Europe

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

 

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

 

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

 

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.

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

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

 

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

 

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

 

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.

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

 

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

 

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

 

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.