FIG Bulletin, 28 February 2020

General

Dormant assets scheme: HM Treasury and DCMS consult on expansion

HM Treasury and the Department for Digital, Culture, Media and Sport (DCMS) have jointly published a consultation paper on expanding the dormant assets scheme established under the Dormant Bank and Building Society Accounts Act 2008. The consultation follows an industryled report by four business leaders which made a series of recommendations on how to broaden the current scheme beyond bank and building society accounts.

The government is consulting on expanding the scheme to the following sectors:

insurance and pensions; investment and wealth management; and securities. Given the significant changes to the pensions landscape in recent years and the government's commitment to pensions dashboards, it is minded to exclude pensions from an expanded dormant assets scheme at this stage. However, it encourages views on this as part of the consultation process.

Assets proposed to be within the scope of the expansion include:

dormant insurance policy proceeds; dormant share proceeds; dormant unit proceeds; dormant distributions and proceeds from investment assets; and other dormant security distributions. Customers will always be able to reclaim the same amount they would have had if their assets were never transferred, as they do in the current scheme, and companies would continue to participate on a voluntary basis.

Under the scheme, funds are held by Reclaim Fund Ltd (RFL). RFL is authorised and regulated by the Financial Conduct Authority (FCA), and holds sufficient money to cover any reclaims while distributing the surplus to The National Lottery Community Fund for social or environmental initiatives across the UK.

There are currently over 30 participating firms listed on the RFL website.

The consultation ends on 16 April 2020.

Updating LIBOR and SMCR references: PRA PS3/20

Following its occasional consultation paper, CP25/19, the Prudential Regulation Authority (PRA) has published a policy statement, PS3/20, setting out its response to the feedback received on some of its proposals. The PRA confirms its final policy relating to chapters 2 (LIBOR references) and 3 (Senior Managers & Certification Regime (SMCR) references) of CP13/19. It received no responses to these chapters and has made no changes to the draft policy. The PRA has consequently made the following changes with immediate effect:

removed LIBOR references and updated supervisory statement, SS20/15: Supervising building societies' treasury and lending activities and statement of policy: The PRA's methodologies for setting Pillar 2 capital; and published updated versions of SS28/15: Strengthening individual accountability in banking and SS35/15: Strengthening individual accountability in insurance to make minor corrections and update redundant references. The PRA will publish feedback and final policy for chapter 5 of CP25/19, which relates to retirement interest-only mortgages, alongside the final policy for CP21/19 (Credit risk: Probability of Default and Loss Given Default estimation) at a later date. This is because both consultation papers proposed changes to the PRA's SS on internal ratings-based approaches (SS11/13).

Brexit

UK government policy paper on approach to UK-EU future relationship negotiations

The UK government has published a policy paper on its approach to negotiations on the future UK-EU relationship. In the paper, the government sets out its proposals for the contents and structure of a comprehensive free trade agreement (CFTA) between the UK and the EU. In the area of financial services, the agreement states that:

The agreement should promote financial stability, market integrity, and investor and consumer protection for financial services, providing a predictable, transparent, and business-friendly environment for cross-border financial services business. The agreement should include legally binding obligations on market access and fair competition, in line with recent CETA precedent. The agreement should also build on recent precedent, such as the EU-Japan EPA and international best practice, by establishing regulatory cooperation arrangements that maintain trust and understanding between our autonomous systems of regulation as they evolve. This could include appropriate consultation and structured processes for the withdrawal of equivalence findings, to facilitate the enduring confidence which underpins trade in financial services. The UK and the EU have committed to carrying out unilateral equivalence assessments for financial services, distinct from the CFTA. The fact that the UK leaves the EU with the same rules provides a strong basis for concluding comprehensive equivalence. More generally, the government states that it will not agree to any obligations for the UK's laws to be aligned with the EU's or for the EU's institutions to have any jurisdiction in the UK. It also reiterates that it will not apply to extend the transition period.

Council of the EU Decision on UK-EU future relationship negotiations

The Council of the EU has adopted a Decision authorising the opening of negotiations on the future UK-EU relationship. An Annex published alongside the Decision contains negotiating directives setting the scope of the negotiating mandate and constitutes a finalised mandate to the European Commission to be the EU's official negotiator. In the financial services section, the EU mandate states:

The envisaged partnership should reaffirm the parties' commitment to preserving financial stability, market integrity, investor and consumer protection and fair competition, while respecting the parties' regulatory and decision-making autonomy, and their...