The European Parliament has published an exchange of letters between the chair of its Economic and Monetary Affairs Committee (Roberto Gualtieri) and the European Commissioner for Financial Stability, Financial Services & the Capital Markets Union (Jonathan Hill).

In his letter of 1 April 2015, Gualtieri referred to the Commission’s two Delegated Acts on third-country equivalence –

  • The first for Switzerland, confirming its equivalence for reinsurance, group solvency and group supervision; and
  • The (so called) “second package“, for Australia, Bermuda, Brazil, Canada, Mexico and the US, confirming their provisional equivalence for group solvency (only);

before reiterating the Committee’s position “that these Delegated Acts are to be presented in a separate manner, per third country and per area“.

In his reply of 11 May 2015, Lord Hill explained that “I … understand your concern regarding the bundling of decisions for adoption and … will … sympathetically consider your request for individual acts for the second package, particularly as this covers the more sensitive area of third-country insurers active in the EU“, (although in truth, it’s more concerned with European (re)insurance groups with third-country subsidiaries, than the other way around).

In his final letter, dated 16 July 2015 and published yesterday, Gualtieri gave notice on behalf of the Parliament “that the deadline for raising objections to the delegated act [for the second package (only)] is extended by three months, i.e. until 7.12.2015″.   

This comes as something of a surprise: like most commentators, we had expected (a) the Parliament to confirm its non-objection to the Commission’s proposals quickly; and (b) the Delegated Acts to become law before the end of Q3 – but that’s much less certain now than it seemed only 4 days ago. In fact, it now appears that:

  • The Parliament was seriously considering whether to object to the inclusion of one or more of the particular countries in the second package;
  • The Parliament recognized that, because it could only accept or reject a whole Delegated Act, it needed to persuade the Commission to offer a series of “second package” Delegated Acts, if it wanted to avoid the difficulty it’s now in;
  • Whilst Lord Hill may have been sympathetic to the Committee’s “request for individual acts for the second package“, he seems to have decided that it would be better to publish a single Delegated Act, in the hope that the Parliament will eventually accept the whole of the second package, than to publish a series of separate Delegated Acts, in circumstances where one or more of them is likely to be rejected;
  • The Parliament needs more time to consider whether to accept or reject the second package – or at least, it wants to give the impression that it’s seriously considering rejection for some other reason.

If that’s right, it begs at least three questions: (a) which country, or countries, is the Parliament concerned about? (b) Why? and (c) Does this have anything to do with the EU / US negotiations about third-country equivalence, covered agreements and collateral? Questions that are easier to ask than answer for now … but if we wait, no doubt, we’ll see.