There have been many developments in national and European financial markets regulation during the past month. We provide a brief overview of these developments, which include the political agreement on certain elements of the EU Banking Reform package and the publication of the bill implementing PSD2.
Decree implementing the Benchmark Regulation
The Decree implementing the Benchmark Regulation has been published in the Bulletin of Acts and Decrees. In this decree, the Dutch Financial Markets Supervisor (AFM) has been designated the competent authority for the Benchmark Regulation. The Decree also grants the AFM the power to impose fines and penalties for infringement of the Benchmark Regulation. It will enter into force on 1 January 2018.
Consultation on crowdfunding legislation
The Dutch Ministry of Finance has launched a consultation on amendments to crowdfunding legislation. The consultation focuses on crowdfunding platforms where funding is raised in the form of privately-placed loans rather than on equity crowdfunding. The consultation closes on 27 November 2017.
ESMA’s Q&A on prospectuses
ESMA has updated its Q&A document on Prospectuses. Several questions relating to exemptions have been amended to reflect the changes brought about by the new Prospectus Regulation, which became applicable in July 2017.
Consultation on Decree Implementing the Insurance Distribution Directive
The Ministry of Finance has launched a consultation on the draft Decree implementing the Insurance Distribution Directive. The amendments include the following topics: employee expertise, product development processes, provision of information, transparency, conflicts of interest, transparency of inducements, the non-life insurers’ product information document, and additional rules on insurance-based investment products.
Guidance on implicit support regarding securitisations
DNB has published a Q&A about notification requirements for securitisation under Article 248(1) of the Capital Requirements Regulation. The EBA guidelines on implicit support for securitisation transactions indicate what constitutes arm’s length conditions and when a transaction is not structured to provide support according to Article 248. The guidelines also include further information on the notification and documentation requirements. Significant supervised entities must take into account the ECB’s guidance of 28 July 2017, which further specifies how the ECB expects to be notified of these transactions. Less significant institutions must notify DNB.
Publication bill implementing PSD2
Following a consultation launched in 2016, the bill implementing the Payment Services in the Internal Market Directive (PSD2) has been published. The amendments relate to various topics, including:
At an earlier stage, the Minister of Finance indicated that implementation of PSD2 before 13 January 2018 is no longer realistic (see previous In context article). Implementation is more likely to take place in the spring of 2018. The Minister has now also elaborated on the consequences, which include that banks will not have to grant access to bank accounts until implementation takes place. In addition, no authorisations can be applied for until that time.
Implementation of European anti-money laundering rules
Following a consultation launched in 2016, the Minister of Finance and the Minister of Security and Justice have published a bill implementing the Fourth Anti-Money Laundering Directive (AMLD4) and the regulation on information accompanying transfers of funds.
The AMLD4 confirms the two core requirements set out in the Dutch Act on the Prevention of Money Laundering and Financing of Terrorism: the requirement to perform customer due diligence research, and the requirement to report unusual transactions to the Financial Intelligence Unit. The scope of the AMLD4 has been expanded to other categories of institutions. A risk-based approach is applied. More than before, customer due diligence must be aligned with the risks of the client, their products or services and the countries where the institution operates. This may mean that an institution will need to collect more information before it can provide services to a client.
Financial institutions can incur higher administrative sanctions if they are in breach of the AMLD4. The maximum administrative sanction will be increased from EUR 4 million to EUR 5 million, and severe breaches can lead to revenue-related administrative sanctions.
The bill also implements the Regulation on information accompanying transfers of funds. Pursuant to this regulation, money transfers must be completely traceable. This is an important tool to prevent, detect and research money laundering and the financing of terrorism. The bill is expected to enter into force during the first half of 2018. The AMLD4 should have been implemented by 26 June 2017.
The requirement stemming from the AMLD4 to maintain an ultimate beneficial owner (UBO) register will be implemented through a separate bill. A consultation for this separate bill was launched in March 2017.
Changes to mortgage credit rules
The 2018 Ministerial Regulation on Mortgage Credit has been published and will enter into force on 1 January 2018. It sets the income criteria for the provision of mortgage credit as well as the maximum amount of mortgage credit in relation to the value of a property. Changes include the setting of the loan to value (LTV) ratio to 100%. On 16 October 2017, the AFM published a press release highlighting that the changes to mortgage credit as of 1 January 2018 must be considered in a timely manner.
EU Banking Reform package
On 25 October 2017, the European Commission published a press release announcing the political agreement between the European Parliament, the Council of the EU and the European Commission. The agreement addresses certain elements of the EU Banking Reform Package proposed in November 2016. The agreement on the changes to the Bank Recovery and Resolution Directive creates a new category of unsecured debt in bank creditors’ insolvency ranking and establishes an EU harmonised approach on the priority ranking of bank bond holders in insolvency and in resolution. The agreement on the changes to the CRR and the Capital Requirements Directive also implements the new International Financial Reporting Standard (IFRS 9). Click here for our publication about the original proposals.
Recent efforts aimed at reducing banks’ bad loans
A consultation has been launched for the draft addendum to the European Central Bank’s guidance on non-performing loans (NPLs) published earlier this year. Following the financial crisis, many European banks have high levels of NPLs, which significantly impact their profitability and their ability to issue loans to, for example, small and medium-sized enterprises.
The ECB’s draft addendum includes quantitative guidance designed to foster more timely provisioning practices for NPLs in the future. Although application of the addendum is non-binding, banks are expected to explain any deviation from the guidance to supervisory authorities. The addendum will apply to all exposures newly classified as non-performing in line with the EBA definition as of 1 January 2018. Progress on the reduction of NPLs will be monitored closely by the ECB.
In addition, the European Commission is also carrying out an impact assessment on statutory prudential backstops addressing insufficient provisioning for newly-originated loans that turn non-performing and has launched a consultation on common minimum levels of capital that EU banks must set aside to cover incurred and expected losses on newly originated loans that turn non-performing.
Common rules and new framework for securitisation adopted by the European Parliament
Following an agreement reached by the European Parliament and the Council of the EU, the European Parliament has now adopted new rules to ensure simple, transparent and standardised securitisation. This includes a regulation on securitisation which will apply to all securitisation products, and an amendment to the CRR to make the capital treatment of securitisations for banks and investment firms more risk-sensitive.
Official Journal EU
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