The formation of a new German coalition after the recent elections appeared deadlocked as Angela Merkel struggled to agree on terms with potential coalition partners. The European Banking Authority is to move from London to Paris as a result of Britain’s decision to leave the European Union. Jeremy Corbyn agreed with Morgan Stanley that the Labour Party was a threat to big banks, whilst the Royal Bank of Scotland announced it would close one third of its high street branches. The investigation into Donald Trump’s election campaign ties to Russia took another step forward with the charging of former national security adviser Michael Flynn with lying to the FBI about his meetings with Russian officials. Here are the main stories in finance and regulation for the last two weeks.


Life assurance company Intesa San Paolo Life dac was fined €1,000,000 and reprimanded as part of a settlement agreement with the Central Bank of Ireland relating to four breaches of the Criminal Justice Act 2010. The regulator found significant failures in Intesa’s money laundering and anti-terrorist controls. The CBI also entered into settlement agreements with four retail intermediaries for failing to hold Professional Indemnity Insurance. The regulatory action was the first under the Insurance Mediation Regulations 2005.

The Central Bank issued Consultation Paper 116 on the Intermediary Inducements - Enhanced Consumer Protection Measures which follows on from its July 2016 Discussion Paper on the Payment of Commission to Intermediaries. It also issued a report on Consumer Understanding of Commission Payments. Responses to the consultation are requested for 22 March 2018. The regulator further issued a Feedback Statement on Consultation Paper 111 on Investment Firms Regulations including changes relating to MiFID II.

Insurance Ireland launched its Diversity and Inclusion Report as an industry guide on best practice. The report aims to ensure diversity and inclusion in the employment practices of the insurance industry. The launch outlined a programme of events with the 30% Club, the NCBI and the Disability Federation of Ireland.


Rumours of possible change of policy on the compulsory margining of foreign exchange forward contracts under the EMIR regulations were circulating, with a number of European agencies signalling that the EU might follow the approach of the United States in removing the margining obligation for these products. The EU obligation to clear the products was delayed until the introduction of MiFID II in January 2018 due to uncertainty about their legal classification. However, many in the industry were concerned that the decision by US regulators to remove the products from the margining rules put EU markets at a competitive disadvantage.

The European Central Bank issued the first consultation on developing a euro unsecured overnight interest rate. The consultation follows the commitment by the ECB to develop a new interest rate before 2020 to complement existing private sector benchmarks and serve as a backstop reference rate. The consultation looks at high level features and the timing of the publication of the new rate. Responses are requested for 12 January 2018. In London, the Financial Conduct Authority confirmed that the 20 panel banks currently submitting information for the setting of the Libor rate would continue to do so until its discontinuance in 2021.

The European Bank for Reconstruction and Development announced a €300m framework to support the persistent challenge of non-performing loans. The facility will allow the Bank to acquire minority stakes in NPL servicers, invest in NPL portfolios and provide senior debt instruments to co-investors for the purchase of NPL portfolios. The EBRD is also supporting efforts to tackle non-performing loans by leading the NPL Initiative, a part of the Vienna Initiative platform. Despite a decline in the 12 months to the end of 2016, NPL levels in central, eastern and south-eastern Europe remained persistently high for many countries, exceeding 10 per cent in six of the 17 countries of the region.

The European Securities and Markets Authority issued a final report on its Consultation on the Money Market Fund Regulation. Its regulatory technical standards were submitted to the European Commission for endorsement and the authority will start work on guidelines and IT guidance to accompany the completed RTS. The regulation is to apply from 21st July 2018 but with a transition period of a year for existing money market funds.

   United Kingdom

In Brexit news, the failure by the UK government to reach agreement with the DUP on the Irish border damaged Britain’s attempts to resolve the three main issues for exit as set down by the European Union. The UK was hopeful of moving to the next stage of negotiations following the UK government’s indication that it would honour in full its liabilities, a concession which could put the final cost of at a potential gross figure of £100bn. Former Prime Minister Tony Blair confirmed that he was actively working for a reverse of the Brexit decision, noting that what the government was delivering was a long way from what was promised by the Leave campaign in the 2016 referendum.

