proposed rules mean inactive lenders and administrators will be required to identify customers eligible for the modified affordability assessment and write to them highlighting the rule changes. Firms should consider how they would conduct such an exercise. The FCA welcomes views on the responsible lending

rule changes until the consultation closes on 26 June 2019.

Also this month

Basel Committee • The Basel Committee updated its Basel III

monitoring workbook, accompanying instructions and the list of frequently asked questions as part of its data collection exercises on 12 March 2019. In addition to recurring items, the Committee shared various worksheets to collect data on its ongoing policy initiatives. The exercise will be repeated semi-annually with end-December and end-June reporting dates.

• The Basel Committee published follow-up reports on Basel III implementation assessments on 25 March 2019. The reports overview follow-up actions taken or planned by member jurisdictions as of end-2018 to address deviations from the Basel standards identified as part of the Committee's Regulatory Consistency Assessment Programme. The follow-up actions pertain to assessments of risk-based capital and LCR regulations that were completed and published as of end-2017.

EBA • The EBA published clarifications to issues

raised on Application Programming Interfaces (APIs) under PSD2 on 11 March 2019. The EBA gives its view on three key issues which relate to the reliability of testing platforms, the identification of

certified firms and the current misalignment of functionality and data requirements between APIs.

• The EBA launched a consultation on the updated guidelines on harmonised definitions and templates for the reporting of funding plans of credit institutions on 5 March 2019. The updated guidelines include changes reflecting the EBA’s experience on the assessment of banks' funding plans in 2017 and 2018 as well as the questions raised via the EBA Single Rulebook Q&A tool. The consultation closes on 5 May 2019.

• The EBA published a consultation on exercising powers in relation to systemically important payment systems (SIPS), on 8 March 2019. The EBA gives general principles and specific conditions that competent authorities must comply with when requesting information from, or initiating reviews of, SIPS operators. The EBA’s overarching message is to be proportionate with requests so as to not create undue burden, and to be transparent with the operator at all times.

• The EBA updated its list of O-SIIs on 19 March 2019. The EBA updates the list on an annual basis according to its criteria with respect to the size, importance, complexity and interconnectedness of firms. The list also sets out the additional CET1 capital buffers that the relevant authorities require for the identified O-SIIs.

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20 • PwC | FS regulatory, accounting and audit bulletin | April 2019

• The EBA launched its Payment Institutions Register on 18 March 2019. The electronic register gives the details of all payment and emoney institutions operating within the EU, for free. It aims to increase transparency and consumer protection for EU citizens.

• The EBA published an updated report on LCR under Article 509(1) of the CRR on 20 March 2019. The report shows that the levels of LCR across banks in the EU are well above the 100% requirement regardless of their business models. The report shows that the average LCR in the EU is higher than in September 2016 but the LCR levels of G-SIFIs are lower than that of other banks.

• The EBA published the results of its Basel III monitoring exercise on 20 March 2019. The report provides a detailed assessment of the final revisions of credit, market, operational risk and leverage ratio frameworks, as well as the impact of the introduction of the aggregate output floor. For the first time, the report measures the impact of the standardised approach and internal ratings-based approach to credit risk separately.

EC • The EC published Commission Delegated

Regulation (CDR) 2019/348 on 4 March 2019. It supplements the BRRD with regard to RTS specifying the criteria for assessing the impact of an institution’s failure under the BRRD on financial markets, on other

institutions and on funding conditions. The CRD entered into force on 24 March 2019.

• The EC published Commission delegated regulation 2019/410 and Commission delegated regulation 2019/411 on 15 March 2019. It provides details of the information on payment services that competent authorities must report to the EBA and the central electronic record of all payment institutions the EBA will host, respectively.

ECB and BoE The ECB and the BoE reached an agreement to activate a standing swap line on 5 March 2019. The BoE will use this swap line to offer to lend euros to UK banks on a weekly basis to provide liquidity to financial markets. In exchange for euros the ECB will be receiving pound sterling. This is a precautionary step in the context of Brexit.

European Payments Council The European Payments Council published its decision on Brexit and UK payment service providers’ (PSPs’) participation in SEPA schemes, on 7 March 2019. The Council has decided to approve the application for continued participation by UK PSPs in SEPA schemes in the event of a no-deal Brexit.

FCA • The FCA published a letter to firms

containing the findings from its credit card fees and charges multi-firm review, on 5 March 2019. The FCA found customers were sometimes being charged multiple

fees in a billing cycle, such as missed payment or over-limit fees, suggesting firms are not doing enough to deal with customers’ financial difficulties. There is an opportunity for firms to improve outcomes for customers by reviewing their fee structure and considering fee caps.

