The speed read

  • Electronic signatures get the FCA green light
  • PRA answers key questions for banks
  • PSR postpones call for input on New Payments Architecture
  • FCA reinforces need for professional indemnity insurance
  • Time limit on professional qualifications extended
  • Extensions granted for regulatory reporting
  • FCA’s expectations on funds
  • PRA’s follows up on IFRS 9, capital requirements and loan covenants
  • FSI on the insurance industry’s response to Covid-19

Electronic signatures get the FCA green light

The FCA published its expectations of firms when dealing with the need for ‘wet-ink’ signatures (i.e. signing a document by hand using a pen).

On agreements, current rules do not explicitly require wet-ink signatures, nor do they prevent firms from using electronic signatures.

Instead, the FCA encourages firms to consider the legal validity of electronic signatures, stressing that the FCA can’t give legal advice. Firms should review the risks of using electronic signatures for agreements, taking into account the client’s best interest, and take steps to mitigate them. As an example, firms should ensure that using an electronic signature doesn’t impact the clients understanding of what they’re agreeing to.

The FCA states that it would accept electronic signatures for all interactions fund-related applications and on all applications from mutual societies. The FCA confirms that firms may use electronic signatures for all interactions with the FCA.

 

PRA answers key questions for banks

The PRA published a set of Q&As that clarifies its position on the use of liquidity and capital buffers in response to the COVID-19 outbreak.

The Q&A is aimed at all firms to which the Capital Requirements Directive IV (CRD IV) applies and will be updated as the COVID-19 situation evolves.

 

PSR postpones call for input on New Payments Architecture

The Payment Systems Regulator (PSR) postponed the deadline for responses to its call for input on competition and innovation in the UK’s New Payments Architecture (NPA). Feedback is now requested by 1 May 2020.

 

FCA reinforces need for professional indemnity insurance

The FCA reconfirmed its position that advice firms need to have professional indemnity insurance (PII) policies in place during the Coronavirus crisis.

Ultimately, they said, it’s a commercial decision for insurers about what cover they will offer including cost and on what terms. But they need to meet their regulatory obligations, including when manufacturing, distributing and writing a contract of insurance. What’s more, if the FCA sees evidence that insurers’ ability to process renewels is being adversely affected by the crisis, they’ll consider taking action.

 

Time limit on professional qualifications extended

The FCA announced that during the Coronavirus emergency, all employees should have the skills, knowledge and expertise needed to do their jobs. However, the FCA has relaxed the 48 month rule that requires employees to gain an appropriate qualification within four years, in cases where the relevant exams were cancelled or postponed as a result of Coronavirus.

Instead, employees will have an additional 12 months to complete the appropriate qualifications if needed. Firms will need to assess and decide if an extension should be granted to an employee and record the reasons for this. The FCA will adopt this approach for 6 months, until 31 October 2020.

 

Extensions granted for regulatory reporting

The regulator has granted extensions to submission deadlines for certain regulatory returns, up until 30 June 2020.

SUP 16 handbook returns:

1-month extension applies for the following returns:

  • COR001A (Own funds)
  • COR001B (COREP Leverage Ratio)
  • COR002 (COREP LE)
  • COR003 (COREP NSFR)
  • COR005 (Asset Encumbrance)
  • FRP001 (FINREP)
  • FSA004 (Breakdown of Credit Risk Data)
  • FSA005 (Market Risk)
  • FSA007 (Operational Risk)
  • FSA008 (Large Exposures)
  • FSA014 (Forecast Data from Firms)
  • FSA017 (Interest rate gap report)
  • FSA018 (UK integrated group – Large Exposures (UK integrated group))
  • FSA019 (Pillar 2 Information)
  • FSA055 (Systems and Controls Questionnaire)
  • REP005 (High Earners Report)
  • RMA-D2 (Financial Resources)

2-month extension applies for the following return:

  • FIN-A (annual report and accounts)

You are not required to submit the following return for 2020:

  • Employers’ Liability Register compliance return

Other Handbook returns:

2-month extension applies for the following returns:

  • Annual financial reports (as required under Disclosure Guidance and Transparency Rules)
  • Credit union complaints return (CREDS 9 Annex 1R)
  • Complaints return (DISP Annex 1R)
  • Claims management companies complaints return (DISP 1 Annex 1AB)

The FCA will continue to monitor the situation and will keep these changes under review.

 

FCA’s expectations on funds

The FCA has further updated its expectations regarding funds in light of coronavirus. While it acknowledges the significant challenge firms are facing in the current environment, the FCA still expect firms to continue to uphold the best interest of their investors at all times.

Updates include a temporary relief to the regulatory deadlines for the publications of half-yearly and annual reports and accounts.

Fund managers wishing to use the additional time should:

  • Inform the fund’s deposit and auditors, and email ukcis@fca.org.ukwith details of the funds for which they intend to make use of the relief, and the intended new date of publication of reports for each fund
  • Publish a prominent statement on their website, no later than the original publishing date of the annual or half-yearly report, explaining the reasons for their decision and giving the revised publication date
  • Consider what other steps they could take to bring the deferred publication date to the attention of unit holders

 

PRA’s follows up on IFRS 9, capital requirements and loan covenants

The PRA published a follow-up note for PRA-regulated insurers clarifying the PRA’s position regarding IFRS 9, capital requirements and loan covenants.

In the note, the PRA stresses the need for well-balanced decision making that takes into account long-term economic trends and the economic impact of Coronavirus. Paragraph 5 of the letter’s Annex includes examples that insurance firms may find helpful when forming their judgements on the impact of Covid-19 on their internal credit assessments.

The PRA also confirms that some points in the Dear CEO letter can be considered of wider applicability beyond those insurers using IFRS 9 to account for financial instruments. The follow-up note highlights sections of the Dear CEO letter which may be relevant to insurers, as well as directing firms to its supervisory statement SS3/17: Solvency II: Illiquid, unrated assets and the accompanying policy statement (PS9/20).

 

FSI on the insurance industry’s response to Covid-19

The Financial Stability Institute (FSI) published a briefing summarising the insurance regulatory response to COVID-19. The briefing states that:

  • Higher insurance claims as a result of Covid-19 are not necessarily the cause of losses for insurers
  • Insurers have been granted relief from regulatory and supervisory measures so they can continue providing services, although we would stress that the FCA still has high expectations regarding conduct at this time
  • Authorities have set out expectations for insurers to conserve capital
  • The far-reaching impact of COVID-19 calls for sustained vigilance by both supervisors and insurers.

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