There have been many developments in national and European financial markets regulation during the past month. Supervisory authorities have published a large number of consultation documents, draft rules and other information since the last edition of In context. We provide an overview of this news, signal important court decisions and also list relevant articles in international legal journals.

Dutch regulation

Financial supervisors may share confidential information with Court of Audit

The AFM and the Dutch Central Bank may share confidential information with the Court of Audit (Algemene Rekenkamer), subject to certain conditions. New legislation to this effect entered into force on 27 May 2014.

So far, existing confidentiality provisions have prevented the Dutch Central Bank and the AFM from passing confidential information to the Court of Audit. According to the Minister of Finance, this meant that the Court of Audit had insufficient means to investigate the effectiveness of the supervision conducted by the two financial supervisors. The new legislation is aimed at remedying this. But the Court of Audit’s tasks will not be extended to include an assessment of the quality of supervision.

New bill introducing credit union regulation and supervision

A bill introducing regulation for and supervision of credit unions has been submitted to the Second Chamber.

Credit unions are gaining importance as an alternative source of financing. Like other alternative forms of financing, they currently need a banking licence for attracting deposits and other repayable funds in the course of business. This implies that they have to meet the same requirements as banks, although their activities are much more restricted. The bill, therefore, introduces regulation and supervision which takes the characteristics of credit unions into account. These are that members share a common interest, and that the credit union has a limited business model of granting credit on own account to its members.

Legislation on manipulation of benchmarks

The Minister of Finance has submitted a proposal to ensure that manipulation of benchmarks is covered by the current rules against market abuse as of 1 January 2015. The proposal also includes an increase in the current sanctions for market abuse: the maximum prison term is increased from two to six years and higher fines are proposed as well.

The government mentions in the explanatory memorandum that new European legislation relating to market manipulation will not take effect until mid-2016. The Dutch provisions on manipulation of benchmarks will be repealed once the new Market Abuse Regulation and the Directive on Criminal Sanctions for Market Abuse have entered into force.


European regulation

Omnibus II Directive takes effect

The Omnibus II Directive took effect on 23 May 2014. This Directive amends, among other things, the Solvency II Directive, including the powers of EIOPA and ESMA, the transitional measures with respect to Solvency II and the treatment of long-term guarantees. De Brauw has published a Legal Alert in which the implications for the Solvency II Directive are explained in detail.

European Council adopts MiFID II

The European Council has adopted legislation regulating the trade in financial instruments and the investment services sector. The new measures, known as MiFID II and consisting of a directive and regulation, are expected to be published shortly. The existing directive (MiFID I) will be replaced. Most of MiFID II will have to be applied in all member states within 30 months after it comes into force, probably 1 January 2017.

De Brauw has published a Legal Alert in which the practical implications of the new rules are explained in detail.

ESMA consultation for the implementation of MiFID II

ESMA is holding a consultation on a draft delegated regulations covering the following issues:

  • investor protection
  • pre and post trade transparency
  • market structures
  • algorithmic techniques
  • transaction reporting
  • commodity derivatives

CRD IV: delegated regulations in effect

A number of delegated regulations supplementing the Capital Requirements Directive and Capital Requirements Regulation took effect on 9 June 2014.

  1. for the euro area, all equities listed in stock markets located in Member States that have adopted the euro as their currency;
  2. for non-euro Member States and third countries, all equities listed in stock markets located within a national jurisdiction.

The definition is relevant for the calculation of the general market risk. This is the risk of a price change in a financial instrument, due to a change in the level of interest rates in the case of traded debt instruments or debt derivatives, or to a broad equity-market movement unrelated to any specific attributes of individual securities in the case of equities or equity derivatives.

Also, the following regulations were published:

  • Delegated Regulation supplementing Directive (EU) No 2013/36/EU with regard to regulatory technical standards specifying the classes of instruments that adequately reflect the credit quality of an institution as a going concern and are appropriate to be used for the purposes of variable remuneration
  • Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards for determining what constitutes the close correspondence between the value of an institution’s covered bonds and the value of the institution’s assets
  • — elegated Regulation supplementing Directive 2013/36/EU with regard to regulatory technical standards specifying the information that competent authorities of home and host Member States supply to one another
  • Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards for determining proxy spread and limited smaller portfolios for credit valuation adjustment risk
  • —Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards for non-delta risk of options in the standardised market risk approach
  • Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards for assessing the materiality of extensions and changes of the Internal Ratings Based Approach and the Advanced Measurement Approach
  • Delegated Regulation supplementing Directive 2013/36/EU with regard to regulatory technical standards further defining material exposures and thresholds for internal approaches to specific risk in the trading book

Regulations on the supervisory powers of the ECB

In November 2014 the European Central Bank will start directly supervising the largest banks within the Eurozone. The European Commission has published two regulations on the powers of the ECB:

European Commission publishes EU’s reform agenda

The European Commission has published a comprehensive review of the measures proposed to strengthen the supervision of the financial sector. Many rules have by now been adopted. However, the Commission is still working on the structural reform of the European banking sector,shadow banking and financial benchmarks.


European and international supervisors

ECB consults on supervisory fees

The European Central Bank has published a draft Regulation on supervisory fees for public consultation. Expenditure for banking supervision in 2015 is estimated at EUR 260 million. Most banks will have to pay between EUR 0.7 million and EUR 2 million per year. For the largest banks the supervisory fees will come to EUR 15 million.

European Securities and Markets Authority – publications

European Banking Authority – publications

IOSCO – publications