13 September 2016

Financial Markets in brief – new regulation and other developments

There have been many developments in national and European financial markets regulation during the past two months. Among other things, the Financial Markets Amendment Bill 2018 and the Consultation on the Financial Markets Amendments Decree 2017 have been published. In this article we provide a brief overview of these and other developments.

Highlighted publications

 

Financial Markets Amendment Bill 2018
The Ministry of Finance has held a consultation on the bill. Proposals covered by the draft proposal include:

  • The permission of the Dutch Central Bank (DNB) will be required if a “403 guarantee” is issued for a supervised financial undertaking (a bank or insurance company).
  • All civil cases involving banking and financial law will be handled by the Amsterdam courts.
  • There will be a statutory ban on seizing a financial undertaking’s deposits if these are held by DNB.
  • The remuneration rules for financial undertakings will be amended. Among other things, the bonus cap will also apply to managers of UCITS and alternative investment funds that are part of a group. This amendment is in accordance with recent guidelines of the European Banking Authority.
  • DNB must decide on banking licence applications within 26 weeks. Currently, this is a 13- week period.
  • Under certain circumstances, DNB may use the deposit guarantee scheme for the funding of a transfer of deposits held with a bank that is bankrupt or subject to emergency regulations.

The Bill is expected to enter into force by mid-2018.

Consultation on the Financial Markets Amendments Decree 2017
The Ministry of Finance has held a consultation on the draft decree. Proposals covered by the draft decree include:

  • Employees who give advice to clients about a general pension fund or the voluntary affiliation to a sectoral pension fund must have a diploma.
  • Financial institutions offering automated advice must ensure that the advice satisfies the same requirements as the advice provided by a natural person.
  • The Ministry of Finance has clarified that the exception to the inducements ban currently available to crowdfunding platforms also applies to equity crowdfunding.
  • Shares will have to be calculated in the same manner as votes, that is, as prescribed by Delegated Regulation (EU) 2015/761.

The Decree is expected to enter into force on 1 July 2017.

Act implementing the MAR and the MAD
The Act implementing the Market Abuse Regulation and the Market Abuse Directive entered into force on 11 August. The Dutch financial markets supervisor AFM has been designated the competent authority for the MAR. It has the power to impose fines and penalties for infringement of the MAR. For an overview of the amendments, please see our article in the July In context. 

Implementation of Mortgage Credit Directive
The Mortgage Credit Directive Implementing Act and Decree entered into force on 14 July. The Directive aims to bring about a well-functioning internal market for residential property credit agreements.

An important consequence of the Act is that an offer made by a lender will now be considered a final offer. This means that the lender must have all the data necessary to perform the creditworthiness assessment prior to making the offer. After making the offer, the credit agreement cannot be terminated or amended to the customer’s disadvantage by invoking an incorrect assessment of creditworthiness. This will change the way offers are presented to consumers. Also, the Act prohibits banks from requiring consumers who obtain a mortgage credit to open a current account or a savings account with that same bank.

FAQs on prospectuses
ESMA has published the 25th version of its Q&A on prospectus related issues. ESMA answers the following new questions:

  • How should the requirement to disseminate an amended advertisement be applied when the advertisement in question is a roadshow?
  • How should the issuer proceed in cases where a participant at a live presentation requests information about an alternative performance measure which is not included in the prospectus?

Consultation about a draft bill on investment objects and investment bonds
On 2 August 2016, a draft bill on investment objects and investment bonds was published for consultation. The bill amends the Financial Markets Supervision Act (Wft) and aims to increase the level of protection of investors in investment objects and investment bonds and to exclude malicious providers from the investment objects and investment bonds market.
To that end, the bill introduces an authorisation requirement and ongoing supervisory requirements for both managers of investment objects and managers of investment bonds, comparable to those applicable to investment firms.
The bill contains provisions which, under certain circumstances, require the appointment of a depositary. The bill also sets out requirements that the depositary must comply with.

EBA recommends changes to banks’ minimum loss absorbing capacity (MREL)
The European Banking Authority has published its interim report on potential amendments to the current framework for the MREL (minimum requirement for own funds and eligible liabilities) under the EU rules on banking recovery and resolution. The interim report contains a number of provisional recommendations to amend the current MREL framework, which may be revised in the final report based on further analysis or feedback.

The EBA’s provisional recommendations aim to address several known shortcomings in the current MREL framework and further align MREL with the global TLAC (total loss-absorbing capacity) standards finalised in November 2015 by the Financial Stability Board for all banks designated as Global Systemically Important Banks (G-SIBs). The provisional recommendations also reduce complexity in EU banking regulation by aligning the MREL framework with the capital requirements of the Capital Requirements Directive IV and the Capital Requirements Regulation.
Although the EBA’s interim report by itself will not have immediate consequences for banks, it does provide important insight into the process of the MREL framework revision. This revision may  significantly impact a bank’s funding structure and the pricing of debt, and may require banks to attract substantial new funds. For more detailed information on this topic, see our article in the July edition of In context. Please note that since publication of this article, the Regulatory Technical Standards on the methodology for setting the MREL have been published in the Official Journal.

Consultation about a draft bill on recovery and resolution for insurers
A draft bill on the recovery and resolution of insurers was published for public consultation on 13 July 2016. Interested parties were able to respond to the draft bill until 28 August 2016.

The draft bill, which looked heavily to the existing framework for the recovery and resolution of banks, expands the tools available to the Dutch Central Bank (DNB) for assisting insurers in trouble, in a predictable and orderly manner to protect the interests of policyholders. The draft bill also introduces the possibility to pay advances to policyholders in the event of an insurer’s bankruptcy, before the bankruptcy verification meeting

Notable implications of the draft bill for insurers include obligations to draw up a pre-crisis plan and to help DNB in drawing up a resolution plan, and DNB’s power to require that insurers take specific measures to remove obstacles that prevent resolvability. For more detailed information on this topic, please see our Legal alert (available in Dutch only).

Consultation on EU personal pension framework
On 27 July 2016, the European Commission (EC) launched a public consultation on a potential EU personal pensions framework. The consultation builds on its Action Plan on Building a Capital Markets Union, in which the EC announced it will assess the case for a policy framework to establish a European market for simple, efficient and competitive personal pensions, and to determine whether EU legislation is required to support this market.

Personal pensions are long-term savings products with a retirement objective which are entered into voluntarily and are neither social security-based nor occupational. Personal pensions can take different shapes such as life insurance products, pension insurance or investment funds.

This consultation aims to identify any existing obstacles within the personal pensions market and seeks views on how to best address these. The consultation runs until 31 October 2016.

Defined Contribution Scheme Improvement Act in effect
The Dutch Defined Contribution Scheme Improvement Act came into effect on 1 September 2016. This act imposes new obligations on all defined contribution scheme providers, including providers that do not offer variable pension benefits. For more detailed information on this topic, please see our In context article.

 

Other publications

 

EC

EBA

ESMA

EIOPA

ECB

BIS

Official Journal EU

MinFin

AFM

DNB

Other