In this blog post, we round-up forthcoming developments in the UK and at EU and International levels in financial services regulation which are expected for January 2021. Continue reading
Regulation and supervision of outsourcing arrangements and third-party relationships entered into by financial institutions continues to be an area of great focus for regulators. The FSB notes that many of the issues it highlighted in its December 2019 report (which focussed on cloud services) are relevant more generally.
The FSB’s latest discussion paper sets out an overview of the regulatory and supervisory landscape on outsourcing and third-party risk management across a number of jurisdictions based on a survey carried out in Q1 2020. The deadline for providing feedback is 8 January 2021.
We are excited to launch the 2020 edition of our Global Bank Review, #disruption.
While the banks sector has faced significant challenges before, the depth and breadth of Covid-19’s disruption has left banks in the position of having to brace for impact to their own businesses, whilst simultaneously demonstrating a change in culture, providing support to vulnerable customers, and supplying vital credit for regrowing our economies. Continue reading
Having initially delayed its planned consultation exercise to allow the financial services sector to focus on responding to Covid-19, the International Organization of Securities Commissions (IOSCO) subsequently found the pandemic a catalyst to proceed. Therefore, at the end of May, IOSCO launched its consultation on proposed updates to the 2005 Outsourcing Principles for Market Intermediaries and the 2009 Outsourcing Principles for Markets; feedback on the proposed new Outsourcing Principles (OPs) is requested on or before 1 October 2020. The decision to proceed reflects the acknowledgement that outsourcing is a key element for consideration when assessing operational resilience across the sector.
This post gives a high level summary of the consultation, with a link to our briefing that focuses in more detail on: the scope of application; IOSCO’s definition of outsourcing; intragroup arrangements; concentration risk; and access and audit rights. To provide additional context to IOSCO’s proposals, the associated briefing also catalogues relevant proposals and initiatives which are running concurrent to the consultation exercise.
On 19 March, the UK Government published guidance requesting that schools and other educational institutions provide limited care for children whose parents have roles that are critical to the COVID-19 response. This includes parents working in certain financial services roles that are essential to the functioning of the economy (referred to as “key financial workers” or “KFWs“).
- A KFW is any individual who fulfils a role which is necessary for the firm to continue to provide (i) essential daily financial services to consumers, or (ii) ensure the continued functioning of markets. The guidance provides a list of example KFWs (PRA) (FCA).
- KFWs could work for any categorisation of financial institution (e.g. dual or solo regulated, payment service providers, market infrastructure providers).
- Firms are best placed to identify their KFWs; they should start by identifying the firm’s activities, services or operations which are essential to services in the real economy or financial stability and then identify the individuals essential to support those functions.
- The PRA/FCA expects that most firms will have a limited number of KFWs.
- When considering KFWs, firms should also identify any critical outsource partners that are essential to the continued provision of services, even if these are not financial services firms.
- The PRA/FCA recommends that the Chief Executive Officer Senior Management Function (SMF1) (or, if not applicable, an equivalent senior member of the management team) is accountable for ensuring an adequate process so that only roles meeting the KFW definition are designated.
- Firms should consider issuing letters to all individuals identified as KFWs as evidence of their status.
Our general briefing on COVID-19 – Key Issues for Employers is available here.
This post was first published on our Digital TMT and Sourcing Notes blog.
On 4 March 2020 the Financial Conduct Authority published a short set of findings from its review of outsourcing in the UK life insurance sector. Despite the review’s narrow scope, the FCA’s findings are readily applicable to other outsourcing contexts, so regulated firms outside the life insurance sector should be aware of these. Continue reading
** This post was updated on 17 March 2020 to reflect the FCA’s publication of information for firms on Coronavirus (Covid-19) response and further updated on 23 March 2020 to reflect the Bank of England’s press release regarding supervisory and prudential policy changes **
On 5 December 2019, the Bank of England (BoE), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) released a number of publications on operational resilience, marking the launch of a consultation phase which will inform how the UK authorities seek to embed the consideration of operational resilience into the regulatory framework.
In this blog post, we round-up forthcoming developments in the UK and at EU and International levels in financial services regulation which are expected for September 2019.
Author: Hanne Gundersrud
The FCA and PRA have announced their second enforcement action in relation to outsourcing failures by the retail bank R. Raphael & Sons plc (“Raphaels“). The firm failed to manage its outsourcing arrangements properly, in breach of FCA Principles 2 and 3, the applicable provisions of Chapter 8 of the FCA’s Senior Management Arrangements, Systems and Controls sourcebook (“SYSC 8”), and PRA Fundamental Rules 2, 5 and 6. Raphaels received separate fines of £775,100 from the FCA and £1,112,152 from the PRA in respect of the breaches, resulting in a combined fine of £1,887,252. Raphaels agreed to resolve the matter with its regulators and therefore qualified for a 30% discount in the fines imposed by both regulators.