UK: FPC review of the leverage ratio

The Financial Policy Committee published the results of its review of the leverage ratio today: see here (pdf). In its document, the FPC sets out the power it would like HM Treasury to grant it: the power to direct the Prudential Regulation Authority to set leverage ratio requirements and buffers for PRA-regulated banks, building societies and investment firms, including: a minimum leverage ratio requirement; a supplementary leverage ratio buffer that will apply to G-SIBs and other major domestic UK banks and building societies, including ring-fenced banks; and a countercyclical leverage ratio buffer.

The document explains the FPC's intentions in respect of this new power of direction. For example, the minimum leverage ratio requirement would be set at 3%.

Publication of the review was accompanied by an exchange of letters between the Governor of the Bank of England and the Chancellor of the Exchequer: see here (pdf) and here (pdf).

UK: HM Treasury consultation on the FPC's power of direction - mortgage lending and LTV and DTI limits

A consultation paper was published today by HM Treasury setting out the intention (with supporting draft legislation) for the Financial Policy Committee to be given the power to direct the Prudential Regulation Authority and Financial Conduct Authority to restrict institutions' mortgage lending with reference to loan-to-value and debt-to-income limits: see here (pdf). This would apply to owner occupied mortgages; the extent to which such limits should apply to buy-to-let mortgages will be the subject of a separate consultation next year.

Europe: Commission study - the promotion of employee ownership and participation

The European Commission has published a study containing an overview of the development of employee financial participation, including employee share ownership, in the European Union: see here (pdf). The study also identifies and analyses various options for removing the obstacles to transnational participation and ownership. An executive summary, and further supporting documents, are available here.

UK: BIS discussion paper on the register of significant control

The Small Business, Enterprise and Employment Bill is currently before Parliament and will, amongst other things, introduce a new central register of those with significant control over UK companies (the so-called PSC register). The Secretary of State will be required to prepare and publish guidance about the meaning of "significant influence or control" and in this regard the Department for Business, Innovation and Skills has published a discussion paper seeking views on the structure, format and content of this guidance and asks whether an external working group would be an appropriate way to develop it: see here (pdf).

FATF Guidance on transparency and beneficial ownership

The Financial Action Task Force has published Guidance on Transparency and Beneficial Ownership: see here (pdf). The Guidance is intended to assist countries in the design and implementation of measures that will deter and prevent the misuse of companies and other corporate vehicles for money laundering, terrorist financing and other illicit purposes.

Europe: Financial Reporting - ESMA publishes European common enforcement priorities

The European Securities and Markets Authority has published a public statement containing the priorities for it and national authorities in respect of listed companies' financial statements. These priorities - described as European common enforcement priorities - include the presentation of consolidated financial statements and the recognition and measurement of deferred tax assets.

A copy of the public statement is available here (pdf). The accompanying press release is available here (pdf). ESMA has also published Guidelines on the enforcement of financial information: see here (pdf).

UK: Kay Review implementation - a progress report

The Department for Business, Innovation and Skills yesterday published a progress report concerning implementation of the recommendations made in the Kay Review of UK Equity Markets and Long–Term Decision Making: see here (pdf). The report also contains the Government's response to the recommendations recently made by the Law Commission in its report Fiduciary Duties of Investment Intermediaries.

Two additional documents accompany the progress report. The first, a BIS research paper, considers the metrics and models used to assess company and investment performance: see here (pdf). The second document contains notes of a BIS roundtable on the practical and legal issues related to limiting the rights of short-term shareholders during takeover bids: see here (pdf).

UK: FRC discussion paper on succession planning due next spring

An article on the FT.com website, titled "Succession planning faces tighter climate", reports that the Financial Reporting Council will next spring publish a discussion document on succession planning, the purpose of which is to strengthen guidelines to ensure that companies have a clear and consistent policy: see here.

UK: Share loss relief and the meaning of "issue"

The First-tier Tribunal (Tax) gave judgment a few days ago in Thomas v Revenue & Customs [2014] UKFTT 980 (TC). It was required to consider, amongst other things, whether shares had been "issued" in the context of a claim for share loss relief under the Income Tax Act 2007. Section 131 of the 2007 Act sets out the conditions and one of these is that the shares have been subscribed for by the individual. Section 135(2) states that an individual subscribes for shares in a company if they are "issued to the individual by the company in consideration of money or money's worth".

The Tribunal held that in the current context of "... very prescriptive statutory provisions ... it seems to us that if parliament had intended the word 'issue' for the purposes of share loss relief to mean something other than its normal company law meaning, it would have done so by means of an explicit definition" (para. [167]). The Tribunal therefore held, with reference to National Westminster Bank plc v Inland Revenue Commissioners [1995] 1 AC 119, that shares were only issued when the entire process of application, allotment and registration had been completed.