• The FCA published a Dear CEO letter outlining its portfolio strategy for high cost lenders on 6 March 2019. The FCA sees the key harms to consumers from high cost lenders to be repeat lending, a possible symptom of unsustainable lending, and poor affordability assessments. The FCA will refocus its supervisory efforts in these two areas along with complaints handling, selling of loan portfolios and changes to business models.

• Jonathan Davison, Executive Director of Supervision – Retail and Authorisations at the FCA, gave a speech at the Credit Summit on 21 March 2019. Davidson told consumer credit firms they can expect a continued focus from the FCA on culture, given the SM&CR will need to be complied with before the end of the year. Davidson also said relending and affordability will be two key themes for the year ahead.

• The FCA published its Review of retained provisions of the CCA on 25 March 2019. Overall, the FCA finds that only some provisions could be appropriately replaced with FCA rules and guidance. It believes a number of consumer rights, protections and sanctions for firms would be lost if not retained within the CCA.

Official Journal Regulation (EU) 2019/518 of the EP and the Council of 19 March 2019 amending Regulation (EC) No 924/2009 as regards certain charges on cross-border payments in the Union and currency conversion charges was published in the Official Journal on 29 March 2019. The Regulation enters into force on 18 April 2019 and generally applies from 15 December 2019.

PRA The PRA published a Statement of Policy: Calcultating risk-based levies for FSCS deposists class on 5 March 2019. The statement sets out the methodology used to calculate the risk-adjustment for DGS member contributions to the FSCS as the UK’s designated DGS authority.

PSR • The PSR published PS19/1: Onshoring EU

regulatory technical standards under the Interchange Fee Regulation on 5 March 2019. The finalised instrument ensures the RTS will apply should the UK leave the EU with no withdrawal agreement in place, meaning nothing changes for card schemes, acquirers, issuers and payment processors.

• The PSR published a Policy statement and consultation on 14 March 2019, sharing findings from its review of its founding Directions and opening a consultation on its proposed new Directions. The PSR finds most of its Directions are still relevant, but is consulting on clarifications and small

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21 • PwC | FS regulatory, accounting and audit bulletin | April 2019

amendments. Firms must share any views before the consultation closes on 26 April 2019.

• The PSR set out its key aims and activities for the next 12 months, in its Annual plan and budget 2019/2020 on 27 March 2019. It plans to increase its focus on consumer issues this year, such as authorised push payment scams and access to cash, as well as monitoring the progress of Pay.UK (the new payment system operator).

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22 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Asset managementIn this section:

Regulation 22 Disclosure and distribution 22 Also this month 22

Regulation

Disclosure and distribution FCA reveals Investment Platform Market Study remedies

The FCA published Investment Platforms Market Study: Final Report and CP19/12: Consultation on Investment Platforms Market Study remedies on 14 March 2019.

Following the interim report, the FCA is still concerned that consumers face barriers to shopping around for a suitable platform due to the complexity of charging structures. However, at this stage, the FCA is not proposing any further interventions. Instead, it will work with the UK Platform Group to take forward work to help improve consumer understanding of platforms and make comparison easier. The regulator plans to review progress made by the industry in 2020/21, and continue to monitor the effectiveness of the MiFID II costs and charges rules in this context.

The FCA also remains concerned that consumers and advisers who want to switch platforms struggle to do so because of the time, complexity and cost involved. In response, the FCA proposes new rules on the transfer of investments to a new platform. The ceding platform must convert the units into an appropriate class if an ‘in-specie’ transfer of

that share-class isn’t possible; the receiving platform must also transfer the units to a cheaper share-class if available. The regulator welcomes industry work to improve the switching process, including efforts by STAR to improve transfer times and customer communications. It will review progress made by industry later in 2019 and consider whether additional intervention is needed.

In addition, the FCA has opened a discussion on the appropriate intervention to make on exit fees, for a wider cohort of ‘comparable firms’ which might include asset managers and insurers. Separately, the regulator intends to further consider whether consumers are able to make informed choices between model portfolios as part of its stock take of the RDR and FAMR during 2019.

The FCA welcomes feedback on CP19/12 by 14 June 2019.

Also this month

Council • The Council published the final

compromise texts of the Regulation and the Directive on the prudential requirements of investment firms on 19 March 2019. The new regime revises the capital requirements, capital composition, liquidity requirements, reporting, disclosure, governance, remuneration and supervision

Amanda RowlandPartner, FS Risk and Regulation Centre of Excellence

amanda.rowland@pwc.com

Andrew StrangeFS Risk and Regulation Centre of Excellence

andrew.p.strange@pwc.com

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23 • PwC | FS regulatory, accounting and audit bulletin | April 2019

of investment firms in the EU. The regime is expected to take effect 18 months after publication in the Official Journal around May-June 2019.

