PCBS has published its first report, which argues that the Government’s planned implementation of the Vickers reforms on ringfencing “fall well short of what is required” and suggests that lobbying from the banking industry will further dilute legislation. PCBS recommends “electrification” of the ringfence, by adding reserve powers to forthcoming legislation in order to implement full separation. It also raises concerns with regard to the heavy reliance on secondary legislation leaves open too many questions of significant policy importance, adding that the absence of such legislation has impeded PCBS as it tries to assess how the Financial Services Act l will give effect to the Vickers recommendations (“it is impossible to say whether parts of the current draft Bill are fit for purpose”. It recommends a strengthened mandate for PRA; that “initial secondary legislation...should give the regulator a duty of ensuring operational independence for the ring-fenced bank in respect of governance, risk management, treasury management, human resourcing, capital and liquidity”; recommends an legislative amendment to impose a legal duty on boards of directors to preserve the integrity of the ringfence and that the regulator be given the power to require a sibling structure between a ring-fenced and non-ring-fenced bank, with a holding company. Among other issues raised: the effect the separation of proprietary trading may have on standards – PCBS will take further evidence on this next year, including considering a the potential for a Volcker rule; FPC should set the leverage ratio, bail-in powers should be included in primary legislation; basic derivatives could be allowed inside the ringfence, subject to conditions – PCBS will look further into this next year; exemptions from the PLAC requirement for overseas assets should place the burden of proof on the bank seeking the exemption. PCBS notes other matters it will report on next year, including competition, corporate governance, how banks are supervised and regulated and how the law, including criminal and civil sanctions, applies to banks and bankers.

The review covered three principal areas of the Lending Code: credit assessment, the UK Cards Association Best Practice Guidelines and the treatment of customers in financial difficulties. Five “green” assessment gradings were issued; no breaches of the Lending Code or management weaknesses were identified and no action plans were requested. It notes that additional requirements in respect of debt collection agents have been embedded into subscribers’ processes and procedures where appropriate.

EBA has published its response to an EC consultation published in October 2012 on a possible recovery and resolution framework for financial institutions other than banks under the provisions of Article 34 of Regulation No 1094/2010 of 24 November 2010. It raises particular concerns with regard to shadow banking and the strong interconnectedness between CCPs and their members.

Text of the above speech, including a Q&A conducted by Glenn Hubbard (Dean of the Columbia University Business School) Abby Joseph Cohen (Senior Investment Strategist, Goldman Sachs) follows. Topics include: ringfencing, the new regulatory framework in the UK and LIBOR.

The report looks at the prudential supervision of microlenders across the EU and identifies the effects of the prudential requirements on microcredit activities resulting from the application of the Banking Consolidation Directive and whether the EU banking prudential requirements need to be amended.

The report considers issues around the Wheatley Review and the reform of LIBOR. It suggests that “if the identity of the benchmark is significantly altered as a result of reform initiatives before existing contracts can be amended it is to be expected that contractual uncertainty may result. Of greatest concern in this regard is the proposed change of sponsor in the context of loan contracts on the LMA standard terms and the sponsor-based definition of the Screen Rate that those terms incorporate … A further concern is the withdrawal of certain tenors and currencies, particularly in the context of existing derivatives contracts which refer to these LIBOR categories, as—for example—certain cross currency swaps may do”.

EIOPA states that the main systemic risks and vulnerabilities faced by the European insurance industry over the coming quarters are: macro-economic risk; credit and market risk and stabilisation in the life insurance sector.

These Regulations prohibit surcharges imposed by traders on consumers in respect of the use of a given means of payment, where the surcharges exceed the cost to the trader of using that means of payment (see regulation 4). Regulation 5 provides for a number of excluded contracts (including contracts for social services, health services and services of a banking or insurance nature) to which the prohibition does not apply. Regulation 6 and the Schedule exempt existing micro-businesses and new businesses from the prohibition until 12 June 2014. Regulations 7 and 8 provide that local weights and measures authorities and the Department of Enterprise, Trade and Investment in Northern Ireland may consider complaints about surcharges, and may apply to a court for an injunction (or in Scotland an interdict or order of specific implement) against a trader acting in breach of regulation 4. Regulation 10 provides that a surcharge in breach of regulation 4 is unenforceable against a consumer and, if already paid, must be repaid to the consumer. (Date in force: 6/4/13)

TSC has published a volume of written evidence with regard to this inquiry.

EIOPA has published its response to an EC consultation published in October 2012 on a possible recovery and resolution framework for financial institutions other than banks under the provisions of Article 34 of Regulation No 1094/2010 of 24 November 2010. It argues that the consultation does not fully address the implications of an insurance failure, suggesting that “the protection of policyholders should also be considered as part of the resolution framework, together with financial stability. Further work is required, however to determine the hierarchy of objectives and when each one would be addressed”.