UK: Bank of England publishes resolution framework

The Bank of England has published its framework for resolving failing banks, building societies and certain types of investment firm: see here (pdf). The first part of the document explains the aims of resolution and describes the key feature of the UK's resolution regime. The second part explains how the Bank expects to carry out the resolution of a failing firm in practice, using the powers available to it as the UK resolution authority.

UK: The UK, the Crown Dependencies and the English courts

The Supreme Court gave judgment today in R (on the application of Barclay and another) v Secretary of State for Justice and the Lord Chancellor and others [2014] UKSC 54: see here or here (pdf). This is an interesting and important decision which explores the relationship between the United Kingdom, and the English courts (including the UK Supreme Court), with the Crown Dependencies (and, in particular, the legislative process of the island of Sark, part of the Crown Dependency of the Bailiwick of Guernsey). A summary of the decision is available here (pdf) and in the following recording:

UK: IMA Principles of Remuneration - updated edition published

The Investment Management Association, which has responsibility for remuneration guidance previously issued by the Association of British Insurers, has published the 2014 edition of its Principles of Remuneration: see here (pdf). The Principles set out members’ views on the role of shareholders and directors in relation to remuneration and the manner in which remuneration should be determined and structured. The 2014 edition of the Principles contains a new statement concerning allowances forming part of fixed pay: in general, the IMA's members believe that the use of allowances as part of fixed pay goes against the spirit of simplicity, clarity and pay for performance.

Germany: amended corporate governance code - copy in English available

A copy, in English, of the amended corporate governance code published earlier this year by the Government Commission on the German Corporate Governance Code is now available: see here or here (pdf). A copy of the Code, with the amendments highlighted, is available here (pdf).

Norway: NUES outlines changes to be made to the Norwegian Corporate Governance Code

Earlier this year the Norwegian Corporate Governance Board (NUES) published the changes it proposes to make to the Norwegian Corporate Governance Code: see here (pdf). The revised Code should be published soon.

UK: The CEO of the PRA comments on bonuses and governance

Andrew Bailey, a Deputy Governor of the Bank of England and the Chief Executive Officer of the Prudential Regulation Authority, delivered a speech yesterday in which he referred to several areas of current controversy: bonus policy (in the light of the EBA's recent report on the payment of allowances and their use to circumvent the bonus cap) and individual accountability (against the background of the PRA consultation on the new senior managers regime).

With regard to bonuses, and incentives more generally, Mr Bailey observed "... the bonus cap is the wrong policy, the debate around it is misguided, and the best thing I can say about allowances is that they are a response to a bad policy". With regard to governance, and the new regime, he stated: "... is it really unreasonable to expect the most senior figures to assume responsibility? Not in my view, and in my experience not in the view of those who take on these roles".

FSB key attributes of effective resolution regimes for financial institutions

The Financial Stability Board has published an updated edition of its guidance The Key Attributes of Effective Resolution Regimes for Financial Institutions: see here (pdf). These attributes represent what the FSB believes to be the core elements of an effective resolution regime.

Europe: EBA reports - banks, remuneration and allowances

The European Banking Authority has published the results of its investigation into discretionary remuneration practices within the EU banking sector, focusing in particular on the use of role based allowances: see here (pdf). The use of such allowances, which some banks have classified as fixed remuneration, is controversial because it has provided one way to sidestep the bonus cap within the Capital Requirements Directive 2013/36/EU.

The EBA states in its report that role based allowances that are discretionary, not predetermined, not transparent to staff or not permanent, should be regarded as variable remuneration and not fixed remuneration. In light of this finding, the EBA has issued an Opinion to the European Commission, and to the EU competent authorities, calling for supervisors to ensure that banks' remuneration practices on allowances comply with the EU Law: see here (pdf).

Ireland: incorporation and tax residency - a mandatory or default rule?

It was budget day yesterday in Ireland and the Government provided an update in respect of its corporate tax policy. This included publication of A Road Map for Ireland's Tax Competitiveness: see here (pdf). Media attention has focused on the demise of so-called 'Double Irish' arrangements which take advantage of the possibility of incorporating a company in Ireland that is not resident there for tax purposes: see, for example, here and here. In his budget speech, the Minister for Finance stated that the ability of companies to use the 'Double Irish' would be removed by changing the tax residency rules to require all companies registered in Ireland to be resident in Ireland for tax purposes. This suggests a mandatory rule: incorporation in Ireland will result in residency in Ireland.

