In the Northern Irish elections, the Democratic Unionist Party lost its overall majority, finishing with just one seat more than Sinn Féin; Gerry Adams said the result was a re-assertion of his call for special designated status for Ireland post-BREXIT. AIB Bank in Ireland announced its first dividend since the 2008 crash, and was the subject of speculation of a return to the stock market next year. President Trump addressed Congress with a well-received policy speech but further turmoil followed when Attorney General Jeff Sessions was shown not to have disclosed meetings with Russia’s US ambassador during the election campaign. Below we capture the main stories in financial regulation over the last two weeks.
Dail Deputy Kevin Moran introduced the ‘Keeping People in their Homes Bill 2017’, which aims to introduce the principle of proportionality into the context of repossession proceedings and to amend the Land and Conveyancing Law Reform Act 2009. The Competition and Consumer Protection Commission published a public consultation on the future of the Irish mortgage market, which focuses on market structure, legislation and regulation. It is part of the work requested by the government under the Programme for Partnership Government. Responses are requested for 20th March 2017.
The Central Bank published data on the credit union sector for the period 2011 to 2016. The data showed that there had been an increase in credit union assets by €2bn to €16bn. The ability of credit unions to withstand stress was judged to have improved, with an average capital ratio of 16 per cent. Credit quality of loans had improved but there remained concern over variations seen across different unions.
The Central Bank published its Review of Motor Claims Handling, a thematic inspection of five insurance companies representing the majority of the Irish market. The inspection focused on the claims process, with respect to the requirements of the Consumer Protection Code 2012. The negative feedback included the time taken to handle claims, which ranged from 4 weeks to 16 weeks, and confusion over the claims assessors handling the claims. The Central Bank did conclude that the insurers were treating customers fairly when dealing with write-off valuations. Consumer research also showed that 74% of consumers questioned agreed that insurers had treated them fairly.
The European Insurance and Occupational Pension Authority’s risk dashboard utilised Solvency II data for the first time. The dashboard is now compiled by reference to data which is drawn from an extended sample of undertakings and an improved methodological approach. The data is derived from reports by 93 groups and 3,076 solo companies. Previously it relied on reporting by 32 insurance groups, on a best efforts basis. The dashboard continues to show that the key challenges facing the industry are the low-yield investment environment and market risk.
The European Union was reported to be preparing a more thorough approach to equivalency, whereby it deems other jurisdictions to have regulations in place which are equivalent to its own. The tightening of rules could negatively impact the City of London as it looks for methods to continue business amidst the general view that a passporting solution will not be available. The reports referenced proposals for EU inspections in foreign countries and continuous monitoring, and the ability to withdraw an equivalence determination on short notice. It appears unlikely that a regime with a ‘light touch’ regulatory approach would be able to obtain an equivalence determination from the EU.
Philip Greene reached a settlement with the BHS pensions trustee in which he agreed to contribute ‘up to’ £363m. Workers are estimated to be entitled to 88% of their contributions. However, Dominic Chappell is continuing to fight the legal action on the basis that the deficit was not caused by or added to during his time as owner of the retailer. The Pensions Regulator is understood to be looking to recover as much as £17m from Mr Chappell.
The Financial Ombudsman reported receiving nearly 200 complaints per week about payday loans, despite an increase in regulatory activity by the Financial Conduct Authority. The Ombudsman noted that complaints were received from people in all walks of life, and mostly centred on affordability checks. Payment protection insurance continued to be the most complained of product, making up half the total amount of complaints received. Overall, complaints to the Ombudsman fell by 11% in comparison to the same period in the previous year. Separately the Financial Conduct Authority announced its plan to put a deadline on PPI mis-selling claims of 29th August 2019, a date which will be preceded by a consumer information campaign.
The Financial Conduct Authority issued a Consultation Paper on ‘Reforming the availability of information in the UK equity IPO process.’ The paper proposes a package of reforms relating to the provision of information to investors. It points to concerns about ‘connected research’ written by analysts within the book-running syndicate as the dominant source of information available to investors during a crucial stage of the process. Such information is subject to potential conflicts of interest. Responses are requested before 1st June 2017.
The journey towards Britain’s exit of the European Union slowed a little as the House of Lords rejected the Government’s Article 50 bill over the lack of clarity on the rights of EU citizens living in the country. The Northern Ireland Affairs Committee of the House of Commons was told that 100,000 firms in the UK had registered companies in Ireland, as hedges against a worst-case scenario. A committee in the House of Lords concluded that the legal case requiring Britain to pay an estimated €60bn to exit the EU was not strong, but accepted that the payment might be the political price of negotiating future trade deals with the EU.
The deadline for compliance with the variation margin obligations on derivatives markets participants was relaxed by various global regulators as it became clear that efforts to complete the required documentation were woefully behind schedule. The regulations require market counterparties to put in place compliant credit support documentation to remove counterparty credit exposure, but the industry was reported to be facing a mountain of documentation negotiations. The piecemeal announcements by different financial regulators left doubt as to the exact extent of the relaxation of the deadline, however.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $515,400 settlement with Californian company United Medical Instruments, Inc. The company accepted 56 alleged violations of the Iranian Transactions and Sanctions Regulations. OFAC determined the company did not voluntarily self-disclose the apparent violations, but that the alleged violations constituted a non-egregious case.