RTS

ESMA Consults on SFT Regulation and Amendments to EMIR RTS

Posted on

On September 30, 2016, ESMA published a consultation paper (ESMA/2016/1409) on draft regulatory technical standards (“RTS“) and draft implementing technical standards (“ITS“) implementing the Regulation on reporting and transparency of securities financing transactions ((EU) 2015/2365) (the “SFT Regulation“).

The SFT Regulation will require market participants to report details of securities financing transactions (“SFTs“) to an approved EU trade repository (“TR“). The main issues addressed are:

  • RTS and ITS procedure and criteria for registration as a TR;
  • RTS and ITS on the use of internationally agreed reporting standards, the reporting logic and main aspects of the structure and content of SFT reports;
  • RTS requirements relating to transparency of data, data collection, aggregation and comparison; and
  • RTS on access levels for different competent authorities.

ESMA also proposes amendments to existing technical standards implementing requirements relating to TRs under the European Markets Infrastructure Regulation (“EMIR“). ESMA states that the amendments are needed to ensure a level playing field for market participants in respect of registration and access rules. ESMA is consulting on the following:

  • consolidated amended text of RTS on registration of TRs under EMIR; and
  • amendments to RTS on access levels under EMIR.

The consultation will close on November 30, 2016. ESMA will use the feedback it receives to finalize its draft technical standards, which are to be submitted to the European Commission for endorsement by the end of Q1 or beginning of Q2 2017. It is expected that the finalized implementing measures will become applicable from 2018.

EBA Consults on Fee Terminology and Disclosure Documents under Payment Accounts Directive

Posted on

 

Pursuant to the Payment Accounts Directive (2014/92/EU) (PAD), on September 22, 2016, the European Banking Authority (EBA) published a consultation paper on draft technical standards on fee terminology and disclosure documents under the directive.

The EBA will be holding a public hearing at its premises on 21 November 2016 and the consultation process closes on December 22, 2016.

Following the consultation the EBA set out the following three draft technical standards:

  • Draft regulatory technical standards (RTS) setting out the standardized terminology for services that are common to at least a majority of member states (required under Article 3(4) of the PAD).
  • Draft implementing technical standards (ITS) relating to the standardization of presentation format on the fee information document (FID) and its common symbol (required under Article 4(6) of the PAD).
  • Draft ITS relating to a standardized presentation format of the statement of fees (SoF) and its common symbol (required under Article 5(4) of the PAD).

The draft technical standards aim to standardize eight terms for services that are to be used by payment service providers (PSPs), as well as providing consumer-friendly definitions of these terms in all EU official languages. The EBA identified the terminology based on the national provisional lists that member states have developed in line with the EBA’s March 2015 guidelines on standardized fee terminology (see Legal update, EBA final report and guidelines on national provisional lists of the most representative services linked to a payment account and subject to a fee).

PSPs will have to use the proposed standardized terminology in the pre-contractual FID and the post-contractual SoF disclosure documents.

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

Posted on

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.

Delegated Regulation on RTS Specifying Criteria for Setting MREL under BRRD published in OJ

Posted on

 

On September 3, 2016, the Commission Delegated Regulation ((EU) 2016/1450) supplementing the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD) with regulatory technical standards (RTS) highlighting the criteria relating to the methodology for setting the minimum requirement for own funds and eligible liabilities (MREL) has been published in the Official Journal of the EU (OJ).

Article 45(6) of the BRRD specifies certain criteria that a resolution authority must consider when determining the level of MREL for a BRRD institution. Article 45(2) of the BRRD gave the European Commission the power to adopt a Delegated Regulation containing RTS further specifying the Article 45(6) assessment criteria.

The RTS contain provisions relating to the interpretation of the six assessment criteria set out in Article 45(6). They also permit resolution authorities to provide a transitional period for reaching the final MREL for firms or entities to which resolution tools have been applied.

The Delegated Regulation was adopted by the Commission on May 23, 2016. It shall enter into force 20 days after its publication in the OJ (i.e. September 23, 2016).

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

Posted on

 

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.

European Commission Addendum to Draft RTS on Margin Requirements for Uncleared OTC Derivatives under EMIR

Posted on

On August 2, 2016, the European Commission published an addendum to the draft regulatory technical standards (RTS) on margin requirements for uncleared OTC derivatives under Article 11(15) of the European Market Infrastructure Regulation (EMIR).  This follows an endorsement by the European Commission on July 28, 2016 of the draft RTS with amendments.  The ESAs will have 6 weeks to respond to these amendments before resubmitting them to the Commission in the form of a formal opinion.

In the addendum, the Commission states that there are some clarifications to be made to the revised draft RTS on margins in Articles 34 and 36 on application timing and in Annex III where a formula is missing. The intention of the Commission is to have the first wave of the initial margin requirements applied from the date one month after the date the RTS enter into force. This was the intention of paragraph 1 in Article 36. However, the Commission considers that the reading of the interaction of paragraph 1 with the other paragraphs in Article 36 is not clear and that the revisions set out in the addendum are therefore necessary.

