Posts by: Heidi Wardle

ESMA Will Not Renew Temporary Restriction on Marketing, Distributing and Selling CFDs to Retail Clients

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On July 31, European Securities and Markets Authority (ESMA) published a press release which announced it would not renew the temporary restriction on the market, distribution or sale of contracts for difference (CFDs) to retail clients in the EU. Therefore, the measures in ESMA Decision (EU) 2049/679 automatically expired on July 31.

This decision was made because most national competent authorities have taken permanent national product intervention measures relating to CFDs, which are at least as stringent as ESMA’s temporary measures. However, it will continue to monitor activity relating to CFDs to determine whether other EU-wide measures may be needed. Release.

EBA Consults on Draft Guidelines on Determination of Weighted Average Maturity of Contractual Payments Due Under the Tranche of a Securitization Transaction

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On July 31, the European Banking Authority (EBA) published a consultation paper on draft guidelines on the determination of the weighted average maturity (WAM) of the contractual payments due under the tranche of a securitization transaction. The guidelines are intended to provide guiding principles for institutions opting to use the WAM approach rather than final legacy maturity approach for calculating the risk-weighted exposure amounts of a securitization position under the methods that use the maturity of the tranche as a risk factor.

The main areas covered by the guidelines are:

  • Meaning of contractual payments due under the tranche.
  • Data and information requirements.
  • Methodologies for determining the contractual payments of the securitized exposures, and of the tranches, both for traditional and synthetic securitizations.
  • Implementation and use of the WAM model.

The EBA will hold a public consultation on the draft guidelines on September 3 and the deadline for responses is October 31.

The consultation paper can be found here.

ESMA Updates MiFIR Data Reporting Q&As: July 2019

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On July 29, ESMA published an updated version of it Q&As on data reporting under the Markets in Financial Instruments Regulation (MiFIR) ((EU) 600/2014). There is one additional Q&A in section 5 about the date to use in field 24 (expiry date) of RTS 23 for financial instruments without a defined expiration date.

The updated Q&As can be found here.

European Commission Publishes Communication on Equivalence Policy With Non-EU Countries

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On July 29, the European Commission published a communication (and annex) on equivalence in the area of financial services. The Commission highlights recent improvements to the design of EU equivalence regimes and notes that significant changes have been introduced to the equivalence regimes in a number of legislative amendments relating to the proposed:

  • Omnibus Regulation relating to the powers, governance and funding of the European Supervisory Authorities (ESAs) – where the role of each ESA in monitoring equivalent third countries is strengthened;
  • Regulation amending the European Market Infrastructure Regulation (EMIR) supervisory regime for EU and third-country central counterparties (CCPs) (EMIR 2.2) – where a more risk-sensitive and proportionate approach for third-country regimes is being introduced; and
  • Investment Firms Directive (IFD) – where new assessment criteria, safeguards and reporting obligations for third-country firms are being created.

In relation to making equivalence assessments, the Commission emphasizes that decisions are not taken in isolation and proportionality is very important, and it notes that the Commission is concerned about identifying risks to the EU financial system.

The communication also summarizes equivalence decisions adopted since January 2018 and sets out its priorities for 2019 and 2020, including:

  • continuing work on equivalence assessments, especially relating to the Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds;
  • repealing existing decisions where the third-country framework no longer delivers the necessary outcomes (for example, under the CRA Regulation);
  • focusing on high-impact areas and third countries (EMIR (Regulation 64/2012) is specifically mentioned);
  • areas where there is an impending review or expiration of an equivalence deadline (the Capital Requirements Regulation (575/2013) is specifically mentioned); and
  • examining market segments that are undergoing dynamic or structural changes (the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR) is specifically mentioned).
  • The communication included the communication itself, an annex and a press release.

A Delegated Regulation Supplementing EuVECA Regulation Regarding Conflicts of Interest is Published in OJ

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On May 22, the Commission Delegated Regulation (EU) 2019/820 supplementing the European Venture Capital Funds (EuVECA) Regulation (345/2013) with regards to conflicts of interest EuVECAs was published in the Official Journal of the EU (OJ).

The Delegated Regulation, which was not objected to by the European Parliament on May 15, 2019 and presumably has not been rejected by the Council of the EU, sets out:

  • The types of conflict of interest for the purposes of Article 9(2) of the EuVECA Regulation.
  • Conflicts of interest policy requirements.
  • Procedures and measures to prevent, manage and monitor conflicts of interest.
  • Management of consequences of conflicts of interest.
  • Strategies for the exercise of voting rights to prevent conflicts of interest.
  • Disclosure of conflicts of interest.

