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EU Regulatory Research

EU Regulatory Research

EU Regulatory Research

REGULATORY UPDATES

G20 LEADER SUMMIT

European Council and European Commission Sends Joint Letter on Key Issues Ahead of G20 Summit

On 27 November, the President of the European Council Donald Tusk and President of the European Commission Jean-Claude Juncker published a joint letter to the G20 leaders ahead of the G20 Buenos Aries Summit held on 30 November 2018 – 1 December 2018. Among other non-financial topics, such as climate change, trade tensions, irregular migration, poverty, and terrorism, the letter discussed building a more resilient international monetary and financial system, including supporting the work of the Financial Stability Board (“FSB”) to evaluate the effects of the regulatory reforms and monitor emerging financial risks and vulnerabilities.

FSB Publishes Letter to G20 Leaders Regarding Financial Reforms

On 26 November, FSB Chair Mark Carney sent a letter to the G20 leaders ahead of the Buenos Aries Summit reporting on the FSB’s progress in 2018 and highlighting key issues that require attention. The key issues include: (i) addressing emerging vulnerabilities, such as risk associated with “non-bank finance” and crypto-assets, while harnessing the benefits of innovation, such as from distributed ledger technology (“DLT”), the global legal entity identifier (“LEI”), artificial intelligence, and various payments technologies; (ii) “disciplined completion and implementation of the G20 reform programme,” such as finalizing policy establishing “resilient, recoverable and resolvable CCPs”; (iii) “pivoting from new policy development to ensuring that reforms are operating as effectively and efficiently as possible,” such as promoting and supporting central clearing; and (iv) optimizing how the FSB works, such as through the “prioritisation of work focused on promoting financial stability and outreach with external stakeholders.”

FSB Publishes Fourth Annual Report on the Implementation and Effects of the G20 Financial Regulatory Reforms

On 28 November, the FSB published its fourth annual report on the implementation and effects of the G20 financial regulatory reforms. The report indicates that “coordinated by the FSB, the main financial reforms the G20 called for are now in place . . . [and] their implementation is well underway.” The report notes, however, that “implementation of the reforms is not complete and it remains uneven” and work remains to: (i) “implement the final Basel III reforms”; (ii) “operationalize resolution plans for cross-border banks and build effective resolution regimes for insurers and [central counterparties (“CCPs”)]”; (iii) make OTC derivatives trade reporting more effective”; and (iv) “further strengthen the oversight and regulation of non-bank financial intermediation.”

FSB DEVELOPMENTS AND PUBLICATIONS

Announcement of new FSB Chair and Vice-Chair

On 26 November, the FSB announced the appointment of Randal K. Quarles (current Governor and Vice Chairman of Supervision at the U.S. Board of Governors of the Federal Reserve) as the new Chair of the FSB and Klaas Knot (current President of De Nederlandsche Bank) as the new Vice-Chair of the FSB. Each has a term of three years commencing on 2 December 2018. The FSB also announced that Mr. Knot will replace Mr. Quarles on 2 December 2021 as Chair of the FSB for another three-year term.

FSB Publishes Reports Regarding OTC Derivatives Market

On 19 November, the FSB published two reports on the: (i) implementation of OTC derivatives reforms; and (ii) removal of legal barriers relating to OTC derivatives trade reporting. Key findings from the derivatives reforms report include, among other things: (i) for trade reporting, “twenty-one out of 24 FSB member jurisdictions have comprehensive trade reporting requirements in force, up by two since end-June 2017”; (ii) for central clearing, “18 member jurisdictions now have in force comprehensive standards/criteria for determining when standardised OTC derivatives should be centrally cleared, and two more jurisdictions adopted mandatory clearing requirements during the reporting period”; (iii) for margin requirements for non-centrally cleared derivatives (“NCCDs”), “sixteen jurisdictions have implemented comprehensive margin requirements for NCCDs, an increase of two”; and (iv) for cross-border coordination and issues, “jurisdictions reported continuing progress, both in establishing broad legal powers to exercise deference with regard to foreign jurisdictions’ regimes, but more particularly with regard to exercising those powers in particular cases.” Key findings from the legal barriers report include: (i) for barriers to full trade reporting, “all but three of the FSB’s member jurisdictions have removed or addressed barriers to full trade reporting”; (ii) for masking, “five FSB member jurisdictions allow masking of counterparty identifiers for some transactions”; and (iii) for regulators’ access to trade repository data, “in twelve jurisdictions, changes have been made or are underway to address or remove barriers to access to trade repository data by foreign authorities and/or non-primary domestic authorities, including legal barriers which have only very recently been removed.”

