Temporary financial relief for mortgage customers
The FCA has published a feedback statement (FS20/6) following its consultation on guidance on temporary financial relief for mortgage customers impacted by Covid-19. FS20/6 illustrates that all respondents acknowledged that consumers in temporary financial difficulty continue to need support, and most supported the proposals.
It also published the final updated version of its guidance for firms regarding mortgages and Covid-19, confirming that:
- Customers that have not yet had a payment holiday and who experience financial difficulty have until 31 October 2020 to request one.
- The current ban on lender repossessions of homes will be continued to 31 October 2020.
- Firms should communicate with customers regarding what happens when their payment holiday ends, and should offer a range of options for how the missed payments will be repaid, if they are able to resume payments.
- Lenders will continue to support customers who have already had a payment holiday where they need further help.
- Payment holidays offered under this guidance will not have a negative impact on credit files.
The updated guidance comes into force on 4 June 2020 and expires on 31 October 2020, unless renewed or updated before.
Progress made on the FCA’s test case of BI claims
The FCA has published an update on progress and some further detail on its court action on business interruption insurance policies. Proposed court action includes identifying the representative sample of policy wordings to be examined in the case, insurers that use those wordings, and the insurers who will participate in the proceedings.
It expects to file the claim form and particulars for the case on 9 June 2020.
The FCA has also published draft guidance which sets out the FCA’s expectations for insurers and insurance intermediaries when handling claims and complaints for business interruption policies during the test case brought by the FCA.
PRA echoes FCA’s stance on use of electronic signatures
The PRA published a statement in response to Covid-19 and increased remote working confirming that, in the absence of any specific legal provisions to the contrary, firms may use electronic signatures for the submission of forms and other regulatory documents. The PRA also confirms it may in specific instances request a ‘wet signature’ where it is appropriate to do so. The PRA will review this approach in the light of evolving working practices.
EBA guidelines on reporting and disclosure of exposures
The European Banking Authority (EBA) published its guidelines on reporting and disclosure of exposures subject to measures applied in response to Covid-19. The guidelines have been developed to address data gaps to ensure an appropriate understanding of institutions’ risk profile and the asset quality on their balance sheets, and include reporting templates, reporting instructions, and disclosure templates.
The first reporting reference date and the disclosure reference date will be 30 June 2020. The reporting guidelines will be part of the version 2.10 reporting framework release that will be published in June 2020.
Finalised guidance for insurance firms on product value
The FCA has published finalised guidance that sets out its expectations for insurers and insurance intermediaries to consider the value of their products in light of Covid-19. Firms have been advised to identify any Covid-19 related material issues that affect the value of their products and their ability to deliver good customer outcomes.
The FCA also published the accompanying Feedback Statement FS20/7.
This guidance will take effect immediately. The FCA will review this guidance in the next six months.
FCA announces financial resilience survey
The FCA announced it will send a survey to obtain a more accurate view of firms’ financial resilience as a result of Covid-19 to around 13,000 firms between 4 and 8 June 2020. The FCA will use the provided data to support its ongoing work.
FCA updated guidance on branch access for essential services
The FCA has updated its guidance for banks, building societies and credit unions regarding branch access for essential services. The FCA recommends that firms continue to balance the needs of their customers with the safety and welfare of their staff, and urges firms to consider the needs of their most vulnerable customers.
Speech: the regulatory response to Covid-19 and 2020 expectations
Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists delivered a speech at the PIMFA Virtual Festival, focusing on the FCA’s response to Covid-19 and its expectations for 2020. In particular, Ms Butler noted that:
- Advisors and wealth managers responded well to the onset of Covid-19.
- There is a need to transition from the immediate ‘incident response’ towards focusing on longer-term impacts.
- The FCA’s future key areas of focus include operational resilience, financial resilience and acting with integrity.
PRA ‘Dear CEO’ letter on IFRS 9 and capital requirements
The PRA published a template version of a ‘Dear CEO’ letter sent to deposit takers regarding the updated FCA guidance on retail mortgage payment deferrals. The PRA’s letter provides guidance in respect of the initial and further payment holidays in the context of IFRS 9 and capital requirements. While detailed guidance is set out in an annex, the covering letter sets out the principles underlying the guidance as follows:
- When there has been a payment deferral, counting of days past due should be based on the agreed schedule for the purposes of the expected credit loss (ECL) backstops and for the Capital Requirements Regulation (CRR) definition of default. However, loans that are not past due can still have suffered a significant increase in credit risk (SICR), credit impairment or default.
- Eligibility for, and use of, Covid-19 related initial and further payment deferrals taken up in accordance with the FCA’s guidance does not on its own automatically result in a loan (a) being regarded as having suffered a SICR or being credit-impaired for ECL, or (b) triggering a default under CRR.
- As firms are likely to have limited borrower-specific information, they should make holistic assessments that look beyond past-due information and use of payment deferrals in order to treat such loans appropriately for accounting and regulatory purposes.
- It is not envisaged that these holistic assessments will be made at the time when a payment deferral is taken up, as the FCA guidance does not require such information to be available at that time.
BoE ‘Dear CEO’ letter to FMIs on distribution of profits
The Bank of England (BoE) published a template version of a ‘Dear CEO’ letter sent from Sir Jon Cunliffe, Deputy Governor for Financial Stability, to UK financial market infrastructures (FMIs) and specified providers. The letter requests that, when considering the distribution of profits, such firms pay close attention to the additional risks and potential operational and financial demands arising in the Covid-19 environment.