Financial Stability Board Issues Asset Management-Related Policy Recommendations

On June 22, 2016, the Financial Stability Board (FSB) published for public consultation Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities. The document sets out 14 proposed policy recommendations to address the following structural vulnerabilities from asset management activities that could potentially present financial stability risks:

  1. Liquidity mismatch between fund investments and redemption terms and conditions for fund units;
  2. Leverage within investment funds;
  3. Operational risk and challenges in transferring investment mandates in stressed conditions; and
  4. Securities lending activities of asset managers and funds.

The key recommendations for liquidity mismatch and leverage focus on both public and private funds.

The FSB reported that it “intends to finali[z]e the policy recommendations by the end of 2016, some of which will be operationalized by the International Organization of Securities Commissions (IOSCO).”

Council of Europe Enacts Delay to MIFID II

On June 17, the Council of the EU issued a press release regarding its adoption of a regulation and a directive enacting a one-year delay to the new securities market rules.

Under the new regulation the deadline for member states to transpose MIFID II into national legislation is July 3, 2017 and the date of application of both MIFID II and MIFIR is January 3, 2018.

2015 Annual Reports

The following bodies have released their 2015 annual reports in the past week:

  • EIOPA (European Insurance and Occupational Pensions Authority)
  • ESMA (European Securities and Markets Authority)
  • EBA (European Banking Authority)

Each report contains a review of achievements from 2015 as well as looking forward to the objectives and challenges which will be relevant in the coming year.

EOIPA and China Insurance Regulatory Commission Sign MoU

On June 15, the European Insurance and Occupational Pensions Authority (EOIPA) and the China Insurance Regulatory Commission signed a Memorandum of Understanding to set up joint work programs and pursue joint activities.

The main objectives of the MoU are:

  1. To build a practical framework for exchange of supervisory information.
  2. To update each other on the developments in the regulatory and supervisory frameworks for insurance and private pensions.
  3. To increase mutual understanding on the Chinese (C-ROSS) and European (Solvency II) supervisory regimes for insurance.

EBA Releases Final Draft Regulatory Technical Standards

On June 13, the European Banking Authority (EBA) released the final draft regulatory technical standards on assigning risk weights to specialized lending exposures under article 153(9) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR).

The Capital Requirements Directive requires the EBA to develop draft regulatory technical standards setting out how institutions should take into account financial strength, political and legal environment, transaction and/or asset characteristics, strength of the sponsor and developer, and security package in assessing risk weights to specialized lending exposures.

Rating Agency Developments

On June 14, 2016, DBRS issued a report entitled: General Corporate Methodology. Report.

On June 14, 2016, DBRS issued a report entitled: DBRS Criteria: Evaluating Corporate Governance. Report.

On June 14, 2016, DBRS issued a report entitled: Rating Project Finance. Report.

On June 14, 2016, Moody’s issued a report entitled: Moody’s Approach to Rating Securities Backed by FFELP Student Loans. Report.

On June 14, 2016, Fitch issued a report entitled: Fitch Reviews Global Trading and Universal Banks. Report.

On June 13, 2016, DBRS issued a report entitled: Rating U.S. Structured Finance Transactions. Report.

On June 9, 2016, Fitch issued a report entitled: Fitch Updates Criteria for CLOs and Corporate CDOs. Report.

On June 9, 2016, Fitch issued a report entitled: Fitch Finalizing Changes to FFELP Student Loan ABS Criteria. Report.

CFTC Requests Public Comment on a Rule Amendment Certification Filing by ICE Futures U.S.

The U.S. Commodity Futures Trading Commission (CFTC) seeks comments from the public on a proposed amendment that “would clarify that parties to a block trade may engage in pre-hedging or anticipatory hedging of the position that they believe in good faith will result from the consummation of the block trade, except for an intermediary that takes the opposite side of its own customer order.” Release.