Industry News
22-02-2012
Banks shell out £1.9 billion for UK mis-selling
LONDON, Feb 22 (Reuters) - British lenders paid out a record £441 million in compensation for insurance mis-selling in December, taking payouts for 2011 to £1.9 billion ($3 billion) and raising the prospect of an even bigger bill this year. Britain's financial regulator said payouts in December jumped 16 percent from the previous record of £379 million in November. Aside from September, there has been an increase in monthly payouts every month since April, when banks lost a court case to end a long-running legal battle. Banks may have to pay more than £6 billion to compensate millions of customers who were wrongly sold loan insurance, and analysts are watching the pace of complaints to assess the final scale of compensation. Payment protection insurance (PPI) policies were typically taken out alongside a personal loan or mortgage to cover repayments if customers fell ill or lost jobs, but they were often sold to self-employed or unemployed people who would not have been ...
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22-02-2012
G20 plots course on reining in "shadow banks"
LONDON, Feb 22 (Reuters) ´ Policymakers from the world's top economies meet this weekend in Mexico City to begin finding common ground to tackle the world's economic challenges, which include reining in a $60 trillion financial sector on the fringe of mainstream banking. Leaders of the Group of 20 asked their task force, the Financial Stability Board (FSB), to come up with plans to regulate "shadow banks" like hedge funds, money market funds, repurchase agreements and securities lending. "It will be a major point at issue this year. However, we are not at a stage where the FSB will reach some kind of decision to be reflected [in the] G20 debate," a diplomat attending the 25-26 February 2012 meeting of G20 finance ministers and central bankers said. Regulators are still looking into the sector, but say action is inevitable to stop riskier activities from migrating as mainstream lenders become more tightly supervised. The FSB set up working groups last year to study measures such ...
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22-02-2012
Barnier's "Euro-Vickers" group up and running
The nine members of the "High-level Expert Group on possible reforms to the structure of the EU banking sector" were announced on Wednesday. They include Carol Sergeant, who chairs an HM Treasury group on devising simple financial products. The group is chaired by Erkki Liikanen, the governor of the Bank of Finland and a former European Commissioner. Sergeant, a former senior official at the Financial Services Authority (FSA), advises senior bank executives and chairs Public Concern at Work, a whistle-blowing charity. The other members of the high-level group, who have been appointed in a personal capacity and chosen on the basis of their technical expertise and professional backgrounds, are from Belgium, the Czech Republic, France, Germany, Italy, the Netherlands, and Spain. The Liikanen group's mandate is "to determine whether, in addition to ongoing regulatory reforms, structural reforms of EU banks would strengthen financial stability and improve efficiency and consumer protection, ...
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22-02-2012
FSCS disclosure and due diligence will fall to advisers after Santander fine, IFAs claim
The onus for doing due diligence on products and for considering investor compensation when advising on investments is likely to fall on financial advisers following the Santander fine, IFAs said. Santander was fined £1.5 million for failure to clarify when investments in structured products were covered by the Financial Services Compensation Scheme (FSCS) and when they were not. Although the issue of structured products and their suitability for retail investors has been high on the regulatory agenda since the collapse of Lehman Brothers, the Santander case has highlighted an issue little considered by investors or financial advisers ´ what part compensation plays in the mix when advising on retail investments. Sam Caunt, company secretary at Kingston Independent Financial Advisers, told Thomson Reuters that clients were largely unaware of the FSCS in terms of how it might have an impact on their investment choices. "Are clients aware of the FSCS´ I would say not; certainly ...
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22-02-2012
Regulatory roundup: February 22, 2012
Today´s round-up includes IOSCO publishing a consultation report entitled Suitability requirements with respect to the distribution of complex financial products. Norton Rose Group EU/UK regulatory roundup: February 22, 2012 Date Source Document number Title of document Cross references Comment 21.02.12 International Organisation of Securities Commissions CR03/12Suitability requirements with respect to the distribution of complex financial productsG20 Washington summit declarationJoint Forum report - Customer suitability in the retail sale of financial products and services The International Organisation of Securities Commissions (IOSCO) has published a consultation report entitled Suitability requirements with respect to the distribution of complex financial products (the Consultation Report). The Consultation Report has been produced following concerns regarding the assessment of customer suitability in relation to the distribution of complex financial products arising out ...
