ECB releases results of latest euro area bank lending survey. The European Central Bank published the results of its April 2016 euro area bank lending survey, which indicated improved loan supply conditions, increased loan demand, and additional compression of lending rates. (4/19/2016) ECB press release.
ESMA updates EMIR public register to include credit derivatives. The European Securities and Markets Authority updated its Public Register for the Clearing Obligation under the European Markets Infrastructure Regulation to add credit derivatives, which will need to be centrally cleared following publication of the relevant EMIR technical standard. (4/19/2016) ESMA press release.
ECB publishes results of March 2016 SESFOD credit terms survey. The ECB released the results of its March 2016 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets, which found that overall credit terms offered to counterparties were less favorable during the three-month period ending in February 2016. The survey also found that non-price credit terms offered in securities financing transactions were less favorable. (4/18/2016) ECB press release.
PRA policy statement on change from FSA to ALMM liquidity reporting. The Prudential Regulation Authority issued a policy statement that finalizes the date of changes to liquidity reporting rules to end the reporting of certain data items prior to the introduction of EU requirements to report additional liquidity monitoring metrics. The changes will become effective on April 22, 2016. (4/18/2016) PRA press release.
FCA reveals key findings from review of inducements and conflicts of interest.The UK Financial Conduct Authority published the findings from its thematic review about the benefits provided and received by firms that carry out Markets in Financial Instruments Directive business and firms that carry out regulated activities in relation to a retail investment product. Among other things, the review found instances where firms exchanged non-monetary benefits with clients that did not appear to enhance the quality of service; offered non-monetary benefits designed to enhance the quality of service alongside those that were not; and failed to maintain adequate records of non-monetary benefits. (4/18/2016) FCA press release.
ECB signs MOU with Brazilian central bank. The ECB announced that it has signed a Memorandum of Understanding with Banco Central do Brasil to facilitate cooperation and the exchange of information in the field of central banking. (4/16/2016) ECB press release.
FCA consults on PSR 2016/17 regulatory fees. The FCA published a consultation paper that seeks comments on proposed changes to the Payment Systems Regulator’s fee levels for the funding of its the Financial Services (Banking Reform) Act 2013 and the EU Interchange Fee Regulation activities and functions. The consultation also proposes postponing the August and September payment deadlines for FSBRA and IFR fees by one month and holding operators of card payment systems liable for the entire fee allocation of the card system. Comments are due on or before May 13, 2016. (4/15/2016) FCA press release.
FCA studies trading data to learn if high-frequency traders anticipate order flow. The FCA issued a new occasional paper that analyzes the order book data from UK trading venues to determine if high-frequency traders are taking advantage of other market participants by anticipating the arrival of their orders and making trades in advance. The study found no evidence that high-frequency traders systematically anticipate other orders that arrive in very quick succession, but did find some evidence that high-frequency traders can anticipate order flow over longer timeframes. (4/15/2016) FCA press release.
PRA proposal on the recalculation of the transitional measure on technical provisions. The PRA requested comments on a consultation paper that proposes a supervisory statement for the recalculation of the transitional measure on technical provisions under Solvency II. Comments are due on or before May 13, 2016. (4/15/2016) PRA press release.
PRA consults on application of the matching adjustment under Solvency II. The PRA published a consultation paper that proposes a draft supervisory statement describing its expectations for firms regarding the application of the matching adjustment (MA) for the purposes of calculating the technical provisions in the context of applications for MA approval, especially relating to annuity assets purchased in a secondary annuity market, ongoing MA compliance, breach of MA requirements and changes to MA portfolios. Comments are due on or before July 15, 2016. (4/15/2016) PRA press release.
PRA and FCA consult on proposed changes to enforcement decision-making processes. The PRA and the FCA published a joint consultation paper that contains proposals for how the agencies will implement changes to the transparency, fairness, effectiveness and speed of their enforcement decision-making processes as recommended by HM Treasury’s Review of enforcement decision-making at the financial services regulators and the Green Report. Comments are due on or before July 14, 2016. (4/14/2016) PRA press release.
ESMA to release results of EU-wide stress tests for CCPs. ESMA announced that it will publish the results of its first EU-wide stress test for Central Counterparties on April 29, 2016. The stress test will expose European CCPs to the counterparty credit risk they would experience in the event of multiple clearing member defaults and simultaneous market price shocks. (4/14/2016) ESMA press release.
