The European Commission has published a communication following its Call for Evidence on the EU regulatory framework for financial services. Following the consultation which closed in January this year, the Commission concludes that, overall, the EU financial services framework is working well but has proposed various policy measures for specific areas where it considers there is room for improvement. The broad objectives of the action plan are to:

  • Reduce unnecessary regulatory constraints on financing the economy

The Commission is proposing various adjustments to regulation to safeguard the capacity of banks to finance the economy. In particular, the Commission will closely monitor market developments to ensure that the 'proportionate' regime for SME growth market issuers under the Market Abuse Regulation strikes the right balance between supporting SMEs and protecting investors.

  • Enhance the proportionality of rules without compromising prudential objectives

The Commission proposes that EU financial rules should not create unintended barriers to new market players and should recognise the diversity of financial institutions in the EU. Amongst various proposals, the Commission is proposing to ease reporting burdens for small and non-complex banks and to review the clearing and margining requirements in the European Markets Infrastructure Regulation (EMIR) for non-financial companies, pension funds and small financial institutions.

  • Reduce undue regulatory burdens

The Commission notes that there are examples of divergent implementation of EU directives into national legislation and consequently, there has been inconsistent enforcement of rules across the EU. Furthermore, 'gold-plating' practices in national legislation or supervision, on top of the minimum requirements set out in the EU Directives, create additional or overlapping requirements, which can cause barriers to the cross-border activity of financial firms. The Commission is currently assessing the national transposition measures which member states have taken for the Transparency Directive (Directive 2013/50/EU) and the Accounting Directive (Directive 2013/34/EU). This includes assessing whether there are divergent rules on the notification of major holdings of voting rights, which in the UK are set out in the FCA's Disclosure Guidance and Transparency Rules.

Additionally, as part of its work on forming the Capital Markets Union, the Commission is reviewing 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 Member States for possible actions to remove those national barriers.

  • Make rules more consistent and forward looking

The call for evidence also underlined the need to ensure consistency in the overall regulatory framework, further enhance investor and consumer protection, address the remaining risks in the financial system and keep the regulatory framework up-to-speed with technological developments.

Next steps

The Commission will monitor the implementation of its proposals and will publish its findings and next steps before the end of 2017. For further information, click here to read the Commission's fact sheet on the proposals.