Regulatory newsletter june 2019 - Initio
0 likes189 views
The document provides summaries of recent regulatory developments from several European authorities and industry organizations. Key updates include: 1) The EBA launching a consultation on technical standards for the standardized approach to counterparty credit risk. 2) ESMA launching a call for evidence on position limits for commodity derivatives under MiFID II. 3) The FCA extending the deadline for notifications for the temporary permissions regime for EU firms to October 30, 2019 due to Brexit. 4) European supervisory authorities consulting on draft implementing technical standards for reporting of intragroup transactions under the Financial Conglomerates Directive.
Regulatory newsletter june 2019 - Initio
- 1. Regulatory newsletter June 2019 1/5 Regulatory update Credit Risk Link EBA launches consultation on technical standards on the standardised approach for counterparty credit risk ▪ The European Banking Authority (EBA) launched today a consultation on four draft Regulatory Technical Standards (RTS) on the Standardised Approach for Counterparty Credit Risk (SA-CCR). These draft technical standards specify key aspects of the SA-CCR and represent an important contribution to its smooth harmonised implementation in the EU. ▪ EBA proposes methods for the mapping of derivative transactions to risk categories, a formula for the calculation of the supervisory delta of options mapped to the interest rate risk category and a method for determining whether derivative transactions are long or short in their risk drivers. MiFID II Link ESMA launches call for evidence on position limits in commodity derivatives under MiFID II ▪ The call for evidence seeks the views of stakeholders on the impact of position limits and position management controls in commodity derivatives markets. Section 3 of the call for evidence provides a summary of the position limit regime under MiFID II and seeks views on the potential impact of position limits on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. Section 4 discusses the impact of position management controls on commodity derivatives markets. Section 5 looks forward at potential improvements to the existing framework. Brexit Link FCA confirms extension of the Temporary Permission Regime deadline ▪ The FCA has today confirmed the deadline for notifications for the temporary permissions regime (TPR) will be extended to the end of 30 October 2019. TPR would allow EEA-based firms passporting into the UK to continue new and existing regulated business within the scope of their current permissions in the UK for a limited period, while they seek full FCA authorisation. ▪ It will also allow EEA-domiciled investment funds that market in the UK under a passport to continue temporarily marketing in the UK. The deadline for applying to the Trade Repository and Credit Ratings Agencies has also been extended to the same date. For EEA payment services and e-money firms, the notification window for temporary permission is closed, but it will open again under the relevant HM Treasury Regulations on 31 July and end on 30 October. Regulatory Reporting Link European Supervisory Authorities consult on draft ITS on reporting of intragroup transactions under Financial Conglomerates Directive ▪ On 22 May 2019, the Joint Committee of the European Supervisory Authorities (EIOPA, EBA & ESMA) published a consultation paper on draft implementing technical standards (ITS) on the reporting of intragroup transactions and risk concentration under Article 21a(2b) and (2c) of the FCD. ▪ The aim is to offer a single framework of requirements for the reporting due by financial conglomerates subject to supplementary supervision in the EU, thereby helping coordinators and other relevant competent authorities to identify relevant issues and exchange information more efficiently, reducing costs and fostering a level playing field across EU conglomerates.
- 2. Regulatory newsletter June 2019 2/5 ▪ It provides the foundation for the full harmonisation of reporting, with one single set of templates, one single embedded dictionary using common definitions and even one single set of instructions to fill in the templates. Sustainable Finance Link ESMA appoints chair for its newly created co-ordination network on sustainability ▪ The European Securities and Markets Authority (ESMA) published a press release announcing it has established a Coordination Network on Sustainability (CNS). The CNS is intended to foster the coordination of Member State national competent authorities’ (NCAs) work on sustainability. ▪ It will be responsible for the development of policy in this area with a strategic view on issues related to integrating sustainability considerations into financial regulation. ▪ Ana María Martínez-Pina Garcia, Vice-Chair of the Comisión Nacional del Mercado de Valores (Spain) has been appointed as chair to the CNS for two years. EMIR Link ESMA updates Q&As on EMIR implementation ▪ The European Securities and Markets Authority (ESMA) published an updated version of its Q&As on the implementation of the European Markets Infrastructure Regulation (EMIR). ▪ The updated Q&As comes up to: − the procedure for financial counterparties and non-financial counterparties to notify that they exceed or no longer exceed clearing thresholds; − the responsibility for the status of counterparties; − the clearing obligation; − a new Q&A on the clearing start date for ‘category 3 and 4’ (see articles 4a and 10 ); − OTC derivatives novations; − the population of the field “clearing obligation”. MiFID II Link ESMA updates Q&As on MiFID II & MiFIR investor protection The updated Q&As provides answers on. ▪ Best execution Reporting on the trading mode acc. to RTS27, on ‘passive’ and ‘aggressive’, orders for firms using quote-driven systems to have client orders executed. ▪ Information on costs and charges Ex-ante information in case of sell orders and of telephone trading; Use of assumed investment amounts for ex- ante information in relation to investment services and/or products with non-linear charging structures; and, Use of ranges and maximum amount / percentages for ex-ante information. Money Markets Link ECB provides a one-off spread between €STR and EONIA Spread between €STR and EONIA is calculated at 8.5 bp. The spread is to be used by EMMI in new EONIA methodology as of 2 October 2019.