• The Council invited the Permanent Representatives Committee to approve the final compromise texts on the regulation and the directive on the prudential requirements of investment firms on 19 March 2019. The compromise texts were agreed by the Council, the EC and EP following trialogue discussions. The texts are expected to be published in the Official Journal by May 2019.

ESMA • Steven Maijoor, the ESMA Chair, gave a

keynote speech at the ALFI 2019 Conference in Luxembourg on 6 March 2019. The speech addressed ESMA’s current priorities in the asset management sector, highlighting costs disclosures under MiFID II and the PRIIPs rRegulation as particular areas of focus. Maijoor reiterated ESMA’s plans to launch a fundamental review of the PRIIPs Regulation, due in Q3 2019.

• ESMA published new Q&As on AIFMD on 29 March 2019, clarifying the application of requirements on the calculation of fund leverage. ESMA states that leverage exposure of an AIF resulting from a short-term interest rate future should not be adjusted for the duration of the future, and that an AIFM should calculate the leverage of each AIF as often as is required to

ensure that the AIF is capable of remaining in compliance with leverage limits.

• ESMA published new Q&As on the UCITS directive on 29 March 2019, clarifying a range of obligations on the UCITS KIID benchmarks and past performance. For example, the Q&As state that where the UCITS fund documentation refers to an index as a benchmark which is not intended to be tracked, it is still necessary to disclose the performance of the benchmark index in the past performance section of the KIID.

• ESMA published a consultation paper proposing draft RTS on the ELTIF Regulation on 28 March 2019. The draft RTS set out requirements to determine, among other things, the cost disclosure framework for ELTIFs and the duration of an ELTIF. Stakeholders are asked to respond by 29 June 2019.

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24 • PwC | FS regulatory, accounting and audit bulletin | April 2019

InsuranceIn this section:

Regulation 24 Brexit 24 Capital and liquidity 24 Retail products 24 Solvency II 25 Accounting 25 IFRS 17 25 Our publications 25 Also this month 25 A brief roundup of other regulatory developments

Regulation

Brexit Government outlines Part VII transfer arrangements

On 7 March 2019 the UK Government published draft legislation allowing insurers up to two years (from Brexit day) to obtain a court order sanctioning a transfer under the pre-exit Part VII regime. Prior to exit day, insurers have to have paid the regulatory transaction fee. The PRA also has to have nominated or approved an independent expert to produce the scheme report for the court process to be considered sufficiently advanced to benefit from this. On 14 March 2019 the PRA requested insurers with EEA business contemplating undertaking a Part VII transfer, not already underway, to contact it immediately.

Capital and liquidity PRA proposes liquidity risk expectations

The PRA published CP4/19 – Liquidity risk management for insurers on 5 March 2019. It proposes introducing a new supervisory statement on liquidity risk management for insurers. It covers key elements of an insurer’s liquidity risk management framework, consideration of material sources of liquidity risk an insurer may be exposed to, expectations of the design and conduct of a stress testing program, considerations for assessing asset liquidity, quantitative metrics

and tools for measuring and monitoring liquidity risk and effective liquidity contingency planning.

The PRA includes its requirements for collateral upgrade transactions in the new supervisory statement, so it plans to withdraw Legacy SS2/13 Collateral upgrade transactions and asset encumbrance: expectations in relation to firms’ risk management practices from the application date. The PRA expects that this will be in the second half of 2019.

The comment period ends on 5 June 2019. See our Hot Topic CP 4/19: Liquidity risk management for insurers for further details.

Retail products HMT eyes Civil Liability Act savings

HMT launched a consultation on the Civil Liability Act report on savings provision: consultation on implementing regulations on 21 March 2019. It outlines reporting and audit requirements to assess whether insurers issuing third party personal injury policies have passed on savings arising from the Civil Liability Act 2018 to their customers. Firms are expected to provide the relevant information (covering the three financial years ending 31 March 2023) to the FCA by 1 November 2023. In addition, firms may voluntarily provide this information for the previous one or two years. The comment period ends on 3 May 2019.

Jim BichardUK Solvency II Leader

jim.bichard@pwc.com

Kareline DaguerFS Risk and Regulation Centre of Excellence

kareline.daguer@pwc.com

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25 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Solvency II Solvency II measures – EIOPA confirms reporting requirements

EIOPA issued The Review of Long-Term Guarantees (LTG) Measures and Measures on Equity Risk: Information Request on 18 March 2019. It details information that it requires on LTG measures, the dynamic volatility adjustment (DVA) and long-term illiquid liabilities to prepare its fourth LTG Report (due in 2019) and Opinion on the measures, as well as for the review of Solvency II (due in 2020).