The Delegated Regulation comes into force on June 11, 2019 and applies from December 11, 2019.

ESMA Updates Q&As on BMR: May 2019

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On May 23, the European Securities and Markets Authority (ESMA) published an updated version (ESMA70-145-11) of its Q&As on the Benchmarks Regulation ((EU) 2016/1011) (BMR), which were previously updated in January 2019. The updated Q&As can be found here.

The Q&As have been updated to include:

  • A new Q&A 7.4 on the relevant time to determine the member state of reference in an application for recognition under Article 32(4) of the BMR.
  • A new Q&A 7.5 on the information on which national competent authorities may rely on in an external audit report of compliance with the International Organization of Securities Commission (IOSCO) principles for oil reporting agencies under Article 32(2) of the BMR.
  • A new Q&A 8.5 on the type of information that should be included in the field “contact info” of ESMA’s register of benchmark administrators.

FSB Launches Evaluation of TBTF for SIBs

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On May 23, the Financial Stability Board (FSB) published a press release announcing the launch of an evaluation of its too-big-to-fail reforms (TBTF) for systemically important banks (SIBs).

The evaluation (i) will focus on the effects of the FSB’s TBTF reforms for SIBs (including increased capital buffers, total loss-absorbing capacity, enhanced supervision and resolution regimes); and (ii) will analyze the impact of the reforms on global systemically important banks and domestic systemically important banks, and will cover all FSB jurisdictions.

The aims of the evaluation are to (i) assess whether the reforms for which implementation has been completed or is well underway are reducing the systemic and moral hazard risk associated with SIBs; and (ii) examine the broader effects of the reforms on the financial system.

The evaluation will be based on the FSB’s July 2017 framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms.

ESMA Establishes New CNS

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On May 23, the European Securities and Markets Authority (ESMA) published a press release which announced the establishment of a new coordination network on sustainability (CNS), which will be chaired by Ana María Martínez-Pina Garcia for two years with immediate effect. The CNS will:

  • Develop the coordination of national competent authorities’ (NCAs) work on sustainability.
  • Be responsible for the development of policy in this area, with a strategic view on issues related to integrating sustainability considerations into financial regulation.

The work will support the European Commission’s sustainability action plan in the areas of investment services and investment funds. The EU envisages a shift towards a more sustainable finance system in the medium and long term and securities regulators must therefore make sustainable finance a key part of their supervisory and enforcement activities.

BCBS Publishes Progress Report on Implementation of Basel Regulatory Framework

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On May 7, the Basel Committee on Banking Supervision (BCBS) published its sixteenth progress report on BCBS members’ implementation of Basel III. The report can be found here.

The report, which looks at implementation as of the end of March 2019, focuses on the status of adoption of the Basel III standards to ensure they are transformed into national law or regulation in accordance with agreed timeframes. The Basel III standards reviewed include: risk-based capital standards, the leverage ratio, the standards for global and domestic systemically important banks and interest rate risk in the banking book, the net stable funding ratio (NSFR), the large exposures framework and the disclosure requirements.

The report states that since BCBS’s previous report, published in October 2018, member jurisdictions have made progress in implementing standards for which deadlines have already passed, including those relating to the revised securitization framework. However, progress has been limited in the implementation of other standards which have yet to be finalized and put into effect in a number of jurisdictions, including the NSFR, which took effect on January 1, 2018, but only 11 jurisdictions have final rules in place.

FSB Publishes Report on Third Thematic Review of Resolution Regimes

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As part of a review launched in June 2018, the Financial Stability Board (FSB) published a report (which can be found here) on its third thematic peer review of resolution regimes. The findings of the first and second peer reviews of resolution regimes were published in April 2013 and March 2016 respectively. The reviews are designed to support the timely and consistent implementation by FSB jurisdictions of the FSB’s key attributes of effective resolution regimes for financial institutions.

Bank resolution planning frameworks have been adopted in most FSB jurisdictions, with planning most advanced for global systemically important banks in jurisdictions that are home to them. The report recommends further work to be done to ensure that bank resolution plans can be put fully into effect:

  • FSB jurisdictions – take further steps to adopt and operationalize their resolution planning framework, including: adopt resolution planning frameworks, adopt resolvability assessment frameworks and provide powers to require banks to take measures to improve resolvability and participate in cross-border coordinating arrangements. By June 2020, jurisdictions identified as not having a resolution planning framework will need to report to the FSB.
  • FSB – undertake work to support member authorities’ resolution planning for banks other than G-SIBs that could be systemic in failure.
  • FSB – work with relevant authorities and other bodies, to promote the sharing of bank resolution planning experiences and practices in enhancing cooperation and information-sharing arrangements.