FSB Publishes Progress Report Regarding Reforming Major Interest Rate Benchmarks

On 14 November, the FSB published a progress report regarding the implementation of the FSB’s 2014 recommendations to reform major interest rate benchmarks. The report focused on three areas of recommendations, which includes: (i) strengthening the interbank offered rates (“IBORs”); (ii) identifying and transitioning to alternative nearly risk-free reference rates (“RFRs”); and (iii) enhancing contractual robustness. With regards to strengthening the IBORs, the report indicated that “work has continued among the other major IBORs (EURIBOR and TIBOR) to strengthen existing methodologies to make them more grounded in actual transactions and in other ways, as well as to strengthen regulatory frameworks and supervision.” With regards to RFRs, the report indicated that “a great deal of progress has been made to identify RFRs and other alternative reference rates in currency areas currently reliant on [the London Interbank Offered Rate (“LIBOR”)] benchmarks, as well as to plan for and in some markets begin to execute transition to those RFRs.” With regards to contractual robustness, the report indicated that “significant work continues on the part of FSB member authorities as well as the International Swaps and Derivatives Association (“ISDA”) and other trade associations on the important task of strengthening contractual robustness to the risk of discontinuation of major interest rate benchmarks.” The report cited ISDA’s current consideration of comments received from its July 2018 consultation paper on fallbacks for certain currencies of LIBOR and certain other interest rate benchmarks. The FSB indicated that it will publish a further report in late 2019.

FSB Publishes for Consultation Discussion Paper Regarding CCP Resolution and CCP Equity in Resolution

On 15 November, the FSB published for consultation a discussion paper regarding financial resources to support CCP resolution and the treatment of CCP equity in resolution. The FSB is seeking feedback regarding “considerations that could guide relevant authorities and [Crisis Management Groups (“CMGs”)] in assessing the nature and quality of financial resources needed to absorb losses and other costs and achieve orderly resolution,” as well as “considerations that could guide authorities in developing possible approaches to the treatment of CCP equity in resolution.” The consultation period closes on 1 February 2019.

FSB Publishes Recommendations Regarding the Use of Compensation Tools to Address Potential Misconduct Risk

On 23 November, the FSB published a report containing recommendations for national supervisors regarding the use of compensation tools to address potential misconduct risk. The FSB indicated that the recommendations are intended to assist supervisors in understanding and reviewing: (i) “the importance of conduct within the firm’s incentive compensation framework and the role of compensation policy in establishing a sound risk and conduct culture”; and (ii) “the use of compensation tools in practice and their role in ensuring accountability when misconduct occurs.”

FSB Publishes Procedural Guidelines

On 27 November, the FSB published updated procedural guidelines (dated 22 October 2018) as a result of completing its review of its processes and transparency. The updated guidelines incorporate additional actions to improve communication and engagement with external stakeholders.

FSB Publishes Cyber Lexicon

On 12 November, the FSB published a cyber lexicon following a consultation issued on 2 July 2018. The cyber lexicon seeks to: (i) promote “cross-sector common understanding of relevant cyber security and cyber resilience terminology”; (ii) “assess and monitor financial stability risks of cyber risk scenarios”; (iii) increase “information sharing as appropriate”; and (iv) support “work by the FSB and/or standard-setting bodies to provide guidance related to cyber security and cyber resilience, including identifying effective practices.” The FSB also published an overview of the responses received from the consultation.

ASSET MANAGEMENT

IOSCO Publishes Consultation Regarding Investment Funds’ Leverage

On 14 November, the International Organization of Securities Commissions (“IOSCO”) published for consultation a report containing a proposed framework to assess leverage used by investment funds and the financial stability risks that could be caused by use of leverage. According to the report, the proposed framework will consist of a two-step process where: (i) the first step “indicates how regulators could exclude from consideration funds that are unlikely to create stability risks to the financial system while filtering and selecting a subset of other funds for further analysis”; and (ii) the second step “calls for regulators to conduct a risk-based analysis of the subset of investment funds identified in the first step.” IOSCO indicated that this consultation will focus on the first step of the framework, although it invites stakeholders to provide feedback on the second step as well as the design of the two-step framework. The consultation period closes on 1 February 2019.

