Europe

EBA Consults on Guidelines on Minimum Professional Indemnity Insurance under PSD2

 

On September 22, 2016, the European Banking Authority (EBA) published a consultation paper (EBA/CP/2016/12) on draft guidelines in relation to professional indemnity insurance (PII) and the criteria competent authorities should follow when stipulating the minimum monetary amount of the PII or comparable guarantees for undertakings that apply to provide payment initiation services or account information services under PSD2 (the Directive on payment services in the internal market ((EU) 2015/2366)). The EBA was mandated to produce the guidelines under Article 5(4) of PSD2. The consultation on the draft guidelines closes on November 30, 2016.

As well as setting out the proposed criteria, the EBA also:

  • Sets out with explanations its proposal to use a formula for the calculation of the minimum monetary amounts.
  • Provides details on indicators for the criteria set out in PSD2 along with the calculation method proposed for some of those indicators.
  • Provides circumstances in which the lowest tier, or default value, should be used.

The EBA also provided practical examples to assist in the calculation of the minimum amount of PII or comparable guarantee.

EBA Consults on Fee Terminology and Disclosure Documents under Payment Accounts Directive

 

Pursuant to the Payment Accounts Directive (2014/92/EU) (PAD), on September 22, 2016, the European Banking Authority (EBA) published a consultation paper on draft technical standards on fee terminology and disclosure documents under the directive.

The EBA will be holding a public hearing at its premises on 21 November 2016 and the consultation process closes on December 22, 2016.

Following the consultation the EBA set out the following three draft technical standards:

  • Draft regulatory technical standards (RTS) setting out the standardized terminology for services that are common to at least a majority of member states (required under Article 3(4) of the PAD).
  • Draft implementing technical standards (ITS) relating to the standardization of presentation format on the fee information document (FID) and its common symbol (required under Article 4(6) of the PAD).
  • Draft ITS relating to a standardized presentation format of the statement of fees (SoF) and its common symbol (required under Article 5(4) of the PAD).

The draft technical standards aim to standardize eight terms for services that are to be used by payment service providers (PSPs), as well as providing consumer-friendly definitions of these terms in all EU official languages. The EBA identified the terminology based on the national provisional lists that member states have developed in line with the EBA’s March 2015 guidelines on standardized fee terminology (see Legal update, EBA final report and guidelines on national provisional lists of the most representative services linked to a payment account and subject to a fee).

PSPs will have to use the proposed standardized terminology in the pre-contractual FID and the post-contractual SoF disclosure documents.

European Commission Adopts Implementing Regulation on ITS for Reporting Results of Internal Approach Calculations under Article 78(2) CRD IV Directive

 

On September 19, 2016, the European Commission adopted an Implementing Regulation implementing technical standards (ITS) for templates, definitions and IT solutions to be used by institutions when reporting the results of their internal approach calculations to the European Banking Authority (EBA) and to competent authorities under the CRD IV Directive (2013/36/EU).

The Implementing Regulation is based on the draft ITS submitted by the EBA to the Commission in March 2015 to which the EBA published an opinion agreeing to the Commission’s amendments to the ITS in May 2016. Once the Implementing Regulation has been published in the Official Journal of the EU (OJ) it will enter into force on the 20th day following its publication.

Deposit Guarantee Scheme Co-Operation Agreement Published by EFDI

On September 15, 2016, the European Forum of Deposit Insurers (EFDI) published its model deposit guarantee scheme co-operation agreement and supporting rulebook.

The recast Deposit Guarantee Scheme Directive (2014/49/EU) requires EU deposit guarantee schemes (DGS) to repay depositors in a cross-border branch through the DGS in the home state country.

The EFDI model co-option agreement covers the cross-border payment framework, mutual lending and the transfer of contributions between DGS. It also contains methodology implementing technical and functional co-operation for cross-border payments together with IT data requirements, funding and crisis communications.

European Parliament Announces Decision to Reject Delegated Resolution of RTS on Key Information Documents for PRIIPs

On September 14, 2016, the European Parliament announced its decision to reject the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance based products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). The text of the legislative resolution rejecting the proposed Delegated Regulation sets out a number of reasons why the Parliament decided to reject the Delegated Regulation, including:

  • The need for detailed guidance on the “comprehension alert” without which there is a risk of inconsistent implementation of this component in the KIDs within the single market;
  • The need for clarification surrounding the treatment of multi-option products; and
  • The risk that the rules within the Delegated Regulation are contrary to the purpose of the legislation which is to provide retail investors clear, comparable, non-misleading and understandable information on PRIIPs.

As well as calling on the Commission to submit a new delegated regulation, the European Parliament also calls on the Commission to postpone the application date of the PRIIPs KID Regulation, to ensure that the requirements in the Regulation and Delegated Regulation are implemented smoothly and avoid the application of level 1 without RTS being in force.

