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 various FinTech publications, a consultation on the finalisation of Basel III and developments on the Insurance Distribution Directive, as well as Capital Markets Union proposals.
Act on transparency in financial markets supervision
The Act on transparency in financial markets supervision has been published in the Bulletin of Acts and Decrees and is expected to enter into force shortly. The Act introduces new powers for the Dutch financial markets supervisor (AFM) and the Dutch Central Bank (DNB). It includes the following measures:
European bank supervisor publishes final guides on bank licensing and fintech bank licensing
The European Central Bank (ECB) has published its final guides to bank licensing and fintech bank licensing. The guides set out the application process and licensing requirements for banks in general, as well as for fintech banks, and intend to support common supervisory practices and to increase transparency.
FinTech publications of the European Commission and the European Banking Authority
The European Commission has published an Action Plan on FinTech setting out steps to enable innovative business models to scale up, support the uptake of new technologies, and increase cybersecurity and the integrity of the financial system. The steps include:
In addition, the European Commission has published a Proposal for a Regulation on European Crowdfunding Services for Business.
The European Banking Authority (EBA) has published a Roadmap on FinTech. Amongst other things, it takes the mandates in the European Commission’s Action Plan on fintech into account, and sets out priorities for 2018/2019. The priorities include:
EBA will also establish a fintech Knowledge Hub.
Additional Capital Markets Union publications
In addition to the European Commission’s fintech publications, the European Commission has published a Communication on completing the Capital Markets Union by 2019 as well as the following legislative proposals:
Implementation of Directive amending bank creditor hierarchy
Following a consultation launched in December 2017, the bill amending the Bankruptcy Act to implement the directive amending the Bank Recovery and Resolution Directive (BRRD) as regards bank creditor hierarchy has been published. The Directive requires that member states create a new class of “non-preferred senior debt” eligible for bail-in.
Developments on the Insurance Distribution Directive
The Dutch Act implementing the Insurance Distribution Directive (IDD) has been published in the Bulletin of Acts and Decrees. It will enter into effect at a time to be determined by Royal Decree.
In addition, the Directive amending the IDD as regards the date of application of member states’ transposition measures was published in the Official Journal of the EU. By 1 July 2018, member states must adopt and publish the laws, regulations and administrative provisions necessary to comply with the IDD, and apply those measures from 1 October 2018 at the latest.
The Delegated Regulation postponing the application date of:
European Commission launches consultation on the finalisation of Basel III
The European Commission has launched an exploratory consultation on the outstanding Basel III post-crisis regulatory reforms agreed upon by the Basel Committee in December 2017. The aim is to gather views from interested parties on the impact that amendments may have on the EU banking sector, as well as the wider economy, and to highlight potential challenges in its implementation. The implementation of the agreed reforms in the EU would require amendments to banking regulation, including the CRR.
The consultation includes potential amendments to the standardised approach for credit risk (SA-CR), internal ratings-based (IRB) approaches for credit risk, minimum haircut floors for non-centrally cleared securities financing transactions (SFTs), the credit valuation adjustment (CVA) framework, as well as a new standardised approach for operational risk (SA-OR), and the replacement of the “Basel II” floor with an aggregate, more risk-sensitive output floor.
The Dutch bank supervisor publishes Q&As on Proprietary Traders
In November 2017, the Dutch Central bank (DNB) announced that it would amend the prudential regime for proprietary traders it considers “local firms” under the Capital Requirements Regulation (CRR). In March 2018, DNB published Q&As answering questions about the follow-up and transitional phase following the changes to the prudential regime. Among other things, the Q&As cover the following topics: capital requirements, capital buffer requirements, internal models, reporting obligations (FINREP and COREP), recovery plans, exemptions and exceptions, and the ICAAP and SREP process.
Consultation on public reporting by companies
The European Commission has launched a consultation on the reporting requirements for listed and non-listed companies. The current EU public reporting framework consists of a large number of directives and regulations, including the Accounting Directive, the IAS Regulation, the Transparency Directive and the Market Abuse Regulation. The Commission wants to assess whether this framework is still relevant to meet the intended objectives and whether it is effective, internally consistent, coherent with other EU policies, efficient and not unnecessarily burdensome. The consultation focuses on financial information (such as financial statements) and non-financial information (including the disclosure of relevant environmental and social information in accordance with the Non-Financial Reporting Directive). The consultation runs until 21 July.
Court of Justice interprets ne bis in idem principle in market abuse case
In a recent judgment concerning four Italian cases, the European Court of Justice has ruled that the ne bis in idem principle may be limited in order to protect the financial interests of the European Union and its financial markets. However, the principle of proportionality must be respected. If a criminal penalty itself punishes the offence in an effective, proportionate and dissuasive manner, bringing administrative procedures of a criminal nature for the same acts may exceed what is strictly necessary to protect the markets. The court explains that national legislation authorising a duplication of proceedings and penalties of a criminal nature must:
ESMA publishes technical advice under the Prospectus Regulation
The European Securities and Markets Authority (ESMA) has published the first part of its technical advice under the Prospectus Regulation. The advice will form the basis for the delegated acts which the European Commission is expected to adopt early next year.
The advice covers the format and content of prospectuses, the EU growth prospectus and the scrutiny and approval of prospectuses. The advice proposes a number of changes to the current prospectus regime, including:
ESMA based its advice on last year’s consultation. Responses to this consultation, including the response of De Brauw, are available on ESMA’s website.
Official Journal of the EU
23 October 2020
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30 September 2020
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