legislation

European Commission Report on Credit Rating Agencies Regulation

Posted on

 

On October 19, 2016, the European Commission published a report (COM(2016) 664 final) responding to reporting obligations set out in Regulation 1060/2009 (CRA Regulation).

The report:

  • Analyzes references to external credit ratings in EU legislation and in private contracts among parties in financial markets.
  • Assesses potential alternatives to external credit ratings that are currently used by market participants in the EU. The Commission is of the view that there are currently no feasible alternatives that could entirely replace external credit ratings.
  • Evaluates the impact of the CRA Regulation on governance and internal procedures of CRAs, in particular the prevention of conflict of interests and the use of alternative remuneration models.
  • Analyzes the provisions relating to structured finance instruments (SFIs) and their potential extension to other asset classes. The Commission does not think it is appropriate to extend CRA Regulation provisions to other financial products.
  • Assesses the impact and effectiveness of the CRA Regulation’s measures concerning competition in the credit rating industry. Given some provisions are still in the process of implementation, the Commission will continue monitoring the development of the market before considering the adoption of further measures. More generally, the Commission will seek to avoid and further reduce regulatory barriers to market entry.
  • Considers the feasibility of establishing a European CRA for the assessment of sovereign debt and a European credit rating foundation for all other credit ratings. The Commission considers there to be no need at present for a European CRA specialized in sovereign debt or for other credit ratings.

Bill Introduced in Congress to Make “Valid When Made” the Law of the Land

, and Posted on

 

Chief Deputy Whip Patrick McHenry (R, NC-10), the Vice Chairman of the House Financial Services Committee, introduced H.R. 5724, the Protecting Consumers’ Access to Credit Act of 2016, which would reaffirm the longstanding legal precedent under the National Bank Act and the Federal Deposit Insurance Act that federal law preempts a loan’s interest if valid when made. The legislation was introduced to address one of the issues raised by the Second Circuit in Madden vs. Midland Funding. Legislation.

EBA Publishes Interim Report on MREL

Posted on

The European Banking Authority (EBA) has published an interim report on the minimum requirement for own funds and eligible liabilities (MREL). Under the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD) the EBA is required to submit a report to the European Commission on the implementation of MREL by October 31, 2016.  This report will assist the Commission in its work on a legislative proposal on the harmonized application of MREL as well as a legislative proposal to review MREL and implement the total loss absorbing capacity standard in the EU.

The EBA’s interim report is intended to provide input into the Commission’s deliberations ahead of the preparations of the EBA’s final report and contains a number of provisional recommendations. Preliminary quantitative findings on the financing capacity and needs of EU banking groups are also available in the interim report, although these are subject to several methodological caveats.  In the absence of MREL decisions for institutions to date, and given the limited information related to the resolution authorities’ MREL policy approach, the EBA was required to make assumptions on the likely scope and calibration of MREL.  These assumptions are by definition different from the actual levels of MREL which will ultimately be determined by resolution authorities in relation to each institution and group.

The interim report is available here.

European Parliament Votes to Postpone MiFID II Implementation until January 2018

Posted on

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.