The Financial Reporting Council responded to criticism on its effectiveness in a report noting that it had tripled its enforcement team from 10 to 30 members over the last five years. The FRC had been accused of being too close to the audit industry which it supervises, particularly when it had cleared KPMG over concerns of its HBOS audit in 2008. The improvements included creating an in-house forensic accounting team to remove the reliance on external accountants and reduce costs. The size of its enforcement team remains dwarfed by that of the Financial Conduct Authority, which currently has nearly 500 dedicated personnel. The FRC further confirmed that it was investigating the accounts of services firm Mitie Group Plc in relation to its 2016 annual report. The firm is also under investigation by the Financial Conduct Authority in relation to its timing of the announcement a profit warning.

The Financial Conduct Authority obtained the conviction of two persons involved in operating an illegal investment scheme which resulted in losses for 300 investors of a total of £1.4m. Samrat Bhandari and Dr Muhammed Aleem Mirza, together with Michael and Paul Moore who had pleaded guilty, used cold calling to vulnerable investors to sell shares in a medical company set up by Dr Mizra. All four men were found to have mislead investors. The FCA also alleged that Alex Hope had perverted the course of justice in relation to a confiscation order made after a successful FCA prosecution. Separately the FCA fined a former Bank of America bond trader £60,900 for market abuse. Paul Walter was found to have created a false and misleading impression as to the supply and demand for Dutch State Loans by entering bids to give the impression he was a buyer and then selling.

The Financial Conduct Authority published its Final Summary on the treatment of SME customers by the Royal Bank of Scotland. The review focused on business customers who were transferred to the bank’s Global Restructuring Group. The summary was prepared with special advisors appointed by the Treasury Committee, who were charged with ensuring that the report provided a fair and balanced account of events.


15 central banks in the European System of Central Banks confirmed their commitment to the foreign exchange Code of Global Conduct. Nationale Bank van België/Banque Nationale de Belgique, Danmarks Nationalbank, Deutsche Bundesbank, Eesti Pank, Central Bank of Ireland, Banca d’Italia, Latvijas Banka, Lietuvos bankas, Banque centrale du Luxembourg, Magyar Nemzeti Bank, De Nederlandsche Bank, Banco de Portugal, Suomen Pankki – Finlands Bank, Sveriges Riksbank and the European Central Bank confirmed their adherence to the principles of the Code when acting as foreign exchange market participants.

The Financial Stability Board, in conjunction with the Basel Committee on Banking Supervision, updated its list of global systemically important banks, whose overall number remains unchanged at 30 institutions. The FSB, in conjunction with the International Association of Insurance Supervisors, decided not to publish a new list of global systemically important insurance entities for 2017, leaving the 2106 list in place.

The recent ‘anti-corruption’ drive in Saudi Arabia by Crown Prince Mohammed bin Salman highlighted the use of Swiss banks by prominent members of the country’s royal family. Saudi authorities are understood to have sought details of accounts from Swiss banks, and a rise in the number of suspicious transaction reports by Swiss banks has also been reported. Prominent members of the Saudi Arabia’s business community were placed under effective arrest, and reportedly offered their liberty in exchange for payments to the government.

Topics covered by Better Regulation include
  • BRRD
  • Banking Structural Reform
  • Basel
  • Benchmarks Regulation
  • Brexit
  • Capital Markets Union
  • Capital Requirements Legislation
  • Central Securities Depositories Regulation
  • Credit Rating Agencies Regulation
  • Deposit Guarantee Schemes Directive
  • Dodd-Frank
  • EMIR
  • GDPR
  • Solvency II
  • Insurance Distribution Directive
  • Interchange Fees Regulation
  • Market Abuse/Insider Dealing
  • Markets in Financial Instruments Legislation
  • Money Laundering Directives
  • Money Market Funds Regulation
  • Mortgage Credit Directive
  • Payment Services Directive
  • PRIIPs Regulation
  • Prospectus Directive
  • Ring-fencing
  • Securities Financing Transactions Regulation
  • Securitisation Regulation
  • Senior Insurance Managers Regime
  • Senior Managers Regime
  • Undertakings for Collective Investment in Transferable Securities Directive