Posts by: Emily Yung

European Commission Launches Inception Impact Assessment and Publishes Roadmap on Interpretative Communication


On July 25, 2017, the European Commission, launched an Inception Impact Assessment, which aims to develop a tool that would improve the investment climate in the EU. On the same date, it published a Roadmap that announces the adoption of an Interpretative Communication on the existing EU standards for the treatment of cross-border intra-EU investments..

The Inception Impact Assessment and Roadmap consider a variety of options to create a stable and clear regulatory environment to incentivize investments in the EU, including creating an interpretative Communication, establishing an EU network of “Investment Contact Points” and creating an EU legal framework for mediation.

Inception Impact Assessment

The Inception Impact Assessment considers the following options to create a more predictable, stable and clear regulatory environment to incentivize investments:

  • Baseline scenario: No EU action. The Commission is nevertheless working on an interpretative communication to provide guidance on existing EU rules for the treatment of cross-border EU investments. This would be without prejudice to any other possible future actions by the Commission in the context of the implementation of single-market rules or in the context of the third pillar of the investment plan.
  • Establishing an EU network of “Investment Contact Points” within the national administrations that could assist investors. In particular, such contact points could be used by investors before a formal dispute when a national public authority arises in order to see how to prevent the escalation of any issues and to inform the investors about their rights and existing remedies. In assessing this option, the Commission will ensure complementarity with other ongoing or planned workstreams in the context of the third pillar of the Investment Plan.
  • Creating an EU legal framework for mediation, enabling mediation between investors and the relevant national authorities and ensuring minimum standards of quality and transparency for the mediation process.
  • In addition to an EU legal framework regulating the procedure of mediation, creating permanent agencies in each member state that could administer the mediation services (for example, by establishing a registration system of mediators) or act as mediators.
  • In addition to an EU legal framework, creating one EU-wide mediation agency, which could administer the mediation services or act as a mediator.


The Roadmap document notes that it currently may not always be clear to investors what their rights are when they invest within the EU, and legal practitioners might find it difficult to interpret EU law and the existing jurisprudence of the Court of Justice correctly. Greater clarity on investors’ EU rights (called substantive EU standards of protection) would be useful for EU investors, national administrations and stakeholders, as well as for legal practitioners. This would provide greater transparency on the effective protection of EU investor rights in the single market and create a more positive environment to attract investments.

To meet those objectives, priority action 8 of the CMU Mid-term Review Communication states that the Commission will adopt an interpretative Communication to provide guidance on existing EU rules for the treatment of cross-border EU investments. The Interpretative Communication will bring together and explain the existing substantive EU standards for the lawful treatment of cross-border EU investments. The Communication could also highlight general principles of EU law, often invoked in the case-law of the Court of Justice, such as the principle of proportionality, legal certainty and the protection of legitimate expectations.

EBA Consults on Draft RTS and ITS on EBA Electronic Central Register Under PSD2


On July 24, 2017, the EBA published a consultation paper on the draft regulatory technical standards (“RTS“) and implementing technical standards (“ITS“) on the EBA electronic central register under the revised Payment Services Directive (“PSD2“) ((EU) 2015/2366) (EBA/CP/2017/12).

Under Article 15(1) of PSD2, the EBA is required to develop, operate and maintain an electronic central register that contains information as notified by competent authorities (“CAs“). PSD2 also mandates the EBA to develop RTS and ITS relating to the register.

The draft RTS set out requirements relating to:

  • Access to the register by the various users of the register.
  • The provision of information by CAs to the EBA, and validation of that information.
  • Safety, availability and performance of the register.
  • Responsibilities of the EBA concerning the management and maintenance of the register.
  • The search of information in the register and the display of search results.

The EBA’s proposed approach is a technological solution that will support both manual insertion and automated transmission of information by CAs to the EBA.

