European Commission

European Commission Adopts Delegated Regulation Supplementing EuVECA Regulation


On February 4, the European Commission adopted a Delegated Regulation supplementing the European Venture Capital Funds (“EuVECA“) Regulation (345/2013) with regard to conflicts of interest (C(2019) 664 final).

The Delegated Regulation specifies the types of conflicts of interest, referred to in Article 9 of the EuVECA Regulation, and the steps that managers of EuVECA funds need to take to identify, prevent, manage, monitor and disclose conflicts.

The Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the EU. It will apply six months after its entry into force. The next step is for the Delegated Regulation to be considered by the European Parliament and Council of the EU. Delegated Regulation.

ECA Publishes a Communication on Access to ECB Banking Supervision Documents and Information


On January 14, the European Court of Auditors (“ECA“) published a communication to the European Parliament on the European Central Bank’s (“ECB“) position on the ECA’s access to audit documents and information relating to its banking supervision role under the single supervisory mechanism (“SSM“). READ MORE

Joint Committee of ESAs Publishes Report on Regulatory Sandboxes and Innovation Hubs


On January 7, the Joint Committee of the European Supervisory Authorities (“ESAs“) (that is, the EBA, EIOPA and ESMA) published a report (JC 2018 74) on regulatory sandboxes and innovation hubs.

The ESAs set out in the report a comparative analysis of the innovation facilitators established to date within the EU, further to the mandate specified in the European Commission’s FinTech action plan, which was published in March 2018. READ MORE

European Commission 2019 Work Program: Financial Services Aspects


On October 23, the European Commission published a communication outlining its work program for 2019. There are a number of priority-pending financial services legislative proposals which the Commission wants the European Parliament and the Council of the EU to take swift action on. The proposals include:

  • Sustainable finance
  • Cross-border investment funds
  • Crowdfunding services
  • The pan-European pension product (“PEPP“)
  • Banking
  • Recovery and resolution on central counterparties (“CPPs“)
  • The European deposit insurance schemes (“EDIS“)
  • Anti-money laundering

The full communication can be found here. The Annexes were published separately, alongside a Q&As document and a factsheet.

Provision of Microcredit in Europe: Commission to Update European Good Code of Conduct


The European Commission (Directorate-General for Employment, Social Affairs and Inclusion) published a press release informing readers that it is updating the European good code of conduct for microcredit provision. The publication can he found here.

Originally launched in 2011, the code’s aim was to provide a common set of standards relating to management, governance, risk management, reporting and consumer and investor relations for the EU microfinance sector.

The purpose of the update is to reflect market changes and the diversity of the microfinance sector. The updates are expected to be in place over the next 12 months.

European Commission Publishes Memo on Preparing for Brexit


The communication, published on July 19, 2018, points out that citizens, businesses, state bodies and others will be affected by Brexit and that a joint effort from all parties is required in order to be fully prepared.

The communication warns to prepare for two main scenarios:

  • If the Withdrawal Agreement is ratified before March 30, 2019, EU law will stop applying to the UK after the agreed transition period of 21 months, that is on January 1, 2021.
  • If the Withdrawal Agreement is not ratified before March 30, 2019, there will be no transition period and EU law will stop applying to the UK on March 30, 2019.

There will be consequences for many industries and the Commission has published more detailed preparedness notices on a sector-by-sector basis. These notices can be found here.

In terms of next steps, the Commission will ask the European Parliament and the European Council to prioritize the adoption of its Brexit proposals, so that they will be in force by the withdrawal date.

There is another Brexit meeting on October 18, 2018, after which the European Council will review the situation again.

European Commission Provides Guidance on MiFID II Ancillary Activity Test


A letter from the European Commission Vice President was published on June 22, 2018 which sought to clarify the exemption found in Article 2(1)(j) of the MiFID II Directive (the “Exemption“).

The Exemption states that the regulated activities of dealing on own account and providing investment services in relation to commodity derivatives will be exempt from the rules contained in the MiFID II Directive provided that the activities are “ancillary” to the main business.

The letter, addressed to Steven Maijoor, stated that in establishing if the Exemption applies, the MiFID activities that the person is engaged in will be compared with the commercial activities of the person or group which the person forms. This therefore accounts for varying commercial structures whereby business activities of a group may be separated into different legal entities.

The full letter explaining the Exemption and when this applies, is available here.

The EC has Published the Draft Text of a Regulation on Sovereign Bond-Backed Securities and Seeks Market Feedback on its Proposals


On May 24, 2018, the European Commission (“EC“) published a proposal for a Regulation of the European Parliament and of the Council on sovereign bond-backed securities (2018/0171 (COD)). Sovereign bond-backed securities (“SBBS“) are euro-denominated debt securities, created by private entities and backed by a pre-determined, diverse pool of bonds issued by euro-area national governments.

Akin to securitisation bonds, this new type of financial instrument is designed to be issued in tranched notes, appealing to a range of risk appetites. Senior ranking notes would pay a lower return than junior notes, in exchange for a lower risk profile. Junior notes would bear losses before senior notes but would be rewarded with a higher coupon.

Rather than being subject to the same regulatory treatment as securitisation bonds, the proposal seeks to grant SBBS the same regulatory treatment as national euro-area sovereign bonds denominated in euro; reflecting the relatively low risk and high liquidity of the pre-determined and diverse underlying portfolio of sovereign debt.

The draft Regulation follows the Commission’s publication of an impact assessment on enabling a regulatory framework for the development of SBBS, in January 2018.

The proposal includes measures relating to:

  • Eligibility and composition of the underlying portfolio and tranching of SBBSs issues (Articles 4 to 6 of the draft Regulation).
  • Issuance and management of SBBSs (Articles 7 and 8).
  • Use of the designation “Sovereign Bond-Backed Securities” (Article 9).
  • SBBSs notification and transparency requirements (Articles 10 to 12).

Specifically, the proposed Regulation requires:

  • The underlying portfolio to include sovereign bonds of all euro area Member States, with relative weights in line with each Member State’s contribution to the capital of the European Central Bank (the so-called ECB capital key).
  • The size of the senior tranche to be fixed at 70% of the overall SBBS issuance. The remaining 30% can be divided in as many sub-senior (or subordinate) claims as the issuer finds best suited to the demand of its investors.

The Commission is inviting market feedback on its proposals. The feedback period is open and ends on July 26, 2018.