Compliance News - 23 July 2010
|
FSA – IMPLEMENTS NEW POWERS
The document includes new rules and guidance covering the following areas:
• Use of the power to impose financial penalties or public censure on those who breach short-selling rules; • Disclosure of significant net short positions (these will go in a new part of the Handbook covering financial stability and market confidence and the current provisions on short selling in the Code of Market Conduct will be deleted); • Use of the power to suspend firms or individuals by stopping them undertaking some or all of the activities which they are permitted to carry on for a period of time; • Use of the power to impose financial penalties on individuals who have carried out controlled functions without the necessary approval from the FSA; • Our policy on the use of the power to gather information in relation to financial stability from specified categories of both authorised and unauthorised persons to help identify potential threats to the UK financial market; • Making alterations to the FEES manual to reflect amendments made by the Act in relation to the Financial Services Compensation Scheme’s (FSCS) contribution to the costs associated with resolutions under the Banking Act 2009. The final issue covered in the document covers further consultation on the proposal to allow the FSCS to recover management expenses from FSCS levy payers when it is acting for another scheme. Source: Financial Services Authority |
|
FSA – STATEMENT ON STRESS TESTING OF BANKS
The FSA has welcomed the publication of the results of the EU-wide stress test exercise conducted by the Committee of European Banking Supervisors (CEBS). The CEBS exercise shows that the UK banks are well placed to handle further periods of economic stress, as outlined in the macro economic parameters detailed by CEBS, should such stress develop.
The purpose of a stress test is to understand the extent to which banks are prepared, should the economic environment take a turn for the worse. It is not a prediction of what will happen or what banks' results will actually be and the CEBS stress test does not take into account actions a bank might take in response to deteriorating economic conditions. It would be misleading therefore to treat the results of the stress test as a forecast either by the FSA or the individual banks. For further details of the CEBS stress testing framework, assumptons in the CEBS exercise and the FSA’s stress testing regime, click on the link below. Source: Financial Services Authority |
|
FSA – TOUGHER PRUDENTIAL STANDARDS FOR CREDIT UNIONS
The Financial Services Authority (FSA) has published its near final rules to strengthen the financial resilience of the credit union sector and reduce the number of credit union failures.
On average, around six credit unions are declared in default each year with customers compensated by the Financial Services Compensation Scheme. The new rules aim to improve the financial soundness of credit unions and therefore maintain consumer choice in the financial services sector. The rules will be contained in a new Credit Union sourcebook (CREDS), which will replace the existing sourcebook CRED. The new rules will raise prudential standards and the main changes are as follows: • New credit unions must have adequate initial capital, the amount of which will be dependent on the nature, scale and complexity of their business. In most cases, smaller credit unions will need to have initial capital of at least £10,000 and larger credit unions at least £50,000; • Smaller credit unions must have a capital-to-assets ratio of at least 3%; and • All credit unions must hold liquid assets of at least 5% of total relevant liabilities but not below 10% per cent in two consecutive quarters. This is the current requirement for smaller credit unions but a slight increase for larger credit unions. The capital-to-assets and liquidity requirements will be phased in, coming into full effect on 30 September 2013, which should give credit unions enough time to comply. The publication of near final rules is timely as it will also help ensure that credit unions are prepared for new Government legislation, which is currently before Parliament and will allow credit unions to carry out a wider range of financial activities. Confirmation of the final CREDS rules will be published after the Government legislation is made, and CREDS will come into effect at the same time as the legislation. Source: Financial Services Authority |
|
FSA – STRENGTHENING CAPITAL STANDARDS 3
The UK is required under EU law to implement amendments to the CRD, which has been set out in new rules. These amendments seek to strengthen the overall financial soundness of credit institutions, and by doing so, they aim to make firms better able to cope with future financial crises.
The paper provides feedback to the responses received to CP09/29: Strengthening Capital Standards 3, explains areas where policy may have changed, and sets out the new rules that firms caught by the CRD must follow under implementation of the amendments to the CRD (the ‘CRD2’ package). This paper also consults on four additional proposals, which could not be included in CP09/29: • Implementing the Committee of European Banking Supervisors (CEBS) guidance on core tier one capital, large exposures and operational risk. • Amending credit risk - 0% risk weight for intra-group exposures under The Standardised Approach. Implementation of the CRD2 rules will now commence from the beginning of 31 December 2010, rather than with effect from the beginning of 1 January 2011 as CP09/29 suggested, reflecting recent advice to Member States from the European Commission. Source: Financial Services Authority |
|
FSA – LEGAL EXPENSES INSURANCE
Ken Hogg, Director Insurance Sector, has written to firms regarding a recent change in interpretation of the 1987 European Directive following a landmark court decision in 2009.