European Commission Calls to Accelerate the Capital Markets Union Reforms

On September 14, 2016, the European Commission published a communication calling for an acceleration of the capital markets union (CMU) reforms (COM(2016) 601 final) in light of the current political and economic context.

Elements of particular interest to financial services practitioners include:

  • The Commission will support the co-legislators in reaching an agreement by the end of 2016 on the modernization of the prospectus rules;
  • The Commission calls on both the European Parliament and the European Council to finalize the Regulation amending the European Social Entrepreneurship Funds Regulation (Regulation 346/2013) (EuSEF Regulation) and the European Venture Capital Funds Regulation (Regulation 345/2013) (EuVECA Regulation) also by the end of 2016;
  • The prospect of a legislative proposal being tabled in 2017 relating to a simple, efficient and competitive EU personal pension product;
  • To reduce capital charges attaching to investments by insurers in infrastructure corporates, the Commission will adopt an amendment to the Solvency II Delegated Regulation (Regulation (EU) 2015/35);
  • In the hope of strengthening retail investor participation in capital markets and opening up the EU market for retail financial services, the Commission will present an action plan on retail financial services.

The Annex to the communication also provides an update on the CMU action plan initiatives.

Implementation Regulation Specifying Main Indices and Recognized Exchanges under CRR Published in OJ

On September 14, 2016, Commission Implementing Regulation (EU) 2016/1646 laying down implementing technical standards with regard to main indices and recognized exchanges in accordance with the Capital Requirements Regulation (Regulation 575/2013), was published in the Official Journal of the EU (OJ). The Implementing Regulation will enter into force on October 4, 2016.

Delegated Regulation on RTS Specifying Criteria for Setting MREL under BRRD published in OJ

 

On September 3, 2016, the Commission Delegated Regulation ((EU) 2016/1450) supplementing the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD) with regulatory technical standards (RTS) highlighting the criteria relating to the methodology for setting the minimum requirement for own funds and eligible liabilities (MREL) has been published in the Official Journal of the EU (OJ).

Article 45(6) of the BRRD specifies certain criteria that a resolution authority must consider when determining the level of MREL for a BRRD institution. Article 45(2) of the BRRD gave the European Commission the power to adopt a Delegated Regulation containing RTS further specifying the Article 45(6) assessment criteria.

The RTS contain provisions relating to the interpretation of the six assessment criteria set out in Article 45(6). They also permit resolution authorities to provide a transitional period for reaching the final MREL for firms or entities to which resolution tools have been applied.

The Delegated Regulation was adopted by the Commission on May 23, 2016. It shall enter into force 20 days after its publication in the OJ (i.e. September 23, 2016).

ECON Objects to Delegated Regulation on RTS on Key Information Documents for PRIIPs

 

The European Parliament published a press release on September 1, 2016 announcing that the Economic and Monetary Affairs Committee (ECON) has voted to object to the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). This market is worth up to €10 trillion in Europe.

The proposed Delegated Regulation sets the regulatory technical standards (RTS) on the presentation, content, review and revision of the KID, together with the conditions for fulfilling the requirement to provide such documents.

ECON’s concerns include the fact that the proposed formulas in the KID for predicting investment performance contain flaws which would make performance look far better than it was likely to be. As such, this would be potentially misleading for investors.

The Commission adopted the Delegated Regulation (C(2016) 3999 final) in June 2016. The resolution will now proceed for consideration by the European Parliament in a plenary session to be held September 12-15, 2016. The PRIIPs KID Regulation is to apply from December 31, 2016. The press release does highlight that the Commission is prepared “as a second best option” to allow the PRIIPs KID Regulation to apply without the RTS in place.

House of Lords EU Committee Launches Inquiry into Brexit and Financial Services

 

On August 31, 2016, the House of Lords EU Sub-Committee on Financial Affairs published a webpage announcing the launch of an inquiry into Brexit and financial services in the UK. The Sub-Committee will begin its inquiry with two evidence sessions concentrating on the consequences of the referendum result for financial services and potential future arrangements.

The issues to be considered by the inquiry are as follows:

  • The reaction of financial services firms to the outcome of the EU referendum result
  • The possibility of the relocation of financial services firms from the UK
  • Priorities for the UK financial services sector in the withdrawal negotiations and in negotiating a future relationship for the UK with the EU
  • Equivalence rights to access the EU single market for the UK
  • Financial regulatory co-operation between the UK and the EU under different models of EU membership
  • A potential free trade agreement and the UK’s financial sector
  • Potential transitional arrangements
  • The importance of passporting rights for firms operating in the UK
  • Risks for retail customers and investors
  • Considerations for non-EU firms wishing to gain access to the EU through the EU’s equivalence regime