Posts by: Stephen Hancock

EBA Publishes Opinion on Eligibility of Deposits, Coverage Level and Co-Operation Between Deposit Guarantee Schemes Under the DGSD

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On August 8, the European Banking Authority (EBA) published an opinion (EBA-Op-2019-10) on the eligibility of deposits, coverage level and co-operation between deposit guarantee schemes (DGS) under the Deposit Guarantee Schemes Directive (DGSD) (2014/49/EU).

The opinion outlines a number of general and specific proposals for the European Commission to consider when preparing its mandated report on the progress made towards implementing the DGSD and if the Commission prepares a proposal for a revised DGSD.

The opinion sets out the EBA’s proposals on a range of topics, including:

  • Home-host co-operation, and co-operation agreements between DGS
  • DGS’ co-operation with various stakeholders
  • Transfer of contributions
  • Coverage level
  • Current list of exclusions from eligibility and current provisions on eligibility

It includes a report that provides a detailed analysis of each topic, including the background, methodology, data sources, options to address the issues identified and conclusions.

EBA Publishes Feedback on Review of Single Rulebook Q&A

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On August 6, the EBA published feedback following a review of the use, usefulness and implementation of its single rulebook Q&A.

The review was carried out in the second half of 2018 using questionnaires addressed to competent authorities and selected industry representatives. It was limited to Q&A relating to the Capital Requirements Regulation (CRR) ((EU) No 575/2013) and the Capital Requirements Directive (CRD) (2013/36/EU), which (at the time) accounted for about one third of final Q&A.

The EBA’s main findings include the following:

  • There are limited cases of non-application of Q&A identified by survey participants.
  • Competent authorities and institutions (to a slightly lesser extent) are, overall, satisfied with the utility of the single rulebook Q&A tool and the answers. However, they suggest various improvements relating to matters including response times, the search function and the presentation of the final answers.
  • There are similarities in terms of the measures taken by competent authorities at the institution level or by institutions internally to promote the Q&A tool and the use of answers.
  • Competent authorities use regular or ad hoc measures to encourage the use of the Q&A tool internally.

Based on its review, the EBA has provided non-prescriptive good practice guidance that institutions could adopt with respect to the use of Q&A (see chapter 4).

In addition, the EBA will consider the comments and suggestions received on the process, tool and answers, with a view to developing realistic and workable proposals for improvements. The EBA is also considering the reported cases of non-application in more detail to better understand the obstacles and issues in relation to the Q&A. It expects follow-up actions to be limited to informal exchanges and ad hoc queries to relevant competent authorities.

European Commission Requests the EIOPA Advise on PEPP Regulation Delegated Acts

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On August 5, the Council of the EU published a cover note, which attaches a call for advice from the European Commission to the European Insurance and Occupational Pensions Authority (EIOPA) (dated July 31) on possible delegated acts concerning the Regulation on a Pan-European Personal Pension Product (PEPP Regulation) ((EU) 2019/1238).

The Commission requests advice relating to:

  • The criteria and factors to determine when there is a significant PEPP saver protection concern under Article 64(9).
  • The specification of additional information for supervisory reporting under Article 40(9) of the PEPP Regulation.

The PEPP Regulation was published in the Official Journal of the EU on July 25.

The Commission requests the final version of the advice by August 14, 2020.

European Commission Publishes Report on Group Supervision Provisions Under Solvency II Directive

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On June 27, the European Commission published a report (COM(2019) 292 final) on the group supervision and capital management provisions under the Solvency II Directive (2009/138/EC).

In the report, addressed to the European Parliament and the Council of the EU, the Commission assesses the benefit of enhancing the Solvency II Directive provisions on group supervision and capital management within a group.

The Commission considers that some areas of the prudential group supervision framework may not ensure harmonized implementation of the rules by groups and national supervisors. This has the potential to have an impact on both the level playing field and capital management strategies.

The Commission has identified some legal uncertainties and diverging supervisory practices that can have a significant impact on group solvency. They concern group own funds, the group solvency capital requirement (SCR) and the group minimum capital requirement (MCR). The use of group internal models may raise additional issues. The Commission has also found a wide variety of interpretations of the group governance provisions.

The Commission has found that diverging implementation of the group supervision provisions may be detrimental to policyholder protection, depending on how national supervisors determine the scope of supervision, and exercise supervision at the level of parent holding companies. In addition, in light of the wide differences between the supervisory powers of different national supervisors, the Commission believes it is necessary to assess the appropriateness of the early intervention powers embedded in the Solvency II regime.

The Commission recognizes that it has identified a number of important issues that may need to be addressed, possibly including by way of legislative changes. However, further analysis is needed on the impact of the potential changes on the existing requirements. Therefore, the Commission deems it appropriate to include group supervision in the scope of its 2020 general review of the Solvency II Directive. As part of the 2020 review, the Commission has invited the European Insurance and Occupational Pensions Authority (EIOPA) to provide technical advice on the issues identified in the report, as well as other related issues that may be detrimental to policyholder protection.

