FIG Bulletin

Recent developments

1 June 2020

2

General 4

COVID-19: FCA update on carrying over Continuing Professional Development 4

FCA Handbook Notice 77 5

COVID-19: European Commission adjusts 2020 work programme 5

Climate-related and environmental risks: NGFS guide 5

Banking and Finance 7

COVID-19: PRA statement on guidance on application of regulatory capital and IFRS 9

requirements to payment holidays 7

COVID-19: PRA Q&A on CRR property valuation requirements 8

COVID-19: FCA guidance consultation on mortgages and payment holidays 8

COVID-19: Delegated Regulation on revisions to RTS on prudent valuation under CRR 8

COVID-19: BBRS report on impact of government loan schemes on business banking

dispute resolution 9

CRR: EBA consults on revised RTS on own funds and eligible liabilities 9

CRD IV: EBA final report on guidelines on loan origination and monitoring 10

Payments 11

COVID-19: FCA guidance consultation on payment firms and safeguarding customer

funds 11

Securities and Markets 12

FCA Market Watch No. 63 12

COVID-19: FCA Primary Market Bulletin No. 28 12

Securitisation Regulation: ESMA updates Q&As 12

MiFID II: ESMA updates Q&As on investor protection and intermediaries 12

MiFID II: ESMA updates Q&As on market structures and transparency 12

MiFIR: ESMA confirms ICMA proposals for reporting of central bank repos 13

EMIR: ESMA updates Q&As 13

Outsourcing principles: IOSCO consultation 14

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COVID-19: IOSCO statement on fair disclosure of impact 14

Insurance 15

Solvency II: PRA PS14/20 and SS1/20 on prudent person principle 15

ISPV authorisation and supervision updates: PRA PS13/20 15

Insurance regulation beyond Solvency II: BoE speech 15

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General

COVID-19: FCA update on carrying over Continuing Professional Development

On 27 May 2020, the UK Financial Conduct Authority (FCA) published a webpage explaining the

circumstances under which the FCA will allow firms to defer individuals' Continuing

Professional Development (CPD) to the next CPD year in the exceptional circumstances of

COVID-19.

The FCA emphasises that it expects firms to continue to demonstrate that relevant individuals

remain competent to carry out their work and that effective and consistent CPD is an essential

part of this. It expects most individuals will be able to continue completing CPD while working

from home or on furlough, through e-learning and other means. It expects firms to support

furloughed staff with materials to complete their CPD.

However, the FCA recognises that there could be exceptional circumstances when individuals

may have difficulty completing the required minimum CPD hours. This may affect firms that:

must ensure their retail investment advisers complete the required minimum 35 hours of

CPD and get independent verification from an accredited body that the firm has met this

requirement; and

carry on insurance distribution activities, that must ensure that each relevant employee

completes a minimum of 15 hours of professional training or development in each 12-

month period.

Therefore, the FCA will temporarily allow firms, in exceptional circumstances, to allow

individuals to carry over any uncompleted CPD hours to the next CPD year. This applies to CPD

years ending before 1 April 2021. The carried over hours will be treated as part of the required

CPD hours of that next CPD year on top of the hours already required.

The FCA indicates "exceptional" circumstances for this assessment could be when individuals

during the current pandemic:

are needed to carry out extra duties to manage risks, and/or to provide support, to

consumers and businesses during the current situation; or

have caring responsibilities, such as having to care for a partner, child, parent,

grandparent or sibling; or

have difficulties accessing CPD material, for example, due to technical difficulties or

unavailable material;

and it is not realistic to expect the individual also to fulfil the CPD requirements.

The FCA requires firms to take certain factors into account, including the individual's role and

responsibilities and their knowledge and skill development. The FCA emphasises that it expects

individuals to stay up to date with its COVID-19 regulatory developments which could count

towards their CPD. Firms should also look into other available online equivalents to training

courses or other ways for their staff to get the necessary CPD. Firms should take these other

options into account as part of their decision to carry over CPD hours.