EIOPA wants NCAs to obtain the required information from a representative sample of insurers (and groups regarding the DVA) within set timescales. It expects selected undertakings to submit their completed reporting templates to their NCA by 17 May 2019 (14 June 2019 for group DVA), to allow NCAs to report back to EIOPA by 29 May 2019 (28 June 2019 for group DVA).

EC finalises standard formula SCR amendments

The EC adopted a delegated regulation amending the Solvency II Delegated Regulation (EU) 2015/35 on 8 March 2019. It makes amendments to the design and calibration of elements of the standard formula SCR.

The EC has taken forward, without major change, most of the proposals in the previous draft. But, in response to feedback from the consultation, it has:

• relaxed the criteria for long-term equity investments to receive a lower capital charge

• deferred the application of the new provisions on calculating the loss-absorbing capacity of deferred taxes until 1 January 2020

• reduced the threshold in the co-investment criterion for using internal models for unrated debt from 50% to 25%.

Despite significant stakeholder pressure, it has not made any changes to the volatility adjustment or risk margin. These amendments are now subject to scrutiny by the EP and Council.

Firms using the standard formula to calculate their SCR need to fully understand the changes and the impact on their business. The EC intends for the amendments to make investments in unlisted equity and unrated debt meeting certain conditions more attractive, so firms may wish to review their investment portfolios in light of these changes. Firms may find the loss absorbing capacity of deferred tax provisions more prescriptive than current requirements. See our At a glance: EC finalises changes to Solvency II standard formula SCR for further details.

PRA updates group supervision requirements

The PRA published PS 9/19 Solvency II: Group own fund availability on 14 March 2019. It includes the final updated policy (SS 9/15 Solvency II: Group supervision) which takes immediate effect. The update aligns the PRA

policy with EIOPA’s point of view that, in assessing group own funds availability, the solo SCR should not be presumed to be a barrier to availability. Following feedback from the consultation (CP15/18), the PRA has made only one minor correction to the initial version.

Accounting

IFRS 17 IASB continues IFRS 17 deliberations

The IASB met on 14 March 2019 to consider the remaining concerns and implementation challenges of IFRS 17 – Insurance Contracts. These include:

• level of aggregation

• credit cards that provide insurance coverage

• transition requirements – risk mitigation option

• transition requirements – loans that transfer significant insurance risk

• amendments to disclosure requirements resulting from the board’s tentative decisions to date

• other implications for disclosure and transition requirements.

See our In transition – The latest on IFRS 17 implementation – The IASB finalises its discussions on IFRS 17 reported concerns and implementation challenges for an overview of its decisions.

The IASB plans to assess the total package of proposed amendments at its April 2019 meeting, with the goal of issuing an exposure draft (possibly with a shortened exposure period from the typical 120 days) around the end of June 2019. The expected timeframe for issuance of final amendments, considering the due process required, is normally 12 to 18 months from the date of the exposure draft.

Our publications Illustrative IFRS consolidated financial statements 2019

Our publication IFRS 17, Insurance Contracts: An illustration: Financial statements presentation and disclosures considers financial reporting by insurers following the adoption of IFRS 17, Insurance Contracts, and IFRS 9, Financial Instruments. It does not address all the disclosure requirements of IFRS, but instead illustrates presentation and disclosure requirements introduced by IFRS 17, as well as new disclosures introduced or modified by IFRS 9 through consequential amendments to IFRS 7, Financial Instruments – Disclosures.

Also this month

EIOPA • On 5 March 2019 EIOPA announced that,

together with EU insurance supervisors, it has agreed with the BoE and FCA a multilateral MoU to take effect should the UK leave the EU without a withdrawal agreement. The MoU covers supervisory cooperation, enforcement and information

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26 • PwC | FS regulatory, accounting and audit bulletin | April 2019

exchange. EIOPA also agreed a bilateral MoU (between EIOPA and the UK authorities) on information exchange and mutual assistance in the field of insurance regulation and supervision.

• EIOPA published YE2017 Comparative Study on Market and Credit Risk Modelling on 25 March 2019. It finds significant variations in asset model outputs of undertakings with an approved internal model covering market and credit risk, which may indicate a need for further supervisory scrutiny. In its next annual study, EIOPA plans to include an analysis of derivatives and extend the analysis of foreign currencies.

