European Commission

EC Publishes Report on Follow-Up to Call for Evidence on EU Regulatory Framework for Financial Services


The European Commission (“EC“) published on December 1, 2017 a report on the follow-up to its call for evidence on the EU regulatory framework for financial services. The report contains an update on progress on the initiatives relating to its call for evidence since the prior communication in November 2016.

The report sets out details of measures introduced following the call for feedback, including several ongoing initiatives that require further analysis. These include:

  • the Commission’s work to monitor the application and impact of the outsourcing provisions in the Benchmarks Regulation;
  • the study conducted by the European Commission as part of the capital markets union action plan to assess the distribution of retail products to retail investors across the EU. The European Commission indicated that it expects to publish final findings from the study at the start of 2018;
  • the launch by the EBA of an IT tool aimed at promoting further proportionality in banking regulation. The idea is that the tool will help guide banks through relevant regulatory standards, provisions and templates in view of their specific size and business model; and
  • the assessment by the European Commission of the proportionality of the Alternative Investment Fund Managers Directive (2011/61/EU). The outcome of the European Commission’s review is expected in 2018.

The report is available here.

EIB and European Commission Launches Advisory Service to Help Cities Plan Investments


On November 28, 2017, the European Investment Bank (“EIB“) and the European Commission launched UBRIS (for “Urban Investment Support“), an urban advisory service with the goal of assisting cities in member states in accessing finance.  UBRIS will help design, plan and implement investment strategies and projects, including providing technical and financial advice.

Cities can apply for UBRIS assistance at the European Investment and Advisory Hub.  Eligibility criteria note that URBIS will prioritize cities seeking support related to a sustainable urban strategy with a view of developing, financing and implementing urban investment programs and that advice should be given on sustainable urban investments, in particular smart, green and socially inclusive investments.

According to press releases of the European Commission and the EIB, UBRIS will help with the following:

  • Improve a city’s investment strategy by giving advice in strategic planning, prioritizing and optimizing of investment programs and projects.
  • Bring projects and investment programs to a bankable stage, including by providing analysis on demand or support in financial structuring and by reviewing draft grant applications.
  • Explore opportunities for financing under the European Fund for Strategic Investments and/or the Cohesion Policy funds.
  • Support the preparation work for investment platforms and facilities combining funds, liaise with financial intermediaries and set up implementation arrangements for these facilities.
  • Develop financing approaches aiming at alleviating the burden on municipal debt and at helping municipal companies and private urban service providers access funding.

UBRIS will initially use EIB advisory and project services and focus on selected assignments.  The EIB and the European Commission will assess the initial work in the second half of 2018 and may consider additional resources at that time.

The EIB and European Commission press releases announcing UBRIS are available here and here.

European Commission Launches Consultation on Investors’ and Managers’ Duties Regarding Sustainability


On November 13, 2017, the European Commission launched a public consultation on institutional investors’ and asset managers’ duties regarding environmental and social sustainability.  The consultation is open for responses until January 22, 2018.

The consultation is in response to a recommendation in the EU High-Level Expert Group on sustainable finance interim report published in July 2017.  The interim report recommended that the Commission clarify that fiduciary duties of institutional investors and asset manages explicitly integrate material environmental, social and governance factors and long-term sustainability.  The Consultation Document notes that the Commission has commenced an impact assessment process assessing how such a clarification of institutional investors’ and asset managers’ duties regarding sustainability could contribute to a more efficient allocation of capital and sustainable and inclusive growth.

The consultation seeks evidence from “all citizens and organizations” of how clarifications or amendments to investor duties can contribute to more efficient allocation of capital and to more sustainable and inclusive growth; of how to ensure that end investors and beneficiaries have the right information to help them make sustainable choices; and from leading responsible investors on their strategies for considering environmental, social and governance issues.  Further information about the consultation, including how to respond, is available here.

