On May 16, the European Commission published a consultation paper on reforms to the structure of the EU banking sector, which focuses on policy options for structural separation. The Commission is seeking views on policy options relating to the scope of banks potentially subject to separation. The deadline for responses to the consultation is July 3. Consultation Paper.
The Commission initiated an investigation last week into the inter-bank fees charged by MasterCard in relation to payments made by card-holders from non-EEA countries, restrictions placed by MasterCard on retailers attempting to reduce the cross-border fees they pay and MasterCard’s business rules and practices.
The Commission is concerned that MasterCard’s behaviour is anti-competitive, with inter-bank fees being largely passed on to retailers, harming EU consumers and affecting cross-border business.
The Commission press release announcing the investigation is available here.
An agreement has been reached on the way the European Central Bank (ECB) will be responsible for the supervision of banks within the framework of the single supervisory mechanism.
The agreement, made between the Council of the EU, the European Commission and the European Parliament (EP), was announced in a press release. Billed as being the first step towards a European banking union, the press release summarizes areas where the EP pushed through changes to improve democratic accountability, including a stronger role for national parliaments, a strict division of the ECB between monetary policy and supervision and stronger accountability of the supervisor by the EP.
The next step in the process towards the single supervisory mechanism will be the formal ratification of the agreement by the EP.
On February 5, the European Commission published two legislative proposals designed to reinforce the European Union’s existing rules on anti-money laundering and fund transfers. The legislative proposals comprise a directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, which is complemented by a regulation on information accompanying transfers of funds, designed to ensure the “due traceability” of these transfers. Both proposals take into account the latest recommendations of the Financial Action Task Force. The aims of the proposed directive include:
- The provision of a clear mechanism for the identification of beneficial owners of funds.
- Achieving greater clarity and transparency of the rules on customer due diligence in order to ensure that firms have adequate controls and procedures in place.
- An expansion of the provisions dealing with politically exposed persons.
It was announced on January 6, that the Basel Committee on Banking Supervision’s (BCBS) Group of Governors and Heads of Supervision (GHOS) has endorsed revised Basel III liquidity standards for banks. This was later welcomed in a statement made by Michael Barnier of the European Commission on January 8.
The revised liquidity standards relate to the formulation of liquidity coverage ratio (LCR), which is an essential part of the reforms being made by Basel III. The package of amendments, which is summarised in a document headed Annex 1, comprises of four elements as follows:
- revisions to the definition of high quality liquid assets and net cash outflows;
- a timetable for phasing in the standard;
- a reaffirmation of the usability of the stock of liquid assets in periods of stress (including during the transition period); and
- an agreement that the Basel Committee will conduct further work on the interaction between the LCR and the provision of Central Bank Facilities.
In addition to the revised liquidity standards, the GHOS also reiterated the importance of full and timely implementation of the Basel III standards. It also endorsed a new charter for the BCBS in order to enhance understanding of its activities and decision-making processes, and identified that a review of the net stable funding ratio would also be a priority over the next few years.
On December 19, 2012, the European Commission adopted nine regulatory and implementing technical standards to complement obligations defined under the European Markets Infrastructure Regulation on OTC derivatives, central counterparties and trade repositories. The adoption of the technical standards finalizes requirements for the mandatory clearing and reporting of OTC derivatives transactions. The technical standards will be effective 20 days after publication in the EU Official Journal. EC Release.
On December 10, ESMA published a formal request it had received from the European Commission for technical advice on the observable effects of the Short Selling Regulation since its coming into force on November 1, 2012.
Amongst the specific questions ESMA has been asked to answer are:
1. To what extent any temporary restrictions and bans imposed by competent authorities on short selling have had any positive effects;
2. To what extent the thresholds set for notification to national regulators and public disclosure are appropriate; and
3. Whether the exemption for market makers allows for liquidity provision without undue circumvention.
The European Commission is obliged to report on the issues above to the European Parliament and the Council by June 30, 2013. It has asked ESMA to deliver its technical advice by May 31, 2013. Market participants can expect ESMA to launch a consultation shortly, with a deadline for responses sometime in the spring of 2013.
On October 5, the European Commission published a consultation paper on a possible framework for the recovery and resolution of non-bank financial institutions. The consultation paper covers three types of institutions and focuses on:
- central counterparties and central securities depositories (financial market infrastructures);
- insurance and reinsurance firms; and
- payment systems and other non-bank financial institutions.
For each of these groups of financial institutions the consultation paper first looks to ascertain how and when the failure of a financial institution can threaten the stability of the financial markets, and then considers what arrangements could be needed to ensure that such failures are resolved in an orderly manner.
The initiative follows the adoption, on June 6, of a Commission proposal for an EU framework in this area for banks and investment firms. The Commission invites responses by December 28.
On 5 September 2012, the European Commission published a consultation document seeking views on issues relating to a possible framework for the regulation of the use and production of indices serving as benchmarks in financial and other contracts. The consultation follows the recent revelations regarding the alleged manipulation of the LIBOR and EURIBOR benchmarks.
The Commission has requested views on the following points:
- Information on indices and benchmarks – their definition, their purposes, the methodology behind their production and the persons who produce them.
- Governance and transparency issues concerning the calculation of benchmarks, including data usage and persons contributing such data.
- The use and purposes of benchmarks.
- The ways in which private and public bodies provide benchmarks.
- The potential impact of regulating benchmarks, including the international issues that will need to be considered.
The Commission has requested comments on the consultation by 15 November 2012.
On September 5, the European Commission launched a consultation inviting stakeholders to comment on possible new rules for the production and use of indices servicing as benchmarks in financial contracts. The consultation covers all benchmarks, including commodities and real estate price indices, in addition to interest rate benchmarks such as LIBOR. The consultation will run through November 15. EC Release. EC Consultation.