LEI ROC Publishes Second Consultation Document Regarding the Relationship of Funds in the Global LEI System

On 19 November, the Legal Entity Identifier Regulatory Oversight Committee (“LEI ROC”) published its second consultation document on fund relationships in the Global LEI system (“GLEIS”). The LEI ROC proposed replacing the current optional reporting of a single “fund family” relationship with three alternative relationships, namely: (i) the “Fund Management Entity,” which would be considered as “the main management entity of a fund when it is legally responsible for the constitution and operation of the fund”; (ii) the “Umbrella Structures,” which would be defined as “a legal entity with one or more than one sub-funds/compartments where each sub-fund/compartment has its own investment objectives, separate investment policies and strategies, segregation of assets, separate investors and which has segregated liability between subfunds/compartments”; and (iii) the “Master-Feeder,” which would be defined as a relationship where “a Feeder Fund is exclusively, or almost exclusively, invested in a single other fund (e.g. U.S., EU UCITS), or several funds that have identical investment strategies (e.g. some alternative investment funds in the EU) referred to as a Master Fund (or Master Funds).” The LEI ROC also recommended eliminating the “Other Fund Family” generic category proposed in the first consultation document and indicated that it does not intend to currently include any additional relationships. The consultation period closes on 14 January 2019.

 

INSURANCE

 

EIOPA Publishes European Insurance Overview for 2018

On 27 November, EIOPA published its first annual European Insurance Overview Report, which provides a data driven overview of the EU’s insurance sector based on reported Solvency II information and does not include any analysis or conclusions. The report covers four key areas of the EU insurance sector: (i) life market developments; (ii) non-life market developments; (iii) solvency and capitalization; and (iv) investments.

EIOPA Publishes Peer Review of Supervisory Practices in Assessing Key Functions under Solvency II

On 15 November, EIOPA published the findings of its peer review assessing how national competent authorities (“NCAs”) supervise and determine how insurers apply the key functions under Solvency II, which include risk management, actuarial, compliance, and internal audit, as part of their governance system and whether these key functions apply the principle of proportionality such that they are not overly burdensome. In general, the peer review identified that NCAs appropriately apply the principle of proportionality and that NCAs have adopted similar approaches in supervising and determining how insurers apply the key functions. The peer review also identified four best practices, which include: (i) “adopt[ing] a structured proportionate approach based on the nature, scale and complexity of the business of the insurer regarding [national competent authorities’] supervisory assessment of key function holders and combination of key function holders at the time of initial notification and on an ongoing basis”; (ii) establishing “a supervisory panel set up internally which discusses and advises supervisors about complex issues regarding the application of the proportionality principle in governance requirements regarding key functions”; (iii) “when assessing the combination of key function holder with [members of the administrative, management or supervisory body (“AMSB”)], to publicly disclose the NCA’s expectations that controlling key functions should generally not be combined with operational functions for example with the membership of the AMSB”; and (iv) “apply[ing] a risk-based approach to the ongoing supervision of the insurer by holding meetings with key function holders on a regular scheduled basis as part of an NCA’s work plan.”

EIOPA Publishes Consultation Paper Regarding Technical Advice on Solvency II and IDD Delegated Regulations

On 26 November, EIOPA published a consultation paper regarding technical advice on the integration of sustainability risks and factors in the delegated acts under Solvency II and the Insurance Distribution Directive (EU/2016/97) (“IDD”). The consultation paper proposes a number of amendments regarding conflicts of interest and product oversight and governance in relation to policyholders' environmental, social, and governance (“ESG”) preferences. The consultation period closes on 30 January 2019.

EIOPA Q&As

On 3 December, EIOPA published updated Q&As regarding:

  • Templates for the submission of information to supervisory authorities under Commission implementing regulation (EU) 2015/2450 supplementing Solvency II; and

  • Technical advice under Commission delegated regulation (EU) 2015/35 supplementing Solvency II relating to valuation and risk-based capital requirements, enhanced governance, and increased transparency.