European Commission Inception Impact Assessment on Legislative Proposal for EU Framework on Crowdfunding


On October 30, 2017, the European Commission published an inception impact assessment for a legislative proposal for an EU framework on crowd and peer-to-peer finance.

In the impact assessment, the Commission sets out information on a potential initiative relating to crowdfunding. The aim of the initiative is to create a framework that will encourage cross-border activity relating to crowdfunding platforms and to provide platforms with a proportionate and effective risk management framework. The Commission is concerned that, to date, crowdfunding activities have been confined to national markets with very little cross-border activity. It is also concerned about the perceived lack of reliability of crowdfunding and peer-to-peer platforms, with the biggest perceived risks being loan defaults, business failures, fraudulent activities and the collapse of platforms because of malpractice.

The Commission sets out three potential options for an EU framework on crowdfunding:

  • A self-regulatory approach with minimum EU standards. Under this option, the Commission would map best practices and local regulatory regimes with the aim of recommending a set of non-binding minimum standards and industry best practices.
  • A comprehensive EU framework. Under this option, the framework would consist of a specific crowdfunding license under the passporting framework, allowing platforms to operate across the single market. Crowdfunding platforms would be subject to proportionate governance and transparency requirements. The Commission envisages that crowdfunding platforms would be subject to a similar regulatory regime as regulated trading venues or payment institutions. The framework might be established through stand-alone legislation or through amendments to existing financial services legislation.
  • A stand-alone opt-in EU framework. Under this option, the Commission would create an EU framework for crowdfunding platforms that platforms wishing to conduct cross-border activity could opt into, with other platforms subject to national law. This framework would also involve a passport and governance and transparency requirements.

If the Commission decides that no EU framework is needed, it envisages that it will maintain regular dialogue with the European Supervisory Authorities (ESAs), member states and the crowdfunding sector to promote convergence and the sharing of best practices.

The Commission indicates that the next steps for this initiative will take place in the first quarter of 2018.

EIOPA Final Report on First Set of Technical Advice on Solvency II Delegated Regulation

On October 31, 2017, EIOPA published a document containing the first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation ((EU) 2015/35) (EIOPAA-BoS-17/280).

The advice covers the following areas:

  • Simplified calculations of capital requirements in the Solvency Capital Requirement (“SCR“) standard formula.
  • Reducing reliance on external credit ratings in the calculation of the SCR.
  • Exposures guaranteed and exposures to regional governments and local authorities (“RGLA“).
  • Risk-mitigation techniques.
  • Undertaking specific parameters.
  • Look-through for investment related undertakings.
  • Loss-absorbing capacity of deferred taxes (“LAC DT“). The advice contains factual information only; this issue will be addressed further in EIOPA’s second set of advice to the Commission.

EIOPA published a consultation paper on the advice in July 2017 (EIOPA-CP-17/004), which followed on from a discussion paper published in December 2016 (EIOPA-CP-16/008). EIOPA has also published a final report that contains details of the feedback that it received on EIOPA-CP-16/008 and EIOPA-CP-17/004, as well as the final text of the advice and a summary of comments received to EIOPA-CP-17/004.

EIOPA is providing its advice in two sets. It will send the second set of advice to the Commission by the end of February 2018. EIOPA issued a call for evidence relating to this second tranche of advice in April 2017. This will address issues such as policy proposals on LAC DT to increase supervisory convergence, risk margin, catastrophe risks, non-life and life underwriting risks, non-proportional reinsurance covers, unrated debt and unlisted equity and own funds. EIOPA plans to consult on these issues before the end of 2017.

European Commission Outlines Work Program for 2018


The European Commission published a communication on October 24, 2017, which outlined its work program for 2018. The communication included numerous annexes and outlined a number of initiatives which are intended to be the focus of the European Commission for the coming year.

The communication goes into further detail in a number of annexes that, for example, set out 10 political priorities, including the completion of the capital markets union and the banking union, as well as create a permanent and accountable European Minister of Economy and Finance.

