Single Resolution Mechanism published. The European Commission published the regulation establishing a Single Resolution Mechanism for the Banking Union. The regulation will enter into force on August 19, 2014. The provisions relating to the cooperation between the Single Resolution Board and the national resolution authorities for the preparation of the banks’ resolution plans will apply from January 1, 2015, and the Single Resolution Mechanism should be fully operational from January 1, 2016. (7/30/2014) EC Statement.
Joint Committee of the Three European Supervisory Authorities
Responsibilities when placing own financial products. The Joint Committee reminded financial institutions of their responsibilities when placing their own financial products with consumers. (7/31/2014) EBA press release. In addition, the European Securities and Markets Authority highlighted specific risks posed to investors by contingent convertible instruments. (8/1/2014) ESMA notice.
Financial conglomerate risk concentration. The Joint Committee launched a consultation on draft Regulatory Technical Standards on risk concentration and intra-group transactions within financial conglomerates. The technical standards aim at enhancing supervisory consistency in the application of the Financial Conglomerates Directive. Comments should be submitted by October 24, 2014. (7/24/2014) ESMA notice.
European Banking Authority
Standards on the treatment of equity exposures under the IRB approach. The EBA published its final draft Regulatory Technical Standards specifying the treatment of equity exposures under the internal ratings-based approach. The RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonization in the European Union banking sector. (8/5/2014) EBA press release.
Consultation on criteria for intervention on structured deposits under MiFIR. The EBA published a paper opening a consultation on its authority to intervene in the market for structured deposits. Comments should be submitted by October 5, 2014. (8/5/2014) EBA press release.
Revised guidance on supervisory reporting. The EBA published revised guidance following the publication of Regulation (EU) No 680/2014 (implementing technical standards on supervisory reporting of the institutions). (8/1/2014) EBA press release.
Amended technical standards on supervisory reporting for institutions. The EBA published Final draft Implementing Technical Standards amending the European Commission’s Implementing Regulation on supervisory reporting under Regulation (EU) No 575/2013 of the European Parliament and of the Council. The amendments are expected to be applicable for reporting as of December 2014. (7/30/2014) EBA press release.
Revised ITS published. The EBA published updated final drafts of Implementing Technical Standards on Asset Encumbrance, Non-Performing Exposures and Forbearance, and Additional Monitoring Metrics for Liquidity. (7/25/2014) EBA press release.
EBA peer review of implementation of credit concentration risk. The EBA published a peer review on the implementation of its guidelines on the management of concentration risk under the supervisory review process. The report shows that National Competent Authorities (NCAs) largely comply with the assessed guidelines and credit concentration risk forms an integral part of NCA’s risk assessment system. (7/24/2014) EBA press release.
French intra-group large exposure measures approved. The EBA published an opinion approving the French draft structural measure of banking separation aimed at reducing group risk. (7/23/2014) EBA press release.
European Securities and Markets Authority
CPSS-IOSCO implementation guidelines. ESMA issued guidelines and recommendations regarding the implementation of the CPSS-IOSCO Principles for Financial Market Infrastructures in respect of Central Counterparties. (8/5/2014) ESMA notice.
MiFID comments. ESMA made public the responses it received to its Consultation and Discussion Papers on MiFID II/MiFIR. (8/5/2014)
CCP registered. ESMA added CME Clearing Europe Ltd to its list of registered central counterparties under the European Markets Infrastructure Regulation. (8/4/2014) ESMA notice.
Updated UCITS guidelines on ETFs and other UCITS issues. ESMA updated its guidelines on the diversification of collateral received by UCITS in the context of efficient portfolio management techniques and over-the-counter financial derivative transactions. The publication triggers a period of two months within which competent authorities subject to these guidelines have to notify ESMA of their compliance position. (8/1/2014) ESMA notice.