IAIS DEVELOPMENTS AND PUBLICATIONS

IAIS Publishes Consultation Regarding Development of Holistic Framework for Systemic Risk in the Insurance Sector

On 14 November, the International Association of Insurance Supervisors (“IAIS”) published a consultation paper proposing the development of a holistic framework to assess and mitigate systemic risk in the insurance sector. The IAIS stated that the proposed framework aims to enhance the current process for assessing and mitigating systemic risk in the insurance sector by: (i) taking into account relevant sources of systemic risk from both “the potential knock-on effects from the failure or distress of individual insurers . . . [and] the propagation or amplification of shocks from even solvent firms, through their collective risk exposures or responses to shocks”; (ii) “addressing cross-sectoral aspects of systemic risk, by comparing the potential systemic risk of insurers with other parts of the financial system, notably the banking sector”; and (iii) “moving away from a binary approach in which certain additional policy measures are only applied to a relatively small group of insurers, [such as the G-SIIs], to an approach with a proportionate application of an enhanced set of policy measures to address activities and exposures that can lead to systemic risk.” To achieve this, the IAIS has set out a number of “key elements” to the proposed framework, which include: (i) “an enhanced set of supervisory policy measures for macroprudential purposes providing the pre-emptive part of the framework, designed to help prevent insurance sector vulnerabilities and exposures from developing into systemic risk”; (ii) “a global monitoring exercise by the IAIS designed to detect the possible buildup of systemic risk in the global insurance sector”; (iii) “where a potential systemic risk is detected, supervisory powers of intervention [for insurance supervisors] that enable a prompt and appropriate response”; (iv) “mechanisms that help ensure the global consistent application of the framework, by having a collective assessment of potential global systemic risk and a coordinated supervisory response when needed,” such as “reporting to the FSB on the outcomes of the IAIS assessment and the supervisory response”; and (v) “an assessment by the IAIS of the consistent implementation of enhanced on-going supervisory policy measures and powers of intervention.” In addition, the IAIS stated that the implementation of the holistic framework should remove the need for an annual identification process by the FSB and national authorities for global systemically important insurers (“G-SIIs”) that focuses on just a few institutions. To this end, the IAIS has requested that the annual G-SII identification process be suspended until November 2022 and that, at that time, the FSB can review the need to either discontinue or re-establish the annual identification process. The consultation period closes on 25 January 2019.

  • On 14 November, the FSB published a response to the consultation paper supporting the development of the holistic framework. Consequently, the FSB has decided not to engage in the identification of G-SIIs for 2018 based on IAIS’s request. The FSB indicated that it intends to review IAIS’s recommendation once the holistic framework is finalized in November 2019 and, consistent with IAIS’s request, to review in November 2022 the need to either discontinue or re-establish the annual identification process.

IAIS Publishes Updated ICPs and ICP Consultation

On 16 November, the IAIS published an updated version of its adopted insurance core principles (“ICPs”). The adopted ICPs have been amended to incorporate the final revised version of ICP 6 (change of control and portfolio transfers), on which the IAIS consulted in June 2018. The IAIS also published on 14 November 2018 the current timelines and status of the ICPs and on 28 November 2018, the current timeline of the Common Framework for the Supervision of Internationally Active Insurance Groups (“ComFrame”) development and ICPs revision. Furthermore, the IAIS published draft revised ICP 15 (investments and ComFrame material integrated with ICP 15); revised ICP 16 (enterprise risk management for solvency purposes and ComFrame material integrated with ICP 16); and revised ICP 8 (risk management and internal controls and additional ComFrame material integrated with ICP 8) based on the comments it received from its 2017 consultation on these ICPs.

IAIS Publishes for Consultation Draft Application Paper Regarding Recovery Planning

On 12 November, the IAIS published for consultation a draft application paper regarding recovery planning of insurers. The paper aims to “provide recommendations and guidance to supervisors regarding recovery planning, and cooperation and coordination between supervisors, provide additional information for insurers with regard to recovery planning, and provide examples to illustrate the application of principles, standards and guidance relevant to recovery planning.” The IAIS is seeking feedback with regards to: (i) the objectives and concepts of recovery planning; (ii) requirements for recovery plans; (iii) governance-related matters in recovery planning; (iv) key elements of a recovery plan; and (v) the role of the supervisor (or supervisors in a cross-border group) with regard to recovery planning. The consultation period closes on 7 January 2019.