Firms should record their decision and the reasons for it, including the number of CPD hours the

individual is carrying over to the next CPD year, but do not need to report this to the FCA. As

long as the decision is made in accordance with its guidance, the FCA will treat the firm as

having complied with the requirements for the current CPD period.

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FCA Handbook Notice 77

The FCA has published Handbook Notice 77, which sets out changes to the FCA Handbook made

by the FCA board on 13 May 2020 and 21 May 2020.

The Handbook Notice reflects changes made to the Handbook by the following instruments:

COVID-19 Premium Finance Instrument 2020 (FCA 2020/20), into force since 18 May

2020;

Payment Services Regulations 2017 (Payment Account) Instrument 2020 (FCA 2020/24)

in force since 22 May 2020; and

Supervision Manual (Reporting No 14) Instrument 2020 (FCA 2020/22) in force on 22

May 2020.

COVID-19: European Commission adjusts 2020 work programme

The European Commission has published a communication outlining its adjusted work

programme for 2020, together with annexes and an updated factsheet. The Commission notes

that it has adopted 291 decisions and other acts since the beginning of the COVID-19 pandemic,

most of which were not included in the Commission's original work programme for 2020,

published in January. Therefore, it has become necessary for the Commission to adjust its work

programme for 2020 as part of a package that aims to deliver a recovery plan for Europe. The

Commission remains determined to deliver on its commitments made in its work programme.

Changes to the work programme of potential interest to financial services practitioners relate to:

sustainable finance: as part of the European Green Deal, a non-legislative proposal

relating to a renewed sustainable finance strategy is expected in Q4 2020 (previously this

was Q3 2020);

the Capital Markets Union (CMU): an action plan on deepening the CMU is

expected in Q4 2020 (previously this was Q3 2020). The other proposals relating to the

CMU are still expected in Q3 2020;

consumer credit: the Commission is expected to publish more on its ongoing

evaluation of the Consumer Credit Directive in Q2 2021;

distance marketing: the Commission is expected to publish more on its ongoing

evaluation of the Financial Services Distance Marketing Directive in Q4 2021; and

the eIDAS framework: a report on the application of the Electronic Identification and

Signature Regulation is due by 1 July 2020 (previously no date was given).

The timing of the initiatives relating to a FinTech action plan, which includes a strategy on an

integrated EU payments market, along with a legislative proposal on cryptoassets and a cross-

sectoral financial services legislative proposal on operational and cyber resilience, remain

unchanged (Q3 2020).

Climate-related and environmental risks: NGFS guide

The Network for Greening the Financial System (NGFS) has published a Guide for Supervisors

on integrating climate-related and environmental risks into prudential supervision. The NGFS is

a group of 66 central banks and supervisors that share best practices and contribute to the

development of environment and climate risk management in the financial sector.

In the guide, the NGFS considers how to best integrate climate-related and environmental risks

into supervisors' work, with a particular focus on the banking and insurance sectors. Among

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other things, it provides an overview of current supervisory practices, the supervisory and

regulatory toolboxes that can be used to address climate-related and environmental risks and an

examination of how these risks could be relevant when determining capital requirements. The

guide also includes five recommendations for courses of action to be taken by NGFS members

and beyond to integrate climate-related and environmental risks into their work.

The NGFS has also published a Status Report on financial institutions' experiences from working

with green, non-green and brown financial assets and a potential risk differential, offering an

overview of industry definitions and practices regarding environmental related risks'

quantification and mitigation.

The NGFS intends to publish shortly two other documents dedicated to climate scenario-

analysis. It will also start working on the data and metrics needs for the purpose of climate and

environment related risks assessment, and investigate the possible access limitations.

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Banking and Finance

COVID-19: PRA statement on guidance on application of regulatory capital and IFRS 9 requirements to payment holidays

On 22 May 2020, the UK Prudential Regulation Authority (PRA) published a statement on

guidance on the application of regulatory capital and International Financial Reporting Standard

9 (IFRS 9) requirements to payment holidays granted or extended to address the challenges of

COVID-19. The statement follows the supervisory and prudential policy measures announced on

20 March 2020 and a Dear CEO letter sent on 26 March 2020 to banks and building societies.

Much of that previous guidance related to the treatment of the payment holidays or deferrals

("payment deferrals") that were being offered at the time.