• In March 2019, EIOPA published answers to questions on (EU) 2015-35 supplementing Directive 2009-138 and (EU) No 2015-2450 templates for the submission of information to the supervisory authorities. EIOPA publishes Q&A on Regulation to ensure consistent and effective application of EU regulation and to aid supervisory convergence.

• EIOPA published Best Practices on Licensing Requirements, P2P Insurance and the Principle of Proportionality in an InsurTech Context on 27 March 2019. It considers the risks of Insurtech and the current supervisory approaches being taken across the EU, highlighting areas of best practice. EIOPA plans to continue this work with national supervisors to support a more systematic approach to InsurTech licensing requirements and the application

of the principle of proportionality to achieve consistent and effective supervisory practices across the EU.

• EIOPA published Systemic Risk and Macroprudential Policy in Insurance on 29 March 2019. It seeks feedback on potential new macroprudential tools and measures to address systemic risk, particularly those highlighted in the EC Call for Advice to EIOPA in relation to the Solvency II Review. The comment period ends on 30 April 2019

FCA The FCA published The SM&CR: Guide for insurers on 20 March 2019. It gives an overview of how the SM&CR works, following its application to dual-regulated insurers from 10 December 2018. It includes details of the Conduct Rules, the Senior Managers Regime and the Certification Regime.

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27 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Monthly calendar Open consultations

Closing date for responses

Paper Institution

12/04/19 Consultation on the ECB’s draft decision on the procedure and conditions for exercise by a competent authority of certain powers in relation to the oversight of systemically important payment systems

ECB

19/04/19 CP6/19 Pillar 2 liquidity: Updates to the framework PRA

23/04/19 CP19/4: Optimising the SM&CR and feedback to DP16/4 – Overall responsibility and the legal function FCA

26/04/19 CP19/13: Recovering the costs of the Office for Professional Body Anti-Money-laundering Supervision: further consultation on fees structure FCA

26/04/19 Decision on the review into our 'day one' Directions and CP18/3 – Consultation on proposed Directions PSR

30/04/19 CP19/8: General Insurance Value Measures reporting FCA

06/05/19 CP3/19 Solvency II: Longevity risk transfers – simplification of pre-notification expectations PRA

25/05/19 Draft Guidelines on Credit Risk Mitigation for institutions applying the IRB Approach with own estimates of LGDs EBA

28/05/19 CP19/10: Publishing and disclosing costs and charges to workplace pension scheme members and amendments to COBS 19.8 FCA

13/06/19 CP5/19 Pillar 2 capital: Updates to the framework PRA

14/06/19 CP19/12: Consultation on Investment Platforms Market Study Remedies FCA

26/06/19 CP19/14: Mortgage customers: proposed changes to responsible lending rules and guidance FCA

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28 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Forthcoming publications

Date Topic Type Institution

Asset management

Q2 2019 Proposed amendment of permitted links rules Policy statement FCA

Q2 2019 The integration of sustainability risks in the UCITS Directive, AIFMD and MiFID II

Technical advice ESMA

Q3 2019 Amendments to bond market liquidity and size specific to the instrument thresholds under MiFIR

Amendment to RTS ESMA

Q4 2019 Functioning of the consolidated tape equity under MiFID II Report ESMA

Q4 2019 Prices for pre and post-trade data under MiFIR Report/technical advice ESMA

Banking

Q2 2019 Review of the disclosure requirements for the LCR Review EBA

Q2 2019 Guidelines on banks’ loan origination, internal governance and monitoring Guidelines EBA

June 2019 High-cost credit review: Overdrafts PS to CP18/42 Policy statement FCA

Summer 2019 FCA guidance on cryptoassets Policy statement FCA

Q3 2019 ITS on MREL disclosure and reporting Consultation EBA

Q3 2019 Guidelines on credit risk mitigation Guidelines EBA

Q4 2019 Draft ITS on Pillar 3 disclosures Draft ITS EBA

Consumer credit

June 2019 Market study on credit information Terms of reference FCA

Insurance

H2 2019 General insurance value measures reporting Policy statement FCA

Pensions

July 2019 Retirement outcomes review Policy statement FCA

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29 • PwC | FS regulatory, accounting and audit bulletin | April 2019

Date Topic Type Institution

Securities and markets

Q2 2019 Money laundering in capital markets Report FCA

Supervision, governance and reporting

April 2019 Regulatory fees and levies: policy proposals for 2019/20 – PS to CP18/34 Policy statement FCA

April 2019 Regulated fees and levies: rates proposals 2019/20 Consultation paper FCA

April 2019 FCA business plan 2019/20 Business plan FCA

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30 • PwC | FS regulatory, accounting and audit bulletin | April 2019