The annexes also set out priority-pending proposals on which the European Commission wants the European Parliament and Council of the EU to prioritize while also listing a number of proposals which it intends to withdraw and legislation it intends to repeal.

The communication, addressed to the European Parliament, the Council of the EU, the European Economic and Social Committee and the Committee of the Regions, is available here.

European Commission Publishes Guidance on MiFiD II Inducements and Research Reforms


On October 26, 2017, the European Commission issued a list of FAQs in an attempt to clarify the obligations of EU investment firms in relation to brokerage and research services which are located in non-EU jurisdictions.

The FAQs, available here, address how European firms can maintain full compliance with MiFiD II obligations when procuring international services. They were published following concerns raised by the FCA that market participants may be unable to access U.S. research without breaching the requirements.

In addition to the guidance published by the European Commission, the SEC also issued a press release, available here, while the FCA welcomed both announcements and issued a statement explaining the implications of the announcements for the UK (available here).

European Commission Request to ESAS to Issue Recurrent Reports on Cost and Performance of the Main Categories of Pension, Insurance and Pension Products

On October 17, 2017, the European Commission published a request to the European Supervisory Authorities (“ESAs“) to issue recurrent reports on the past performance and cost of the main categories of insurance, pension and retail investment products.

In its request, the Commission states that the reporting should be based on information originating from disclosures and reporting required under the MiFID Directive, the Insurance Distribution Directive, the Regulation on key information documents for packaged retail and insurance-based investment products and other EU and national legislation.

The Commission outlines a tentative timetable for the reports, indicating that the first report on data availability, costs and performances should be available in the third and fourth quarter of 2018.

Mitigating Risks Associated with SFTs: European Commission Publishes Report

The European Commission has published a report to both the European Parliament and the Council of the EU under Article 29(3) of the Regulation on reporting and transparency of securities financing transactions ((EU) 2015/2365), (the “SFTR“).

Pursuant to Article 29(3) of the SFTR, the Commission is required to report on progress in international efforts to mitigate the risks linked with securities financing transactions.

The report provides a brief assessment of European securities financing transaction markets as well as discusses the Financial Stabilities Board’s (the “FSB“) recommendations aimed at mitigating securities financing transaction risks.

The report concludes that the FSB’s recommendations have been addressed in the EU through specific provisions within various financial services legislation and guidelines and the adoption of the SFTR.

To view the report, click here.

European Commission Confirms Insurance Block Exemption Regulation Not to Be Renewed

On December 13, 2016, the European Commission announced in a press release that Regulation 267/2010, the Insurance Block Exemption Regulation (“IBER“), will not be prevented from expiring on March 31, 2017. The IBER entered into force on April 1, 2010 and provides a block exemption for agreements relating to joint compilations, tables and studies. This enables the exchange of statistical information (calculations, tables and studies), subject to the specified conditions, and common coverage of certain types of risks (co-(re)insurance pools), subject to market share thresholds and other specified conditions.

In March 2016, the Commission published a report and document presenting the preliminary findings and conclusions of its review of the IBER, which began in 2014. The Commission’s provisional conclusion with regard to joint compilations, tables and studies was that the functioning of the insurance industry no longer appears to require a special instrument like a block exemption regulation. As regards co-(re)insurance pools, the Commission considered the IBER to be of limited use and relevance.

The Commission has now confirmed the block exemption is no longer warranted because the Commission’s 2011 Guidelines on horizontal cooperation (OJ 2011 C11/1) already provides guidance on how to assess the conformity of joint compilations, tables and studies with EU antitrust rules. However, the expiry of the IBER does not mean that these forms of cooperation become unlawful under Article 101 of the Treaty on the Functioning of the European Union (TFEU). Rather, insurers, as with all other companies doing business in the EU, will need to assess their cooperation in the market context to see whether it is in line with EU competition rules.