The PRA notes that the first payment deferrals are now coming to an end and the FCA has

published, in draft form, updated guidance on how lenders should treat borrowers at the end of

the initial deferral period. See our separate briefing on the FCA proposals: Mortgages and Covid-

19: UK FCA extends support measures until at least 31 October 2020 and updates its Guidance

for lenders and servicers.

As a consequence of the FCA proposals, firms are assessing the capital and accounting treatment

for exit from, and in some cases extension of, payment deferrals. In its statement, the PRA sets

out its high-level view of the implications of the FCA's draft updated guidance on the PRA's

previous guidance and on accounting and the regulatory definition of default more generally.

The PRA will provide further detail when the FCA has finalised its guidance.

In summary, the PRA considers that eligibility for, and use of, COVID-19 related payment

deferrals or extensions to those deferrals granted in accordance with the FCA's proposed

guidance would not automatically result in a loan:

being regarded as having suffered a significant increase in credit risk (SICR) or being

credit-impaired for expected credit loss accounting (ECL) purposes; or

triggering a default under the Capital Requirements Regulation (CRR).

This means:

the PRA guidance has not changed for payment deferrals related to COVID-19 that are

granted to borrowers for the first time, including existing payment deferrals granted

prior to this guidance; and

the key judgments for regulatory capital and ECL purposes is whether those borrowers

who do not resume full payments at the end of a payment deferral should be treated as in

default (for CRR) or as having suffered a significant increase in credit risk or credit

impaired (for IFRS 9).

The PRA statement elaborates on these analyses.

Consistent with the scope of the draft updated FCA guidance, the PRA's statement focuses on

mortgage products. However, it expects its guidance to be broadly relevant to similar

government-endorsed schemes, and similar measures by lenders, to respond to the adverse

economic impact of COVID-19. The PRA believes the guidance is consistent with IFRS and the

CRR. However, it also recognises it is the responsibility of firms to satisfy themselves that they

have prepared their annual and interim financial reports in accordance with the applicable

reporting frameworks and for auditors to reach their own audit or review conclusions about

those reports. Similarly, it is for firms to ensure they comply with the CRR requirements.

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COVID-19: PRA Q&A on CRR property valuation requirements

On 29 May 2020, the PRA published a questions and answers on commonly asked questions it

has received from firms during the period of disruption caused by COVID-19 on the

requirements in the CRR for property valuations for residential and commercial real estate

exposures.

The PRA explains that firms have identified difficulties in conducting physical inspections due to

social distancing measures, obtaining reliable property valuations and determining appropriate

approaches to suspended or unreliable house price indices.

The two questions answered cover:

the PRA's expectations of existing mortgage exposures concerning the monitoring and

review of property valuations under Articles 229(1) and 208(3) of the CRR; and

the approach firms should take if a house price index (HPI) that is used to update

property valuations for capital requirements purposes is unreliable or unavailable.

The document will be updated, if appropriate, as the current situation evolves.

COVID-19: FCA guidance consultation on mortgages and payment holidays

On 22 May 2020, the UK Financial Conduct Authority (FCA) published a guidance

consultation on mortgages and COVID-19. The proposals include extending the period during

which customers can apply for a payment holiday and during which firms cannot commence or

continue repossessions, in each case, for a further 4 months, until 31 October 2020. Existing

payment holidays can also be extended for a further 3 months. The FCA invited comments on the

proposals, but only until 26 May 2020.

Read about the main proposals in our briefing: Mortgages and Covid-19: UK FCA extends

support measures until at least 31 October 2020 and updates its Guidance for lenders and

servicers.

The FCA will aim to publish the final guidance quickly, and it will come into force shortly after. It

would update the previous version of FCA guidance for mortgage providers it published in March

2020.

The FCA states that separate guidance on consumer credit products will be updated in due

course.