IAIS Publishes Issues Paper Regarding Digitalization in Insurance

On 12 November, the IAIS published an issues paper regarding the increasing digitalization of the insurance industry and its potential impact on consumer outcomes. The paper examines examples of digitalization, such as the use of mobile devices, the internet of things, Big Data, artificial intelligence, chat-bots, DLT, and “robo-advisors” and discusses the impact on consumer outcomes and insurance supervision in light of ICP 19 (Conduct of Business). In particular, the issues paper focuses on “product design and underwriting, as well as marketing, sales and distribution aspects of the insurance value chain.”

IAIS Publishes Application Paper Regarding Supervision of Insurer Cybersecurity

On 8 November, the IAIS published an application paper regarding supervision of insurer cybersecurity. The paper aims to provide “guidance to supervisors seeking to develop or enhance their approach to supervising the cyber risk, cybersecurity, and cyber resilience of insurers” by building upon a number of international frameworks and guidance, including: (i) the G7 Fundamental Elements of Cyber Security for the Financial Sector (“G7FE”); (ii) the related G7 Fundamental Elements for Effective Assessment of Cybersecurity for the Financial Sector (“G7FEA”); and (iii) the Committee on Payments and Market Infrastructure (“CPMI”)-IOSCO Guidance on Cyber Resilience for Financial Market Infrastructures (“CPMI-IOSCO Guidance”). In particular, the paper provides a number of recommendations and real-world examples regarding: (i) the general cybersecurity strategy and framework; (ii) governance of insurer cybersecurity frameworks; (iii) risk and control assessment; (iv) monitoring of cybersecurity frameworks; (v) response to cyber incidents; (vi) recovery from cyber incidents; (vii) information sharing; and (viii) continuous learning. Overall, the paper recommends that “the regulation and supervision of jurisdictions should be tailored to the specific conditions and characteristics of the jurisdiction, allowing solutions that are adequate to achieve outcomes consistent with the ICPs without becoming excessive.”

IAIS Publishes Application Paper Regarding Composition and Role of the Board

On 8 November, the IAIS published an application paper regarding the composition and role of insurers’ Boards of Directors. The paper discusses the components of an effective Board by providing a “description of problems or potential challenges for the supervisor followed by proposals for supervisory tools and good practices to remedy the problem or challenge.” The paper also provides additional material to assist insurers with the “practical interpretation and application of selected standards and guidance of ICP 5 (Suitability of Persons) and ICP 7 [(Corporate Governance)].” In general, the paper concludes that an effective Board: (i) “establishes a sustainable business model and a clear strategy”; (ii) “articulates and oversees a clear and measurable statement of risk appetite against which major business options are actively assessed”; and (iii) “meets its regulatory obligations, is open and proactively engages the supervisor and sets a culture that fosters prudent management.”

IAIS Publishes Application Paper Regarding the Use of Digital Technology in Inclusive Insurance

On 12 November, the IAIS published an application paper regarding the use of digital technology in inclusive insurance, which includes “all insurance products targeted to the excluded or underserved market[s].” The paper aims to provide “guidance to supervisors, regulators and policymakers when considering, designing and implementing regulations and supervisory practices with respect to the use of digital technology in inclusive insurance,” as well as exploring the use of FinTech and InsurTech in inclusive insurance.

MARKETS

MiFID/MiFIR

On 9 November, ESMA launched a call for evidence regarding periodic auctions for equity instruments. EMSA indicated that it launched the call for evidence in response to concerns from certain stakeholders that frequent batch auctions, which is a “new type of periodic auction trading system for equity instruments consisting of auctions of a very short duration during the trading day triggered by market participants,” has been rapidly gaining market share and is being used to circumvent the double volume cap mechanism under the MiFID II transparency requirements. ESMA is seeking comments to “assess whether and to which extent these systems can be used to circumvent the MiFID II transparency requirements and, should this be the case, to develop appropriate policy measures.” The consultation period closes on 11 January 2019.

On 13 November, ESMA published an updated version of its supervisory briefing on MiFID II suitability requirements, which aims to provide guidance to national competent authorities on MiFID II suitability rules. The supervisory briefing was updated to include the new version of ESMA’s guidelines on suitability published on 28 May 2018.