It is interesting to note, however, that the Road Map document says that a default rule will be introduced under which all companies incorporated in Ireland will be treated as resident in Ireland for tax purposes. If the term 'default rule' is taken to mean a rule that will apply unless some contrary action or agreement is taken, then this would suggest the possibility for incorporation in Ireland not to be accompanied by residency in Ireland for tax purposes. The publication of the Finance Act 2014, in which the new residency rule will be introduced, should help to clarify this point.

Basel Committee consults on corporate governance principles for banks

The Basel Committee on Banking Supervision has published for consultation Corporate Governance Principles for Banks: see here (pdf). The principles build on the Committee's 2010 document Principles for enhancing corporate governance.

UK: slavery, supply chains and disclosure - Government proposals

The Government has announced, in a press release published yesterday, that "Big businesses will have to publicly state each year what action they have taken to ensure their supply chains are slavery free". The press release, available here, explains that this disclosure requirement will be included in a Bill - the Modern Slavery Bill - that is currently before Parliament. A consultation will take place to decide which businesses will be subject to this new obligation.

UK: FTSE100 directors' earnings increase by 21% in a year - IDS report

Income Data Services report that the earnings of FTSE100 directors have increased by 21% in the past year: see here (pdf).

Italy: new edition of the corporate governance code published

Earlier this year the Italian Corporate Governance Committee published a revised edition of its corporate governance code: see here (pdf). A copy of the code, with the amendments highlighted, is available here (pdf).

Denmark: Recommendations on Corporate Governance

The codes and principles directory maintained by the European Corporate Governance Institute was updated today with a copy of the 2014 Recommendations on Corporate Governance published by the Danish Committee on Corporate Governance: see here.

Ireland: ISE statement on UK Corporate Governance Code and Irish Corporate Governance Annex

The Irish Stock Exchange has announced, following the publication of a revised edition of the UK Corporate Governance Code, that no changes will be made to the Irish Corporate Governance Annex [pdf] which, along with the UK Corporate Governance Code, will continue to apply to Irish incorporated companies with a primary listing on the Main Securities Market: see here.

UK: women on boards - latest monitoring report published

The Department for Business, Innovation and Skills has published the latest edition of its monitoring report in respect of women on FTSE350 boards: see here (pdf). This reports that women now account for 22.8% of board directorships in FTSE100 companies.

NB. European data on board diversity has recently been published by Egon Zehnder: see here.

Ireland: Central Bank consults on new macro-prudential measures

The Central Bank has published a consultation paper in which it sets out proposals to introduce new macro-prudential measures, including placing restrictions on the loan to value and loan to income ratios that lenders can apply when lending for house purchases: here (pdf).

UK: SFO secures first conviction for LIBOR manipulation

The Serious Fraud Office has secured its first criminal conviction as part of its investigation into the manipulation of LIBOR: see here.

UK: Bank of England consultations (including the governance of ring-fenced bodies)

The Bank of England has today published several consultation papers that set out proposed changes designed to improve the resilience and resolvability of deposit-takers and reduce the disruption to customers and the system if a deposit-taker or insurer fails: see here. A consultation paper has also been published in respect of the implementation of bank ring-fencing and this focuses on legal structure, governance and the continuity of services and facilities: see here (pdf). The governance part of this paper considers, amongst other things, the proposed requirements for the composition and structure of the board of ring-fenced bodies.

UK: FPC seeks additional powers of direction in respect of residential lending

The Financial Policy Committee is seeking additional powers which would enable it to direct the Prudential Regulation Authority and Financial Conduct Authority to place limits on residential mortgage lending by regulated lenders, with reference to loan to value ratios and debit to income ratios. Further information is available in a statement published by the FPC setting out the rationale for seeking this new power: see here (pdf).

Ireland: Companies Bill 2012 completes report and final stages in the Seanad Éireann

The introduction of Ireland's new company law framework has moved one step closer. The Companies Bill 2012 has now completed its report and final stages in the Seanad Éireann: see here. The Bill's progress can be followed here.

France: AMF report on corporate governance and executive compensation

AMF has published its 2014 report on corporate governance and executive compensation: see here. The report is based on an analysis of the disclosures made by 60 listed companies in respect of the AFEP-MEDEF corporate governance code published in June 2013.

Europe: obligation to publish prospectus did not apply to enforced sale of securities

The Court of Justice gave its opinion last month in Almer Beheer BV, Daedalus Holding BV v Van den Dungen Vastgoed BV, Oosterhout II BVBA (Case C‑441/12). The court held, to quote directly from its opinion, that: "Article 3(1) of Directive 2003/71/EC ... on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC, as amended by Directive 2008/11/EC ..., must be interpreted as meaning that the obligation to publish a prospectus prior to any offer of securities to the public is not applicable to an enforced sale of securities, such as that at issue in the main proceedings".