GlossaryABI Association of British Insurers

ABS Asset Backed Security

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive 2011/61/EU

AML Anti-Money Laundering

AMLD3 3rd Money Laundering Directive 2005/60/EC

AMLD4 4th Money Laundering Directive 2015/849/EU

AMLD5 5th Money Laundering Directive

AQR Asset Quality Review

ASB UK Accounting Standards Board

Banking Reform Act (2013)

Financial Services (Banking Reform) Act 2013

Basel II Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework

Basel III Basel III: International Regulatory Framework for Banks

Basel Committee Basel Committee of Banking Supervision (of the BIS)

BBA British Bankers’ Association

BCR Basic capital requirement (for insurers)

BIS Bank for International Settlements

BoE Bank of England

BMR EU Benchmarks Regulation

BRRD Bank Recovery and Resolution Directive 2014/59/EU

CASS Client Assets sourcebook

CCA Consumer Credit Act 1974 (as amended)

CCB Countercyclical capital buffer

CCD Consumer Credit Directive 2008/48/EC

CCPs Central Counterparties

CDS Credit Default Swaps

CET1 Common Equity Tier 1

CFTC Commodities Futures Trading Commission (US)

CGFS Committee on the Global Financial System (of the BIS)

CIS Collective Investment Schemes

CMA Competition and Markets Authority

CMU Capital markets union

COBS FCA conduct of business sourcebook

COCON FCA code of conduct sourcebook

CoCos Contingent convertible securities

ComFrame The Common Framework

CONC FCA consumer credit sourcebook

COREP Standardised European common reporting

Council Generic term representing all ten configurations of the Council of the European Union

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CPMI Committee on Payments and Market Infrastructures

CRA1 Regulation on Credit Rating Agencies (EC) No 1060/2009

CRA2 Regulation amending the Credit Rating Agencies Regulation (EU) No 513/2011

CRA3 Proposal to amend the Credit Rating Agencies Regulation and directives related to credit rating agencies COM(2011) 746 final

CRAs Credit Rating Agencies

CRD ‘Capital Requirements Directive’: collectively refers to Directive 2006/48/EC and Directive 2006/49/EC

CRD II Amending Directive 2009/111/EC

CRD III Amending Directive 2010/76/EU

CRD IV Capital Requirements Directive 2013/36/EU

CRD V CRD IV-related EC November 2016 banking reform package amendments

CRR Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms

CRR II CRR-related EC November 2016 banking reform package amendments

CSD Central Securities Depository

CSDR Central Securities Depositories Regulation (EU) 909/2014

CSMAD Criminal Sanctions Market Abuse Directive 2014/57/EU

CTF Counter Terrorist Financing

DEPP The FCA’s Decision Procedure and Penalties Manual

DG FISMA Directorate-General for Financial Stability, Financial Services and Capital Markets Union

DG MARKT Internal Market and Services Directorate General of the European Commission

DGS Deposit Guarantee Scheme

DGSD Deposit Guarantee Schemes Directive 2014/49/EU

DLT Distributed ledger technology

D-SIBs Domestic Systemically Important Banks

EBA European Banking Authority

EC European Commission

ECB European Central Bank

ECJ European Court of Justice

ECL Expected credit loss

ECOFIN Economic and Financial Affairs Council (configuration of the Council of the European Union dealing with financial and fiscal and competition issues)

ECON Economic and Monetary Affairs Committee of the European Parliament

ECP Eligible counterparty

EDIS European Deposit Insurance Scheme

EEA European Economic Area

EEC European Economic Community

EFTA European Free Trade Association

EIOPA European Insurance and Occupations Pension Authority

ELTIF European long-term investment fund

EMIR Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (EU) No 648/2012

EP European Parliament

EPC European Payments Council

ESA European Supervisory Authority (i.e. generic term for EBA, EIOPA and ESMA)

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

32 • PwC | FS regulatory, accounting and audit bulletin | April 2019

ESCB European System of Central Banks

ESEF European Single Electronic Format

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

€STR Euro short-term rate

ETC Exchange-traded commodity

ETN Exchange-traded note

EU European Union

EU Securitisation Regulation

Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012

EURIBOR Euro Interbank Offered Rate

Eurosystem System of central banks in the euro area, including the ECB

EuSEF The European social Entrepreneurship Funds Regulation

EuVECA European Venture Capital Funds Regulation (EU) 345/2013

FAMR Financial Advice Market Review

FATF Financial Action Task Force

FC Financial counterparty under EMIR

FCA Financial Conduct Authority

Fiat currency Currency whose value is underpinned by the strength of the issuing government, e.g. USD, GBP, euro and other major world currencies

