Recent regulatory developments focussing on banking and finance. See also our General regulatory news of relevance to all financial institutions.

Contents

• COVID-19: PRA PS19/20 on FSCS temporary high balances coverage extension
• COVID-19: LSB updates Standards of Lending Practice
• Draft Debt Respite Scheme Regulations: House of Lords Secondary Legislation Scrutiny Committee report
• CRR and BRRD: EBA final report on draft ITS on disclosure and reporting of MREL and TLAC
• Operational risk and operational resilience: BCBS consults on principles

COVID-19: PRA PS19/20 on FSCS temporary high balances coverage extension

On 4 August 2020, the UK Prudential Regulation Authority (PRA) published a policy statement, PS19/20, on the Financial Services Compensation Scheme (FSCS): temporary high balances coverage extension. PS19/20 contains feedback to responses to the PRA's July 2020 consultation paper on the FSCS (CP6/20).

The PRA is proceeding with its proposals with no alterations and is extending coverage under the FSCS for temporary high balances (THBs) from six months to twelve months from the date of deposit, or the first date the THB becomes legally transferable to the depositor. Coverage for THBs will revert to six months from 1 February 2021. The extension is in response to the impact of COVID-19 on residential property and investment markets, and access to banking services, for some depositors.

Appendix 1 to PS19/20 contains the PRA Rulebook: Capital Requirements Regulation (CRR) Firms, Non CRR Firms and Non Authorised Persons: Depositor Protection ( THBs) Instrument 2020 (PRA 2020/6), which makes changes to the Depositor Protection Part of the PRA Rulebook. Appendix 2 contains an updated Deposit Guarantee Scheme Statement of Policy. Both the rule changes and the updated Statement of Policy take effect from 6 August 2020.

COVID-19: LSB updates Standards of Lending Practice

The Lending Standards Board (LSB) has published an update on how its Standards of Lending Practice for Business Customers and the related Information for Practitioners apply to products offered under the government's Bounce Bank Loan Scheme (BBLS) and the Coronavirus Business Interruption Loans Scheme (CBILS).

The LSB has also made further changes to the updates to the Standards and the Information for Practitioners to clarify their application to products offered to customers under the CBILS and BBLS and to recognise that the government may issue further guidance relating to the schemes. Sections 2 and 3 of the update set out the revised text, which supersedes the previous version published in May 2020. The LSB has also published a revised text of the Standards (dated August 2020), incorporating these changes.

Draft Debt Respite Scheme Regulations: House of Lords Secondary Legislation Scrutiny Committee report

The House of Lords Secondary Legislation Scrutiny Committee has published its twenty-fourth report of session 2019-21, which comments on the draft Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020. The Regulations establish the first part of a debt respite scheme, offering temporary protection (a breathing space) for people in problem debt who receive professional debt advice or mental health crisis treatment.

The Committee welcomes this policy. However, it asks that the draft explanatory memorandum be amended to include further information the Committee has obtained from HM Treasury about the scope of the new scheme and how it will operate in practice (in particular, how to ensure that people under pressure with problem debt can easily access appropriate advice). The further information is set out in a Q&A format in Appendix 1 to the report, as well as being expanded on in the commentary.

The Committee also urges the government to consider establishing a register of authorised professional debt advisers to help direct people to where they can receive the appropriate support.

CRR and BRRD: EBA final report on draft ITS on disclosure and reporting of MREL and TLAC

The European Banking Authority (EBA) has published its final report on final draft implementing technical standards (ITS) on disclosure and reporting of the minimum requirement for own funds and eligible liabilities (MREL) and the total loss absorbency requirement (TLAC). The six Annexes to the ITS are linked from the press release accompanying the report.

The ITS contain integrated disclosure and reporting obligations for firms relating to MREL and TLAC. They reflect a mandate set out in Articles 430(7) and Article 434a of the CRR and Articles 45i(5) and (6) of the Bank Recovery and Resolution Directive (BRRD).

The EBA will submit the final draft ITS to the European Commission for adoption.

The EBA has proposed different application dates for the supervisory reporting and public disclosure requirements:

• the supervisory reporting requirements will apply from 28 June 2021. The EBA states that the first reference date for reporting in accordance with the ITS is expected to be 30 June 2021; and
• the public disclosure requirements will apply as of the date of application of the requirements to which the templates relate, as specified in the CRR II Regulation and the BRRD II Directive. This means that the provisions on disclosures on TLAC will apply immediately after their entry into force, while the provisions on disclosures on MREL will apply from 1 January 2024 or from any later compliance deadline set by the applicable resolution authority.

The EBA intends to develop a data point model, an XBRL taxonomy and validation rules relating to the reporting requirements, which will be published in Q3 2020.

Operational risk and operational resilience: BCBS consults on principles

The Basel Committee on Banking Supervision (BCBS) has published for consultation two documents in which it proposes new principles for operational resilience and revisions to the principles for the sound management of operational risk:

• Revisions to the principles for the sound management of operational risk proposes updating the principles for the sound management of operational risk to align them with the Basel III operational risk framework that was finalised in 2017, to update the guidance where needed in the areas of change management and information and communication technology (ICT), and to enhance the overall clarity of the principles document; and
• Principles for operational resilience, which proposes new principles that aim to mitigate the impact of potentially severe adverse events by enhancing banks' ability to withstand, adapt to and recover from them. The proposed principles, which build on the proposed updates to the principles for the sound management of operational risk, are largely derived and adapted from existing guidance on outsourcing, business continuity and risk management-related guidance issued by the BCBS or national supervisors. They focus on governance, operational risk management, business continuity planning and testing, mapping interconnections and interdependencies, third-party dependency management, incident management, and resilient cyber security and ICT.

The deadline for comments on both sets of proposals is 6 November 2020.

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