FCA interim report on investment banking raises questions about anti-competitive practices and IPO share allocation. The FCA released the interim findings of its investment and corporate banking market study, which raised concerns about the use of contractual clauses by banks that limit clients’ choice of providers on future transactions. The FCA recommends eliminating the use of these clauses because they limit the ability of banks without lending facilities to compete in the primary market. The FCA’s study also found that some banks may allocate IPO shares in a way that favors certain clients and creates conflicts of interest, a practice the FCA indicated it will examine through increased supervisory work. (4/13/2016) FCA press release.
FCA seeks input on reforms to address availability of information in the UK IPO process. The FCA requested comments on a discussion paper that proposes reforms to the UK IPO process to make information from approved prospectuses available to investors earlier and to address the potential for conflicts of interest during the preparation and distribution of connected research. Comments are due on or before July 13, 2016. (4/13/2016) FCA press release.
FCA Occasional Paper analyzes the factors that influence IPO allocations. The FCA published Occasional Paper No. 15: Quid pro quo? What factors influence IPO allocations to investors?, which uses data from the FCA’s market study on investment and corporate banking to examine how investment banks manage conflicts of interest when allocating IPO shares. The paper found that syndicate banks tend to make favorable IPO share allocations to investors who submit price-sensitive bids or otherwise provide them with useful information for pricing the IPO. The paper also found that book-runners made favorable allocations to investors who generate revenues in other parts of their business. (4/13/2016) FCA press release.
BOE assumes administrative responsibility for SONIA interest rate benchmark. The Bank of England announced that it will become the administrator of the Sterling Overnight Index Average interest rate benchmark on April 25, 2016. The Wholesale Markets Brokers’ Association will continue to calculate and publish the benchmark on behalf of the BOE. (4/13/2016) BOE press release.
ESMA opinions on Danish pension schemes’ requests for exemptions from central clearing under EMIR. ESMA issued opinions on requests from three Danish pension schemes for exemptions from the obligation to centrally clear OTC derivative contracts under EMIR. ESMA concurred with Finanstilsynet that the exemptions are justified for the three pension schemes due to difficulties in meeting the variation margin requirements. (4/13/2016) ESMA press release.
European Commission proposes new tax disclosure requirements for multinational companies operating in the EU. The European Commission proposed amendments to the Accounting Directive that would require large multinational corporations doing business in the EU to report additional information on where they earn profits and where they pay tax in the EU. The new requirements would apply to companies operating in the EU with global revenues of more than €750 million a year and would require companies to publish an aggregate figure for total taxes paid outside the EU as well as the taxes they pay in the EU on a country-by-country basis. (4/12/2016) EC press release.
FCA survey finds good practices for ensuring customer understanding of transactions. The FCA published the results of its survey of 17 retail banks on the measures they take to ensure their customers understand the financial products they purchase. The survey highlights several examples of good practice, including the use of customer feedback to inform the design of future products, efforts to simplify products to avoid customer confusion, and the use of a more personal approach to improve customer outcomes. The FCA also expressed concern that some firms confused customer satisfaction with customer understanding and encouraged firms to check their customers’ understanding regularly throughout the life cycle of a product. (4/12/2016) FCA press release.
ESMA updates data on performance of Credit Rating Agencies. ESMA released updated statistical data on the performance of credit ratings issued by Credit Rating Agencies that are registered or certified in the EU. The latest dataset covers the six-month period from July 1 to December 31, 2015. (4/12/2016) ESMA press release.
ESMA offers views on EU framework for loan origination by investment funds.ESMA published an opinion on the EU framework for loan origination by investment funds in which it explained its views on the key components of a common European framework, including the authorization of loan-originating funds and their managers, eligible investors, organizational requirements and leverage. (4/12/2016) ESMA press release.
EBA report offers supervisory best practices for ensuring compliance with securitization risk retention, due diligence and disclosure requirements. The European Banking Authority released a report that examines the approach of Competent Authorities in supervising institutions’ compliance with securitization risk retention, due diligence and disclosure requirements. The report found that most institutions are complying with these requirements and identified several supervisory best practices to assist Competent Authorities in their compliance assessments of institutions. (4/12/2016) EBA press release.
EBA publishes Opinion on complying with AML/CFT due diligence requirements when working with customers seeking asylum from higher-risk third countries.The EBA issued an Opinion that identifies measures institutions can take to comply with customer due diligence and other anti-money laundering and counter-terrorism financing requirements when offering financial products and services to asylum seekers from higher-risk jurisdictions. (4/12/2016) EBA press release.