 On 14 November, ESMA published updated Q&As regarding market structure and transparency topics under MiFID II/MiFIR.

  • The updated market structure Q&A document includes one new Q&A regarding direct electronic access and algorithmic trading.

  • The updated transparency Q&A document includes three Q&As regarding: (i) pre-trade transparency requirements for a request for quote system; (ii) whether it is possible for investment firms to qualify as a systematic internaliser in instruments that are not traded on a trading venue; and (iii) trading venues making data available free of charge 15 minutes after publication.

On 9 November, ESMA published updated Q&As regarding ESMA’s temporary product intervention measures under MiFIR. The updated Q&A document includes one new Q&A regarding how firms should ensure the prominence of the appropriate risk warning specified by ESMA’s Decision (2018/796) to temporarily restrict the marketing, distribution, or sale of contracts for differences (“CFD”) to retail clients, and one updated Q&A regarding the definition of “payments for the purpose of entering into a CFD.”

EMIR

On 27 November, the Council of the EU invited the Permanent Representatives Committee of the EU to agree on the latest negotiating mandate under the Presidency proposal regarding the European Commission’s proposal for a regulation amending EMIR regarding the procedures and authorities for the authorization of CCPs and the requirement for the recognition of third-country CCPs. The Council of the EU also published a statement clarifying that the establishment of the CCP Supervisory Committee under the European Commission’s proposed regulation “is a unique solution, and does not create any precedent for any financial services-related legislative act in the future.”

European Commission Publishes for Consultation Draft Delegated Regulation Regarding the Prospectus Regulation

On 28 November, the European Commission published for consultation a draft delegated regulation (Ares (2018) 6089173) regarding the Prospectus Regulation (EU/2017/1129) in relation to the format, content, scrutiny, and approval of prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Commission Regulation (EC) 809/2004. The consultation period closes on 26 December 2018.

European Commission Publishes Communication Regarding the Capital Market Union

On 28 November, the European Commission published a communication entitled “Capital Markets Union: time for renewed efforts to deliver for investment, growth and a stronger role of the euro.” The communication describes the efforts to implement the Capital Market Union so far and lists the initiatives that still require significant progress, such as for the Pan-European personal pension product (“PEPP”), covered bonds, and cross-border distribution of collective investment funds.

International Standard Setting Bodies Publishes Final Report Regarding Incentives to Centrally Clear OTC Derivatives

On 19 November, IOSCO, FSB, the Basel Committee on Banking Supervision (“BCBS”) and CPMI jointly published their final report on the post-implementation evaluation of the effects of the G20 regulatory reforms regarding incentives to centrally clear OTC derivatives. Key findings from the report include: (i) generally, “the changes observed in OTC derivatives markets are consistent with the G20 Leaders’ objective of promoting central clearing as part of mitigating systemic risk and making derivatives markets safer”; (ii) “the relevant post-crisis reforms, in particular the capital, margin and clearing reforms, taken together, appear to create an overall incentive, at least for dealers and larger and more active clients, to centrally clear OTC derivatives”; (iii) “non-regulatory factors are also important and can interact with regulatory factors to affect incentives to centrally clear”; (iv) “some categories of clients have less strong incentives to use central clearing, and may have a lower degree of access to central clearing”; (v) “the provision of client clearing services is concentrated in a relatively small number of bank-affiliated clearing firms”; and (vi) “some aspects of regulatory reform may not incentivise provision of client clearing services,” such as the inclusion of initial margin in the leverage ratio calculation.

IOSCO Publishes Results from Survey Regarding Principles for the Regulation and Supervision of Commodity Derivatives Markets

On 19 November, IOSOC published a final report with the results from a survey of IOSCO members that examined member compliance with the IOSCO Principles for the Regulation and Supervision of Commodity Derivatives Markets (the “Principles”). The report indicated that the “majority of respondents were broadly compliant with the Principles” and that “IOSCO members have made substantial progress towards achieving full compliance and, in many cases, have strengthened their implementation of the Principles.”