COVID-19: Delegated Regulation on revisions to RTS on prudent valuation under CRR

On 28 May 2020, the European Commission adopted a Delegated Regulation amending

Delegated Regulation (EU) 2016/101 supplementing the CRR with regard to regulatory technical

standards (RTS) for prudent valuation under Article 105(14) of the CRR. An Annex setting out

the formulae to be used for the purpose of aggregating additional valuation adjustments (AVAs)

has been published alongside the Delegated Regulation. The Delegated Regulation has been

adopted in response to COVID-19 triggering an unprecedented systemic shock and extreme

levels of volatility, which have had an impact on aggregated AVAs .

The Delegated Regulation will enter into force on the day after its publication in the Official

Journal of the EU (OJ). The Commission states that as it is expected that the extreme market

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volatility due to COVID-19 will recede within the next months, the amendments to the RTS

should only apply until 31 December 2020.

Separately, the UK House of Commons European Scrutiny Committee has published a letter

from Sir William Cash, Committee Chair, to John Glen, Economic Secretary to the Treasury. The

Committee is concerned that the draft Delegated Regulation appears to go beyond the

recommendations for additional flexibility in the implementation of the Basel III standards

agreed by the Basel Committee on Banking Standards in March and April 2020, especially with

respect to the prudential treatment of certain loans and assets, and the calculation of banks'

leverage ratio. It expresses disappointment that the Treasury's Explanatory Memorandum on the

draft contained little information on the government's position as any changes to the CRR will be

of direct relevance to the UK during the post-Brexit transition period. The Committee therefore

requests the following information by 10 June 2020:

the government's position on the proposed changes made to the EU prudential

framework, especially in relation to the proposed amendments that do not flow from

recommendations by the Basel Committee on Banking Supervision (BCBS), and the

expected impact on lending by the banking industry; and

details about whether the government has sought or is seeking any changes to the

proposed Delegated Regulation, and whether it has been successful in securing them.

COVID-19: BBRS report on impact of government loan schemes on business banking dispute resolution

On 22 May 2020, the Business Banking Resolution Service (BBRS) published a report on the

impact of the government-backed COVID-19 loan schemes on business banking dispute

resolution. The report includes a poll of 500 UK small business decision-makers and focuses on

businesses' experiences with the government's financial aid schemes and the potential economic

consequences and challenges arising from them.

The BBRS was established following Simon Walker's independent review of the scale and

complexity of banking complaints from small and medium-sized businesses (SMEs). The service

is in a live pilot phase and will be fully launched later in 2020. Once it is fully launched, the

BBRS hopes other lenders will join, enabling it to extend its service to more SMEs and banks

across the UK.

CRR: EBA consults on revised RTS on own funds and eligible liabilities

The European Banking Authority (EBA) is consulting on draft RTS on own funds and eligible

liabilities. The intention is to update Commission Delegated Regulation (EU) 241/2014, which

contains RTS specifying some of the eligibility criteria for own funds under the CRR, to reflect

updates made by CRR II. The proposed amendments relate to the following issues:

aligning the existing provisions to changes introduced by CRR II in the area of own funds.

This is the case, in particular, for provisions relating to the regime of supervisory prior

permission for the reduction of own funds and market making; and

specifying some of the newly introduced criteria for eligible liabilities instruments

derived from the own funds regime. These include the absence of direct or indirect

funding for the acquisition of ownership of eligible liabilities, the absence of incentives to

redeem and the need for the resolution authority's prior permission for the reduction of

eligible liabilities. For some of these aspects, the EBA aims to require full alignment

between eligible liabilities and own funds.

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The consultation ends on 31 August 2020.

CRD IV: EBA final report on guidelines on loan origination and monitoring

Following consultation, the EBA has published a final report on guidelines on loan origination

and monitoring, together with an explanatory note on its approach to loan origination and

feedback to its consultation.