Methods for UCITS to calculate risk. ESMA is consulting on the calculation of counterparty risk by Undertakings for Collective Investment in Transferable Securities which enter into OTC derivative transactions which need to be centrally cleared under the European Markets Infrastructure Regulation. Comments should be submitted by October 22, 2014. (7/22/2014) ESMA notice.
UK Joint Regulatory Developments
Accountability and remuneration proposals. The Prudential Regulation Authority and Financial Conduct Authority published two joint consultation papers aimed at improving individual responsibility and accountability in the banking sector. The consultations include a new approval regime for the most senior individuals whose behavior and decisions have the potential to bring a bank to failure, or to cause serious harm to customers; and introduce new rules on remuneration to strengthen the alignment between long-term risk and reward in the banking sector. Comments on either proposal should be submitted by October 31, 2014. (7/30/2014) Bank of England press release.
Bank of England
Procyclicality working group paper. The Bank of England published, in conjunction with a group of academics and industry practitioners, a discussion paper which examines trends in the investment decisions of insurance companies and pension funds. The study finds evidence of procyclical investment behavior by insurance companies while UK defined benefit pension funds behaved countercyclically in the short-term. Over the medium-term a structural “de-risking” trend (whereby pension funds shifted investment allocations from equities to fixed income instruments) has dominated. (7/31/2014) Bank of England press release.
UK Financial Conduct Authority
Restrictions on the sale of CoCos. The FCA announced new temporary restrictions on firms from distributing contingent convertible securities to the mass retail market. The temporary rules take effect October 1, 2014, and end October 1, 2015. The FCA intends to open a consultation in September 2014 on permanent rules that would go into effect in October 2015. (8/5/2014) FCA press release.
Proposed loan to income ratio guidance. The FCA published proposed guidance on the loan to income ratio for residential mortgages. Comments should be submitted by September 7, 2014. (8/5/2014) FCA press release.
SIPP capital framework. The FCA published a new capital framework for self-invested personal pension plan operators. The new rules are effective September 1, 2016. (8/4/2014) FCA press release.
FCA consults on Recovery and Resolution Directive. The FCA published a consultation paper setting out proposed changes to the FCA Handbook that are required to transpose the EU Recovery and Resolution Directive into the UK regulatory regime. Comments should be submitted by October 1, 2014. (8/1/2014) FCA press release.
Update on defined contribution audit. The FCA announced that a progress update has been published by the Independent Project Board responsible for overseeing the audit of charges and benefits in legacy defined contribution workplace pension schemes. The update outlines the approach and methodology being used to undertake the review. (8/1/2014) FCA press release.
Best execution and payment for order flow. The FCA published its thematic review of best execution and payment for order flow. (7/31/2014) FCA press release.
Whistleblower study. The FCA published the results of its research into the impact of financial incentives on encouraging whistleblowing. The research showed that introducing financial incentives for whistleblowers would be unlikely to increase the number or quality of the disclosures received. (7/29/2014) FCA press release.
Interim management statements. The FCA opened a consultation on removing the requirement for issuers of shares admitted to trading on a regulated market to publish interim management statements pursuant to Transparency Directive Amending Directive (2013/50/EC). Comments should be submitted by September 4, 2014. (7/23/2014) FCA press release.
UK Prudential Regulation Authority
Variable remuneration clawback rules. The PRA published a policy statement setting out its final rule on the clawback of financial remuneration. Among other things, the rule provides that variable remuneration will be subject to clawback for at least seven years from the date awarded. The clawback rules will come into force on January 1, 2015. (7/30/2014) PRA press release.
Proposed implementation of the EU Bank Recovery and Resolution Directive.The PRA opened a consultation on proposed changes to the PRA Rulebook. The proposed amendments would implement the European Union Bank Recovery and Resolution Directive, and make changes to a supervisory statement to reflect the PRA’s expectations. The proposal addresses recovery plans, resolution packs, intragroup financial support agreements, notification of failure or likely failure, and contractual recognition of bail-in. Comments should be submitted by September 19, 2014. (7/24/2014) PRA press release.