Hello everyone and welcome to this week’s financial services updater.
The first highlight this week is a statement that the FSA has published on its website concerning CRD IV implementation.
You may remember that in July last year the Commission published a proposed Capital Requirements Regulation, which, together with the proposed CRD IV Directive, will recast and replace the existing Capital Requirements Directive. This CRD IV package of proposals not only reflects the Basel III capital proposals, but also includes new proposals on sanctions for non-compliance with prudential rules, corporate governance and remuneration.
The FSA has now published an update on the CRD IV package which has been under discussion between the European Parliament, European Commission and Council of Ministers. The FSA states that the legislation will not be adopted earlier than autumn 2012. On that basis it does not appear feasible that the legislation will enter into force on 1 January 2013 as originally intended. No alternative dates have yet been communicated by the EU institutions.
However, the FSA states that it will continue to undertake all preparatory work that is possible in the absence of finalised legislative text, in full expectation that the CRD IV will follow the Basel III implementation timetable. The FSA expects all firms within scope to do the same. In relation to the FSA’s preparatory work it’s worth noting the latest Policy Development update refers to the FSA publishing a Consultation Paper on the CRD IV in Q3 2012.
The second highlight this week concerns FAQs that the FSA has posted on its website concerning the transition to the Financial Conduct Authority or FCA.
The questions and answers cover a wide range of issues. However, in a number of places the FSA’s response is that it will answer a particular point in its FCA approach document that will be published in October.
However, there are a few nuggets.
For example, the FSA confirms that the FCA will not be a retrospective regulator and will judge what firms have done based on the rules and principles that were in place at the time.
Also, firms which are already regulated by the FSA will be automatically transferred over and will not have to submit a new application for authorisation.
The FSA also explains in the FAQs that delivering culture change within firms is one of the main things that its working on. Whilst more detail will be set out in the October approach document the FSA does state that its overall focus will continue to be on senior management as it believes that they are crucial in setting their firm’s culture.
The FSA says that boards need to understand the regulator’s priorities and need to challenge their executives to make sure they put customers at the heart of what they do.
In relation to dual regulation the FSA explains that there will be some co-ordination to maximise the exchange of information between the Prudential Regulation Authority (PRA) and FCA but firms need to be clear that they are going to be dealing with two separate regulators. Each regulator will act on their own when dealing with firms because they will each have different objectives and different things that they will look at in firms.
Obviously we will be keeping track of developments concerning the PRA and FCA on our online technical resource, Phoenix which can be found on the Norton Rose website.
I hope you find this week’s updater helpful, good bye.
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