There have been many developments in national and European financial markets regulation during the past month, such as the publication of a draft Bill providing that, in the future, issuers will not be required to publish quarterly financial reports. In addition, supervisory authorities have published a large number of consultation documents, draft rules and other information since the last edition of In context. The European Securities and Markets Authority, for example, has launched a consultation on the procedures for the approval of prospectuses, and the European Central Bank has published its Guide on banking supervision. And finally, we signal important court decisions.
Publication of quarterly figures to be phased out
In the future, listed companies will no longer be required to publish their quarterly figures. This follows from a consultation on a draft Bill implementing the amended Transparency Directive. Although the revised Transparency Directive provides that member states may require issuers to publish interim financial statements, the Ministry of Finance has decided against this possibility. The other options and national discretions in the Directive will not be exercised either. In addition, the Bill proposes the following changes:
- Issuers whose securities are admitted to trading on a regulated market and who have activities in the extractive or logging of primary forest industries must disclose in a separate report, on an annual basis, payments made to governments in the countries in which they operate. This system of country-by-country reporting will be introduced to increase the transparency of payments (taxes, royalties and bonuses) made by the oil, gas, mining and logging industries to their host governments worldwide. All payments exceeding EUR 100,000 will have to be disclosed. These provisions will apply to financial years started on or after 1 January 2016.
- The sanctioning powers of the financial supervisors will be amended in accordance with the Transparency Directive. The maximum fine that can be imposed on an issuer in the case of a single serious breach will be EUR 10,000,000 (or up to 5% of the total annual turnover). The maximum fine is currently EUR 4,000,000.
- The definition of home member state will be clarified so that it will no longer be possible for issuers to avoid being supervised by any competent authority in the European Union.
- The deadline for publishing half-yearly financial reports will be extended to three months after the end of the reporting period. This provision will apply to the half-yearly financial reports relating to financial years started on or after 1 April 2015.
- Issuers shall ensure that half-yearly and annual reports remain publicly available for at least 10 years (instead of five years).
- Issuers will no longer be required to disclose new loan issues.
- Proposed amendments of an issuer’s articles of association will no longer have to be communicated to the AFM.
The Transparency Directive must be implemented no later than 26 November 2015. The consultation runs until 24 October.
Bill implementing the SSM Regulation submitted to Parliament
On 4 November the Single Supervisory Mechanism (SSM) will come into action. The European Central Bank will then have the power to grant and withdraw the authorisation of any credit institutions and to assess the acquisition of holdings in credit institutions in the euro area. In the case of a bank with seat in the Netherlands the Dutch Central Bank (DNB) prepares the draft decision on which the ECB’s final decision is based. The draft decision must be sent to the ECB within 26 weeks; the ECB must reach a final decision within 20 business days. DNB has the power to dismiss licence applications, but it does not have the power to refuse the application for a declaration of no objection. Under the SSM DNB will continue to be responsible for the granting of licences to banks with corporate seat outside the European Union and to opt-in banks.
The distribution of tasks and responsibilities between the ECB and the Dutch supervisory authorities is laid down in the Bill implementing the Single Supervisory Mechanism Regulation, which the Ministry of Finance submitted to Parliament in October.
The Decree (in Dutch) implementing the publication requirements of the Capital Requirements Directive took effect on 25 September. The Decree implements articles 89 and 90 of the Directive and applies to banks and investment institutions with seat in the Netherlands.
Article 89 of the Directive lists the information which an institution has to disclose annually. Article 90 says that institutions shall, among the key indicators, disclose in their annual report their return on assets, calculated as their net profit divided by their total balance sheet.
Consultation on Rules on the banker’s oath 2015
The Rules on the banker’s oath (or promise) took effect on 1 January 2013. The Dutch Ministry of Finance recently launched a consultation (in Dutch) on a new regulation, which extends the banker’s oath to generally include all bank employees, including temporary workers and employees on secondment. Furthermore, the regulation contains the wording of the oath (or promise) and provides how and when it should be taken.
The consultation runs until 11 November.
Delegated regulations on rating agencies
The European Commission has adopted three delegated regulations implementing key provisions of the Regulation on Credit Agencies. These technical standards set out:
- the disclosure requirements for issuers, originators and sponsors on structured finance instruments
- reporting requirements for credit rating agencies (CRAs) on fees charged by CRAs to their clients
- reporting requirements to CRAs for the European Rating Platform
Delegated regulation CRD IV
The European Commission has published a regulation laying down implementing technical standards with regard to the uniform formats and date for the disclosure of the values used to identify global systemically important institutions.
European and international supervisors
ECB publishes Guide to banking supervision
From 4 November the European Central Bank (ECB) will directly supervise ‘significant’ banks in the euro area countries, and will indirectly supervise less significant banks. In its Guide to banking supervision the ECB explains the functioning of the ‘Single Supervisory Mechanism’ (SSM). The guide also sets out the supervisory principles of the SSM, the conduct of supervision in the SSM, and the sanctions the ECB may impose. For example, the ECB may impose on credit institutions administrative pecuniary penalties of up to twice the amount of the profits gained or losses avoided because of the breach, or up to 10% of the total annual turnover in the preceding business year
Consultation on prospectus related issues under the Omnibus II Directive
ESMA has launched a consultation on regulatory technical standards in relation to the following topics in the Prospectus Directive:
- procedures for approval of the prospectus
- incorporation by reference
- prospectus publication
- dissemination of advertisements
The consultation runs until 10 December.
Other ESMA publications
- Draft Regulatory Technical Standards under the revised Transparency Directive relating to the notification of major shareholdings
- Consultation on the definition of “derivatives” in MiFID
- Consultation on draft Implementing Technical Standards on main indices and recognised exchanges under the Capital Requirements Regulation
- Updated Q&A on the application of the Alternative Investment Managers Directive
- Consultation on draft standards for the clearing of foreign-exchange nog-deliverable forwards
- ESMA defines products, counterparties and starting dates for the clearing of interest rate swaps
- Consultation on clearing obligation under EMIR
- Work programme 2015
European Banking Authority – publications
- Consultation on group financial support
- Indicators from global systemically important institutions
- Consultation on Guidelines identifying the minimum qualitative and quantitative indicators that institutions should include in their recovery plans
- Guidelines on payment commitments to deposit guarantee schemes
- Guidelines on recovery and resolution
- Consultation on triggers for early intervention and resolution
- Consultation on the implementation of resolution tools
- Update on risks in the EU financial system
- Consultation on treatment of liabilities in bail-in
International Organization of Securities Commissions – publications
- Update to survey on the Principles for the Regulation and Supervision of Commodity Derivatives Markets
- Statement on Non-GAAP Financial Measures
- Second Securities Markets Risk Outlook
- Report on market-based financing for SMEs and Infrastructure
- Review of the Implementation of Significant Foreign Exchange Benchmarks
International case law
No obligation to publish a prospectus in an enforced sale of securities
Article 3(1) of Prospectus Directive must be interpreted as meaning that the obligation to publish a prospectus prior to any offer of securities to the public is not applicable to an enforced sale of securities. This appears from a recent judgment of the Court of Justice.