ESMA releases Q&A document on CFDs and other speculative products. ESMA published new guidance that offers questions and answers regarding the application of MiFID to the marketing and sale of financial contracts for difference and other speculative products to retail clients. The Q&As address key aspects relevant to the authorization of firms offering these products to retail customers and conflicts of interest arising from the business models and practices used by firms offering CFDs and speculative products. (4/8/2016) ESMA press release.
ESMA publishes public responses to Benchmarks Regulation Discussion Paper. ESMA published the feedback it received in response to its Discussion Paper on the Benchmarks Regulation. (4/8/2016) ESMA press release.
PRA consultation paper on remuneration requirements under Solvency II. The PRA is seeking comments on a draft supervisory statement that clarifies the PRA’s expectations for how Solvency II firms should comply with key Solvency II remuneration requirements, including the identification of Solvency II staff, deferral, and the performance measurement. Comments are due on or before June 2, 2016. (4/7/2016) PRA press release.
FCA publishes results of thematic review on meeting investors’ expectations.The FCA released the findings of its thematic review of UK authorized investment funds and their management firms, which examined whether these funds operate according to investors’ expectations created by marketing and disclosure material as well as investment mandates. The review found that some funds did not clearly explain how they were managed to investors, some management firms did not have appropriate oversight measures in place to ensure that funds are managed in accordance with the stated investment policy, and some firms did not monitor the distribution of their funds to ensure they were sold appropriately to third parties. (4/7/2016) FCA press release.
European regulators finalize proposal for Key Information Documents for PRIIPs. The EBA, ESMA, and the European Insurance and Occupational Pensions Authority published the final regulatory technical standards on Key Information Documents for Packaged Retail and Insurance-based Investment Products, which provide retail investors in the EU with information about the risks, performance and costs of these products. The new rules will become effective on December 31, 2016. (4/7/2016) ESMA press release.
ESMA’s peer review finds supervision of compliance with MiFID suitability requirements is lacking. ESMA published the findings of its peer review of national regulators, which examined how national regulators assess and enforce compliance with MiFID requirements that firms only recommend suitable investment products when offering investment advice to retail customers. The review found that most regulators only performed limited supervision and enforcement of these requirements. (4/7/2016) ESMA press release.
Responses to ESMA Consultation on draft guidance on transaction reporting, reference data, order record keeping, and clock synchronization. ESMA published the feedback it received to its Consultation on Guidelines on transaction reporting, reference data, order record keeping, and clock synchronization. (4/7/2016) ESMA press release.
European regulators identify risks to EU financial system. The EBA, ESMA, and EIOPA published its Spring 2016 report on Risks and Vulnerabilities in the Financial System. The report highlights three main risks, which include the low profitability of financial institutions in a low yield environment; the increasing interconnectedness of bank and non-bank entities; and the potential for disruptions from emerging market exposure. The report also proposes policy actions to address these risks. (4/7/2016) ESMA press release.
EBA to host discussion on synthetic securitization and credit guarantees. The EBA announced that it will hold a seminar on May 31, 2016, to discuss opportunities and challenges on the role and potential use of credit guarantees and synthetic securitization in the banking sector. The EBA will co-host the seminar with the European Investment Bank Group. (4/7/2016) EBA press release.
ESMA adds new Q&As on prospectus related issues. ESMA updated is Q&A document on prospectus related issues to include new information on the capitalization and indebtedness table as well as the validity of the base prospectus. (4/6/2016) ESMA press release.
EBA consultation on draft amendments to RTS on CVA proxy spread. The EBA is consulting on draft amending RTS on credit valuation adjustment proxy spread. The proposed RTS would introduce limited amendments to specify instances where alternative approaches can be used to identify an appropriate proxy spread in an effort to alleviate the over-estimation of current own funds requirements for counterparties. Comments are due on or before July 6, 2016. (4/6/2016) EBA press release.
EBA updates the Risk Dashboard. The EBA published an updated Risk Dashboard, which provides an overview of the main risks and vulnerabilities in the EU banking sector. The updated Dashboard indicates that EU banks increased their capital ratios during the fourth quarter of 2015, banks’ profitability remained low, and the ratio of non-performing loans and advances remained high. (4/6/2016) EBA press release.