Under Article 40 of the European Markets in Financial Instruments Regulation (MiFIR), published earlier in 2014, the European Securities and Markets Authority (ESMA) was given powers to temporarily prohibit or restrict the marketing, distribution or sale of certain financial instruments, or financial instruments with certain specified features, or any type of financial activity or practice, in each case subject to the satisfaction of certain conditions.

Extremely similar powers are given to the European Banking Authority (EBA) in respect of structured deposits. A structured deposit is defined as a deposit whose principal balance is repayable at par at maturity, on terms under which interest or premium on the deposit is dependent upon the performance or value of an underlying such as an index, a financial instrument, a commodity or a foreign exchange rate. Structured deposits have been bought within the scope of the MiFID regime for the first time by MiFIR, pursuant to the PRIPS initiative to harmonise the regulation of financial investments having similar economic effects.

Similar powers are also given to national competent authorities of EU member states, in relation to both financial instruments and structured deposits, subject to the same conditions as well as further safeguards.

Of the conditions to be met, in each of the above cases, the most important is that the proposed action should address a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the EU financial system.

In connection with these temporary intervention powers, the European Commission is empowered to adopt delegated acts that specify the criteria and factors to be taken into account in determining when there is such an investor protection concern or threat to the operation or stability of markets or the financial system. Therefore, the European Commission   has requested ESMA to provide technical advice in this regard in relation to the financial markets or commodity markets, and similarly has requested such technical advice from the EBA in relation to structured deposits. As a precursor to its technical advice, ESMA launched a consultation in May 2014, setting out its proposals as to such criteria and factors. The EBA chose to wait until ESMA’s consultation had closed before launching its equivalent consultation paper in relation to structured deposits on 5 August 2014.