RBS 2010 Annual Report Download - page 400

Regulatory developments and reviews
The Group works with domestic and international trade associations and
proactively engages with regulators and other authorities such as the
Basel Committee, the EU Commission, Governments and regulators, in
order to understand the implications of proposed regulatory change and
to contribute to the development of regulatory policy.
The Group and its subsidiaries have co-operated fully with various
regulatory reviews and developments in the UK and internationally,
including enquiries or investigations into alleged or possible breaches of
regulations.
United Kingdom
In the UK, the Group has actively engaged with a large number of
legislative and regulatory consultations. Reflecting global developments,
financial stability - notably bank prudential requirements and the new
regulatory framework - remains a key focus for the UK regulatory
authorities.
The Group has continued to participate fully in the analysis of the cause
of the financial crisis and the development of potential policy and reform.
Awide range of ideas and proposals, aimed at strengthening the
resilience of the banking system and addressing perceived shortcomings
in existing regulation, have been advanced and continue to be developed.
With respect to prudential requirements, the Group provided detailed
feedback on the FSA's consultations on Strengthening Capital Standards
and its Discussion Paper on reviewing trading activities, to name but two.
Other consultations included HM Treasury’s consultations on the
structure of financial regulation and on the new bank levies.
The Group has actively engaged with, and contributed to, a number of
inquiries regarding the future of banking. These included the Independent
Banking Commission, the OFT’s retail banking review and various
Treasury Select Committee inquiries. It has contributed to debates on
resolution frameworks, including possible mechanisms such as
contingent capital and bail-in arrangements, and is participating in the
FSA's pilot for the development of Recovery and Resolution Plans
("Living Wills"). It will be developing suitable Living Wills in line with
forthcoming regulatory requirements.
The Group has continued to play an active role in the development of
requirements impacting products and processes. Examples include the
FSA’s review of mortgages (Mortgage Market Review) and of investment
advice (Retail Distribution Review). With regard to payment cards, the
Group worked closely with the Government (the Department of Business
Innovation and Skills) and the industry to develop and implement
appropriate measures to improve product features and transparency.
With regard to the OFT’s review of Cash ISAs, the Group worked closely
with the industry to agree a series of voluntary improvements to the
product and switching process.
In 2010, the Consumer Credit Directive was transposed into national law
and introduced standardised disclosure requirements for all lenders of
unsecured consumer credit. It is aimed at improving cross border lending
and promoting responsible lending and borrowing.
UK regulated firms within the Group are members of the Financial
Services Compensation Scheme (FSCS), which provides compensation
to eligible customers of authorised financial services firms that are unable
to meet their obligations. The FSCS is a contributor to depositor
confidence and financial stability and the Group is supporting the FSCS
in increasing awareness amongst UK consumers. In addition, during
2010 RBS developed and implemented a new ‘single customer view’
systems capability, which provides tailored information to the FSCS in
order to facilitate fast payment of compensation to depositors within
seven days.
The FSA, in their 2010/11 Business Plan, emphasised that they would be
implementing a new intensive supervision strategy in relation to 'Treating
Customers Fairly' (TCF). The Group has implemented TCF governance
arrangements for all relevant businesses, and continues to undertake a
process of continuous improvement of management information to
demonstrate its continued commitment to treating customers fairly
throughout the product lifecycle.
The Group also continues to co-operate with the Information
Commissioner’s Office, the UK’s independent public body set up to
uphold information rights in the public interest, promoting openness by
public bodies and data privacy for individuals. The Group continues to
improve its processes in line with changing guidelines in order to meet
information security requirements.
European Union/global developments
The Group follows closely the work (and recommendations) of the G20,
as well as international standard setters such as the Basel Committee on
Banking Supervision. Of particular note were the discussions that took
place throughout 2010 regarding proposals from the Basel Committee on
Banking Supervision for an enhanced capital and liquidity framework. The
Group was closely involved in all aspects of the proposals on capital and
liquidity, as well as on other related policy areas, such as countercyclical
capital buffers and contingent capital, being developed separately.
Also notable in 2010 was significant work by the European Commission
and the Committee of European Securities Regulators to review the
Markets in Financial Instruments Directive in areas such as transparency,
investor protection and a widening of the scope of the Directive.
Additionally, proposals to revise legislation on market infrastructure, to
encourage central clearing of derivative instruments, were put forward by
the Commission. The Group provided input in all these areas.
Lastly, the EU has also overhauled its supervisory framework, creating a
system of EU Supervisory Authorities and the European Systemic Risk
Board. Powers of the authorities will include the supervision of national
regulators, but also potentially direct supervision of selected financial
institutions should it be required in specific circumstances.
RBS Group 2010398
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