Latest news of financial regulation
13 Feb 2014
The ESMA launched a consultation on guidelines on alternative performance measures (APMs). The aim of the guidelines is to encourage European issuers to publish transparent, unbiased and comparable information on their financial performance in order to provide users with a better understanding of their performance. Some examples of APMs include EBIT (Earnings Before Interest & Tax), EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation), free cash flow, underlying profit or net-debt. The proposed guidelines would apply to issuers with securities traded on regulated markets and all competent authorities and other bodies in the EU that undertake enforcement activities under the Transparency Directive.
The closing date for responses to this consultation is 14 May 2014 and ESMA expects to publish the final guidelines in the fourth quarter of 2014.
11 Feb 2014
ESMA issued updated Question & Answers (Q&As) on the implementation of the EMIR. These updated Q&As clarify, among others, issues related to reporting to trade repositories such as on how to construct and generate Unique Trade Identifiers, the reporting of empty/not available fields and the UPI taxonomy.
06 Feb 2014
The EP’s plenary session reconfirmed the existing ECON Committee position by voting on the amendments to the Commission’s proposal.
Parliament's negotiating mandate calls for a lean decision-making system capable of winding up a bank over a weekend. It entrusts key roles to the banking supervisor and resolution authority so as to ensure that the process of shutting down a bank is not prone to political paralysis. Yet it also gives some extra powers to the Resolution Board, on which national authorities are represented, to ensure an appropriate balance between tasks undertaken at EU and national levels.
Group leaders in the debate before the vote criticised Council's stance, which, they said, was leading to a waste of precious time.
ECOFIN Council, 18 Feb: the Council will take stock of negotiations with the EP on a single resolution mechanism for banks.
EC + EP + EU Council: Agreement in trilogue
Financial Markets: CFTC announces measures to promote trading on swap execution facilities and support an orderly transition to mandatory trading
10 Feb 2014
The CFTC adopted an interim final rule to clarify the scope of permissible access by market participants to swap data and information maintained by a registered swap data repository (“SDR”). These measures, in conjunction with the Commission’s implementation of the trade execution mandate, will maximize the level of trading on these regulated platforms and support the transition to a transparent, risk-reducing swap-market structure under CFTC oversight.
11 Feb 2014
The ESMA published a consultation paper setting out the draft Regulatory Technical Standards (RTS) required for the implementation of the CRA3 Regulation.
The draft RTS, which complements the existing regulatory framework for credit rating agencies (CRAs), cover:
- disclosure requirements on structured finance instruments (SFIs);
- the European Rating Platform (ERP); and
- the periodic reporting on fees charged by CRAs.
Consultation runs until 11 April 2014.
7 Feb 2014
The Greek EU Council Presidency published report which considers the European Parliament's amendments to EC proposed regulation in preparation for political agreement.
10 Feb 2014
The IOSCO published a consultation report on code of conduct fundamentals for credit rating agencies, which proposes significant revisions and updates to the current IOSCO code of conduct for credit rating agencies (IOSCO CRA Code).
The proposed revisions are designed to strengthen the IOSCO CRA Code by:
- enhancing provisions regarding protecting the integrity of the credit rating process, managing conflicts of interest, providing transparency, and safeguarding non-public information;
- adding measures regarding governance, training, and risk management; and
- seeking to improve the clarity of the IOSCO CRA Code.
Consultation runs until 28 March 2014.
7 Feb 2014
The ESMA published an opinion on practices to be observed by investment firms when selling complex financial products to investors. ESMA is issuing this opinion to remind national supervisors and investment firms about the importance of requirements governing selling practices under MiFID (Markets in Financial Instruments Directive).
The areas covered by the Opinion relate to:
- firms’ organisation and internal controls;
- the assessment of the suitability or appropriateness of certain products;
- disclosures and communications in relation to products; and
- compliance monitoring of the sales functions.
07 Feb 2014
The ECB published a draft of the ECB Single Supervisory Mechanism(SSM) Framework Regulation for public consultation. The draft Framework Regulation lays the basis for the work of the SSM when it takes over as supervisor of euro area banks in November 2014.
The draft Framework Regulation describes the rules and procedures governing the following aspects:
- assessment of a bank’s significance to determine whether it falls under the ECB’s direct or indirect supervision;
- the ECB’s oversight of the whole system;
- cooperation between the ECB and the NCAs with a view to ensuring a smooth functioning of the SSM;
- language regime for the various processes within the SSM;
- general principles for the conduct of supervisory procedures by the ECB;
- procedures relating to the SSM’s micro-prudential and macro-prudential tasks;
- arrangements for close cooperation with countries whose currency is not the euro;
- administrative penalties for breaches of the relevant law.
The consultation runs until 7 March 2014.
The final publication of the ECB SSM Framework Regulation is legally required by 4 May 2014.
Credit Rating Agencies: EBA, ESMA and EIOPA publish final report on mechanistic references to credit ratings in the ESAs' guidelines and recommendations
06 Feb 2014
EBA, ESMA and EIOPA published final report on mechanistic references to credit ratings in their guidelines and recommendations. The ESAs reviewed all their existing guidelines and recommendations in order to identify, and where appropriate remove, references to external credit ratings that could trigger sole or mechanistic reliance on such ratings.
This common definition aims at harmonising the different interpretations of ‘sole and mechanistic reliance' in the ESAs regulations and guidelines.