Having assessed the existing national practices related to the operation and maintenance of the national public registers under the current Payment Services Directive (“PSD“) (2007/64/EC), the EBA has concluded that the ITS should specify the type, and format, of information that will be contained in the register for:

  • Payment and electronic money institutions and their agents.
  • Exempted payment and electronic money institutions and their agents.
  • Branches of payment institutions, electronic money institutions and account information service providers (“AISPs“) providing services in a host member state.
  • AISPs and their agents.
  • Providers of services based on specific payment instruments that can be used only in a limited way.
  • Providers of electronic communication networks executing payment transactions or providing services in addition to electronic communications services.

The EBA is holding a public hearing on September 4, 2017. The consultation closes to responses on September 18, 2017.

European Commission’s Review of Consumer Rights Directive


The European Commission has published the results of its evaluation of the Consumer Rights Directive (2011/83/EU) (“CRD“).

The evaluation found that the CRD had positively contributed to the functioning of the business-to-consumer internal market and had ensured a high common level of consumer protection across member states of the EU. Areas for improvement were also highlighted. READ MORE

Council of EU Presidency Compromise Proposal on Proposed Regulation Amending CCR


The Council of the EU has published the final Presidency compromise proposal on the proposed Regulation amending the Capital Requirements Regulation (Regulation 575/2013) (“CRR“) as regards the transitional period for mitigating the impact on its own funds of the introduction of International Financial Reporting Standard 9 (“IFRS 9“) and the large exposures treatment of certain public sector exposures denominated in nondomestic currencies of member states.

The European Parliament issued a resolution for the adoption of IFRS 9 in September 2016, and in November 2016 the European Commission, as part of its legislative proposals to revise the CRR and the CRD IV Directive (2013/36/EU), suggested transitional arrangements to mitigate the effect of the introduction of IFRS 9 on Common Equity Tier 1 capital resulting from the impairment requirements of IFRS 9. The EBA published an opinion on transitional arrangements and credit risk adjustments due to the introduction of IFRS 9 in March 2017.

ESMA Consults on Guidelines on CCP Conflicts of Interest Management Under EMIR


On June 1, 2017, ESMA published a consultation paper (ESMA70-151-291) on guidelines relating to central counterparties (“CCPs“) management of conflicts of interest.

ESMA explains that the European Market Infrastructure Regulation (“EMIR“) only contains generic provisions relating to CCPs’ conflict of interest management. It requires CCPs to act in the best interests of their clearing members and the clients. Therefore, CCPs need to have in place robust organizational arrangements and policies to prevent potential conflicts of interest and to solve them if they occur. ESMA believes that further guidance would be beneficial and further facilitate supervisory convergence on this area.

The purpose of the guidelines is to set out the criteria CCPs should apply to avoid or mitigate the risks of conflicts of interest and to ensure a consistent implementation across CCPs. Areas addressed by the guidelines include:

  • written arrangements to identify and manage any potential conflicts of interest between CCPs, clearing members and clients;
  • where written arrangements are not sufficient, disclosure of conflicts of interest to the clearing member or clients before entering into any new transactions; and
  • possible conflicts with a CCP’s parent undertaking or subsidiary.

The consultation will close on August 24, 2017, upon which ESMA will consider the feedback received to the consultation. ESMA expects to publish a final report on the guidelines by the end of 2017.

EIOPA Publishes Guidance on Authorization and Supervision in Light of Brexit


On May 25, 2017, it was reported on Reuters that the European Insurance and Occupational Pensions Authority (“EIOPA“) is to publish guidance directed to national regulators on the principles for authorization and supervision to ensure that they do not undercut one another in their attempts to attract firms moving from London due to Brexit. EIOPA is monitoring developments in this area and will publish guidance in due course.

According to Reuters, the European Securities and Markets Authority (“ESMA“) is also to publish guidelines on this issue before the summer. ESMA’s chairman has said it has discussed the potential risks of new “letter box” companies being set up in the EU, which would delegate key operations to group companies in London. ESMA warns that these arrangements could undermine stability.

EMMI Report on Outcome of EURIBOR Pre-Live Verification Program


On May 5, 2017, the European Money Markets Institute (“EMMI“) published a report on the outcome of the Euro Interbank Offered Rate (“EURIBOR“) pre-live verification (“PLV“) program.

