RBS 2012 Annual Report Download - page 289

RBS GROUP 2012
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Prudential and related reforms
A key focus during 2012 was work on agreeing the EU’s Capital
Requirements Directive (CRD) following the publication of draft legislative
text in 2011 for the CRD IV package to implement Basel III in the EU.
Progress of the legislation was slower than hoped and did not conclude
before the Basel III start date of 1 January 2013. Nevertheless, the
European Banking Authority did press ahead with proposals for a number
of the technical standards mandated by CRD IV, including: reporting of
own funds, liquidity, leverage and large exposures; gain on sale of
associated with future margin income in a securitisation context; credit
valuation adjustment; and prudent valuation.
Other prudential initiatives have included, notably: continued work on
developing the Solvency II framework for insurers; capital requirements
for central counterparties; corporate governance in financial institutions;
and supervision of financial conglomerates.
Market and structural reforms
Key developments included:
x European Markets Infrastructure Regulation - the regulation came
into force on 16 August 2012. In many areas, the European
Securities and Markets Authority (ESMA) is yet to finalise draft
technical standards. Full implementation is likely to be in the third
quarter of 2013, when the final technical standards are due to be
released by the ESMA.
x Markets in Financial Instruments Directive - the European
Parliament voted on the proposal in September 2012 but the Council
of the EU had not agreed its final position by the end of 2012. The
new Irish Presidency of the Council plans to finalise the proposals
before the end of its term in June 2013.
x Financial Transaction Tax - the EU Commission has previously
published proposals, which would see trades in bonds and shares
taxed at 0.1% and complex derivatives taxed at 0.01%. While the
original EU-wide proposal was rejected due to opposition from
several member states, including the UK, a subset of eleven EU
member states has agreed to proceed via the Enhanced
Cooperation Mechanism. The Commission set out detailed
proposals for this in February 2013.
x Other initiatives - these have included proposals to revise the Data
Protection Directive, further changes to the market abuse regime
and prospectus requirements, further legislative developments
impacting credit rating agencies and changes to depositor and
investor protection.
EU retail market reforms
Notwithstanding the focus on prudential and market reforms in response
to the financial crisis, the EU Commission during 2012 also continued to
work on a wide range of retail agenda initiatives. These included:
x bank account transparency, switching and the potential for making
basic bank accounts a legal right for EU citizens;
x the Insurance Mediation Directive II, which could have implications
for packaged accounts with inbuilt insurance products;
x multilateral interchange fees; and
x the Mortgage Credit Directive, which is still progressing through the
legislative process and which covers areas including responsible
lending and pre-contract disclosure.
Regulatory architecture reforms
The Financial Services Act to introduce the “twin peaks” model of
financial regulation received Royal Assent in December 2012 and so the
formal split of the FSA into the Prudential Regulation Authority and the
Financial Conduct Authority will take place on 1 April 2013 as expected.
In the meantime, the FSA continued to alter its structure in anticipation of
the split. The Group has been closely involved in work with trade
associations to respond to a number of related consultations, notably to
the ‘Journey to the FCA’ document.
UK regulatory developments
UK regulatory developments during 2012 continued to be extensively
determined by global and EU developments, with UK regulators working
to implement requirements coming into force and actively participating in
policy development at the EU and global levels. There was less focus on
prudential reviews issued by UK authorities in 2012 but nevertheless a
number of papers were published, including consultations on macro-
prudential tools and large exposures. In addition, there were a number of
other developments specific to the UK.
The future of banking
The Group has actively engaged with, and contributed to, a number of
inquiries regarding the future of banking. These included the
Government’s White Paper on the implementation of the Independent
Commission on Banking recommendations, a Parliamentary inquiry into
banking standards and various inquiries (in Europe as well as the UK)
looking more specifically at LIBOR and other benchmarks. The Group is
represented on, and is working closely with, the British Bankers’
Association Taskforce on Banking Standards, and the Group have
specifically welcomed the developing role of the Chartered Banker:
Professional Standards Board. In addition, work continued on the
finalisation of recovery and resolution planning frameworks.
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