Posts by: Max Iles

Council of EU Agrees on Approach to Legislative Proposals for Insolvency Hierarchy Directive and IFRS 9 Regulation

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The Council of the EU has agreed on a general approach to the legislative proposals for a directive (which will relate to the ranking of unsecured debt instruments in insolvency) amending the Bank Recovery and Resolution Directive (2014/59/EU) (“BRRD“) and a Regulation amending the Capital Requirements Regulation (Regulation 575/2013) (“CRR“) (which concerns transitional periods under the International Financial Reporting Standard 9 (“IFRS 9“)).

A press release published on June 16, 2017, by the Council of the EU (in its configuration as the Economic and Financial Affairs Council (ECOFIN)) outlined the following general approach on the legislative proposals:

  • In relation to BRRD, the Council agreed on the text set out in the Council’s final compromise proposal dated May 31, 2017 (9479/17).
  • In relation to CRR, the Council agreed on the text set out in the Council’s final compromise proposal dated May 31, 2017 (9480/17).
  • On June 12, 2017, the Council’s Permanent Representatives Committee recommended that the Council agree on these texts as their general approach.

The press release states that EU ministers have asked the Council Presidency to start talks with the European Parliament on these proposals as soon as the Parliament has approved its own negotiating stance. It quotes the finance minister of Malta (which currently holds the Council Presidency), stating that the Council hopes that “the Parliament will be able to start negotiating by the end of this year.”

The draft Insolvency Hierarchy Directive and the IFRS 9 Regulation form part of the package of banking reforms that were adopted by the European Commission in November 2016. The EU authorities have decided to fast-track these relatively discrete measures ahead of their consideration of the remainder of the reforms.

ESAs Publish 2016 Annual Reports

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On June 15, 2017, ESMA, EIOPA and the EBA (the European Supervisory Authorities (“ESAs“)) each published their annual reports outlining the relevant ESA’s objectives, activities and key achievements in 2016.

ESMA’s annual report summarizes the work carried out by ESMA in 2016 under each of the following activities:

  • Assessing risks to investors, markets and financial stability.
  • Creating a single rule book.
  • Promoting supervisory convergence.
  • Supervising credit rating agencies and trade repositories.

The EBA’s annual report outlines the EBA’s work in 2016, which included:

  • Completing the single rule book applicable to the EU banking sector.
  • Supporting the finalization of the Basel III package of measures and its implementation in the EU.
  • Enhancing its monitoring of different aspects of the single rule book, including on own funds, remuneration practices and significant risk transfers in securitizations.
  • Improving its role in monitoring and assessing key risks in the banking sector across the EU.
  • Monitoring financial innovation and contributing to secure and efficient retail payments in the EU.

EIOPA’s annual report outlines the EIOPA’s work associated with the implementation of the Solvency II Directive (2009/138/EC) on January 1, 2016, such as the secure collection and storage of data. Other areas of work included:

  • The calculation and publication of risk-free rates on a monthly basis.
  • An EU-wide insurance stress test.
  • The development of a macro-prudential approach to the low interest rate environment in Solvency II.

Advice to the European Commission on a number of issues, including the development of a pan-European personal pension product and, within the context of the Joint Committee of the ESAs, on the key information documents for packaged retail and insurance-based investment products.