Board diversity: PRA letter
The Prudential Regulation Authority (PRA) has written to chairs of regulated firms aiming to reinforce the importance it places on diversity for improving decision-making and providing effective challenge. It also reminds firms of the requirement to comply with PRA rules in this area and refers to:
- PRA supervisory statement SS5/16 on corporate governance; and
- the European Banking Authority's (EBA's) February 2020 report on diversity practices.
The PRA advises chairs to satisfy themselves that their firm is meeting its requirements and to take remedial action where they are not. In doing so, chairs (and where appropriate, chairs of the nomination committee) should consider the extent to which the diversity policy is embedded in recruitment and succession planning for the board, to support constructive debate and challenge on the range of issues facing the firm. Chairs should expect to discuss this with their supervisors through the course of their normal supervisory dialogue.
Supervising liquidity and funding risks: PRA PS4/20 and SS24/15
Following its earlier consultation, CP27/19, the PRA has published a policy statement, PS4/20, and an updated supervisory statement, SS24/15, on its approach to supervising liquidity and funding risks. They are relevant to PRA-authorised UK banks, building societies and PRA-designated UK investment firms.
The PRA received three responses to its consultation. Respondents generally welcomed the proposals, but did request some clarifications, which are set out in chapter 2. The PRA states that it will align supervisory practice with the new policies in SS24/15 and the Bank of England's (BoE) Market Operations Guide, but has made no changes to the proposals outlined in CP27/19.
The updated SS24/15 comes into effect immediately.
BoE launches COP26 private finance agenda
The BoE has launched the 2020 UN climate change conference (COP26) private finance agenda to help private finance support the whole economy transition to net zero. The objective is that every professional financial decision will need to take climate change into account.
The BoE states that, to achieve net zero, every company, bank, insurer and investor will need to adjust their business models for a low carbon world. The right framework for reporting, risk management and returns will embed these considerations and help finance a whole economy transition. The goals are briefly summarised in an infographic.
Mark Carney, outgoing BoE governor, gave a speech at the launch event. The full strategy will be published once Dr Carney's term as BoE governor ends in March 2020 and he takes up his roles as UN Special Envoy for Climate Action and Finance, and the UK Prime Minister's finance adviser for COP26.
The European Central Bank (ECB) has also published a speech on climate change and the financial sector, given by Christine Lagarde, ECB President, at the launch event.
Covid-19: FCA and BoE statements
The Financial Conduct Authority (FCA) has published a statement on its expectations of firms in relation to Covid-19. The FCA states that, working alongside the BoE and HM Treasury, it is working closely with the financial services sector to ensure it is responding effectively to the Covid-19 outbreak.
The FCA states that all firms should have contingency plans in place to deal with major events and, alongside the BoE, it is reviewing the contingency plans of a wide range of firms. This includes assessing operational risks, firms' ability to continue to operate effectively and the steps firms are taking to serve and support their customers.
The FCA expects firms to take all reasonable steps to meet their regulatory obligations, including being able to enter orders and transactions promptly into the relevant systems, use recorded lines when trading and give staff access to necessary compliance support. The FCA has no objection to firms undertaking these activities from backup sites or with staff working from home.
Separately, the BoE has published a Governor statement to the Treasury Select Committee relating to Covid-19. Among other things, the Prudential Regulation Committee is reviewing the contingency plans of banks, insurers and financial market infrastructure.
Evolution of TechSprints: FCA report
The FCA has published a report on the evolution of the FCA TechSprint approach and how it aims to foster innovation through collaboration.
In its report, the FCA explains the TechSprint model and how it has evolved over time. It also provides an evaluation of the model, noting some areas where the FCA is working to further develop and improve its approach in the context of the FCA's wider efforts to foster sustainable and desirable innovation in financial markets. Through case studies, the FCA illustrates key points, learnings and provided added information and insights to help others who are thinking of adopting a similar approach.
The FCA welcomes further engagement and feedback on its TechSprint approach and encourages those with suggestions and ideas to get in touch.
FCA Handbook Notice 74
The FCA has published Handbook Notice 74, which sets out changes to the FCA Handbook made by the FCA board on 30 January 2020 and 27 February 2020. The Handbook Notice reflects changes made to the Handbook by the following instruments:
- Pension Schemes (Disclosure of Transaction Costs and Administration Charges) (Amendment) Instrument 2020 (FCA 2020/2) , in force on 1 April 2020;
- Insurance: Conduct of Business Sourcebook (Access to Travel Insurance) Instrument 2020 (FCA 2020/3) , which comes into force on 1 June 2020 for Annex A and Part 1 of Annex B, and 5 November 2020 for the remainder of the instrument; and
- Fees (Miscellaneous Amendments) (No 15) Instrument 2020 (FCA 2020/8) , in force on 1 April 2020, except for Part 2 of Annex B which comes into force on 31 March 2020.
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