The guidelines specify the internal governance arrangements, processes and mechanisms and

requirements on credit and counterparty risk set out in Articles 74(1) and 79 of the Capital

Requirements Directive (CRD IV) relating to the granting and monitoring of credit facilities

throughout their life cycle. They also introduce requirements for borrowers' creditworthiness

assessment, together with the collection of information and data for the purposes of these

assessments, reflecting provisions on creditworthiness assessments in Articles 18 and 20 of the

Mortgage Credit Directive (MCD) and Article 8 of the Consumer Credit Directive.

The guidelines apply from 30 June 2021. The guidelines on loan origination procedures also

apply to loans and advances that already exist on 30 June 2021 if their terms and conditions are

changed after 30 June 2022, provided that the changes follow a specific credit decision approval

and their implementation requires a new loan agreement or an addendum to the existing

agreement. A transition period lasting until 30 June 2024 will apply to allow firms time to

address possible data gaps and adjust their monitoring frameworks and infrastructure.

The guidelines will repeal and replace existing EBA guidelines on creditworthiness assessments

under the MCD.

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Payments

COVID-19: FCA guidance consultation on payment firms and safeguarding customer funds

On 22 May 2020, the UK Financial Conduct Authority (FCA) published a guidance

consultation on additional temporary guidance to strengthen payment firms' (including

payments institutions (PIs) and e-money institutions (EMIs)) prudential risk management and

arrangements for safeguarding customers' funds in light of COVID-19. The guidance is part of a

broader programme of work the FCA was planning to consult on later in the year. This has now

been brought forward due to pressures COVID-19 is placing on firms' finances.

The FCA notes that guidance for firms on safeguarding and managing prudential risk is already

available in its payment services approach document. However, the FCA has evidence that some

firms have not implemented the Electronic Money Regulations 2011 or Payment Services

Regulations 2017 as expected. Examples include commingling of customer and firm funds, firms

keeping inaccurate records and accounts, and not having sufficiently effective risk management

procedures. Therefore, this temporary guidance aims to provide additional clarity to help

strengthen firms' prudential risk management and their arrangements for safeguarding

customers' funds, as well as outline how firms can put in place more robust plans for winding

down.

The guidance includes sections on:

keeping records and accounts and making reconciliations;

safeguarding accounts and acknowledgement letters, including a proposed

acknowledgement letter for safeguarding banks and custodians at Annex 1;

selecting, appointing and reviewing third parties;

when the safeguarding obligation starts;

unallocated funds;

annual audit of compliance with safeguarding requirements;

small PIs;

disclosing information on treatment of funds on insolvency to customers;

governance and controls;

capital adequacy;

liquidity and capital stress testing;

risk-management arrangements; and

wind-down plans.

The consultation closes on 5 June 2020 with the aim of the final guidance, if confirmed, being

published at the end of June 2020.

A full consultation on changes to the approach document, which will likely include a proposal to

incorporate this temporary guidance in the approach document, will be conducted later in 2020.

The FCA proposes that the temporary guidance will remain in place until the approach

document is updated following the full consultation.

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Securities and Markets FCA Market Watch No. 63

The UK Financial Conduct Authority (FCA) has published the latest edition of its Market Watch

newsletter which sets out its expectations of market conduct in the context of increased capital

raising events and alternative working arrangements due to COVID-19.

The FCA recognises the uncertainty created by the coronavirus crisis and operational challenges

arising from the public policy on social distancing. However, it expects all market participants,

including issuers, advisors and anyone handling inside information to continue to act in a

manner that supports the integrity and orderly functioning of financial markets. This includes

complying with all their obligations under relevant regulation including the Market Abuse

Regulation (MAR).

Read more on the FCA's expectations in our briefing: COVID-19: UK FCA urges diligence for

market abuse and managing conflicts of interest.

COVID-19: FCA Primary Market Bulletin No. 28

On 27 May 2020, the FCA published Primary Market Bulletin No. 28, which focuses on issues

resulting from COVID-19. Topics covered include:

a statement on temporary relief for the timing of the publication of half yearly financial

reports;

a statement on market practice on "going concern" assessments, which follows difficulties

raised by issuers about how to address COVID-19-related uncertainties in the "going

concern" assessment and their disclosure in financial statements; and

the FCA's view on issuers' engagement with shareholders at this time, and issuers' role in

delivering "soft pre-emption" in placings.

