Coronavirus: your regulatory update 11/05
The speed read
- HM Treasury launches Bounce Back Loan Scheme
- Some loans exempted from consumer credit regime
- BoE announces support for SME lending
- FCA comments on Bounce Back Loan Schemes
- Clarity around accessing restricted savings
- Access to premises shouldn’t void policies, says FCA
- FCA pilots digital sandbox
- Position limits for certain commodity derivatives published
- Money laundering and terrorist financing under the spotlight
- Standards of lending to support BBLS
- More FCA flexibility around SMCR
- FCA expectations on financial crime systems and controls
- Information security still a priority for FCA
- MiFID II obligations during Covid-19
- Forward planning supported with new Grid
- PRA sets out its priorities in light of Covid-19
- FCA extends reporting deadline under Payments Account Directive
- BoE and PRA delay implementation of operational resilience requirements
- How has Covid-19 impacted the banking sector?
HM Treasury launches Bounce Back Loan Scheme
HM Treasury’s Bounce Back Loan Scheme (BBLS) was launched to support loans of up to £50,000 to small businesses with a 100% government-backed guarantee for lenders. The Chancellor of the Exchequer has written a letter to all accredited lenders under the Coronavirus Business Interruption Loan Scheme (CBILS) setting out the interest rate that Bounce Back Loans will be offered at (2.5%) and outlining legislative and regulatory changes being made to support the delivery of the scheme.
Some loans exempted from consumer credit regime
The Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020 has come into force. It applies to loans of £25,000 or less that are made by commercial lenders to sole traders, unincorporated associations and partnerships of fewer than four people under the BBLS. These types of loans will be exempt from credit agreements and will therefore not be subject to the detailed consumer credit regulatory regime.
This will exclude the activity of entering into loans under the BBLS from the ambit of regulation under Financial Services and Markets Act 2000. There is an exception as the Order allows for the existing regulatory regime to continue to apply to lenders who carry on the activity of debt collecting in relation to loans under the BBLS.
BoE announces support for SME lending
The Bank of England announced changes to the Term Funding Scheme in order to support the BBLS. The TFSME allows eligible banks and building societies to access four-year funding at rates very close to Bank Rate. The scheme is designed to incentivise the provision of credit to businesses and households to bridge through the current period of economic disruption. The scheme includes additional incentives to provide credit to SMEs, including longer terms.
The PRA has also issued a statement setting out what it sees as the major risks under the scheme, particularly eligibility for recognition as unfunded credit risk mitigation (CRM) under the Capital Requirements Regulation (CRR), and confirming that banks subject to the UK leverage ratio will be able to exclude loans under the Bounce Back Loan scheme from the UK leverage ratio exposure measure.
FCA comments on BBLS
The FCA has updated its statement on the Coronavirus Business Interruption Loan Scheme (CBILS) to include further details on the launch of the new Bounce Back Loan Scheme (BBLS), addressing in particular the relationship between its rules and the schemes, and the prevention of financial crime. The FCA also published a letter from Christopher Woolard, FCA Interim Chief Executive, to Caroline Wayman, Chief Ombudsman and Chief Executive of the Financial Ombudsmen Service (FOS), outlining the new regulatory arrangements for the BBLS, the new approaches to creditworthiness assessments under the CBILS, and how FOS will approach complaints arising from lending under these schemes.
Clarity around accessing restricted savings The FCA updated its Covid-19 information for firms webpage to include a new section on accessing restricted savings. The FCA confirms that if a customer requests to withdraw funds, it would expect firms to:
Access to premises shouldn’t void policies, says FCA The FCA has confirmed that, where access is required as part of the terms of a policy, it expects insurers to take account of a customer’s temporary change in how they access those premises, and treat their customers fairly. The new guidance says insurers shouldn’t void policies or reduce potential claims as a result.
With the aim of providing enhanced regulatory support to firms looking for innovative ways to tackle the challenges posed by Covid-19, the FCA will accelerate its plans to pilot a ‘digital sandbox’. The FCA welcomes initial expressions of interest in how they might assist in the development of the sandbox. Applications will open later in summer 2020.
Position limits for certain commodity derivatives published The FCA has published updated position limits for certain commodity derivative contracts traded on UK trading venues. These limits are published in advance of the publication of ESMA Opinions on the limits. These limits may change in light of an ESMA opinion, or in the event that the FCA decide it is necessary.
Money laundering and terrorist financing under the spotlight The Financial Action Task Force (FATF) published a paper identifying challenges, good practices, and policy responses to new Money Laundering and Terrorist Financing threats and vulnerabilities arising from Covid-19. Recommended actions include:
Standards of lending to support BBLS The Lending Standards Board (LSB) published an update for firms offering products under CBILS and BBLS on how the Standards of Lending Practice for business customers effect the requirements of BBLS and take account of the changes to CBILS announced on 27 April. LSB recognises that, by participating in the Government schemes, firms may not be able to apply in full effect all provisions within the Standards as certain aspects of the products have been determined by Government and firms will have a limited role in the design and review of the products.
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