13 December 2018

Financial Markets in brief – new regulations 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 a provisional agreement on the EU Banking Reform Package, the adoption of the bill on recovery and resolution of insurers and the bill implementing PSD2, ESMA’s publications on the Market Abuse Regulation, and a draft regulation supplementing the Prospectus Regulation.

Highlighted publications

EU Banking Reform Package

Following the financial crisis, ambitious reforms to the regulatory framework for the EU banking sector were implemented. These reforms aimed to bring back and safeguard financial stability and market confidence. In 2016, the European Commission published proposals to complete this reform agenda:

  • Implementing outstanding elements resulting from international standards set by the Basel Committee and Financial Stability Board, and
  • a comprehensive review of existing EU banking regulation.

Click here for our booklet on these original proposals.

In May 2018, the Council of the EU agreed on a General Approach for the EU Banking Reform Package. The European Parliament voted on its negotiation mandate in June 2018. Subsequently, trilogue negotiations began.

On 4 December 2018, the Council of the EU and the European Parliament reached a provisional political agreement on certain aspects of the EU Banking Reform Package. According to the Council of the EU’s general endorsement, a number of outstanding issues remain, including: remuneration, off-balance sheet guarantees to Collective Investment Undertakings, and treatment of shadow-banking or market-based finance.

Negotiations on the remaining issues will continue both at the technical and political level. The Council of the EU indicates that this will take place with a view to finalising negotiations by the end of 2018. Once the negotiations have been finalised, both the European Parliament and the Council of the EU will need to formally adopt the package.

The provisional agreement relates to the amending of the following two regulations and two directives:

  • Bank capital requirements (amendments to the Capital Requirements Regulation and Capital Requirements Directive IV);
  • Recovery and resolution of banks (amendments to the Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation).

ESMA publications on the Market Abuse Regulation

New Q&As on the MAR

ESMA has published a new version of its Q&As on MAR. This includes an updated question on the prohibition for PDMRs to conduct transactions on their own account or for the account of a third party during a closed period (article 19(11) of the MAR). ESMA explains that this prohibition does not include transactions of the issuer relating to its own financial instruments even if it is the PDMR taking the decision or bringing a previous decision into practice.

Increase of the threshold for notifications by PDMRs

An overview published by the European Securities and Markets Authority shows that Denmark, France and Italy have raised the threshold for notifications by PDMRs and closely associated persons from EUR 5,000 to EUR 20,000.

The obligation for PDMRs and closely associated persons to notify the issuer and the competent authority of every transaction conducted on their own account generally applies once the total number of transactions have reached the threshold of EUR 5,000. However, member states have the possibility to raise this threshold to EUR 20,000. The overview published by ESMA includes the reasons provided by the competent authorities for the increase.

Report on sanctions under the MAR

ESMA has published its annual report on administrative and criminal sanctions and other

administrative measures under the Market Abuse Regulation. It shows the sanctions imposed on the basis of the MAR from 3 July 2016 to 31 December 2017

Recovery and resolution of insurers

On 27 November 2018, the First Chamber of the Dutch parliament adopted the Dutch Bill on Recovery and Resolution of Insurers.

Draft regulation supplementing the Prospectus Regulation

The European Commission has published a draft regulation supplementing the Prospectus
Regulation as regards the format, content, scrutiny and approval of the prospectus. The annexes containing the specific information to be included in the various types of prospectuses and in a universal registration document have also been published. The drafts are based on the ESMA consultations and are open for feedback until 26 December.

The Prospectus Regulation and the supplementing regulation apply as of 21 July 2019.

Implementation of PSD2 in the Netherlands

The First Chamber has adopted the bill implementing the Payment Services in the Internal Market Directive (PSD2) in the Netherlands. The date of entry into force is not yet known.

On 13 November 2018, the Minister of Finance responded to parliamentary questions about the draft decree implementing PSD2.

Financial Supervision Funding

The Act on the Funding of Financial Supervision 2019 has been published and is expected to enter into force on 1 January 2019. The main change under the act is that levies will be specified in delegated legislation rather than in the act itself, making the system more flexible. A decree on the funding of financial supervision will be published soon, and will contain the rules for apportioning the costs to the different categories of supervised entities.

The principles of the system remain unchanged: financial supervision costs will continue to be funded by financial institutions on a pay-as-you-go basis. Also, part of the funds deriving from penalty payments and administrative fines will continue to be allocated to the State.

Dutch Central Bank’s supervisory priorities for 2019

The Dutch Central Bank has published its supervisory agenda for 2019. It sets out the highlights to which the supervisor will devote additional attention in addition to its ongoing prudential supervision. Among other things, it will work to incorporate climate-related risks in its assessment frameworks, will continue to examine how financial institutions prevent involvement in organised crime, and will explore further options for conducting supervision by using electronically obtained and analysed data. Tail risks will also be given special attention. Click here for our In context article on supervisory priorities for the pension sector.

Proposal for a holistic framework for systemic risk in the insurance sector

The Financial Stability Board (FSB) has welcomed the IAIS’s proposed Holistic Framework for Systemic Risk in the Insurance Sector and implications for the identification of Global Systemically Important Insurers (G-SIIs) and for G-SII policy measures. The FSB has decided not to engage in an identification of G-SIIs in 2018. In November 2019, the FSB will assess the IAIS’s recommendation to suspend G-SII identification as of 2020. In November 2022, the FSB will review the need to either discontinue or re-establish an annual identification of G-SIIs.

European Single Resolution Board publishes first part of its 2018 MREL policy

The Single Resolution Board (SRB) has published the first part of its 2018 policy statement on the minimum requirement for own funds and eligible liabilities (MREL) for less complex banks. This update to last year’s MREL approach has a few additional features: the MREL policy now caters for all resolution tools, not only those based on an open-bank bail-in, and it removes reference to the Basel I floor in the MREL formula. The policy will serve as a basis for setting binding consolidated MREL targets for banks under the SRB’s remit.

Later this year, the SRB will publish an enhanced MREL policy for the most complex banks.

Good practices for insurers’ risk management

Based on on-site theme-based investigations, DNB has published good practices for the management of risks by insurers. It includes good examples of how Solvency II rules must be implemented in risk management.

 

Other publications

 EC

EP

 Council of the EU

EBA

ESMA

EIOPA

 

ECB

Official Journal of the EU

MinFin

MinSZW

AFM

DNB

Other

 

 

 

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