14 December 2017

Financial Markets in brief – new regulation and other developments

There have been many developments in national and European financial markets regulation over the past month. We provide a brief overview of these developments, which include the Basel Committee’s post-crisis reforms agreement, the Dutch Central Bank’s supervisory priorities for 2018, and Euronext’s new rules for reverse listings.

Highlighted publications

Consultations of the Dutch Ministry of Finance

Financial markets Amendment Decree 2018

The Dutch Ministry of Finance has published the Financial Markets Amendment Decree 2018. This draft decree includes the following proposals:

  • mortgage credit providers offering their customers the option to agree to a new debit interest rate during a fixed-interest period may not charge compensation which exceeds their financial loss
  • clarification that mortgage credit providers offering mortgage credits in a foreign currency have a choice of two alternatives that they can offer to customers for the reduction of the foreign exchange risk
  • the decree includes an exception to the single exposure limit for credit institutions in Caribbean Netherlands: these institutions may have exposures of more than 25% to the federal government of the United States (US Federal Government Treasury Bills).

The consultation closes on 14 January 2018.

Financial Markets Remedial Decree 2018

The Dutch Ministry of Finance has launched a consultation on a decree remedying a number of mistakes and omissions which occurred during the implementation of European directives and regulations, including the Capital Requirements Directive, the Capital Requirements Regulation and the Solvency II Directive.

The consultation closes on 31 December 2017.

Euronext announces new rules for reverse listings

Euronext has published new rules for reverse listings. In the context of the new policy, “reverse listings” are defined as transactions by an issuer that lacks any meaningful assets (as determined by Euronext). The new rules include:

  • a sufficient number of securities must be distributed to the public
  • issuers must have published or filed audited annual financial statements or pro forma accounts for the preceding three financial years
  • issuers must appoint a listing agent
  • issuers must perform know-your-customer checks
  • issuers must publish an information document

The listing fees will consist of an administrative fee of EUR 40,000 and the subsequent admission fee for the listing of the shares to be issued and listed.

Euronext has also amended its Rule Book II to reflect these changes in the reverse listing rules. The new policy will apply from 1 January 2018.

Basel Committee’s post-crisis reforms agreement

The Basel Committee on Banking Supervision has reached an agreement on outstanding Basel III bank capital reforms, including changes to:

  • the standardised approach for credit risk
  • the internal ratings-based approach for credit risk
  • the credit valuation adjustment (CVA) framework
  • the standardised approach for operational risk
  • the measurement of the leverage ratio and an add-on for global systemically important banks (G-SIBs) on top of the current 3% leverage ratio

In addition, the output floor for capital requirements was set at 72.5%.

These reforms must be implemented throughout the EU in order to become binding on banks. The European Commission has said that it will consult European institutions, member states and various stakeholders before amendments to implement these standards in the EU Capital Requirement Regulation and Directive are proposed.

Developments: EU Banking Reform package

Following the political agreement reached in October 2017, the European Parliament and the Council of the EU have adopted:

  • a directive amending the Bank Recovery and Resolution Directive (BRRD) as regards bank creditor hierarchy
  • a regulation amending the Capital Requirement Regulation (CRR) on transitional arrangements for IFRS 9

The Estonian EU Presidency has also published a progress report on the package and has published presidency compromise texts of the four remaining legislative proposals in the package.

On 5 December 2017, the Dutch Minister of Finance launched a consultation for the draft bill implementing the directive amending the BRRD in relation to bank creditor hierarchy. The consultation will run until 9 January 2018.

Common rules and new framework for securitisation adopted by the Council of the EU

Following the adoption by the European Parliament, the Council has now also adopted new rules to ensure simple, transparent and standardised securitisation. This includes a regulation on securitisation and an amendment to the CRR.

MiFID II publications

The Dutch financial markets supervisor AFM expects market participants to comply with MiFID II requirements as of 3 January 2018, unless this cannot be reasonably expected from individual market participants. In its supervision under MiFID II, the AFM will focus on investor protection and on implementing safeguards for the proper functioning of the financial markets.

Recent MiFID II publications by the European financial markets supervisor (ESMA) include:

The Dutch Bank supervisory publishes supervisory priorities

The Dutch Central Bank (DNB) has published its “Supervision Outlook for 2018” and “Vision on Supervision for 2018-2022”. In the coming years, DNB will prioritise the key themes of technological innovation and the impact of climate change. DNB will also harden its stance on combating financial and economic crime. DNB’s Supervision Outlook for 2018 details the sector-wide priorities identified in the supervisory strategy for banks, insurance companies, and pension funds.

Implementation of the PRIIPs Regulation

The Decree implementing the Regulation on Key Information Documents (KIDs) for Packaged Retail and Insurance-Based Investment Products (PRIIPs) was published in the Bulletin of Acts and Decrees on 28 November 2017. It will enter into force on 1 January 2018. The Act implementing the PRIIPs Regulation will also enter into force on 1 January 2018.

New Q&As on the Market Abuse Regulation

ESMA has published an updated version of its Q&As on the MAR to include new questions on transactions by managers:

  • How should permission to trade in a closed period be considered in the context of the general insider dealing provisions of Article 14 of the MAR?
  • Are the types of “transaction” by a PDMR prohibited during a closed period the same as those types of transaction subject to the notification requirements set out under Article 19(1) of MAR?

Other publications

EC

EP

EBA

ESMA

EIOPA

ECB

Official Journal EU

MinFin

MinSZW

AFM

DNB

Other