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Keeping their focus on success

Critical Third Parties serving the UK financial sector must ready themselves for compliance with the newly proposed operational resilience requirements.

By Rob Moulton, Fiona Maclean, and Charlotte Collins

On 7 December 2023, the PRA, FCA, and BoE jointly published a Consultation Paper (PRA CP26/23 and FCA CP23/30) which proposes a set of regulatory requirements and expectations for critical third parties (CTPs) that provide services to authorised persons, relevant service providers, and financial market infrastructure entities (FMIs). The key aim of the proposals is to manage potential risks to the stability of, or confidence in, the UK financial system that may arise due to a failure in, or disruption to, the services that a CTP provides to such entities.

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UK regulator continues to raise concerns that current market practices could lead to systemic risk.

By Victoria Sander

The Prudential Regulation Authority (PRA) has issued another communication, the latest of a series related to reinsurance arrangements for the UK life insurance sector. Charlotte Gerken, Bank of England Executive Director, Insurance Supervision and chair of the PRA’s main executive committee, issued a letter on 15 June to Chief Risk Officers (CROs) communicating the PRA’s insights from its recent schematic review of funded reinsurance.

The PRA has identified reinsurance arrangements, which UK annuity providers use extensively, as an area of potential risk, including potential systemic risk due to increasing exposures to a limited number of longevity reinsurance providers to the sector. The latest missive focuses specifically on reinsurance under which the insurer transfers both asset and investment risk as well as the longevity risk to a particular reinsurer — a form of reinsurance increasingly popular for annuity providers writing large amounts of bulk pension annuity business.

The UK government signals a diversion from the onshored regime towards a more flexible financial services regulatory framework.

By Rob Moulton, Anne Mainwaring, and Anna Lewis-Martinez

HM Treasury has published a consultation paper marking the start of Phase II of its financial services review, which will focus on the broader regulatory framework for financial services regulation in the UK post-Brexit.

HM Treasury acknowledges the drawbacks of the EU approach to financial services regulation. Namely, this approach has complicated the operation of the regulatory model under the Financial Services and Markets Act 2000 (FSMA), which HM Treasury considers to be an appropriate framework for financial services regulation in the UK after the end of the transition period. HM Treasury therefore proposes an adaptation of the FSMA model as the most effective approach to the post-EU regulatory framework, acknowledging that the onshored regime of EU legislation will fail to provide an adequate long-term solution for the UK’s post-EU financial services regulatory framework.

Insights from Latham’s flagship event: Managing the risk and promise of digitisation in financial services

Authors: Andrew Moyle, Nicola Higgs, Christian McDermott, and Kirsty Watkins.

The financial services industry is leading the way in outsourcing, with contract values in excess of US$10.7 billion in 2018, causing regulators to focus more than ever on the associated risks. Guidelines on outsourcing arrangements from the European Banking Authority (EBA), which came into effect on 30 September 2019, expand the requirements on institutions in this area, while both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are also increasing their outsourcing supervision and enforcement activity.

We discussed the new requirements for financial institutions to maintain a register of outsourcing arrangements, and adhere to more stringent risk assessment and due diligence requirements at our recent event entitled Balancing the Scales: Managing the Risk and Promise of Digitisation in Financial Services.

10 Key Regulatory Focus Areas for UK/European Wholesale Markets in 2019

By David Berman, Carl Fernandes  Nicola Higgs, Rob Moulton, and Charlotte Collins

This blog post explores developments relating to the EU Benchmarks Regulation and the transition away from LIBOR. This is the third blog of this series, which has been taken from our wider publication: 10 Key Regulatory Focus Areas for UK/European Wholesale Markets in 2019 – Progress Report. Read the full publication here.