ESMA Publishes Documents Regarding the Securitization Regulation

On 13 November, ESMA published a number of documents implementing the new European framework for securitization and creating a specific framework for simple, transparent, and standardized (“STS”) securitization under the Securitization Regulation (EU/2017/2402), including:

  • A report containing the draft regulatory technical standard (“RTS”) and implementing technical standards (“ITS”) on the “information and templates to be provided as part of an application by a firm to register as a securitization repository with ESMA, as well as the operational standards and access conditions for information collected and maintained by securitization repositories.”

  • ESMA’s final report on technical advice to the European Commission regarding “fees to be charged by ESMA for registering and supervising securitization repositories.”

  • Further guidance to market participants on ESMA’s arrangements for being notified of a securitization’s STS status, which currently consists of a set of reporting instructions and an interim STS notification template pending the development of ESMA’s STS register in the upcoming months.

  • A statement “addressing various topics related to its near-term implementation activities under the Securitization Regulation.”

ESMA Announces List of Members of its Securities and Market Stakeholder Group

On 4 December, ESMA announced the appointment of the new members of its Securities and Market Stakeholder Group, who will begin their two-and-a-half-year terms on 1 January 2019 and replace the members whose terms expire on 31 December 2018. The SMSG provides ESMA with opinions and advice on its policy work and must be consulted on technical standards, guidelines, and recommendations.

ESMA Launches Renewal of Consultative Working Group

On 4 December, ESMA launched the process to renew its Consultative Working Group (“CWG”) of its Financial Innovation Standing Committee (“FISC”) and published a calling for expression of interest from stakeholders that wish to become a member of the CWG. The CWG provides technical assistance to ESMA and the FISC on their work regarding financial innovation, such as providing FISC with “market intelligence on emerging financial innovations.” The expression of interest closes on 15 January 2019.

EMSA Adopts Decision to Renew the Restriction on Binary Options

On 9 November, ESMA published a statement indicating that on 7 November 2018 it had adopted a decision to continue to prohibit the marketing, distribution, or sale of binary options to retail clients for a further three months. The existing measures, which have been in effect since 2 July 2018 and were scheduled to expire on 2 January 2019, will now expire on 2 April 2019.

ESMA Publishes Annual Market Share Calculation for EU Registered Credit Rating Agencies

On 3 December, ESMA published its annual market share calculation for EU registered credit rating agencies (“CRAs”) for 2018. The calculation aims to assist issuers and related third parties in satisfying the requirements under Article 8d of the CRA Regulation, which requires that “issuers or related third parties are required to consider appointing a CRA with no more than 10% total market share whenever they intend to appoint one or more CRAs to rate an issuance or entity.” 

ESMA Publishes Updated Q&As Related to CDSR

On 12 November, ESMA published updated Q&As regarding the implementation of the Central Securities Depository Regulation (“CSDR”). The updated Q&A document includes five new Q&As regarding the provision of services by the Central Securities Depository in another member state, as well as the calculation of cash penalties for the purposes of settlement discipline. 

ESMA Publishes Updated Q&As Related to Short-Selling Regulation

On 14 November, ESMA published updated Q&As regarding the implementation of the Short Selling Regulation (“SSR”). The updated Q&A document includes one new Q&A regarding the identification of the relevant competent authority following the application of MiFID II/MiFIR.

UPCOMING DEADLINES 

o   7 December: EIOPA’s consultation closes regarding the risk of long-term illiquid insurance liabilities.

o   26 December: European Commission consultation closes on a draft delegated regulation (Ares (2018) 6089173) regarding the Prospectus Regulation in relation to the format, content, scrutiny, and approval of prospectus to be published when securities are offered to the public or admitted to trading on a regulated market.

o   31 December: ESAs’ consultation closes regarding amending the implementing regulations on the mapping of the external credit assessment institutions.

o   7 January 2019: IAIS consultation closes regarding recovery planning for insurers.

o   11 January 2019: ESMA call for evidence closes regarding frequent batch auctions.

o   14 January 2019: LEI Regulatory Oversight Committee consultation closes regarding the relationship of funds in the global LEI system.

o   15 January 2019: ESMA Consultative Working Group expression of interest closes.

o   25 January 2019: IAIS consultation closes regarding the development of a holistic framework to assess and mitigate systemic risk in the insurance sector.

o   30 January 2019: EIOPA consultation closes regarding technical advice on the integration of sustainability risks and factors in the delegated acts under Solvency II and the Insurance Distribution Directive.

Ianthe Zabel
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