Under the Regulations, the freedom to choose a lawyer arises in the following areas: • Principally under Regulation 6, where recourse is had to a lawyer to represent the insured in any inquiry or proceedings. It is important to note that freedom of choice arises before the commencement of any inquiry or proceedings; • Whenever there is a conflict of interest; and • Finally, if firms have chosen the option in Regulation 5(4) where the insured is afforded the right to entrust the defence of his interest to a lawyer of his choice, then the freedom to choose a lawyer exists as soon as the right to claim under the policy arises, and cannot be curtailed. It follows that any terms that detract from, or qualify in any way, the freedom to choose a lawyer as explained above, will not be compliant with the Directive and will be in breach of the Regulations. In light of the judgment, firms are also reminded that the undertaking given by DAS to the FSA in July 2006 can no longer be relied on, and has been removed from the FSA website. The undertaking has been removed because the freedom to choose a lawyer was qualified in the undertaking. Removal of the DAS undertaking from the FSA website does not detract from the requirement that all firms should have fair terms in their standard contracts with consumers. Source: Financial Services Authority |
|
ABI – FRAUDULENT CLAIMS PEAK
Insurers are detecting more fraudulent insurance claims than ever according to figures released by the ABI. Last year over 2,000 dishonest insurance claims worth more than £16 million were detected every week.
ABI figures show that in 2009: • 122,000 fraudulent insurance claims were uncovered, up 14% on 2008. The value of these claims, at £840 million, rose by 14% on the previous year. • Motor insurance frauds were highest by value, with dishonest claims totalling £410 million uncovered. The most common frauds involved home insurance, with 62,000 bogus or exaggerated claims detected. • 4% of all claims by cost were fraudulent. This is similar to 2008, although double the figure of five years ago. Many of the 8,500 dishonest liability claims exposed involved bogus personal injuries. Examples of such frauds include: • A man claimed he had fractured his hand after falling over a pothole in the street, when in fact he had sustained the injury after he punched a wall during a domestic dispute. • A young woman claimed to have tripped over a loose pavement, when in fact her injuries were actually sustained from jumping down a flight of stairs while running away from security guards on suspicion of shoplifting. • Head injuries allegedly sustained by falling over, were in fact sustained after being hit on the head by a baseball bat during a fight. Nick Starling, the ABI’s Director of General Insurance and Health, said: “Reducing fraud remains an ongoing battle for the insurance industry. Our honest customers rightly object to having to pay higher premiums to subsidise the fraudulent minority, which is why insurers continue to up their game in the war on the cheats. Whether claiming against a third party for bogus personal injury or on their own insurance, fraudsters are more likely than ever to get caught, leading to more expensive and harder to obtain insurance and credit, and the possibility of a criminal record.” Source: Association of British Insurers |
|
CML – GROSS MORTGAGE LENDING UP 15% IN JUNE
Gross mortgage lending in June was an estimated £13.1 billion, a 15% increase from £11.4 billion in May and a 7% increase from £12.2 billion in June last year, according to new data from the Council of Mortgage Lenders.
Gross lending in the second quarter of 2010 was an estimated £35 billion, up 17% from the first quarter of this year (£30 billion) and up 7% from the second quarter of 2009 (£32.7 billion). Lending in the first half of 2010 remained unchanged from the first half of 2009 (£65 billion). CML Economist Paul Samter commented: "Our gross lending estimate of £13.1 billion in June represents a seasonal pick-up and is higher than June last year, but is still indicative of low levels of activity. There are signs of house prices stabilising and more properties coming onto the market following the abolition of home information packs. This may improve liquidity in the market, but transaction levels are subdued and likely to remain so while access to credit remains constrained." "The FSA has outlined a clear direction of travel as part of its mortgage market review. The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit.” Source: Council of Mortgage Lenders |
|
FSCS – PUBLISHES ANNUAL REPORT
FSCS paid £204m in compensation during 2009/10 and is preparing for faster payout. In its Annual Report and Accounts 2009/10, the Financial Services Compensation Scheme (FSCS) reported that it has paid more than £204m in compensation to over 21,000 claimants.
Two thirds of the compensation paid during the year was for Payment Protection Insurance (PPI) and investment claims. PPI claims have increased significantly during the year rising to more than 2,400 and the FSCS expects the numbers of claims in this area to continue to grow in 2010/11. Source: Financial Services Compensation Scheme |
|
FOS – UPDATES ONLINE PPI RESOURCE
Further case studies have been added and the material now includes regular-premium credit card PPI.
Source: Financial Ombudsman Service |
