ESMA Final Draft RTS for Central Clearing of Interest Rate Swaps under EMIR

On October 2, the European Securities and Markets Authority (ESMA) published a report containing final draft regulatory technical standards (RTS) for the central clearing of interest rate swaps (IRS) under EMIR. The four IRS classes that will be subject to central clearing are basis swaps, fixed-to-float swaps, forward rate agreements and overnight index swaps, each denominated in a range of currencies.  Report.

The EBA Publishes Updates on the Bank Recovery and Resolution Directive

On October 3, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS), implementing technical standards (ITS) and guidelines relating to group financial support under the Bank Recovery and Resolution Directive (BRRD). Under the BRRD, a number of conditions must be satisfied to permit one group entity to provide financial support to another group entity that meets the conditions for early intervention under the BRRD. The EBA is required to produce draft RTS and guidelines specifying these conditions. The deadline for comments on the consultation is January 4, 2015.

On October 1, the EBA published a consultation paper on draft guidelines on the interrelationship between the sequence of write-down and conversion of liabilities when the bail-in power under the BRRD is used and the hierarchy of capital instruments in the Capital Requirements Regulation. The deadline for comments on the consultation is January 3, 2015. Consultation Paper. Consultation Paper.

ESMA Compliance Table Relating to MiFID Remuneration

On October 7, the European Securities and Markets Authority (ESMA) published a guidelines compliance table relating to its guidelines on remuneration policies and practices under the Markets in Financial Instruments Directive (MiFID).

The table lists the jurisdictions whose national competent authorities (NCAs) have informed ESMA whether they comply or intend to comply with the guidelines. The only jurisdiction in the table listed as not complying is Germany. There is a comment in the table that states that the German NCA (BaFin) does not entirely comply with the guidelines insofar as it excludes from their scope any remuneration agreed within the scope of application of collective agreements. Guidelines Compliance Table.

Q&As and FAQs Updated by the Basel Committee, the FCA, the European Commission and the European Banking Authority

On October 7, the Basel Committee on Banking Supervision issued frequently asked questions on the Basel III leverage ratio framework.

On October 6, the Financial Conduct Authority (FCA) published a Q&A paper for alternative investment fund managers (AIFM) on reporting transparency information to the FCA.

On October 3, the European Commission published a frequently asked questions paper on the Regulation on improving securities settlement and regulating central securities depositories (CSDR).

On October 3, the European Banking Authority updated its Q&As on the single rulebook, publishing 16 new answers to questions largely relating to supervisory reporting and credit risk. Basel FAQs. FCA Q&As. European Commission FAQs. EBA Q&As.

UK FCA Policy Statement on Sponsor Competence and Consultations on Joint Sponsors and Sponsor Conflicts

On September 26, the Financial Conduct Authority (FCA) published consultation paper CP14/21, incorporating its policy statement CP14/02 (sponsor competence) and other changes into the Listing Rules and Prospectus Rules. CP14/21 also includes details of a consultation on joint sponsors and invited views on sponsor conflicts.

The main change is that the FCA has removed the competency framework against which sponsors should assess themselves. LR 8.6.12R(9) now requires sponsors to have effective systems and controls for compliance with each of the five competencies found in LR 8.6.7R(2)(b).

The amendments to LR 8, LR 11 and Appendix 1.1 of LR, set out in the Listing Rules (Sponsors) (Amendment No 5) Instrument 2014 (FCA 2014/54) come into force on February 1, 2015. Amendments to LR 5 and LR13, together with the changes to the Prospectus Rules, each set out in that same instrument, come into force on October 1.  Consultation Paper.

Findings from ICO Visits to Credit Reference Agencies

On September 30, the UK Information Commissioner’s Office (ICO) published a review of the manner in which personal data is processed by credit reference agencies (CRAs).

Although the report focuses on CRAs, the ICO states that the issues highlighted are equally relevant to other organizations processing large amounts of personal data and to lenders who share information with CRAs.

The report identified certain areas that could be improved, including implementing a process to remind organizations supplying data to CRAs of their obligations under the Data Protection Act 1998, and a system to ensure that all CRAs’ clients are audited at least once a year.

The appendices to the report provide advice for firms relating to each of the topics covered by the report including training, staff awareness, data sharing, monitoring and reporting issues and information risk management.  Report.

UK PRA and FCA Publish Final Policy on Implementing the FPC’s LTI Ratios

On October 1, the Prudential Regulation Authority (PRA) issued PS9/14 and the FCA published FG14/8 setting out their final policies on implementing the Financial Policy Committee’s (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.

The policies were published after the FPC noted that acting against the excessive indebtedness caused by a high number of mortgages with high LTI ratios will make the financial system more stable.

The FPC made its recommendation on LTI ratios in June. The FPC recommended that the PRA and the FCA should ensure that mortgage lenders limit the proportion of mortgages at LTI multiples of 4.5 and above to no more than 15% of their new residential mortgages. The final policies of the PRA and FCA include permitting the application of the LTI limit to be at a group level rather than at the level of each regulated entity.  PRA Policy Statement.  FCA Finalized Guidance.

G20 Publishes Report on Effective Approaches to Support Implementation of G20/OECD High-Level Principles on Long-Term Investment Financing by Institutional

On September 21, the G20 published a report on effective approaches to support implementation of the G20/Organisation for Economic Co-operation and Development (OECD) high-level principles on long-term investment financing by institutional investors.

The G20 published the high-level principles of long-term investment financing by institutional investors in September 2013. The principles are designed to assist the OECD, the G20 and any other interested countries to facilitate and promote long-term investment by institutional investors.

The report contains the final version of the effective approaches as agreed by the G20/OECD task force on institutional investors and long-term financing on September 9. Report.

PRA and FCA Issue Consultation on Data Collection on Remuneration Practices under CRD

On September 22, the UK Prudential Regulation Authority (PRA) issued a joint consultation paper with the Financial Conduct Authority (FCA) on data collection on remuneration practices under the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation.

The consultation sets out the PRA and FCA’s proposals to amend their current approach to data collection of remuneration practices and the reporting requirements for banks, building societies, PRA-designated investment firms, IFPRU investment firms and other types of firms to the extent they are to be included in the scope of consolidation of an institution for which data is to be collected in accordance with CRD IV. The proposals concern the remuneration benchmarking information report and the high earners’ report. Consultation Paper.

 

ESAs’ Joint Committee Publishes Report on Risks and Vulnerabilities in the EU Financial System

On September 22, the Joint Committee of the European Supervisory Authorities (ESAs) published its bi-annual report on the risks and vulnerabilities in the EU financial system. The report considers those risks that have worsened or emerged since the ESAs’ previous report, which was published in March and focused on a range of risks including weak economic growth, high levels of private and public debt, and the effects of persistently low interest rates and fragmentation. Report.