Earlier this month the European Court of Justice’s advocate general issued two opinions limiting the authority the E.U.’s regulators have over the laws of the member countries. In the first opinion, the advocate general concluded that a proposed financial transaction tax to be adopted by 11 E.U. countries (and opposed by the U.K.) is illegal. See, e.g., BBC News. Two days later, the advocate general found that the European Securities and Markets Authority ("ESMA") cannot override the decisions of individual member countries and prohibit short-selling on an emergency basis. According to the Telegraph, the advocate general said: "The emergency powers granted to ESMA to intervene in the financial markets of member states so as to regulate or prohibit short selling go beyond what could be legitimately adopted as a harmonizing measure necessary for the establishment or functioning of the internal market." According to Bloomberg, these developments are considered a victory for the U.K., which has been fighting E.U. efforts to centralize financial regulation in Brussels.
Regulators in the E.U. have also suffered setbacks in their efforts to start mandatory reporting for over-the-counter derivatives. ESMA has revised the European Market Infrastructure Regulation implementation timetable so that the registration of the first trade repositories is not expected before November 7, 2013. Reporting to trade repositories will, therefore, not start before February 2014.
Like their U.S. counterparts, E.U. regulators are also addressing the risks posed by money market funds ("MMFs"). The European Commission published proposed rules that would apply to MMFs located or sold in Europe. Among other things the rules would require MMF's which maintain stable net asset values to establish a predefined capital buffer. E.C. Press Release.
The Governing Council of the European Central Bank ("ECB") announced it will introduce loan-level reporting requirements for asset-backed securities ("ABS") backed by credit-card receivables, when these are used as collateral in the Eurosystem’s monetary policy operations. Firms will be required to provide loan-level on a quarterly basis beginning April 1, 2014. To enable effective reporting of loan-level data, the credit card cash flow-generating assets backing an ABS must all belong to the same asset class. ECB Press Release.
Earlier in September the ECB announced enhanced loan-level reporting requirements for residential mortgage-backed securities and ABS backed by loans to small and medium-sized enterprises that are used as collateral in Eurosystem monetary policy operations.ECB Press Release.