18 January 2018

Financial Markets in brief – new regulation and other developments

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 publication of the Financial Markets Amendment Bill 2018, a review of the European prudential rules for investment firms, the implementation of MiFID II in the Netherlands, a consultation on draft regulatory technical standards under the new Prospectus Regulation, and the publication of common rules and new framework for securitisation.

Highlighted publications

Financial Markets Amendment Bill 2018

The Ministry of Finance has submitted a bill to Parliament to amend the Financial Markets Supervision Act. Proposals covered by the bill include:

  • A statutory ban on seizing a financial undertaking’s deposits if these are held by DNB.
  • The European Central Bank and DNB must decide on banking licence applications within 26 weeks. Currently, this is a 13-week period.
  • It will be made easier for the AFM to provide confidential data and information to the Netherlands Authority for Consumers & Markets.
  • The AFM and the Dutch Central Bank will be allowed to provide confidential information to the Ministry of Justice Agency for Scrutiny, Integrity and Screening.

Several proposals in the consultation document have not been included in this bill, mainly because the Ministry of Finance needs more time to prepare them. Finally, based on the response to the consultation, the Ministry has decided not to concentrate the handling of civil cases involving banking and financial law in Amsterdam courts. The bill is expected to enter into force by mid-2018.

Implementation of MiFID II in the Netherlands

On 28 December 2017, the Act and Decree implementing certain provisions of MiFID II and MiFIR, a Delegated Directive Supplementing MiFID II and a Delegated Regulation Supplementing MiFID II, were published in the Bulletin of Acts and Decrees. They entered into force on 3 January 2018.

Review of the European prudential rules for investment firms

The European Commission has published proposals aimed at introducing more proportionate and risk-sensitive rules for investment firms. According to these proposals, the vast majority of EU investment firms would no longer be subject to rules that were originally designed for banks, whereas the largest and most systemic investment firms would remain subject to the same regime as EU banks.

The proposal amending, among other regulations, the CRR and MiFIR covers requirements in terms of own funds, levels of minimum capital, concentration risk, liquidity, reporting and public disclosure under the Regulation for all investment firms that are not systemic. The proposal amending CRD IV and MiFID II covers requirements for the appointment of prudential supervisory authorities, the initial capital of investment firms, the supervisory powers and tools, governance, remuneration and the publication requirements for competent authorities.

Ministry of Finance consultations

  • The Ministry of Finance has launched a consultation on the draft Decree on transparency in financial markets supervision. Among other things, this decree determines which figures DNB may publish in comparative overviews per bank. The consultation runs until 28 January 2018.
  • The Ministry of Finance has launched a consultation of the draft Ministerial Regulation implementing certain provisions of the Insurance Distribution Directive. Pursuant to this draft Ministerial Regulation, persons practising insurance distribution as an ancillary activity will be exempted from the Wft under certain conditions. It also includes provisions relating to the cooperation and information exchange between the AFM, supervisory authorities in other Member States and EIOPA. The consultation runs until 1 February 2018.
  • The Ministry of Finance has started a consultation on the use of the citizen service number for making compensation payments under the deposit guarantee scheme. The consultation runs until 2 February.

Changes to Euronext rules

Euronext has amended its harmonised rules (Rule Book I) to include the requirements introduced by MiFID II. As the scope of the MiFID II regime is much broader than MiFID I, Euronext has amended a number of definitions, and has added several new ones. A number of rules have also been updated to comply with the new regime, including the trading rules for securities and derivatives. The revised Rule Book I entered into force on 3 January.

Euronext has also amended its Rule Book II to reflect the changes in the reverse listing rules; see our article in the December 2017 edition of In context.

Regulation on transparency of securities financing transactions

The Ministry of Finance has submitted a Bill to Parliament implementing the Regulation on transparency of securities financing transactions. Securities financing transactions (STFs) are transactions that allow investors and firms to use assets, such as the shares or bonds they own, to secure funding for their activities. SFTs include repos and securities lending.

The regulation provides that:

  • all SFTs must be reported to central databases, unless one of the parties is a central bank
  • information on the use of SFTs by investment funds must be disclosed to investors
  • minimum transparency conditions must be met when collateral is reused

Most provisions can be included in the decree implementing the SFTR. However, the regulation also provides that, in cases of regulation infringements, supervisors must have the power to temporarily ban persons with managerial responsibilities from exercising management functions, irrespective of the sector they are working in. Since the AFM and DNB currently only have the power to impose a ban on individuals employed by financial institutions and market operators, this requires an amendment of the Financial Markets Supervision Act.

Consultation on draft regulatory technical standards under the new Prospectus Regulation

The new Prospectus Regulation requires ESMA to submit draft regulatory technical standards on a number of topics. The consultation document that ESMA published in December includes proposals relating to:

  • the key financial information that must appear in the summary of the prospectus
  • the data that need to be sent to ESMA for inclusion in ESMA’s prospectus register
  • advertisements relating to public offers or admission to trading. Among other things, ESMA addresses the broader definition of advertisements compared to the existing prospectus regime and the warnings that must be included.
  • situations which require the publication of a supplement to a prospectus
  • publication of a prospectus: ESMA addresses several topics, including publication in electronic form, publication of final terms, and the inclusion of hyperlinks in the prospectus.

The consultation closes on 9 March 2018.

Common rules and new framework for securitisation published

New rules to ensure simple, transparent and standardised securitisation have been published in the Official Journal of the EU. This includes a regulation on securitisation and an amendment to the CRR.

New Q&As on the Market Abuse Regulation

ESMA has updated its Q&A document on the Market Abuse Regulation. It includes a new question on the timespan for the calculation of the CO2 equivalent emissions and the rated thermal input.

Proposal to delay the application date of the Insurance Distribution Directive

The European Commission has proposed postponing the date of application of member states’ transposition measures until 1 October 2018. The IDD must still be transposed into national law by 23 February 2018. The European Parliament and 16 member states had requested this postponement to give certain insurance distributors additional time to prepare for the new requirements. In order to align the application dates, the proposals include postponing, until 1 October 2018, the application of:

SSM Supervisory Priorities for 2018

The European bank supervisor has announced the four SSM supervisory priority areas for 2018 in its role as supervisor of significant European banks. The ECB aims to ensure that banks address their key risks effectively. The priorities are business models and profitability drivers, credit risk, risk management, and activities comprising multiple risk dimensions. The priorities list should not be considered exhaustive.

Minimum Requirement for Own Funds and Eligible Liabilities

The Single Resolution Board (SRB) has, together with the Banking Union national resolution authorities, published its 2017 policy statement on the Minimum Requirement for Own Funds and Eligible Liabilities. This Policy Statement will serve as a basis for setting consolidated MREL targets for banks under the remit of the SRB.

Other publications

EC

EP

EBA

ESMA

 

EIOPA

 

ECB

 

Official Journal EU

 

MinFin

 

MinSZW

 

AFM

 

DNB

 

Other