The European Commission has published a communication setting out the results of its Call for Evidence on the EU regulatory framework for financial services. The aim of the Call for Evidence was to look at the cumulative effect of the new financial sector rules put in place since the financial crisis.

Background

On 18 February 2015 the Commission published a Green Paper, Building a Capital Markets Union, to consult on its overall approach to creating the Capital Markets Union (CMU). On 30 September 2015 the Commission published an Action Plan on Building a Capital Markets Union to set out its priorities following its Green Paper consultation, together with a number of accompanying proposals and consultations referred to in the Action Plan, including the Call for Evidence on the EU regulatory framework for financial services.

The Call for Evidence covered the rules concerning financial institutions, markets and infrastructures as well as the relevant institutional framework. The objectives of the Call for Evidence were to gather feedback on the following areas: (1) the extent to which the regulatory framework has caused excessive compliance costs and burdens; (2) to identify areas giving rise to duplicative or unhelpful reporting and disclosure obligations; (3) barriers to entry for new market players or those seeking to provide new services; (4) overlapping, duplicative or inconsistent rules, including where different pieces of financial services legislation contain similar but differing definitions; and (5) regulatory gaps that should be addressed.

Call for Evidence

In its press release accompanying the results of its Call for Evidence, the Commission states that it serious about better regulation and that the Call for Evidence has been a hugely important exercise. The results show that the overall framework is sound and has helped to target key themes in legislation where improvements can be implemented, such as: (i) removing unnecessary regulatory constraints on financing the economy; (ii) enhancing the proportionality of rules to help promote competition and enhance the resilience of the financial system; (iii) reducing undue regulatory burdens; and (iv) making rules more consistent and forward-looking.

The detailed follow-up actions are set out in the Commission’s communication publishing the results of the Call of Evidence in which the Commission states that it intends to:

  1. monitor market developments to make sure that the regime for SME growth market issuers under MAR strikes the right balance between supporting SMEs to list and protecting investors;

  2. assess the national transposition measures for the Transparency Directive and the Accounting Directive, including a concern that there are divergent rules on the notification of major holdings of voting rights;

  3. review the national options in the Audit Regulation, with a specific focus on the cross-border impact of mandatory rotation and the blacklist of prohibited non-audit services. As part of its Regulatory Fitness and Performance (REFIT) initiative, the Commission will also consult on the impact of diverging national options;

  4. undertake a mapping exercise of national transposition measures to identify gold-plating provisions which create undue additional compliance costs. Currently, the Commission is assessing the national transposition of 17 Directives. It will continue to monitor the progress of those to be transposed in 2017/2018; and

  5. review, as part of the CMU Action Plan, national provisions that create an unjustified or disproportionate burden to the cross-border movement of capital. The objective is to prepare a joint roadmap with the Member States for possible actions to remove those national barriers.

Next Steps

The Commission states that it will monitor progress in the implementation of the respective areas and will publish its findings and possible next steps before the end of 2017. The Commission aims to put in place the building blocks of the CMU in the EU in place by 2019.