Securitisation Regulation: ESMA updates Q&As

The European Securities and Markets Authority (ESMA) has published an updated version of its

Q&As on the Securitisation Regulation. As well as modifying some existing questions, the

document addresses new questions relating to:

securitisation repositories; and

disclosure requirements and templates.

MiFID II: ESMA updates Q&As on investor protection and intermediaries

ESMA has updated its Q&As on investor protection and intermediaries under the Markets in

Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation

(MiFIR) (together, MiFID II). The updated version includes a new Q&A on MiFID inducements,

clarifying the application of the MiFID definition of "acceptable minor non-monetary benefits".

MiFID II: ESMA updates Q&As on market structures and transparency

ESMA has updated its Q&As on market structures topics and transparency topics under MiFID

and MiFIR.

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The updated Q&As on market structures issues clarify the authorisation requirements of

multilateral systems facilitating the execution of repurchase agreement (repo) transactions

under Article 5 of MiFID (Q&A 9b on multilateral and bilateral systems).

The updated Q&As on transparency issues include:

a new Q&A that clarifies the default liquidity status, size specific to the instrument (SSTI)

and large in scale (LIS) thresholds of non-equity instruments;

the publication of transactions in an aggregated form (Q&A 20 and 21, Non-equity

transparency); and

an amendment to an existing answer on the conversion of LIS and SSTI thresholds in lots

(Q&A 19, Non-equity transparency).

MiFIR: ESMA confirms ICMA proposals for reporting of central bank repos

The International Capital Market Association (ICMA) has published a response it has received

from ESMA confirming proposals for reporting of central bank repurchase transactions (repos)

under MiFIR. ICMA developed a proposal to report repo trades under MiFIR and submitted

two sample reports and an explanatory note to ICMA in November 2019 for review and

validation. The response from ESMA confirms the main aspects of the ICMA proposals.

International Swaps and Derivatives Association (ISDA) summarises the main points as being:

the basic principle proposed by ICMA was confirmed. Under MiFIR, it is the collateral

that should be reported, not the repo itself;

only the purchase leg needs reporting;

repos with multiple collateral securities should be reported as a Complex Trade, a

concept introduced for certain derivatives. This means breaking up such a repo into

components;

in cases where the collateral allocation is only available after the T+1 reporting deadline,

ESMA leaves it to national competent authorities to assess whether the delay is justified,

taking into account that the reported trade is an securities financing transaction (SFT);

and

pledge-based repos (which are really secured loans, not repos) must be reported, because

the rules on what to report are set by SFT Regulation (SFTR), not MiFIR, and ESMA has

interpreted SFTR as including pledge-based repos.

EMIR: ESMA updates Q&As

ESMA has updated its Q&As on practical questions regarding data reporting issues, under the

European Markets Infrastructure Regulation (EMIR). The updated Q&As add a new Q&A 54

relating to trade repositaries, providing clarifications on reporting of over-the-counter (OTC)

derivatives by a financial counterparty (FC) on behalf of a non-financial counterparty below

clearing threshold (NFC-) under EMIR Refit. In particular, the new Q&A clarifies:

what are the reportable details that the NFC- should provide to the FC;

how the FC should proceed if the NFC- does not renew its legal entity identifier (LEI);

how the FC should proceed if an NFC that has been classified as an NFC+ changes its

status to NFC- and fails to timely inform the FC of this fact; and

how FC and NFC- should proceed if they report to two different trade repositories.

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Outsourcing principles: IOSCO consultation

The International Organization of Securities Commissions (IOSCO) has published a consultation

document on proposed updates to its 2005 outsourcing principles for market intermediaries and

its 2009 outsourcing principles for markets. IOSCO explains that, since they were first

published, developments in markets and technology have increased regulatory attention on

outsourcing risks and the need to ensure the operational resilience of regulated entities.

The principles currently apply to regulated entities that outsource tasks to service providers.

