More banks exploring CBDCs
A survey carried out by the Bank for International Settlements has revealed that most central banks are exploring central bank digital currencies (CBDCs), and more than half of them are conducting concrete experiments or working on a pilot.
93% of central banks are doing some work on CBDCs with 18% of those likely to issue a retail CBDC within the next three years. CBDCs are seen to complement fast payment systems (FPS) which have already been adopted by more than 70-% of those jurisdictions surveyed.
AMF publishes markets and risk outlook
French regulator Autorité des Marchés Financiers (AMF) has published its 2023 Markets and Risk Outlook which summarizes risks across areas including Financial stability, Market organization and functioning and Financing of the economy. The executive summary states:
- The rapid normalization of interest rates is radically changing the environment in which financial market participants operate.
- The risk of a market correction remains very high and largely depends on market participants’ ability to adapt to this new interest-rate environment.
- The rise in interest rates also increases credit risk, adversely affects the sustainability of debt and affects refinancing ability.
- Rising interest rates favor time deposits and regulated passbook savings accounts. After contracting in the second half of 2022, retail investors’ activity in the stock market increased slightly in early 2023.
- Structural risks (cyber, financing of the energy transition) remain high.
Treasury publishes annual review of UK financial services
The UK Treasury, with the City of London Corporation, has published its annual review of UK financial services 2023.
The report reviews the past year in the UK financial services and announces a new Finance for Growth Roadmap which set out a long-term plan to reinforce and renew the UK’s role as a global financial center. As well as confirming some of the comments made in the Chancellor’s Mansion House speech (see below), the report also highlights some areas for strengthening and improvement including:
- Improving UK growth companies’ access to capital from UK investors
- Making the UK a more attractive location for companies to list through proposed changes to listings rules.
- Making the UK a more attractive domicile for investment funds.
- Encouraging a culture of celebrating business success.
- Reacting more swiftly to industry consultations.
The report concludes: “With cooperation between Government, regulators and business closer than ever, together we will deliver not just a more competitive financial services sector but a more innovative economy.”
UK Chancellor outlines future plans
In his Mansion House speech UK Chancellor Jeremy Hunt outlined three themes targeted for future regulation and development.
Hunt referred to the forthcoming consultation response with the Pensions Regulator and the FCA on the Value For Money framework. This framework will set out a roadmap to encourage a new pension type: collective defined contribution funds. Defined benefit (DB) pensions will see a permanent superfund regulatory regime set up to provide sponsoring employers and trustees with a new scaled-up way of managing DB liabilities. Hunt also announced a call for evidence to assess the role of the Pension Protection Fund and proposed accelerating the consolidation of Local Government Pension Scheme assets, with a deadline of March 2025 for all LGPS funds to transfer their assets into local government pension pools.
Hunt announced draft legislation on prospectus reforms, delivering another plank of Lord Hill’s UK Listing Review. He also confirmed that the FCA will begin consultations to inform the markets of any rule changes on removing the requirement to unbundle research costs by the first half of next year. He also announced the establishment of a new “intermittent trading venue” that will improve private companies access to capital markets before they publicly list. This will be up and running before the end of 2024.
Hunt reminded the audience of the passing of the Financial Services and Markets Act which “unlocks wholesale reform of our approach to regulation” he went on to “announce that we are commencing repeal of almost 100 pieces of unnecessary retained EU law, further simplifying our rulebook whilst retaining our high regulatory standards.” He also announced an independent review into the future of payments to deliver the next generation of retail payments, including a review of mobile payments.
ESMA guidance on post-trade transparency
The European Securities and Markets Authority (ESMA) has published a new Manual onpost-trade transparency to provide market participants and national competent authorities with guidance for how to apply the relevant Markets in Financial Instruments Regulation obligations in a consistent manner.
The Manual covers:
- which instruments and transactions are subject to post-trade transparency;
- who has to report and publish post-trade transparency information;
- when post-trade information has to be made public: real-time vs deferred;
- which post-trade information has to be made public: reporting fields and flags; and
- the common aspects as well as the differences between the post-trade transparency regime and the transparency calculations in relation to the scope of instruments and transactions.
ESMA says the Manual will be updated on a regular basis.
A selected summary of key developments for regulated financial institutions
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