Further to the announcement from HM Treasury (the Treasury) on its approach to amending financial services legislation under the European Union (Withdrawal) Act, this statement provides stakeholders with an update on how we are preparing for the UK leaving the European Union (EU). The Financial Conduct Authority (FCA) continue to prepare for a range of scenarios, including one in which the UK leaves the EU on 29 March 2019 without a withdrawal agreement and implementation period having been ratified between the UK Government and the EU.
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The European Banking Authority (EBA) recently published an Opinion relating to the risks posed by lack of preparation by financial institutions for the departure of the UK from the EU. In this Opinion, the EBA asks Competent Authorities to ensure that financial institutions take practical steps now to prepare for the possibility of a withdrawal of the UK from the EU with no ratified Withdrawal Agreement in place, and no transition period. 

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The working group on euro risk-free rates, for which the European Central Bank (ECB) provides the secretariat, is calling on market participants and all other interested parties to comment on its assessment of candidate euro risk-free rates against key selection criteria. The new euro risk-free rate will replace EONIA, which will no longer meet the criteria of the EU Benchmarks Regulation as of 2020. The three candidate euro risk-free rates are:

The euro short-term rate (ESTER), the new wholesale unsecured overnight bank borrowing rate, which the ECB will produce before 2020; GC Pooling Deferred, a one-day secured, centrally cleared, general collateral repo rate, which is produced by STOXX, a wholly owned subsidiary of Deutsche Börse Group; RepoFunds Rate, a one-day secured, centrally cleared, combined general and specific collateral repo rate, which is produced by NEX Data Services Limited, a wholly owned subsidiary of NEX Group plc, soon to be acquired by CME Group.

The ECB set up the working group on euro risk-free rates in September 2017 together with the Financial Services and Markets Authority, the European Securities and Markets Authority and the European Commission. The working group is tasked with, among other things, identifying and recommending alternative risk-free rates. Such rates could serve as a basis for an alternative to current benchmarks used in a variety of financial instruments and contracts in the euro area.

Invitation
You are invited to submit your comments on this consultation using the response form provided. Please send your response to EuroRFR@ecb.europa.eu by 17:00 CET on 13 July 2018. An anonymised summary of the replies will be published.

Source: https://www.ecb.europa.eu/

The nation’s largest bank holding companies are strongly capitalized and would be able to lend to households and businesses during a severe global recession, according to the results of supervisory stress tests. The most severe hypothetical scenario projects $578 billion in total losses for the 35 participating bank holding companies during the nine quarters tested. The “severely adverse” scenario, the most stringent scenario yet used in the Board’s stress tests, features a severe global recession with the U.S. unemployment rate rising by almost 6 percentage points to 10 percent, accompanied by a steepening Treasury yield curve.
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The Financial Stability Board (FSB) published two guidance documents to assist authorities in implementing its Key Attributes of Effective Resolution Regimes for global systemically important banks (G-SIBs). The guidance documents were issued for public consultation in November 2017 and have been revised in light of the comments received during the consultation. The guidance will support the application of the overall policy framework to end “too-big-to-fail”. Together with the final guidance the FSB published feedback notes setting out how responses to the November public consultations have been incorporated into the final guidance.
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The Financial Conduct Authority (FCA) has published the latest analysis from its Financial Lives survey. Today’s report puts the spotlight on the financial situation of people across the UK and highlights where in the UK people may be more vulnerable. This report finds notable differences between urban and rural areas. In rural areas, where there is greater reliance on bank branches, a higher proportion of people have difficulty getting to a bank and tend not to be able to use online banking. However, people in rural areas are more likely to be satisfied with their overall financial circumstances. By contrast, people living in urban areas are less likely to be satisfied with their overall financial position, are more likely to use high-cost loans and on average have higher levels of unsecured debt.

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The Law Commission made recommendations to Government and the Financial Conduct Authorities (FCA) on Pension Funds and Social Investment. A final joint response to this has now been published. he Law Commission made several recommendations for us in relation to Independent Governance Committees (IGCs), which we have considered carefully.
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In his speech, Fernando Restoy, Chairman, Financial Stability Institute, Bank for International Settlements, on the institutional organisation of financial supervision. “I will focus on how supervisory models have changed since the financial crisis and, in particular, how the role of central banks has evolved in that regard. For that purpose I will draw on a recent publication by the Financial Stability Institute (Calvo et al (2018)) in which we analyse the changes observed in the organisation of financial sector supervision during the last decade across a broad sample of jurisdictions.”

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The Federal Reserve Board on Thursday approved a rule to prevent concentrations of risk between large banking organizations and their counterparties from undermining financial stability. As demonstrated during the financial crisis, excessive exposure between the largest financial institutions spread contagion and eroded confidence in these institutions.

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