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22-02-2012
Pritchard Stockbrokers client assets frozen by FSA
The Financial Services Authority (FSA) has issued a first supervisory notice to Pritchard Stockbrokers Limited. It prevents the firm from undertaking any further regulated activities except to close out transactions already under way and freezing client assets held by them. According to a notice on Pritchard's website, the supervisory notice on February 10, 2012 arose out of a CASS visit by the FSA to Pritchard and the notice also freezes all client assets that are held by Pritchard or controlled by Pritchard but held by other firms. The FSA website states that it had "serious concerns about the way that Pritchard Stockbrokers has been running its business and handling investor money. We are concerned that the firm has failed to adequately protect the money that it holds on behalf of investors, and has allowed this money to be used to meet its own costs". The FSA says that it is continuing to work with the firm, but investors will not be able to withdraw their money or assets at this ...
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22-02-2012
No legal leeway for changing SNB oversight, says expert
ZURICH, Feb 22 (Reuters) - Switzerland has no wiggle room under the constitution to change the way the country's central bank is supervised, according to a legal review commissioned after a currency trading scandal forced the bank's former chairman to quit. Philipp Hildebrand resigned on Jan 9 after his wife bought dollars a few weeks before he oversaw a cap on the strong Swiss franc. He said he could not prove he had been unaware of the transaction and wanted to protect the bank's integrity. Responding to criticism for lax oversight in the affair, the government tasked Paul Richli, a former professor at Lucerne University, with outlining responsibility for supervising the Swiss National Bank in current law and the constitutional room for manoeuvre for any changes. "The legal opinion does not see any other possible solutions that are fundamentally different concerning the distribution of responsibilities between the administration, parliament and SNB internal supervision," the ...
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21-02-2012
Santander fine puts structured products back in the spotlight
Santander's fine for being unclear about when investors in structured products would be covered by the Financial Services Compensation Scheme (FSCS) has shown how careful firms need to be to cover all the bases, a lawyer has said. A structured products specialist, however, thought the fine was "just a relic" of the 2009 review into structured products and that the industry had largely cleaned up its act. Santander was fined £1.5 million for failing to confirm to investors under which circumstances their structured products investments would and would not be covered by the FSCS. The Financial Services Authority (FSA) said that following the financial crisis which became apparent in September 2008, Santander should have realised the increased importance of the FSCS cover to consumers. The FSA also said Santander had taken too long to look into the issues arising mainly with its key facts documents, and to remedy them. Santander contested the FSA's decision and made representations to ...
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21-02-2012
Regulatory roundup: February 21, 2012
Today´s round-up includes the Council of the European Union adopting the proposed Regulation on short selling and certain aspects of credit default swaps. Norton Rose Group EU/UK regulatory roundup: February 21, 2012 Date Source Document number Title of document Cross references Comment 21.02.12 Council of the European Union 6625/12PRESSE 54Regulation adopted on short selling and credit default swapsEuropean Commission - Short sellingEuropean Parliament seals ban on sovereign debt speculation and short selling limitationsESMA - Short selling The Council of the European Union has issued a press release stating that it has adopted the proposed Regulation on short selling and certain aspects of credit default swaps. The Regulation introduces common EU transparency requirements and harmonises the powers that regulators may use in exceptional situations where there is a serious threat to financial stability.Adoption of the Regulation follows agreement reached with the European Parliament ...
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21-02-2012
Credible deterrence here to stay, says FSA's McDermott
The Financial Services Authority (FSA)'s "credible deterrence" regime is here to stay and will continue under the new Financial Conduct Authority (FCA), according to Tracey McDermott, acting director of enforcement and financial crime. McDermott also warned that the FSA and the FCA would not hesitate to use "early intervention" as an enforcement tool. Speaking at a City & Financial enforcement conference today, McDermott said that the creation of the FCA represented a real opportunity for regulators and the industry to approach things differently. She said that consumer confidence in the financial services industry was at an all-time low, and stressed: "Something needs to change." McDermott said that the FCA, which will take over responsibility for enforcement following the abolition of the FSA, could play a significant role in restoring confidence in the industry. "Credible deterrence is here to stay and [the FCA] will carry on the enforcement work of the FSA," she said. She added ...
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20-02-2012
Lloyds changes to interest-only mortgages symptomatic of not treating customers fairly, says Charcol
Mortgage broker John Charcol has said that Lloyds Banking Group's new policy for interest-only mortgages fails to treat customers fairly and is an unintended consequence of over-zealous regulation. Lloyds announced changes to its interest-only mortgage lending criteria that restrict which types if repayment plans will be acceptable in the future. The changes follow similar moves last month by Barclays/Woolwich and Santander. Ray Boulger, senior technical manager at Charcol, told Thomson Reuters that the moves appeared to have been prompted by regulatory changes proposed in the Mortgage Market Review (MMR) consultation paper published at the end of last year. He said the problem was that while for many first-time buyers, interest-only mortgages were unlikely to be the best option, many existing homeowners with interest-only mortgages would be penalised by the banks' changes. Many would be unable to move home because in theory they would not meet the new affordability criteria now demanded ...
