Legal Shorts 10.01.20 including Barclays urged to stop financing some fossil fuel groups

Barclays urged to stop financing some fossil fuel groups

On 8 January 2020, a group of Barclays’ shareholders filed a climate change resolution at the annual general meeting asking Barclays to phase out its financing of fossil fuel companies that are active agents in driving the climate crisis.

The resolution was co-filed by eleven institutional investors, which collectively manage £130bn, and include Sarasin & Partners, Folksam Investors Brunel Pension Partnership and LGPS Central, as well as 100 individual shareholders, led by ShareAction, the responsible investment charity.

The resolution, the first such resolution filed at a European bank, calls on Barclays to publish a plan to phase out financing companies in the energy sector and gas and electric utilities that are not aligned with the Paris climate agreement, which aims to keep a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels.

Shareholders at Barclays’ annual general meeting in May 2020 will vote on the resolution.

ESMA clarifies Securities Financing Transaction Regulation reporting

On 6 January 2020, ESMA published its final report, its guidelines on reporting under the SFTR, amended SFTR validation rules and a statement on Legal Entity Identifiers. The guidelines aim to clarify a number of provisions of the SFTR and to provide practical guidance on the implementation of some of those provisions. The guidelines aim to reduce the reduction of costs along the complete reporting chain. The guidelines provide clarity on a number of factors including:

  • the reporting start date when it falls on a non-working day –
  • the number of reportable SFTs;
  • the population of reporting fields for different types of SFTs;
  • the approach used to link SFT collateral with SFT loans;
  • the population of reporting fields for margin data;
  • the population of reporting fields for reuse, reinvestment and funding sources data;
  • thengeneration of feedback by trade repositories (TRs) and its subsequent management by counterparties, namely in the case of (i) rejection of reported data and (ii) reconciliation breaks; and
  • the provision of access to data to authorities by TRs.

The guidelines apply from 7 January 2020 or the date on which the relevant reporting obligation in accordance with Article 33(2)(a) of the SFTR becomes applicable, whichever date is later.

ISDA guide on cross-border application of margin rules for non-cleared derivatives

On 7 January 2020, ISDA published a guide to the cross-border application of US, EU and Japan margin rules for uncleared derivatives. ISDA states that the guide is intended to help market participants who will fall under the initial margin requirements for non-cleared derivatives in 2020 and 2021 – in particular, non-dealers – to understand the implications of trading across national boundaries.

ISDA explains that there are practical challenges in analysing multiple foreign rule sets and identifying situations in which different rules will apply, as well as understanding whether substituted compliance is available to reduce the compliance burden. Firms will need to understand the different aggregate average notional amount calculations that are relevant to them, the investment management thresholds that apply to their trading relationships, and the substantive requirements they will have to meet.

The ISDA guide describes the cross-border and substituted compliance rules under different margin regimes, and uses that framework to examine the applicable rules for the US, the EU) and Japan. It focuses on the position of an entity that is not a swap dealer but is either directly subject to margin rules or is obliged to comply with the margin requirements of its counterparties.

FCA and Bank of England announce proposals for data reforms across the UK financial sector

On 7 January 2020, the FCA and the Bank of England outlined their plans to develop their data and analytics capabilities. Both authorities depend on access to high-quality data to fulfil their respective missions of maintaining monetary and financial stability, market integrity, effective competition and consumer protection.

The FCA’s refreshed “Data Strategy” sets out a plan to become a highly data-driven regulator. The strategy outlines the FCA’s increased focus on the use of advanced analytics and automation techniques to deepen its understanding of how markets function and allow it to efficiently predict, monitor and respond to firm and market issues. Alongside investment in new technology and increased use of external data, the FCA will pursue a broader transformation, investing in skills and new ways of working to enable it to better understand and use data and innovative technology. The approach includes establishing data science units in selected parts of the organisation and exploitation of new opportunities arising from the FCA’s migration to cloud-based IT infrastructure.

The Bank of England has published a discussion paper entitled “Transforming data collection from the UK financial sector”, to improve the timeliness and effectiveness of data collection from firms across the financial system.

The discussion paper marks the first step of a review announced in its response to British financier Huw van Steenis’ “Future of Finance” report, which recommended that the Bank of England develops a new digital data strategy. The discussion paper sets out the issues facing the current data collection system and identifies and explores a series of potential solutions, to prompt feedback from and further discussion with industry.

In addition, the FCA, the Bank of England and seven regulated firms have jointly published a “Viability Assessment” report on the latest Digital Regulatory Reporting (DRR) pilot. DRR will potentially allow firms to automatically supply data requested by the regulators, thereby reducing the cost of collection, improving data quality and reducing the burden of data supply on the industry. This document covers an assessment of the technological and economic factors that may impact a shift towards more automation in regulatory reporting. Following this report, the Bank of England and the FCA have committed to continue to work together to:

  • explore joint work on common data standards;
  • commission a joint review of the legal implications of writing reporting instructions as code;
  • commission a joint independent review of some of technical solutions explored as part of the Digital Regulatory Reporting (DRR) pilot; and
  • collaborate closely while engaging with industry and planning future phases.

Andrew Bailey to replace Mark Carney as Governor of the Bank of England

On 20 December 2019, HM Treasury published a press release announcing that Andrew Bailey will succeed Mark Carney as the Governor of the Bank of England. Mr Bailey’s appointment will commence on 16 March 2020 and is for an eight-year term.

Mr Bailey is currently the FCA’s Chief Executive and he has been a member of the BoE’s Financial Policy Committee (FPC) since 2012. To ensure continuity, an interim Chief Executive of the FCA will be appointed ahead of Mr Bailey’s departure to manage the FCA until HM Treasury chooses a permanent successor.