Posts by: Aoife Casey

European Commission Adopts Delegated Regulation Supplementing EuVECA Regulation


On February 4, the European Commission adopted a Delegated Regulation supplementing the European Venture Capital Funds (“EuVECA“) Regulation (345/2013) with regard to conflicts of interest (C(2019) 664 final).

The Delegated Regulation specifies the types of conflicts of interest, referred to in Article 9 of the EuVECA Regulation, and the steps that managers of EuVECA funds need to take to identify, prevent, manage, monitor and disclose conflicts.

The Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the EU. It will apply six months after its entry into force. The next step is for the Delegated Regulation to be considered by the European Parliament and Council of the EU. Delegated Regulation.

ECB Publishes Decision Revising Format of MIB and Repealing Decision Establishing T2S Board


On February 4, the Decision (EU) 2019/166 of the European Central Bank (“ECB“) on the Market Infrastructure Board (“MIB“) and repealing Decision ECB/2012/6 on the establishment of the TARGET2-Securities (“T2S“) Board (ECB/2019/3) was published in the Official Journal of the EU (“OJ“). READ MORE

EBA Releases Results of 2018 EU-Wide Stress Test


A report was recently published by the European Banking Authority (“EBA“) setting out the results of its 2018 EU-wide banking stress test which covered a sample of 48 banks in 15 countries in the EU and the EEA at the highest level of consolidation, representing about 70% of total EU banks’ total assets.

An overview of the key aggregate results and a description of the main drivers of the capital impact is provided by the report. Annex II includes a bank-by-bank summary of the results, while banks’ individual results are accessible on the EBA’s website. READ MORE

European Commission Letter to ESMA on Share Cancellation Under MMF Regulation


On July 20, the European Securities and Markets Authority (“ESMA“) published a letter it has written to the European Commission about share cancellation under the Regulation on money market funds ((EU) 2017/1131) (“MMF Regulation“).

The letter responds to a January 2018 letter from the Commission in which it agreed with ESMA’s analysis that the practice of share cancellation is not compatible with the MMF Regulation.

ESMA calls on the Commission to make public the text of an opinion of the Legal Service of the Commission on the compatibility of the reverse distribution mechanism or share cancellation with the MMF Regulation. It appears the opinion has been shared with some market participants, but not all. ESMA is of the view that the Commission needs to make its interpretation clear to ensure a proper and consistent interpretation and implementation of the MMF Regulation.

The MMF Regulation started to apply from July 21, 2018.

EBA Final Report on Guidelines on Management of Non-Performing and Forborne Exposures

On October 31, the European Banking Authority (“EBA“) published its final report on guidelines on the management of non-performing and forborne exposures (EBA/GL/2018/06).

The guidelines seek to reduce non-performing exposures (“NPEs“) on banks’ balance sheets. The EBA expects credit institutions with a gross non-performing loan (“NPL“) ratio at 5% or above to establish NPE strategies and to introduce governance and operational requirements to support those strategies. The NPE strategy should set out the credit institution’s approach and objectives regarding effective management to maximize recoveries and ultimately a reduction in NPE stocks in a clear, credible and feasible manner for each relevant portfolio. READ MORE

ECB Finalizes Guide to On-Site Inspections and Internal Model Investigations


On September 21, the European Central Bank (the “ECB“) finalized its guide to on-site inspections and internal model investigations under the single supervisory mechanism (the “SSM“).

Under the SSM Regulation (Regulation 1024/2013), the aim of ECB Banking Supervision is ensuring a detailed and thorough analysis of the supervised entities’ business and can be exercised on and off-site. On-site supervision is performed through on-site investigations or internal model investigations, as specified under Article 12 of the SSM Regulation. On-site investigations are in-depth investigations of risk, risk controls and governance. Internal model investigations are in-depth assessments of internal models used for the calculation of own fund requirements, in particular with regard to methodologies, economic appropriateness, risks, risk controls and governance.

The guide aims to provide a reference document for supervised entities and other legal entities for which an on-site inspection has been launched by the ECB. It provides a general overview of the legal and supervisory framework for the investigations, describes the process and sets out applicable principles for inspections, covering the powers of inspection teams and the rights of inspected legal entities. The guide applies to inspections conducted in significant institutions, less significant institutions and other legal entities referred to in Article 10(1) of the SSM Regulation, including third parties to whom credit institutions have outsourced functions.

ESMA Publishes Opinion on Amendments to MiFIR RTS


On September 21, ESMA published an opinion (dated September 20, 2018) on amendments to Delegated Regulation (EU) 2017/587 (RTS 1) (ESMA70-156-769).

RTS 1 specifies that, in the context of the quoting obligation for systematic internalizers (the “SI“) “the determination of whether prices reflect prevailing market conditions”.

In November 2017, ESMA consulted on revisions to RTS 1 to clarify the concept of “prices reflecting prevailing market conditions” as well as other amendments to improve consistency in the application of its provisions. ESMA published a final report in March 2018 setting out a draft Delegated Regulation amending RTS 1 that sought to clarify that, for financial instruments subject to the minimum tick size regime, SI quotes would only be considered to reflect prevailing market conditions where those quotes reflect the price increments applicable to EU trading venues trading the same instruments.

The European Commission informed ESMA in August 2010 that it intended to endorse the amendments to RTS 1 subject to changes. In particular, the Commission intended to limit the obligation that quotes of SIs only adequately reflect prevailing market conditions where such quotes mirror the minimum price increments applicable to shares and depositary receipts, and not to all applicable equity and equity-like instruments as proposed by ESMA. The Commission also proposed a number of technical amendments to the other proposals submitted by ESMA.

In its opinion, ESMA agrees to limit the application of tick sizes to quotes of SIs to shares and depositary receipts. Although it continues to believe that applying the obligation to all equity and equity-like instruments better achieves the legislative goals expressed in Article 14(7) of Markets in Financial Instruments Regulation (Regulation 600/2014), ESMA considers that the Commission’s amendment will ensure the application of tick sizes to SIs’ quotes for most equity instruments in a timely fashion.

A revised draft Delegated Regulation amending RTS 1 is set out in the Appendix to the opinion.

Council of EU Adds Pakistan to List of High-Risk Third Countries Under MLD4


The Council of EU published the minutes of a meeting held in its configuration as the General Affairs Council (12279/18) on September 18, 2018.

On page 13 of the minutes, the Council confirms that it will not object to the addition of Pakistan to the list of high-risk third countries set out in Commission Delegated Regulation (EU) 2016/1675, which supplements the Fourth Money Laundering Directive ((EU) 2015/849) (“MLD4“).

The European Parliament will now consider the Delegated Regulation and decide whether to raise an objection. If the Parliament does not object, the Delegated Regulation will be published in the Official Journal of the EU (the “OJ“). It will enter into force 20 days after its publication in the OJ and will apply from that date.

Corrigendum to Delegated Regulation Relating to Passporting Under MiFID II Published in OJ


The Official Journal of the EU (OJ) has published a corrigendum to Commission Delegated Regulation ((EU) 2017/1018) supplementing the MiFID II Directive (2014/65/EU) with regard to regulatory technical standards (RTS) specifying information to be notified by investment firms, market operators and credit institutions.

The corrigendum makes the following minor change to the text of article 5(b) of the version of the Delegated Regulation published in the OJ:

“For: “(b) a short description of the appropriate arrangements to be in place and the date from which these arrangements will be provided in the host Member State;”

read: “(b) a short description of the arrangements and the date from which those arrangements will be provided in the host Member State;”.”

The Delegated Regulation was made under article 34(8) of the MiFID II Directive.