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20-02-2012
ESMA begins EMIR level-two process with a discussion paper; plans public hearing next month
The European Securities and Markets Authority (ESMA) is seeking views on detailed rules, known as technical standards, it will be required to draft for 'EMIR', the European regulation for OTC derivatives, central counterparties and trade repositories. As part of the 'level two' process (where the politically agreed EMIR itself is 'level one'), ESMA submits draft regulatory technical standards (RTS) and implementing technical standards (ITS) to the European Commission, which in a new fast-track process agreed in the 2007 Lisbon Treaty known as 'delegated acts' (because the European Parliament and Council delegate quasi-legislative power to the Commission), adopts them as 'Commission regulations'. Although Commission regulations do not pass through the normal European lawmaking process as European regulations (and directives) do, they are legally binding and, like European regulations, directly applicable across the European Union. Following the political agreement on EMIR earlier this ...
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20-02-2012
UK regulator warns against 'unreasonable' use of tribunal system
The UK's Financial Services Authority (FSA) has warned firms not to use the Upper Tribunal process 'unreasonably' after it was awarded costs against a small firm that unsuccessfully appealed the cancellation of its permission. It is the first time the regulator has applied for its costs to be awarded in a case heard at the tribunal. The tribunal handed the FSA £8,665.60 after it dismissed a claim by Scottish accountant James Perman & Company (JPC). The regulator cancelled the permission of the Ayrshire-based firm in June 2010 after JPC 'repeatedly' refused to comply with the FSA's request to conduct a supervisory visit to its offices. JPC referred the matter to the Upper Tribunal in July 2010 but the reference was dismissed and the firm's permission was cancelled. The FSA then successfully applied to the tribunal to recover its costs, arguing that it had offered the firm a reasonable settlement in November. An FSA spokesman said that the move was rare but that the regulator believed ...
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20-02-2012
Iceland's financial watchdog sacks director
REYKJAVIK, Feb 18 (Reuters) - Iceland's Financial Surveillance Authority (FME) said on Saturday it had sacked director Gunnar Andersen following a report into his time as an executive at failed bank Landsbanki. The FME said the report showed that, in a response to a request by the FME in 2001 for information on Landsbanki's international operations, Andersen left out two Guernsey-registered companies owned by a holding company that was foreign-registered albeit fully owned by Landsbanki. The FME said in a statement on its website that Andersen did nothing illegal at the time but the news risked tarnishing his credibility as director of the FME. "Our view is not that these events cast doubt on him as a fit and proper person to perform his day-to-day duties but as this information is now in the public eye, it could distract the operation of the FME and reduce public trust and confidence in the institution," the report, commissioned by the FME and posted on its website, said. ...
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20-02-2012
US official "optimistic" on global accounting move US official "optimistic" on global accounting move
LONDON, Feb 20 (Reuters) - A senior U.S. regulator was "optimistic" on Monday about finding a framework for the world's top economy to use global book keeping rules for investors to compare cross-border companies. "We are hopeful we can put forward a model," James Kroeker, chief accountant at the U.S. Securities and Exchange Commission (SEC), told Reuters. More than 100 countries, including Europe, use accounting rules from the International Accounting Standards Board (IASB) and are waiting to see if the world's biggest capital market, with up to 12,000 listed companies, adopts them too. Other heavyweights like Japan would likely follow suit. Kroeker said the SEC had delayed its decision due the more urgent and heavy work of fleshing out a reform of Wall Street known as Dodd-Frank. Work on aligning U.S. and IASB accounting rules aimed at paving the way to U.S. adoption has also taken more time, along with a review of IASB governance. Kroeker said he will make a proposal ...
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20-02-2012
CPP suspends its shares after new pressure from FSA
LONDON, Feb 20 (Reuters) - British credit card insurer CPP has decided to suspend its shares following new scrutiny from the Financial Services Authority (FSA) regulator into its business practices, which have been the subject of an FSA probe for much of the last year. CPP said on Monday that the FSA wanted it to review other previous business sales and make some changes to its renewals process. CPP reiterated that the ongoing FSA probe would have a "significant adverse financial impact" on the company, and would therefore suspend trading in its shares given the ongoing uncertainty over the company's position. CPP, whose products help victims of identity theft, has been under investigation by the FSA since last March. The regulator said CPP may have overstated the risks of identity theft to customers and may not have explained properly how its products worked. Last week, it suffered a new blow when Barclaycard decided against renewing its contract with the company. ...
