David Parody Chief Operations Officer - FSC · FSC Staff has been given “RM” role. With a firm from birth to maturity to better understand you Targeted interfacing between firm

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8th October 2009

Getting ready for 2015

David ParodyChief Operations Officer

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8th October 2009

What (some) people say about the FSC….

“An expensive, bureaucratic, monster that is out of control”“A regulator that has no idea of our business, with staff that does not know what they are doing”“A tick boxing exercise”“Stops me from doing my business”“Brings nothing to the table”

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8th October 2009

Ever growing FSC

NOTE : Licensees not included : EIFs, MSBs & Auditors

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Dedicating our resources

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Quality of Regulatory Staff

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Composition of FSC income

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Giving a better service

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Controlling costs

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Our response

Direct costs (annual fees) are commensurate with the complexity of the business being undertaken/risks presentedStaffing is recruited and trained to understand the business that they are responsible forFSC Staff has been given “RM” role. With a firm from birth to maturity to better understand youTargeted interfacing between firm and FSC based on assessed risksChallenge process on costs by GoG

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8th October 2009

FSC’s Revised Risk Assessment

Banking Risk-based approach introduced in 2001Generic Risk-based approach for all firms introduced 20042009 Revision seeks to;

Deliver more effective assessmentReduce regulatory compliance elementFocus on ability of firms to face on-coming risksRefocus FSC effortsIncrease numbers of on-site work & turnaround

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Spending our time wisely

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Getting you there quicker

Simplified application processUnified across types of activityFaster turnaroundLess bureaucraticRe-introduced pre-meeting with people that matter

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The FSC’s Crystal Ball

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Steady Growth

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Long Term

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Mixed Bag

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Ready to go

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International Dimension

MoUGuernsey & Luxembourg signed last year

MMoUIOSCO – About to complete process for B signatoryIAIS – Completing self assessment

EU Supervisory bodiesCESRCIEOPSCEBSRegulatory CollegesEuropean Banking Authority (EBA) European Insurance and Occupational Pensions Authority (EIOPA)European Securities and Markets Authority (ESMA)

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8th October 2009

Capital Requirements Directive

On 8 April 2009 the text of Directive 2009/27/EC was published Further amended to require banks to have remuneration policies that do not encourage or reward excessive risk taking.

The remuneration proposals will only apply to staff who take decisions that may affect the level of risk assumed by the firms. The proposed amendments will impose an obligation on firms to have remuneration policies that are consistent with and promote sound and effective risk management. The principals will not dictate the amount or form of remuneration.

All EU credit institutions and investment firms will need to comply with the amended CRD, as implemented by local legislation. The above is due to be effective in July 2011

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8th October 2009

Payment Services Directive

PSD provides the legal foundation for the creation of an EU-wide single market for payments. Aims at establishing a modern and comprehensive set of rules applicable to all payment services in the European Union. Proposed directive has two main sections.

Licensing regime for Payment Institutions. This will apply to firms offering payment services, but which are not currently licensed as Credit Institutions or E-Money Issuers. Conduct of business rules for all payment services providers. These will apply to new Payment Institutions, Credit Institutions and E-Money Issuers. They include requirements on transparency, authorisation of payments, execution of payments and liability.

Banks and E-money providers will be able to rely on their authorisations under the BCD.1 November 2009

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E-Money

EU Commission issued a proposal for a Directive on the taking up, pursuit and prudential supervision of the business of electronicmoney institutions. This will amend Directives 2005/60/EC and 2006/48/EC and would completely repeal Directive 2000/46/EC.The proposed Directive aims to further facilitate the use of E-money. 1 November 2011

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Alternative Investment Vehicle Directive

The French goals for dealing with this area were stability, investor protection and on a secondary level the internal market. Problems with the existing proposed directive, particularly:

Private placement and active marketing had to be differentiatedFreedom of investment (ie in third country funds) had to be protected but they wanted to remove the equivalence requirement as this could not be verified and replace with effective regulation from within the EU and transparency. Only EU domiciled funds would be allowed to bepassported. There needed to be full harmonisation of the role, responsibilities and liabilities of depositories with passporting of depositories permitted.The directive provisions had to be tailored for the different types of funds

A final vote on the directive is anticipated for July 2010Concerns about the draft directive expressed by others, including:

The fact that prime brokers were missing from the textPrime brokers may act as a depository but for collateral not safe keeping. What happens when a prime broker (eg Lehman) defaults?There directive has provision for only one, however there may bemultiple prime brokers. However EU view is just oneWhat about funds where there is no need for a depository?There is no definition of fund administrator in the directive, will it be similar to UCITs?

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8th October 2009

Solvency II

With the implementation date for Solvency II now set it is important that Gibraltar insurers develop a detailed gap analysis of anticipated shortfalls against the requirements of Solvency II as a basis for establishing their implementation plan.Although much of the focus to date has been on the development of the solvency capital requirement (SCR) and technical provisions standards through the QIS exercises, increasingly firms should start giving greater attention and priority to the potential implications of the Pillar 2 and 3 requirements for which draft advice is now becoming available.Quantitative Impact Study 5 (QIS5) – June to November, 2010

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Evaluations

Successful IMF & FATF evaluationsRepeat of FATF?Next IMF type visit?Independent Review by Government of Gibraltar against UK standards?

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Other pipeline issues

Corporate Governance ConsultationMortgage RegulationPII RequirementsApproved Persons

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