FICC Fixed income, currencies and commodities

FiCOD1 Amending Directive 2011/89/EU of 16 November 2011

FiCOD Financial Conglomerates Directive 2002/87/EC

FMI Financial Market Infrastructure

FMLC Financial Markets Law Committee

FMSB FICC Markets Standard Board

FOS Financial Ombudsman Service

FPC Financial Policy Committee

FRC Financial Reporting Council

FRTB Basel Committee fundamental review of the trading book market risk capital requirements

FSA Financial Services Authority

FSB Financial Stability Board

FSBRA Financial Services (Banking Reform) Act 2013

FS Act 2012 Financial Services Act 2012

FSCP Financial Services Consumer Panel

FSCS Financial Services Compensation Scheme

FSI Financial Stability Institute (of the BIS)

FSMA Financial Services and Markets Act 2000

FTT Financial Transaction Tax

G30 Group of 30

GAAP Generally Accepted Accounting Principles

GDPR General Data Protection Regulation

G-SIBs Global Systemically Important Banks

G-SIFIs Global Systemically Important Financial Institutions

HCSTC High Cost Short Term Credit

HMRC Her Majesty’s Revenue and Customs

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

33 • PwC | FS regulatory, accounting and audit bulletin | April 2019

HMT Her Majesty’s Treasury

IA Investment Association

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

IBA ICE Benchmark Administration

ICAAP Internal Capital Adequacy Assessment Process

ICAS Individual Capital Adequacy Standards

ICO Initial coin offering

ICOBS Insurance: Conduct of Business Sourcebook

ICPs Insurance Core Principles

IDD The Insurance Distribution Directive (EU) 2016/97

IFRS International Financial Reporting Standards

ILAA Internal Liquidity Adequacy Assessment

ILAAP Internal Liquidity Adequacy Assessment Process

ILS Insurance-Linked Securities

IMAP Internal Model Approval Process

IMCO The European Parliament’s Committee on Internal Market and Consumer Protection

IMD Insurance Mediation Directive 2002/92/EC

IMF International Monetary Fund

IORP Institutions for Occupational Retirement Provision

IOSCO International Organisation of Securities Commissions

IRB Internal Ratings Based

IRRBB Interest rate risk in the banking book

ISDA International Swaps and Derivatives Association

ITS Implementing Technical Standards

JCESA Joint Committee of the European Supervisory Authorities

JMLSG Joint Money Laundering Steering Committee

KID Key Information Document

KIID Key Investor Information Document

KYC Know your client

LCR Liquidity coverage ratio

LEI Legal Entity Identifier

LIBOR London Interbank Offered Rate

MA Matching Adjustment

MAD Market Abuse Directive 2003/6/EC

MAR Market Abuse Regulation (EU) 596/2014

Material Risk Takers Regulation

Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU of the EP and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile

MCD Mortgage Credit Directive 2014/17/EU

MCOB Mortgages and Home Finance: Conduct of Business sourcebook

MCR Minimum Capital Requirement

Member States Countries which are members of the European Union

MiFID Markets in Financial Instruments Directive 2004/39/EC

MiFID II Markets in Financial Instruments Directive (recast) 2014/65/EU – also used to refer to the regime under both this directive and MiFIR

MiFIR Markets in Financial Instruments Regulation (EU) No 600/2014

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

34 • PwC | FS regulatory, accounting and audit bulletin | April 2019

MLRO Money Laundering Reporting Officer

MMF Money Market Fund

MoJ Ministry of Justice

MoU Memorandum of Understanding

MPC Monetary Policy Committee

MREL Minimum requirements for own funds and eligible liabilities

MTF Multilateral Trading Facility

NBNI G-SIFI Non-bank non-insurer global systemically important financial institution

NCA National competent authority

NDF Non-Directive Firms – firms that do not fall within Solvency II

NFC Non-financial counterparty under EMIR

NIS Directive Proposal for a directive of the EP and Council concerning measures to ensure a high common level of network and information security across the EU

NPL Non-performing loan

NSFR Net Stable Funding Ratio

NST National specific template

NURS Non-UCITS Retail Scheme

OECD Organisation for Economic Cooperation and Development

Official Journal Official Journal of the European Union

OFT Office of Fair Trading

Omnibus II Second Directive amending existing legislation to reflect Lisbon Treaty and new supervisory infrastructure (2014/51/EU). Amends the Prospectus Directive (Directive 2003/71/EC) and Solvency II (Directive 2009/138/EC)

ORSA Own Risk Solvency Assessment

O-SIIs Other systemically important institutions

OTC Over-The-Counter

OTF Organised trading facility

PAD Payment Accounts Directive 2014/92/EU

PERG Perimeter Guidance Manual

PIFs Personal investment firms

PPI Payment Protection Insurance

PRA Prudential Regulation Authority

Presidency Member State which takes the leadership for negotiations in the Council: rotates on 6 monthly basis