The PLV program has given EMMI an in-depth view of the market underpinning EURIBOR. It confirmed that market activity has changed as a result of current regulatory requirements, other sources of liquidity available to market participants, and other external factors. In this context, EMMI concluded that:

  • The rate and volatility levels under both methodologies (that is, current quote-based vs. fully transaction-based) are insufficiently similar for a seamless transition to be feasible under current market conditions.
  • The decreased level of daily market activity under current market conditions does not allow for a methodology that is fully based on transactions, as this would not yield a sufficiently sound and robust benchmark.

In its FAQs published alongside the report, EMMI stressed that there will be no immediate changes to the EURIBOR methodology and that the current quote-based EURIBOR will continue for the period necessary to develop an alternative methodology. EMMI stated that it remains committed to align the EURIBOR benchmark with the EU Benchmarks Regulation ((EU) 2016/1011). Accordingly, it will work on a hybrid methodology (that is, a model that is supported by transactions whenever available and relies on other pricing sources when necessary).

EBA Amends ITS on Benchmarking of Internal Approaches for 2018 Benchmarking Exercise


On May 4, 2017, the European Banking Authority (“EBA“) published an amended version of its implementing technical standards (“ITS“) on benchmarking of internal approaches under Article 78(8) of the CRD IV Directive (2013/36/EU) (EBA ITS 2017 02).

The final draft ITS are contained in a zip file that has been added to the EBA’s dedicated webpage on regulatory technical standards (RTS) and ITS on benchmarking portfolios. They are intended for use by the EBA and competent authorities in their 2018 assessment of internal approaches for credit and market risk. The ITS have been amended to reflect updates to the Single Rulebook. They also reflect updates to the benchmarking portfolios that were necessary to facilitate the 2018 benchmarking exercise for both credit and market risk so that they remain relevant for supervisors.

The amendments are expected to apply to the submission of initial market valuation data in November 2017 and of other market and credit risk data in April 2018. The EBA has submitted the updated ITS to the European Commission, but the Commission has not yet adopted them.

The EBA aims to annually update the ITS to ensure future benchmarking exercises are relevant and successful.

Brexit – European Council Adopts EU Negotiating Guidelines


On April 29, 2017, a Special European Council, meeting as 27 member states, adopted the Article 50 guidelines to formally define the EU’s position for the Brexit negotiations with the UK.

The guidelines are set out under six headings that cover core principles, a phased approach to the negotiations, an agreement on arrangements for an orderly withdrawal, preliminary and preparatory discussions on a framework for the EU-UK future relationship, the principle of sincere cooperation, and the procedural arrangements for negotiations under Article 50.

On May 22, 2017, the General Affairs Council is expected to authorize the opening of the negotiations, nominate the European Commission as the EU negotiator, and adopt the negotiating directives. The guidelines and the negotiating directives may be updated in the course of the negotiations as necessary.

ESMA Will Not Extend EMIR Exemption for the Collateralization of Bank Guarantees for Energy Derivatives

On November 19, 2015, the European Securities and Markets Authority (“ESMA“) published a statement announcing that it will not further extend the existing three year grace period (expiring March 2016) for non-financial firms’ use of non-collateralized bank guarantees to cover transactions in energy derivatives cleared by EU central counterparties (“CCPs“) under EMIR (the Regulation on OTC derivative transactions, central counterparties and trade repositories) (Regulation 648/2012).

From March 15, 2016, CCPs authorized under EMIR will need to fully collateralize commercial bank guarantees used to cover transactions in derivatives relating to electricity or natural gas produced.

ESMA considered that an extension would not be appropriate for the following reasons:

  • Allowing fully uncollateralized commercial bank guarantees could mean an undue source of risk for CCPs.
  • The existing three year grace period seemed sufficient for the wholesale energy market to prepare for the incoming collateral obligations.
  • Some EU CCPs already have implemented the EMIR requirements.
  • EMIR requires that a CCP only accepts highly liquid collateral with minimal credit and market risk.
  • A new postponement would maintain a discrepancy with international standards such as the CPMI-IOSCO principles for financial market infrastructures.
  • ESMA expects parties to be ready to implement the collateral obligation relating to commercial bank guarantees by March 2016.