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20-02-2012
Regulatory roundup: February 20, 2012
Today´s round-up includes the FSA publishing a memo entitled Transactions in flex derivatives contracts conducted through Eurex OTC. Norton Rose Group EU/UK regulatory roundup: February 20, 2012 Date Source Document number Title of document Cross references Comment 17.02.12 Financial Services Authority Transactions in flex derivatives contracts conducted through Eurex OTCFSA Market Watch - Issue 40FSA Market Watch - Issue 41 The FSA has published a memo entitled Transactions in flex derivatives contracts conducted through Eurex OTC. In this memo, the FSA discusses the guidance on reporting transactions in derivatives concluded through clearing platforms of derivatives markets (ISIN and Aii), which it set out in issue 40 of its Market Watch newsletter.The memo confirms that the FSA and the approved reporting mechanisms (ARMs) will obtain instrument reference data for Eurex flex derivatives contracts enabling it to identify and accept the instruments for those transactions. Therefore, ...
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20-02-2012
Lloyds claws back £1.5 million in bonuses after insurance debacle
LONDON, Feb 20 (Reuters) - Lloyds will claw back nearly £1.5 million ($2.4 million) of bonus payments to its former chief executive and four other leading directors, following an insurance mis-selling debacle at the part state-owned British bank. Lloyds, 40 percent owned by the government after a bailout, said on Monday it would reclaim some of bonuses it paid out on its 2010 results to take into account a £3.2 billion ($5.1 billion) provision it made last year over mis-sold payment protection insurance (PPI). Lloyds' decision to take back the bonuses marks the first time that a British bank has exercised a "clawback" option on executive pay packages since the 2008 financial crisis. It also follows renewed scrutiny from politicians and the general public over bankers' bonuses. Last month, Lloyds Chief Executive Antonio Horta-Osorio, who replaced Daniels in 2011, waived his bonus after taking time off work on sick leave. Philip Hampton and Stephen Hester, the chairman and ...
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17-02-2012
EIOPA 2012 action plan for colleges focuses on basics, says PwC
The 2012 action plan for colleges of supervisors published by the European Insurance and Occupational Pensions Authority (EIOPA) is not hugely ambitious and instead concentrates on the basics, such as setting a first meeting, according to Paul Clarke, global Solvency II leader at PwC. The plan broadly sets two main targets: Solvency II preparation and information exchange within colleges. EIOPA said colleges which had not been constituted until now or which had not fulfilled the college work plan 2011 should, among other things, organise a college meeting, agree on the scope of group supervision and start discussing the group's nature and main risks. They should agree on a 2012 work plan, set up an emergency plan and start discussing a coordination arrangement. According to EIOPA, all colleges, including the above, should have a work plan where the group internal model is designed to calculate the consolidated group solvency capital requirement (SCR), as well as the SCR of insurance ...
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17-02-2012
UK Bribery Act puts pressure on Asian countries and companies, conference hears
The UK Bribery Act will be used to pressure Asian countries to improve their anti-corruption programmes, according to speakers at a Hong Kong conference. The act was also likely to be used by the UK government as a tool of economic policy against Asian businesses competing with British firms, added one in-house lawyer for an information technology company. Peter Connor, general counsel for Europe, the Middle East and Africa at Citrix Systems in Switzerland, said Asian companies needed to have broader, practical, more holistic anti-corruption programmes to comply with the act. They also needed to factor in the U.S. Foreign Corrupt Practices Act (FCPA) and how it differs with the UK Bribery Act (UKBA) on private versus public sector corruption, he added. Speaking at the Anti-Corruption Asia Congress in Hong Kong this week, he stressed that while third-party checks were important, in a region where corruption can be rife, companies needed to focus on their compliance programmes and ...
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17-02-2012
Italy mulls fee to rein in ultra-fast share trade
MILAN, Feb 16 (Reuters) - Italy will introduce a special fee to rein in high-frequency share trading as soon as next month, two sources close to the market regulator said on Thursday, making it the latest European country to seek to curb volatility in their stock markets. "The Italian bourse is mulling an overhaul of its fee structure to include a special fee that will hit those who submit and immediately cancel a high amount of orders," one of the sources said, referring to an activity typically related to high-frequency trading (HFT). Computer-driven high-frequency trading has been blamed by critics for making markets more volatile, although others say the practice boosts liquidity. HFT strategies attempt to profit from ever-smaller price movements in stocks. The orders they generate are therefore more likely to be cancelled or amended quickly as the prices of other stocks or instruments change. Earlier this year, France said it would introduce a 0.01 percent tax on high-frequency ...
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