Banking Structural Reform: In response to the publication of proposal by the European Commission, EBF, AFME and Mr Liikanen release comments on its implications
29 Jan 2014
In response to the publication of proposal of 29 January 2014 by the EC for an EU Regulation on bank structural measures, the European Banking Federation (EBF), the Association for Financial Markets in Europe (AFME) and Mr Liikanen, Governor of the Bank of Finland and Chairman of the High-level Expert Group on reforming the structure of the EU banking sector, released comments on its implications.
Separation anxiety: structural reform of EU credit institutions (Morrison - Foerster)
Bank Capital Requirements: EBA, ESMA and EIOPA consult on draft technical standards on the mapping of ECAIs credit assessments
05 Feb 2014
The Joint Committee of the three European Supervisory Authorities (EBA, ESMA and EIOPA - ESAs) launched a consultation on draft Implementing Technical Standards (ITS) on the mapping of the credit assessments to risk weights of External Credit Assessment Institution (ECAIs). The following elements have been taken into account in the mapping process:
- Specific requirements have been established for the calculation of the default rate, which should improve the objectivity and consistency of the ‘mappings';
- Default experience obtained from external ratings of other ECAIs or credit scores produced by the ECAIs themselves have been considered;
- In case no external or internal default rate data is available, an estimate of the quantitative factor has been required based on the assessment provided by the ECAIs.
Consultation runs until 5 May 2014.
05 Feb 2014
FSB published a consultative paper on options for aggregating OTC derivatives trade repository data. The paper examines the three broad types of model for an aggregation mechanism: a physically centralised model; a logically centralised model; and the collection and aggregation by authorities themselves of raw data from TRs. It discusses the key requirements and challenges, focusing on legal considerations and data and technology considerations, and proposes criteria for assessing different aggregation models.
Consultation runs until 28 Feb 2014.
Payment System: European Parliament approves the transition period of 6 month for the migration towards SEPA
04 Feb 2014
The EP’s plenary session approved the draft rules that allows non SEPA compliant payments to continue for a limited period of time, until 1 August 2014, in parallel with SEPA compliant payments. This ensures the continued smooth processing of payments for consumers and businesses.
The formal adoption by the Council of Ministers
Market Abuse Directive: European Parliament approves the draft rules on financial market manipulation
04 Feb 2014
The EP’s plenary session approved the draft rules that lay down tougher criminal penalties, including prison terms, for serious market abuses such as unlawful disclosure of information, insider dealing or market manipulation and also inciting, aiding or abetting them.
News & articles
Once the draft rules are formally approved by the Council of Ministers, member states will have 24 months to put them into effect.
Financial Markets: Participants in the U.S.-EU financial markets regulatory dialogue discuss on regulatory developments
30 Jan 2014
Participants in the U.S.-EU Financial Markets Regulatory Dialogue met to exchange information on regulatory developments, identify potential regulatory conflicts, and discuss their shared interests in continuing to implement robust standards, including those on the G-20 financial regulatory agenda. EU and U.S. officials held productive discussions on key G-20 commitments, including the implementation of Basel III capital and liquidity rules, the status of implementation of derivatives reforms (including a discussion of related cross-border issues), the development of resolution regimes and strategies, and structural proposals in their banking systems.
Solvency II: EIOPA sets up the timeline for the delivery of Solvency II Implementing Technical Standards and Guidelines
31 Jan 2014
EIOPA set up the timeline for the delivery of the Solvency II Implementing Technical Standards and Guidelines. The overall goal of the project is to deliver the regulatory and supervisory framework for the technical implementation of the Solvency II regime from the first day of application, 1 January 2016. The key products of this project will be the Implementing Technical Standards (ITS) and the Guidelines for Solvency II.
Banking Union: ECB makes progress with asset quality review, and confirms stress test parameters for comprehensive assessment
03 Feb 2014
The ECB announced the progress made in its on-going comprehensive assessment. It also confirmed that it will apply the parameters for the stress test released by the EBA. Together with the asset quality review, the stress test forms part of the comprehensive assessment that aims to enhance the transparency of the balance sheets of significant banks and to rebuild investor confidence prior to the ECB taking over its supervisory tasks in November 2014. The ECB expects the scenarios for the stress test to be sent to the banks by the EBA at the end of April 2014.
31 Jan 2014
The EBA announced the key components of the forthcoming 2014 EU-wide stress test that will be conducted on a wide sample of EU banks.
The EU-wide stress test will be conducted on a sample of 124 EU banks which cover at least 50% of each national banking sector, and will be run at the highest level of consolidation. Given its objectives, the 2014 EU-wide stress test will be conducted under the assumption of a static balance sheet which implies no new growth and constant business mix and model throughout the time horizon of the exercise.
The resilience of EU banks will be assessed under a period of three years (2014-2016).
The methodology and scenario are expected to be published in April 2014 and banks' individual results to be released at the end of October.
News & articles
EBA outlines this year's stress test for EU's biggest banks (Wall Street Journal)
European banks face stress tests (The Guardian)
29 Jan 2014
The IOSCO published the final report on recommendations regarding the protection of client assets. The eight principles published provide guidance to regulators on how to enhance their supervision of intermediaries holding client assets by clarifying the roles of the intermediary and the regulator in protecting those assets.
The report outlines the intermediary’s responsibility to ensure compliance with these rules, including through the development of risk management systems and internal controls to monitor compliance.
- Last Update: Friday 07 March 2014, 18:01.