EBA Publishes Final Draft RTS on Separation of Payment Card Schemes and Processing Entities under IFR

Posted on

On July 28, 2016 the EBA published final draft regulatory technical standards (RTS) relating to the separation of payment card schemes and payment processing entities under the Interchange Fee Regulation ((EU) 2015/751) (IFR) (EBA/RTS/2016/05).

The final draft RTS have been developed under Article 7(6) of the IFR. Under this article the EBA must specify the requirements with which payment card schemes and processing entities have to comply in order to guarantee the independence of their accounting, organizational and decision-making processes. The accompanying press release highlights that the aim of the final draft RTS is to facilitate greater competition among processing services providers, which is in line with the general objective of the IFR to create a single market for card payments across the EU.

Under the final draft RTS payment card schemes and processing entities are required to:

  • have accounting processes in place to produce annual information related to separated profit and loss accounts reviewed by an independent and certified auditor;
  • have separate workspaces; and
  • ensure the independence of senior management, management bodies and staff.

The final draft RTS will now be submitted to the European Commission for endorsement.

European Commission Intends to Endorse, with Amendments, Draft RTS on Risk Mitigation Techniques for Uncleared OTC Derivative Contacts under EMIR

Posted on

On July 28, 2016, The European Commission published a letter to the Joint Committee of the European Supervisory Authorities (ESAs) informing them that it intends to endorse, with amendments, the draft regulatory technical standards (RTS) on risk mitigation techniques for OTC derivative contracts not cleared by a central counterparty (CCP) under Article 11(15) of EMIR. The Commission also published the revised text of the draft RTS, together with the accompanying annexes.

The letter highlights that the Commission intends to make several clarifications and to restructure the legal text of the draft RTS. The changes include:

  • introducing a recital containing reasoning for the delayed phase-in of the requirements for equity options;
  • clarification that EU counterparties wishing to rely on the intragroup exemption may submit their application after the RTS enter into force;
  • clarification that cash initial margin may be held with equivalent third country institutions (as well as with authorized EU credit institutions);
  • clarification that requirements relating to foreign exchange (FX) contracts should start to apply from the date of application of the relevant Delegated Act under the MiFID II framework, as opposed to the date of entry of this Delegated Regulation; and
  • changes to one provision relating to concentration limits for pension scheme arrangements.

The ESAs now have six weeks to amend the draft RTS and resubmit them to the Commission in the form of a formal opinion.

EBA Publishes Final Draft RTS on Criteria for Preferential Treatment in Cross-Border Intra-Group Financial Support under LCR

Posted on

On July 27, 2016, the EBA published a report containing final draft regulatory technical standards (RTS) on the specification of the additional objective criteria for preferential treatment in cross-border intra-group financial support in the calculation of the liquidity coverage requirement (LCR) under the Capital Requirements Regulation (Regulation 575/2013) (CRR) (EBA/RTS/2016/04).

The CRR permits a preferential treatment in the calculation of the LCR for intra-group liquidity flows. The Commission Delegated Regulation on the LCR ((EU) 2015/61) (LCR Delegated Regulation) specifies additional objective criteria for this preferential treatment for flows in the context of credit and liquidity facilities within a group or an institutional protection scheme (IPS) Articles 422(10) and 425(6) of the CRR mandate the EBA to develop RTS to further specify these additional objective criteria.

Under the final draft RTS:

  • a low liquidity risk profile of the liquidity provider and receiver required in the LCR Delegated Regulation will be determined on the basis of its compliance with the LCR and the Pillar 2 requirements, as well as on the basis of the outcome of the latest supervisory review and evaluation process (SREP);
  • credit institutions’ management bodies will be required to submit a written and reasoned legal opinion certifying that the credit or liquidity line in the LCR Delegated Regulation is a committed line legally and practically available at any time. The line is also subject to other requirements such as currency denomination or maturity date, to reinforce its appropriateness for the application of the preferential treatment; and
  • The LCR Delegated Regulation requires that the liquidity risk profile of the liquidity receiver be taken into account in the liquidity risk management plans of the liquidity provider. Under the RTS, the liquidity provider must monitor and oversee the liquidity position of the receiver on a daily basis. The contingency funding plan of the liquidity provider must ensure that, from this monitoring, the liquidity support to the receiver is guaranteed, even in times of stress.

The final draft RTS will now be submitted to the European Commission for endorsement.

EBA Final Draft RTS on Assessment Methodology for Internal Ratings-Based Approach

Posted on

The European Banking Authority (EBA) has published final draft regulatory technical standards (RTS) on the specification of the assessment methodology for competent authorities regarding compliance of an institution with the requirements to use the internal ratings-based (IRB) approach in accordance with Articles 144(2), 173(3) and 180(3)(b) of the Capital Requirements Regulation (Regulation 575/2013) (CRR).

The final draft RTS provide a mapping of the minimum IRB requirements as laid down in Chapter 3, Title II, Part Three of the CRR, into fourteen chapters. Each chapter starts with a brief description of the assessment criteria to be used by competent authorities relating to verification requests and of the methods to be used by competent authorities in this context.  Under the IRB approach, institutions determine their own funds requirements for credit risk, taking into account their own estimates of risk parameters.  Competent authorities may, under the CRR, permit institutions to use the IRB approach, provided that the relevant conditions set out in the CRR are met.

The draft RTS are available here and will now be submitted to the European Commission for endorsement.