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Icsa Guernsey Fiduciary Update Aug 16

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Eamonn Finnerty and Andy Sloan looked at:
• GFSC Supervisory Approach
• Lending, Credit & Finance Project Update
• A Guernsey perspective of Brexit

Published in: Government & Nonprofit
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Icsa Guernsey Fiduciary Update Aug 16

  1. 1. The Fiduciary Regulatory Landscape Presentation to ICSA 9 August 2016 Eamonn Finnerty & Andy Sloan Copyright of Guernsey Financial Services Commission 1
  2. 2. Presentation Overview • GFSC Supervisory Approach • Lending, Credit & Finance Project Update • BREXIT – a Guernsey perspective Copyright of Guernsey Financial Services Commission 2
  3. 3. PRISM Online Services Data Management Operating Platform Risk Based Supervision
  4. 4. Supervision under PRISM Risk mitigation plan Internal challenge- RGP Assess risk probability Engagement level Impact category • Check outcomes • Re-assess firm
  5. 5. Definitions • Impact – The degree of damage that a licensee, fund, registered entity or group, could cause to its consumers, the financial system in the Bailiwick and elsewhere, the Bailiwick economy and the public were it to (a) fail; or (b) fail to observe proper standards of conduct. • Probability risk - Is the likelihood of a problem occurring.
  6. 6. Impact and Engagement Levels Engagement Level High Medium High Medium Low Low Firm Impact Continuous Assessment Full Risk Assessment Risk Assessment Thematic & Trigger based supervision
  7. 7. Probability Risk Categories • Strategy/Business Model Risk • Governance Risk • Conduct Risk • Operational Risk • Financial Crime Risk • Credit Risk • Market Risk • Capital Risk • Liquidity Risk • Insurance Risk • Environmental Risk
  8. 8. Guernsey Financial Services Commission Financial Crime Risk Governance Risk Operational Risk Conduct Risk Strategy / Business Model Risk Capital Risk Overall Risk Insurance Risk Liquidity Risk Environmental Risk 0 20 40 60 80 100 120 140 160 RMP actions since go live
  9. 9. Governance Risk • Insufficient Oversight by the Board of outsourced functions; • Insufficient oversight of risk management by the Board; • Lack of suitable evidence (MI) provided to and reviewed by the board. As a result the Board is unable to demonstrate that it has effective oversight; • Lack of independent challenge to the Board, lack of independence from the group; • Insufficient spread of experience and knowledge of the Boards; and • Lack of independence of key senior management roles, e.g. compliance officer/MLRO; • Poorly written (or non-existent!) minutes and Board Resolutions Guernsey Financial Services Commission 9
  10. 10. Reactive Supervision • Applies to all firms, particularly pertinent to the supervision of low impact firms • Some examples of triggers: • From the firm – regulatory return • From a customer – complaint • From other external sources • From Financial Crime Supervision & Policy Division – e.g. following an AML/CFT visit
  11. 11. Fiduciary Duty in respect of Tax advice Client Money/Assets Data Security RATS Outsourcing Trustee Investment Duty Financial Resources Requirement Client Take On Copyright of Guernsey Financial Services Commission Potential Thematic Reviews
  12. 12. Observations • Really ‘know your client’ • CDD at the heart of the business • Embedded compliance culture • Risks understood, measured, managed and mitigated • Collective understanding and knowledge in business • Good governance is key
  13. 13. The Lending Credit & Finance Project Copyright of Guernsey Financial Services Commission 13 Consumer Credit Focus • Affordability • Transparency • Financial Promotions Advertising & Marketing • Education Innovative FSB Focus • Support & availability • Regulatory landscape • Innovation Soundbox
  14. 14. The Lending Credit & Finance Project Copyright of Guernsey Financial Services Commission 14 Consumer Credit Focus Group Innovative FSB Focus Group Project Board
  15. 15. The Lending Credit & Finance Project Copyright of Guernsey Financial Services Commission 15 Repeal the NRFSB Law Introduce a Lending Credit & Finance Law Enhance Consumer Credit Lending Controls Regulatory Certainty for Lending Innovative FSBs
  16. 16. The Lending Credit & Finance Project Copyright of Guernsey Financial Services Commission 16 –Category 1 –Category 2 –Category 3 –Risk-Based Exemptions & Not Included Discussion Paper outline
  17. 17. Consumer Credit Lending Copyright of Guernsey Financial Services Commission 17 Guernsey Citizens Advice Bureau 2015 Annual Report Total Enquiries in 2014 = 9,850 Of which 1,146 consumer related
  18. 18. Innovation Copyright of Guernsey Financial Services Commission 18