PRIIPs Packaged retail and insurance-based investment products

PSD2 The revised Payment Services Directive (EU) 2015/2366

PSP Payment service provider

PSR Payment Systems Regulator

P2P Peer to Peer

QIS Quantitative Impact Study

QRT Quantitative Reporting Template

RAO Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)

RDR Retail Distribution Review

REMIT Regulation on wholesale energy markets integrity and transparency (EU) 1227/2011

RFB Ring-fenced bank

RFQ Request for quote

RFRs Risk-free rates

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

35 • PwC | FS regulatory, accounting and audit bulletin | April 2019

RFRWG The Risk-free Rate Working Group of the BoE

RONIA Repurchase Overnight Index Average

RRPs Recovery and Resolution Plans

RTS Regulatory Technical Standards

RWA Risk-weighted assets

SARON Swiss Average Rate Overnight

SCR Solvency Capital Requirement (under Solvency II)

SCV Single customer view

SEC Securities and Exchange Commission (US)

SEPA Single Euro Payments Area

SFP Structured finance product

SFT Securities financing transaction

SFTR Securities Financing Transactions Regulation (EU) 2015/2365

SFO Serious Fraud Office

SI Systematic internaliser

SIMF Senior Insurer Manager Function

SIMR Senior Insurer Managers Regime

SM&CR Senior Managers and Certification Regime

SME Small and Medium sized Enterprises

SMF Senior Manager Function

SOCA Serious Organised Crime Agency

SOFR Secured Overnight Financing Rate

Solvency II Directive 2009/138/EC

SONIA Sterling Overnight Index Average

SPV Special purpose vehicle

SREP Supervisory Review and Evaluation Process

SRF Single Resolution Fund

SRM Single Resolution Mechanism

SRMR Single Resolution Mechanism Regulation

SSM Single Supervisory Mechanism

SSR Short Selling Regulation (EU) 236/2012

STS Simple Transparent and Standardised (concerning securitisations)

SUP FCA supervision manual

SYSC The part of the FCA handbook titled senior management arrangements, systems and controls

T2S TARGET2-Securities

TC Treasury Committee

TLAC Total Loss Absorbing Capacity

TMTP Transitional Measure on Technical Provisions

TONA Tokyo Overnight Average Rate

TPR The Pensions Regulator

TR Trade Repository

UCITS Undertakings for Collective Investments in Transferable Securities

UCITS V UCITS V Directive 2014/91/EU

UKLA UK Listing Authority

UTI Unique Trade Identifier

XBRL eXtensible Business Reporting Language

Executive summary Sustainable finance

agenda builds momentum

Cross sector announcements

Banking and capital markets

Asset management Insurance Monthly calendar Glossary

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Contacts

Amanda Rowland +44 (0) 7702 678480 amanda.rowland@pwc.com

Kareline Daguer +44 (0) 7739 874106 kareline.daguer@pwc.com Insurance, conduct and prudential

Hortense Huez +44 (0) 7738 844840 hortense.huez@pwc.com Prudential regulation, Basel III, liquidity and funding

Andrew Strange +44 (0) 7730 146626 andrew.p.strange@pwc.com Retail distribution, SM&CR, upcoming regulatory change

Mike Vickery +44 (0) 7808 573882 mike.p.vickery@pwc.com Insurance, Solvency II

Hannah Swain +44 (0) 7803 590553 swain.hannah@pwc.com Operational resilience and financial crime

David Brewin +44 (0) 7809 755848 david.r.brewin@pwc.com Client assets and prudential regulation

Tania Lee +44 (0) 7976 687457 tania.a.lee@pwc.com Insurance, Solvency II

Tom Boydell +44 (0) 7483 399332 tom.boydell@pwc.com Retail banking, consumer credit and non-bank lending

Daniela Bunea +44 (0) 7561 789058 daniela.bunea@pwc.com Central clearing, FMIs, benchmarks, IBOR reform

Tessa Norman +44 (0) 7826 927070 tessa.norman@pwc.com Publications and retail distribution

Conor MacManus +44 (0) 7718 979428 conor.macmanus@pwc.com Prudential regulation

Mete Feridun +44 (0) 7483 362070 mete.feridun@pwc.com Prudential regulation, banks and asset managers

Lucas Penfold +44 (0)7483 407581 lucas.penfold@pwc.com Wholesale markets and asset management conduct regulation

Adam Stage +44 (0) 7483 422845 adam.stage@pwc.com Operational resilience