On January 13, 2015, the Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015 were published.
The Regulations amend the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 to introduce a systemic risk buffer (SRB) that will apply to ring-fenced banks (RFBs) and certain large building societies. This measure implements Articles 133 and 134 of the Capital Requirements Directive IV (CRD IV).
The Financial Policy Committee (FPC) will be responsible for setting out the framework for determining which institutions should hold the buffer and, if so, how large the buffer should be. It will need to publish this methodology by May 31, 2016. The Prudential Regulation Authority (PRA) will be responsible for applying the framework and will have ultimate discretion over which firms must hold the buffer and its size.
The Regulations were made on January 12, 2015 and come into force, unless otherwise stated, on May 31, 2016. The systemic risk buffer is applicable from January 1, 2019. Regulations.
The Financial Conduct Authority (FCA) obtains concurrent competition powers on April 1, 2015, enabling it to enforce the prohibitions on anti-competitive behaviour in the Competition Act 1998 (CA98) and the Treaty on the Functioning of the European Union (TFEU) in relation to the provision of financial services. The FCA will also have powers to carry out market studies, and make market investigation references to the Competition and Markets Authority (CMA) under the Enterprise Act 2002 (EA02), in relation to the provision of financial services.
On January 15, 2015, the FCA launched a consultation seeking views on draft guidance papers and amendments to the FCA handbook in relation to their exercise of these powers. Consultation closes on March 13, 2015. Consultation.
The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has published two draft reports on (i) the proposed Regulation on banking structural reforms and (ii) the proposed Regulation on securities financing transactions.
Each of the draft reports contains a European Parliament legislative resolution on each of the Regulations which set out suggested amendments to the European Commission’s original proposals. The draft reports are to be considered by ECON during March 2015 and the European Parliament is scheduled to consider the Regulations at its plenary session on April 27 – 30, 2015. Report (i). Report (ii).
On December 19, 2014, the European Securities and Markets Authority (ESMA) published final technical advice (ESMA/2014/1569) to the European Commission and a consultation paper (ESMA/2014/1570) on the MiFID II Directive (2014/65/EU) and MiFIR (the Markets in Financial Instruments Regulation (Regulation 600/2014).
The consultation paper includes draft regulatory technical standards (RTS) and implementing technical standards (ITS) under the MiFID II Directive and MiFIR. The consultation paper invites responses to the draft RTS and ITS by March 2, 2015, and responses will be used to finalise the draft RTS which will be sent to the Commission for endorsement by the middle of 2015. Technical Advice. Consultation Paper.
The European Securities and Markets Authority (“ESMA“) published final technical advice on December 19 to the European Commission, and a consultation paper on the MiFID II Directive and the Markets in Financial Instruments Regulation (“MiFIR“).
The consultation paper includes draft regulatory technical standards and implementing standards under the MiFID II Directive and MiFIR. Consultation closes on March 2. The accompanying press release is found at the following link: press release.
On December 18, the European Insurance and Occupational Pensions Authority (“EIOPA“) published an updated version of its risk dashboard (dated December 19), together with a background note (dated December 4).
EIOPA states that the risk environment facing the insurance sector remains challenging. Among others, the dashboard suggests that the overall outlooks for macroeconomic risks seems to be worsening, and that profitability challenges remain, due to low investment yields.
On December 18, the government published a European Commission notice (dated December 16) containing guidance on implementing certain provisions of EU Regulation 833/2014.
The notice explains that the Regulation relates to restrictive measures targeting sectorial co-operation and exchanges with the Russian Federation including, among other things, measures aimed at limiting access to EU capital markets for Russian State-owned financial institutions. The guidance is designed to help national authorities and other relevant parties (including EU financial institutions) to implement the Regulation in a uniform manner.
The guidance takes the form of answers to certain questions that have been brought to the Commission’s attention. In relation to the financial services measures, the Q&As cover trade finance, emergency funding, loans (other than for trade finance or emergency funding), and capital markets.
On December 11, the Council of the EU published a note (dated December 10) that amends the ECB’s powers to impose sanctions.
The ECB published its recommendation for a Council Regulation in April 2014. The recommendation aims to establish a coherent regime for the imposition by the ECB for sanctions relating to the performance of its supervisory tasks under the Regulation establishing the single supervisory mechanism, by adapting the framework already set out for the purposes of monetary policy conduct.
The Basel Committee on Banking Supervision (“BCBS“) issued revisions to the Basel II securitization framework on December 11.
The framework, which comes into effect in January 2018, forms part of the BCBS’s broader Basel II agenda to reform regulatory standards for banks in response to the global financial crisis. The revisions aim to address a number of shortcomings in the securitization framework highlighted by the financial crisis and strengthen the capital standards for securitization exposures held in the banking book.
The final requirements set out in the framework incorporate feedback to two rounds of consultation in 2012 and 2013 and take account of two quality impact studies undertaking during those consultations. Compared to the 2013 proposals, this final set of requirements includes amendments that smooth the impact of maturity on capital charges, as well as technical enhancements and clarifications.
On December 11, the European Banking Authority (“EBA“) published its risk dashboard for the third quarter of 2014, summarizing the main risks and vulnerabilities in the EU banking sector.
The data reflected in this version of the dashboard shows that, among other things:
- Capital positions in EU banks reached the highest level since 2009, driven by capital issuances ahead of the stress test and assets quality review exercises;
- Levels of non-performing loans remained stable, but were still high;
- Profitability levels were volatile;
- Shifting of balance sheet structure continued; and
- Loan-to-deposit ration remained fairly unchanged during H1 2014.
The EBA also published an interactive tool.