  19. 19. Brexit: a Guernsey perspective Dr Andrew Sloan Director, Financial Stability, GFSC DISCLAIMER: The views and opinions expressed in this presentation are those of the author and do not necessarily represent official policy or position of the GFSC 19
  20. 20. Financial stability risks overblown 20 Source: IMF / COURTIERS Global GDP 2014 US $ Billions
  21. 21. Economics of Brexit 21 Source: City UK: UK financial and related professional services, meeting the challenges and delivering opportunities, August 2016 • Short term: inevitable demand shock, consumer and investment fall, offset by monetary and (potentially) fiscal policy • Long term: depend on terms of trade negotiated by UK with EU & ROW and various other supply side factors
  22. 22. The Three Brexiteers ‘15th July Reuters “BERLIN, July 15 (Reuters) - Germany's finance minister believes it is reasonable for Britain to demand access to the EU market for London's banks, but Berlin will also make demands in talks on Britain's future relationship with the bloc, a ministry spokesman said. The spokesman was clarifying comments made on Thursday by Finance Minister Wolfgang Schaeuble, who said it was "very reasonable" of his British counterpart to want access to the EU single market for financial institutions in London. "He used the word 'reasonable'," the spokesman said on Friday in response to a question from Reuters. "But the sentence then goes on. He said the British would make demands that are reasonable from their point of view, and from our point of view it is just as reasonable that we have demands," the spokesman told a government news conference. "We will see what the result is of this negotiating process. An application has not even been put forward yet and so everything we say about that is speculation," he added. 22
  23. 23. UK ‘options’ (sic) • Hard Brexit: outside single market and customs union • EEA (Norwegian) • Single market access at price of: 1. ‘four freedoms’ 2. contribution to structural funds • Ukraine: single market access with restricted movement of people) • Swiss: series of bilaterals, due to expire in 2017 as a result of referendum result on free movement • Canada: free trade agreement, not single market access, limited coverage of services 23
  24. 24. ‘City UK’ and the UK position 24 Source: City UK: UK financial and related professional services, meeting the challenges and delivering opportunities, August 2016
  25. 25. Four potential scenarios 25
  26. 26. Guernsey and the EU ‘Protocol 3’ in for goods, out for services and people 26
  27. 27. Guernsey and the EU 27 "Guernsey should be seen as an island of stability during this period of uncertainty. We're already a 'third country' for financial services and have had an established 'third country' relationship with the EU for a considerable time” Guernsey Finance Press Release, March 2016.
  28. 28. Guernsey and EU market access Present much market access national regimes, particularly for UK, but: • AIFMD funds regime, ESMA equivalence subject to EC confirmation • MIFID II ‘investment services’ – to replace national regimes post 2018 but without definitive trigger to switch off national regimes. Guernsey EU ‘equivalence’ under: • Statutory audit • Data protection (v. 1995 version, two year grandfathering under v2016 which comes into force 2018) • CRDIV (for operational risk) for banking sector • AIFMD (ESMA assessment requiring confirmation by EC) 28
  29. 29. Guernsey: ‘mandate for UK negotiations’ • States’ instruction to executive: (Billet d’Etat XXX, June, 2016) i. protect Guernsey's interests in the UK exit agreement; ii. replace Protocol 3; iii. protect our constitutional relationship with the UK; iv. look at, and take advantage of, new trading relationship opportunities 29
  30. 30. Guernsey future potential? 21 September 2015 Copyright of Guernsey Financial Services Commission 30 Source: City UK: UK financial and related professional services, meeting the challenges and delivering opportunities, August 2016
  31. 31. Guernsey future potential? “According to the results of a survey of firms collectively administering over £35bn of alternative investments the extension of the EU AIFMD passport to Guernsey would lead to a general 10% increase in fund launched and marketed into the EU and, potentially more significantly, an increase in capital raising per fund by around 20% on average” Guernsey fund flow submission to ESMA on market impact of AIFMD passport. Post Brexit telephone survey response suggests that, long term, direct access to UK and EU markets through cloning could lead to above assumptions being underestimate. 31
  32. 32. Conclusion 32 Could break either way!
  33. 33. Any questions? 33

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