European Parliament

European Parliament Publishes Provisional Version of Resolution It Has Adopted on Its 2016 Report on Banking Union

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The European Parliament has published a draft of the text of the resolution it has adopted on its annual report on banking union. The Parliament’s resolution is divided into themes, these being resolution, supervision and deposit insurance. The Parliament notably encourages all states that have yet to join the Euro currency to do so or to join the banking union, so as to align the internal market with the same.

It also expresses concern at the growth of the shadow banking sector and highlights that the UK’s Brexit referendum result now requires a substantive assessment of EU-wide financial supervision, with particular focus on ensuring that exit negotiations played out between the two parties should not lead to an uneven playing field between non-EU and EU financial institutions. In particular, the Parliament stands by the current levels of regulation and suggests that the exit vote and negotiations should not be used to generally promote deregulation of the financial markets across the EU as this may have dire economic consequences internationally.

The resolution can be found here.

European Parliament Announces Decision to Reject Delegated Resolution of RTS on Key Information Documents for PRIIPs

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On September 14, 2016, the European Parliament announced its decision to reject the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance based products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). The text of the legislative resolution rejecting the proposed Delegated Regulation sets out a number of reasons why the Parliament decided to reject the Delegated Regulation, including:

  • The need for detailed guidance on the “comprehension alert” without which there is a risk of inconsistent implementation of this component in the KIDs within the single market;
  • The need for clarification surrounding the treatment of multi-option products; and
  • The risk that the rules within the Delegated Regulation are contrary to the purpose of the legislation which is to provide retail investors clear, comparable, non-misleading and understandable information on PRIIPs.

As well as calling on the Commission to submit a new delegated regulation, the European Parliament also calls on the Commission to postpone the application date of the PRIIPs KID Regulation, to ensure that the requirements in the Regulation and Delegated Regulation are implemented smoothly and avoid the application of level 1 without RTS being in force.

ECON Objects to Delegated Regulation on RTS on Key Information Documents for PRIIPs

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The European Parliament published a press release on September 1, 2016 announcing that the Economic and Monetary Affairs Committee (ECON) has voted to object to the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). This market is worth up to €10 trillion in Europe.

The proposed Delegated Regulation sets the regulatory technical standards (RTS) on the presentation, content, review and revision of the KID, together with the conditions for fulfilling the requirement to provide such documents.

ECON’s concerns include the fact that the proposed formulas in the KID for predicting investment performance contain flaws which would make performance look far better than it was likely to be. As such, this would be potentially misleading for investors.

The Commission adopted the Delegated Regulation (C(2016) 3999 final) in June 2016. The resolution will now proceed for consideration by the European Parliament in a plenary session to be held September 12-15, 2016. The PRIIPs KID Regulation is to apply from December 31, 2016. The press release does highlight that the Commission is prepared “as a second best option” to allow the PRIIPs KID Regulation to apply without the RTS in place.

Cyber Security: European Parliament Formally Adopts Network and Information Security Directive at Second Reading

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On July 6, 2016, the European Parliament plenary session formally adopted the Network and Information Security Directive (“NIS Directive”) at second reading.

Securing network and information systems in the EU is fundamental to keep the online economy running and to ensure prosperity. The NIS Directive is the key instrument supporting Europe’s cyber resilience. The aim of the NIS Directive is to bring cybersecurity capabilities at the same level of development in all EU member states and ensure that exchanges of information and cooperation are efficient, including at a cross border level.

The NIS Directive also stipulates security obligations for operators of essential services, including transport, health and finance and digital service providers, such as online marketplaces, search engines and cloud services. Any disruption to the services provided by essential operators poses a severe risk to society and the economy and therefore the requirements will be stronger for such operators than for digital service providers. Each member state will also be required to designate one or more national authorities and lay down a strategy to deal with cyber threats.

The NIS Directive will now be published in the OJ and will enter into force on the twentieth day after publication. The EU member states will then have 21 months to transpose the NIS Directive into their national laws and six further months to identify operators of essential services.

For further information, please see the European Parliament press release.