However, IOSCO is proposing to expand their application to include trading venues, market

participants acting on a proprietary basis, credit rating agencies and financial market

infrastructures.

The revised principles comprise a set of "fundamental precepts" covering issues such as the

definition of outsourcing, the assessment of materiality and criticality, their application to

affiliates, the treatment of sub-contracting and outsourcing on a cross-border basis. They also

include seven principles, each of which is supplemented with guidance for implementation,

covering:

due diligence in the selection and monitoring of a service provider;

the contract with a service provider;

information security, business resilience, continuity and disaster recovery;

confidentiality issues;

concentration of outsourcing arrangements;

access to data, premises, personnel and associated rights of inspection; and

termination of outsourcing arrangements.

The consultation report includes a set of questions, including one of particular relevance during

the COVID-19 pandemic:

"What measures for business continuity would be effective in situations where all, or a

significant portion, of both the outsourcers' and third-party providers' work force is

working remotely? In particular, what steps should be taken so Cyber Security and

Operational Resilience can be ensured?"

The consultation was delayed to allow firms and financial institutions to redirect their resources

to focus on the challenges of COVID-19. However, IOSCO has decided to publish the

consultation document as the pandemic has highlighted the need to ensure resilience in

operational activities and to maintain business continuity in situations where both external and

often unforeseen shocks impact both firms and their service providers.

The deadline for comments on the proposals is 1 October 2020; an extended consultation period

(normally 90 days) to take account of the extra pressures on firms presented by COVID-19.

COVID-19: IOSCO statement on fair disclosure of impact

On 29 May 2020, IOSCO published a statement encouraging issuers to provide fair disclosure

about the impact of COVID-19 and related matters. In particular it highlights the importance to

investors and other stakeholders of timely and high-quality information about the impact of

COVID-19 on an issuer's operating performance, financial position, and prospects.

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Insurance Solvency II: PRA PS14/20 and SS1/20 on prudent person principle

Following its consultation, CP22/19, the UK Prudential Regulation Authority (PRA) has

published its feedback and a policy statement, PS14/20, and a supervisory statement, SS1/20, on

the prudent person principle (PPP) under the Solvency II Directive.

Following feedback, the PRA has made some changes to the policy, the most significant of which

involve clarification of:

objective standards;

the extent of risk management and outsourcing expectations; and

the distinction between valuation uncertainty at a point in time and uncertainty over the

realisable value of an asset under stress.

The PRA has also made some minor editorial amendments and typographical changes to

improve the clarity and readability of SS1/20. In addition, following supervisory conversations

with firms, it has clarified in SS1/20 that the PPP applies to reinsurance arrangements. The PRA

does not consider that these changes alter the substance of its expectations.

SS1/20 comes into effect immediately.

ISPV authorisation and supervision updates: PRA PS13/20

Following its consultation in CP19/9, the PRA has published its feedback and policy statement,

PS 13/20, updating its requirements on the authorisation and supervision of insurance special

purpose vehicles (ISPVs).

The PRA's final policy includes:

amendments to the ISPV Part of the PRA Rulebook (Appendix 1);

an updated version of SS8/17: Authorisation and supervision of ISPVs (Appendix 2); and

an updated Multi-arrangement ISPV (MISPV) New Risk Assumption Notification Form

(Appendix 3).

In response to the feedback, the PRA has amended paragraph 3.4 of SS8/17 to improve

readability, and corrected references in paragraph 3.30. It has also corrected typographical

errors identified in the draft policy. The PRA does not believe that these changes alter the policy

intent.

The new policy in SS8/17 takes effect on 22 May 2020. The amendments to the ISPV Part, and

the updated MISPV form will take effect on 26 May 2020.

Insurance regulation beyond Solvency II: BoE speech

The Bank of England (BoE) has published a speech by Charlotte Gerken, Executive Director of

Insurance Supervision, on regulatory views and life beyond Solvency II. Ms Gerken reflects on

what we have learned about Solvency II during a first test of the regime, to inform how the UK

regulatory framework may develop following the end of the EU withdrawal implementation

period, and what some of the regulator's key supervisory priorities are.

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