COREPER Publishes Position on European Crowdfunding Service Providers

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On June 26, a press release was published by the Council of the EU’s Permanent Representatives Committee (COREPER). COREPER has agreed its position relating to the proposed Regulation on European crowdfunding service providers and the proposed Directive making consequential amendments to the MiFID II Directive (2014/65/EU).

The press release states that the EU is setting out a new regulatory framework for the operation of crowdfunding platforms. The new framework will make it easier for crowdfunding platforms to provide their services across the EU. It harmonizes the minimum requirements on these platforms when operating in their home market and other EU countries. The proposal also increases legal certainty by harmonizing investor protection rules.

COREPER’s position

  • removes barriers for crowdfunding platforms operating across borders;
  • provides tailored rules for EU crowdfunding businesses depending on whether they provide their funding in the form of a loan or an investment (through shares and bonds issued by the company that raises funds);
  • provides a common set of prudential, information and transparency requirements to ensure a high level of investor protection; and
  • defines common authorization and supervision rules for national competent authorities.

According to COREPER’s position, the proposal covers crowdfunding campaigns of up to €8 million over a 12-month period as a general rule. Where member states have decided to set the threshold for prospectus obligations below €8 million, they should be able to prohibit the raising of capital for crowdfunding projects from its residents for amounts exceeding that national threshold. Larger operations are regulated by MiFID and the prospectus regulation. Reward- and donation-based crowdfunding fall outside the scope of the proposal since they cannot be regarded as financial services.

ESMA Writes to European Commission on Delaying Review of Certain MiFID II Transparency Requirements

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On June 25, the European Securities and Market Authority (ESMA) published a letter (dated June 17) sent by Steven Maijoor, ESMA Chair, to Olivier Guersent, European Commission Director General for Financial Stability, Financial Services and Capital Markets Union (CMU), on the annual review required by Article 17 of Commission Delegated Regulation (EU) 2017/583 on transparency requirements for non-equity instruments (RTS 2).

The letter follows up a previous letter (dated January 16) sent to the Commission relating to the review reports on the MiFID II Directive and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR). In that letter, ESMA raised the issue of carrying out the annual review of the operation of certain transparency requirements for bonds and derivatives, as required by Article 17 of RTS 2. A positive assessment by ESMA can lead to a legislative change subjecting more bonds, and larger trade sizes in bonds and derivatives, to real-time transparency.

ESMA considers that the outstanding uncertainties on the time and conditions of Brexit do not allow for an adequate assessment at this time. Including or excluding UK data from the assessment would have a fundamental impact on the results, and any decision whether to include UK data would depend on whether the UK is still a member of the EU at the time any legislative change would take effect. In addition, Brexit will likely affect liquidity in bond and derivative markets and the value of the assessment will be limited if it is carried out before these effects have materialized.

ESMA Publishes Consolidated Guidelines on the Application of the Endorsement Regime Under CRA Regulation

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On March 20, the European Securities and Markets Authority (ESMA) published the official translations of its consolidated guidelines on the application of the endorsement regime under Article 4(3) of the Credit Rating Agencies Regulation (Regulation 1060/2009) (CRA Regulation) (ESMA33-9-282). READ MORE →

Commission Publishes Delegated Regulation Supplementing MLD4

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On May 14, a Delegated Regulation ((EU) 2019/758) supplementing the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4) with regulatory technical standards (RTS) specifying the minimum action and the type of additional measures credit and financial institutions must take to mitigate money laundering and terrorist financing risk in certain third countries was published in the Official Journal of the EU (OJ). READ MORE →

FCA Updates Paper on Price Discrimination in Cash Savings Market

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On May 14, the Financial Conduct Authority (FCA) updated its webpage on its July 2018 discussion paper on price discrimination in the cash savings market (DP18/6).

The FCA states that it is considering the responses to the discussion paper in the context of its broader work on assessing the role and impact of Open Finance and the role of a duty of care in its future approach to regulation, as outlined in its 2019/20 business plan.

In DP18/6, the FCA set out a range of options to address issues faced by longstanding customers in the easy-access cash savings market and stated that it would publish a feedback statement in early 2019. It now intends to publish a consultation paper or feedback statement in the second half of 2019, which will outline the feedback received to the discussion paper and its next steps.

Shareholder Rights Directive: The Proxy Advisors Regulations 2019

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On May 14, the Proxy Advisors (Shareholders’ Rights) Regulations 2019 (SI 2019/926) were published. The regulations transpose into UK law Article 3j (transparency of proxy advisors) of the Shareholder Rights Directive (as amended by the Shareholder Rights Directive II). The Regulations will enter into force on June 10. READ MORE →