European Commission Extends Transitional Period for Capital Requirements for Banks’ Exposures to CCPs

On June 4, 2015, the European Commission published the provisional text of the Implementing Regulation it has adopted to extend the transitional period for capital requirements for EU banking groups’ exposures to central counterparties (CCPs) under the Capital Requirements Regulation (Regulation 575/2013) (CRR).

The current transitional period, which was introduced by an earlier Implementing Regulation, expires on June 15, 2015. The new Implementing Regulation will extend the transitional period by six months to December 15, 2015.

In an accompanying press release, the Commission explains that capital charges for exposures to CCPs are higher if the CCP is not authorized or recognized under EMIR (that is, for a CCP not considered as “qualifying”). Since the authorization and recognition processes take time, the CRR provides a transitional period during which the higher capital requirements will not be applied, to ensure a level playing field. As the authorization and recognition processes for existing CCPs serving EU markets will not be fully completed by June 15, 2015, the Commission has extended the transitional phase to December 15, 2015.

European Commission Requests 11 Member States to Implement Bank Recovery and Resolution Directive (BRRD)

On May 28, 2015, the European Commission published a press release announcing that it has requested 11 member states (Bulgaria, the Czech Republic, France, Italy, Lithuania, Luxembourg, the Netherlands, Malta, Poland, Romania, and Sweden) to fully implement the BRRD.

The member states in question have failed to meet the deadline of December 31, 2014 for incorporating the BRRD into their national law. If any of the countries fail to comply within two months, the Commission may decide to refer them to the European Court of Justice.

ESMA Responds to Prospective Directive and Securitization Consultations

ESMA has responded to the European Commission’s consultations on the Prospective Directive and Securitization, recommending, in relation to prospectuses, an approach that would facilitate access to capital, while stressing the need for maintaining a robust level of investor protection.  It argues that the prospectus should be more comprehensible, focusing on the actual purpose of the prospectus while reducing the burden on issuers where possible. On securitization, ESMA emphasized the need to assess the full impact of ongoing reforms, and to provide investors with incentives to conduct adequate risk surveillance, monitor ongoing risks and perform thorough due diligence of their securitization investments.

ESMA Publishes Consultation Paper on Clearing Obligation Under EMIR

On May 11, 2015, the European Securities and Markets Authority (ESMA) published a fourth consultation paper (ESMA/2015/807) on the clearing obligation under EMIR (the Regulation on OTC derivative transactions, central counterparties and trade repositories (Regulation 648/2012)). The consultation paper provides clarifications on various aspects of the draft regulatory training standards that ESMA is required to draft and submit to the European Commission. Stakeholders are invited to provide comments on the consultation paper before July 15, 2015.

Fourth Money Laundering Directive and Wire Transfer Regulation

The European Commission has published two communications to the European Parliament concerning the position of the Council of the EU on the adoption of the proposed Fourth Money Laundering Directive (MLD4), and the proposed Wire Transfer Regulation (WTR). Both MLD4 and the WTR were adopted by the Council of the EU at first reading on April 20, 2015. In each case the Commission confirms that the Council’s position reflects the political agreement reached on December 16, 2014, between the Parliament and the Council, including elements proposed by both institutions, and states its support for this agreement.

European Commission’s CCP Recovery and Resolution Roadmap

The European Commission has published a roadmap for non-bank recovery and resolution to provide a high-level public description of the planned initiative. Roadmaps give a first description of planned Commission initiatives – they describe the problem and set out possible policy options. They also provide an overview of the different planned stages in the development of the initiative, including consultation of stakeholders and impact assessment work. This roadmap identifies central counterparties as the sector for which a recovery and resolution framework may be necessary. An impact assessment is currently under preparation, with a legislative proposal on central counterparties expected in the third quarter of 2015.

European Commission Publishes Report on the Exercise of the Power to Adopt Delegated Acts Conferred on the Commission by Prospectus Directive

On April 13, 2015, the European Commission published a Report to the Council and the European Parliament on the exercise of the power to adopt delegated acts conferred on the Commission pursuant to Directive 2003/71/EC of the European Parliament and of the Council of November 4, 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (Prospectus Directive).

The Commission Report concludes that while the Commission believes that the delegation of powers to it has been crucial to further develop the single rulebook and therefore establish more harmonized, high quality rules, the Commission has not used some of those powers yet. The Commission Report in this context notes that the provisions concerned will also form part of the PD review required by Article 4 of the PD II, by January 1, 2016. The Commission therefore considers that the EP and the Council should not revoke those delegations of powers in accordance with Article 24b of the PD, as it may need to use those powers to adopt certain delegated acts in the future, in light of the developments on the financial markets.

European Commission Plans to Vet Gas and Energy Contracts and Its Approach to Russian Suppliers

A proposal to grant the European Commission a role in vetting gas supply contracts across the EU has been met with fierce resistance from the member states. The current proposal is another element of the EU’s broader initiative to create an “energy union,” as recommended by the Commission in its framework strategy in late February this year and initially approved on Thursday, March 19, 2015 to lower prices and improve the security of its gas and electricity supplies. The latest draft proposal suggests involving the Commission in all agreements with external suppliers that may affect EU energy security.

European Commission Unveils Tax Transparency Package

The European Commission has laid out its plans in a new Tax Transparency Package to clamp down on tax deals made between EU governments and multi-national corporations. As of next year, EU members would have to declare their cross border tax rulings every three months, as well as divulging information on existing deals. The Package comes during ongoing investigations into a number of member states’ tax regimes, and concerns that tax rulings which give a low level of taxation in one member state can entice companies to shift profits there artificially, leading to serious erosion of possible tax revenues for other member states.

In particular, the Commission is investigating deals between multinationals and governments in Luxembourg, Ireland, the Netherlands, and Belgium, and whether some of these agreements amounted to state aid. Last year, allegations emerged that around 340 multinational companies had tax avoidance deals with Luxembourg.

Prospectus Directive: Commission Consultation

On February 18, 2015, the European Commission published a consultation paper on the review of the Prospectus Directive (2003/71/EC). Matters on which the Commission seeks views include:

When a prospectus is needed. In particular, views are sought as to whether the current exemption thresholds should be adjusted so that a larger number of offers can be carried out without a prospectus; whether there should be an exemption for secondary issues under certain conditions, in addition to the proportionate disclosure regime for rights issues; and whether a prospectus should be required when securities are admitted to trading on an MTF.

The information that a prospectus should contain. Questions include whether the proportionate disclosure regime should be modified or extended; whether there should be a simplified prospectus for SMEs and companies with reduced market capitalization admitted to trading on an SME growth market; and whether there should be a maximum length for prospectuses.

How prospectuses are approved, including the role of national competent authorities in the approval process of prospectuses and the equivalence of third-country prospectus regimes. In particular, the Commission asks whether the scrutiny and approval procedure should be made more transparent to the public and flexible for issuers, for example by making public the first draft prospectus filed with a competent authority for review and by allowing the issuer to carry out certain marketing activities, going beyond advertising, in the period between the first submission of a draft prospectus and the approval of the final version.

Responses must be received by May 13, 2015. The Commission intends to decide in the next months how the Prospectus Directive should be amended. It plans to prepare amendment proposals in the second half of 2015, to be presented to the European Parliament and Council of the EU, together with its review of the application of the Directive, in early 2016 at the latest.