European regulatory summary – March 2017

The UK has finally invoked Article 50 in a letter delivered to the European Union (EU) and the EU has outlined a strategy for Brexit negotiations. Final rules for ensuring integrity of the financial benchmarks have been published by the European Securities and Markets Authority (ESMA). Also, ESMA has published a report on implementing rules on MiFID II. The European Insurance and Occupational Pensions Authority (EIOPA) has published a discussion paper on Solvency II delegated regulation.

ESMA News

• Final rules to ensure integrity of EU financial benchmarks

ESMA has created a report containing the draft regulatory and implementing technical standards (RTS/ITS) under the Benchmarks Regulation (BMR). These contain the detailed rules to implement the new European regulatory framework aimed at ensuring the accuracy and integrity of benchmarks across the European Union. 

Click here to access the report.

• Haircuts in EU Securities Financing

The ESMA report on trends, risks and vulnerabilities (TRV) includes a stock-take of the multi-trillion euro market for securities financing transactions (SFTs) in the European Union; in particular, firms’ use of collateral haircuts. The EU Regulation on Transparency of Securities Financing Transactions and of Reuse (SFTR) is part of a globally coordinated effort initiated by the Financial Stability Board (FSB) to reduce financial stability risks arising from shadow banking activities, including SFTs. The key component of SFTR is a transaction reporting requirement by SFT counterparties.

Click here to access the document.

• Guidelines under CSDR

ESMA has issued final reports on two sets of guidelines regarding the implementation of the Central Securities Depositories Regulation (CSDR). The CSDR harmonises the settlement of securities by providing a set of common requirements for central securities depositories (CSDs) operating securities settlement systems. 

To access these reports click on links report 1  and report 2.

• Implementing rules for package orders under MiFID II

The final report has been issued on draft regulatory technical standards regarding the treatment of package orders under the amended Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). ESMA’s draft RTS specifies how the MiFIR pre-trade transparency requirements apply to package orders. 

Click here to access the report.

Discussion paper on Solvency II delegated regulation

EIOPA supports a sound process of post-evaluation of the new insurance supervisory  regime. One of EIOPA’s key objectives is to ensure a rigorous, evidence-based and transparent review of Solvency II. As part of this process, EIOPA has launched a project dedicated to the review of the Delegated Regulation and in particular of the Solvency Capital Requirement (“SCR”) standard formula. 

EBA Consultation on guidelines on procedures for complaints of alleged infringements of the PSD2 

The European Banking Authority (EBA) has launched a public consultation on its draft guidelines on the complaints procedures. These procedures will be administered by competent authorities (CAs) to assist in ensuring and monitoring effective compliance by payment service providers (PSPs) with the revised Payment Services Directive (PSD2). These draft guidelines are part of the EBA’s work to support the PSD2 core objectives of strengthening the integrated payments market across the European Union, ensuring a consistent application of the legislative framework and promoting transparency. The consultation runs until 16th May 2017.

Click here to access the consultation paper.

Consultation on RTS on CCP to strengthen fight against financial crime

The Joint Committee of the three European Supervisory Authorities (ESAs - EBA, EIOPA and ESMA) has launched a public consultation on draft regulatory technical standards (RTS) to help Member States determine when payment service providers and electronic money issuers should appoint a Central Contact Point (CCP) to support the fight against money laundering and terrorist financing. These draft RTS are part of the Joint Committee's work to establish consistent and effective risk-based supervisory practices across the EU. The consultation runs until 5th May 2017.

Click here to access the consultation paper.

FCA statement on EMIR variation margin deadline of 1st March 2017

The Financial Conduct Authority (FCA) welcomes the statements made by the European Supervisory Authorities  and the International Organization of Securities Commissions  on 23rd February 2017 in connection with variation margin.

Click here for the statement by the European Supervisory Authorities.

Click here for the statement by the International Organization of Securities Commissions.

The new regime for variation margin may require a number of significant changes for many firms, in terms of documentation and other arrangements.

The FCA understands that some firms may not be in a position to exchange variation margin fully in compliance with the Regulatory Technical Standards by 1st March 2017 despite their efforts to date. In FCA’s supervision of firms’ progress, FCA will take a risk-based approach and use judgement as to the adequacy of progress, taking into account the position of particular firms and the credibility of the plans they have made. Where a firm has not been able to comply fully, the FCA will expect it to be able to demonstrate that it has made best efforts to achieve full compliance, and be ready to explain how it will achieve compliance in as short a time as practicable for all in-scope transactions entered into from 1st March 2017. The FCA will expect detailed and realistic plans to be in place, which they may request to see at any time. They expect firms to have come into compliance within the coming few months.

Click here to access the Regulatory Technical Standards