European Parliament Votes to Postpone MiFID II Implementation until January 2018

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On June 7, 2016, the European Parliament published a press release announcing that it has voted to postpone the implementation of MiFID II (the MiFID II Directive (2014/65/EU)) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR)) until January 3, 2018. This grants member states a year’s extension on the original July 3, 2016 deadline to transpose the legislation. The extension was triggered by the European Commission and the European Securities and Markets Authority’s (ESMA) delay in producing the necessary technical standards.

MiFID II intends to close the gaps left by MiFID I. Following the financial crisis, it was introduced to create a single market for investment services and activities, with the aim of improving the competitiveness of EU financial markets. The Parliament, through MiFID II, seemingly aims to introduce: (i) a dedicated regime for the treatment of package transactions with regards to pre-trade transparency obligations; (ii) clarification for the own-account exemption for corporate end-users and securities financing transactions, which are excluded from MiFID transparency obligations; and (iii) a technical cross-referencing issue between the Prospective Directive (2003/71/EC) and MiFID II.

On June 8, the Parliament proceeded to publish the provisional edition of: (i) the text of the legislative proposal for a Directive amending the MiFID II Directive as regards certain dates; and (ii) the text of the legislative proposal amending the MiFIR, the Market Abuse Regulation (Regulation 596/2014) (MAR) and the Regulation on improving securities settlement and regulating central securities depositories (CSDs) (Regulation 909/2014) (CSDR) as regards certain dates.

It now remains for the proposals to be formally adopted by the Council, following which they will be published in the Official Journal of the EU (OJ) and enter into force in line with the timing stipulated in the legislation.

Text of PSD2 Adopted by European Parliament

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On October 9, 2015, the European Parliament published the provisional text of the proposed directive repealing and replacing the Payment Services Directive (2007/64/EC), known as PSD2.

PSD2 will need to be formally adopted by the Council of the EU and will then be published in the Official Journal of the EU, after which date there will be a 2-year implementation period for member states.

European Parliament Adopts Non-Binding Resolution on Building a Capital Markets Union (CMU)

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On July 9, 2015, the European Parliament announced its adoption of a non-binding resolution stating that the building blocks for a fully functional CMU should be in place no later than 2018. The Parliament calls on the European Commission to speed up its work on the action plan and put forward legislative and non-legislative proposals as soon as possible to achieve the objective of a fully integrated single EU capital market by the end of 2018.

ECON Adopts Resolution on CMU

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On June 16, 2015, the European Parliament published a press release announcing that its Economic and Monetary Affairs Committee (ECON) has adopted a resolution on the capital markets union (CMU).

The adopted resolution has not yet been published, although the press release highlights:

  • ECON wants to see a balanced approach towards the CMU, with non-bank sources of finance being developed.
  • The need for effective cross-border insolvency rules needs to be addressed.
  • Possible changes and additions to the existing regulatory regime should aim at removing entry barriers for small and medium-sized enterprises (SMEs).

Fourth Money Laundering Directive and Wire Transfer Regulation

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The European Commission has published two communications to the European Parliament concerning the position of the Council of the EU on the adoption of the proposed Fourth Money Laundering Directive (MLD4), and the proposed Wire Transfer Regulation (WTR). Both MLD4 and the WTR were adopted by the Council of the EU at first reading on April 20, 2015. In each case the Commission confirms that the Council’s position reflects the political agreement reached on December 16, 2014, between the Parliament and the Council, including elements proposed by both institutions, and states its support for this agreement.

European Parliament Votes to Adopt ECON Report on MMF Regulation

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On April 29, 2015, the European Parliament adopted a report by its Committee on Economic and Monetary Affairs (ECON) containing amendments to the European Commission’s proposed Regulations on Money Market Funds (MMF Regulation). The ECON  report proposes:

  • limiting constant net asset value (CNAV) MMFs to two types (retail CNAV MMFs and public debt CNAV MMFs);
  • introducing low volatility net asset value MMFs, requiring MMFs to divest their asset portfolios and have in place sound stress-testing processes;
  • preventing MMFs from receiving external support from third parties, including their sponsors;
  • requiring MMFs to report certain information to their investors on a weekly basis; and
  • requiring public debt and retail CNAV MMFs and low volatility net asset value MMFs to apply “liquidity fees” and “redemption gates” to help stem sudden outflows.