The European Securities and Markets Authority

In the last month the European Securities and Markets Authority (“ESMA”) published guidance concerning:

  • Its enforcement priorities for 2014. Priorities upon which ESMA, along with European national enforcers, will focus include the preparation and presentation of consolidated financial statements and related disclosures; financial reporting by entities which have joint arrangements and related disclosures; and recognition and measurement of deferred tax assets.
  • Updated Questions & Answers on the implementation of the European Markets Infrastructure Regulation. The updated guidance includes a discussion on trade reporting to trade repositories and includes a validation table.
  • Updated Questions & Answers on prospectus issues, particularly prospectus summaries.
  • Updated Questions & Answers on the application of the Alternative Investment Managers Directive. The updated guidance clarifies the reporting obligations to national competent authorities; as well as the delegation of portfolio and/or risk management.

ESMA also opened consultations on:

  • The definition of derivatives as financial instruments under the current Markets in Financial Instruments Directive (MiFID I). Comments should be submitted on or before January 5, 2015.
  • Draft Regulatory Technical Standards on prospectus related issues under the Omnibus II Directive. The proposed draft RTS addresses four topics within the prospectuses regime: procedures for approval of prospectuses; publication of prospectuses; information which may be incorporated into prospectuses by reference; and dissemination of information relating to offers to the public and admissions to trading on a regulated market outside the prospectus, including advertisements. Comments should be submitted on or before December 19, 2014.

The European Banking Authority

Last week the European Banking Authority (“EBA”) published the results of the 2014 EU-wide stress test of 123 banks. The stress test assessed the resilience of EU banks to adverse economic developments. Stress Test Results Webpage. The Economist noted that the test results were mostly encouraging, finding that in severe recession, only 25 banks would experience losses that could reduce their capital to below the required minimum. However, critics of the test contend that it wasn’t sufficiently stringent and point out that many banks still carry large amounts of sovereign debt.

Other recent EBA developments include:

  • The publication of its findings regarding discretionary remuneration practices across the EU banking sector. The report shows that some institutions have classified so-called “role-based” allowances in a way that increases the fixed component of remuneration, which may cause violations of the bonus cap. As a result of this analysis, the EBA issued an Opinion to the European Commission and EU competent authorities calling for supervisors to ensure that firm remuneration practices comply with EU legislation.
  • The publication of a discussion paper on simple, standard and transparent securitizations. Comments should be submitted on or before January 14, 2015.
  • The publication of draft Regulatory Technical Standards and Guidelines for the provision of group financial support, and draft Implementing Technical Standards on the disclosure of group financial support agreements. Group financial support refers to one entity of a banking group providing support to another entity of the same group when the latter encounters financial difficulties. Comments should be submitted on or before January 4, 2015. A public hearing on the draft standards and guidelines will be held on December 8, 2014.