- 3. Regulatory newsletter June 2019 3/5 Sector update Insurance Link EIOPA publishes a report following its thematic review of the use of Big Data Analytics in motor and health insurance ▪ The report identifies among other things: − Increased use by insurers of new data sources such as social media profiles and telematics data alongside traditional data sources. This use of combined types of data is creating opportunities for increasingly tailored products and services. − Credit, driving and claims scores created with algorithms by third party data vendors has grown. − The use of Big Data Analytics is leading to a greater number of smaller risk pools. − 3% of firms are now using tools such as artificial intelligence or machine learning; while 24% are at proof-of-concept stage in applying such tools. − Robo-advisors and chatbot applications are gaining momentum in the market. The ‘Internet of Things’ will drive greater use of usage-based insurance products. Banking Link Basel Committee reports on Basel III implementation progress ▪ The Basel Committee on Banking Supervision today issued the Sixteenth progress report on adoption of the Basel regulatory framework, which sets out the adoption status of Basel III standards for each Committee member jurisdiction as of end-March 2019. It includes the Basel III post-crisis reforms published by the Committee in December 2017 and the finalised market risk framework published in January 2019. These reforms will take effect from 1 January 2022. ▪ Member jurisdictions have made further progress in implementing standards for which the deadlines have already passed. These include, notably, the revised securitisation framework and the leverage ratio based on the existing exposure definition. However, the report also shows that progress has been limited in the implementation of other standards, which in a number of jurisdictions have yet to be finalised and put into effect, such as the Net Stable Funding Ratio (NSFR). Cross sector Link DTCC white paper offers vision for central clearing in US treasury cash markets ▪ The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced the release of a new white paper that explores the current structure of the U.S. ▪ The paper looks at initiatives – both implemented and planned – from DTCC’s subsidiary Fixed Income Clearing Corporation (FICC) and how they will promote the growth of central clearing including the Sponsored Membership Program and the Centrally Cleared Institutional Triparty (CCIT) Service. It also explores several proposals to support the growth of central clearing activity, including: − Advancement of the FICC Start Leg Repo Initiative to include compared same-day starting repo transactions in eligible netting securities in the risk management, novation, guarantee and settlement in the DVP Service benefit − Expansion of capabilities to designate Locked-In Trade Sources to allow for additional trading volume to be centrally cleared through FICC Asset Management Link EFAMA’s comments on Joint Research Centre’s (JRC) technical report on EU ecolabel
- 4. Regulatory newsletter June 2019 4/5 ▪ The EFAMA welcomes the European Commission’s initiative to develop an EU Ecolabel for retail financial products. The organisations sees this as an opportunity to create a coherent European approach and promote sustainable investments among retail investors. ▪ Given the wider context and current focus of the “Ecolabel”, the EFAMA believes it makes most sense to confine the label to environmental sustainability. Nevertheless, it is agreed that some minimum safeguards pertaining to a product’s social and governance-related sustainability should be provided for. Focus Crypto-assets Link ECB paper warns of regulatory arbitrage on crypto-assets ▪ With crypto-assets gaining in prominence, the European Central Bank has set up task force to examine their potential implications for monetary policy and the smooth running of market infrastructures and payments, as well as the stability of the financial system. ▪ Currently, the task force says crypto-assets do not pose a threat because their combined value is still small and their linkages to the financial sector are limited. The regulatory framework also means that the likes of Bitcoin can also not be used to conduct money settlements in systemically important financial market infrastructures (FMIs). Crypto-assets Link French Regulatory Agency AMF sees 14,000% surge in crypto-related scam enquiries since 2016 ▪ The French stock markets regulator AMF has seen over a 14,000% surge in enquiries related to fraudulent crypto offers in 2018 as opposed to 2016, the agency wrote in a new annual report released May 7. ▪ In the report, the Autorité des Marches Financiers specified that the number of enquiries associated with crypto-related scams online has surged to over 2,600 in 2018 from only 18 similar enquiries in 2016. ▪ With that, the amount of fraudulent online offers in other industries such as foreign exchange (forex) and binary options have significantly decreased, the AMF noted. As such, fraudulent offers concerning investment in forex and binary options triggered a total of 3,768 enquiries in 2016, with the number having decreased to 968 enquiries in 2018. Crypto-assets Link IOSCO requests feedback on key considerations for cross-border crypto regulation ▪ The board of the International Organization of Securities Commissions agreed to publish a consultative paper regarding the challenges that market regulators face when providing investor protection to those trading digital assets. ▪ The report sets out key considerations that are intended to assist regulatory authorities in evaluating CTPs within the context of their regulatory frameworks. The primary topics covered include: − Access to CTPs; − Safeguarding participant assets; − Conflicts of interest; − Operations of CTPs; − Market integrity; − Price discovery; and − Technology.
- 5. Regulatory newsletter June 2019 5/5 Crypto-assets Link Audit companies predict more fund administrators will enter the crypto space ▪ As the cryptocurrency market has matured, more fund administrators are becoming more open to servicing crypto assets and could begin working more with clients in the future, according to a new report by PwC. ▪ Results also highlighted that funds tend to be domiciled in the same jurisdictions as traditional hedge funds, with the top three jurisdictions named as the Cayman Islands, the US and the British Virgin Islands. ▪ It further discussed there is a lack of ‘traditional’ fund administrators in the crypto asset space as most funds use relatively small fund administrators for net asset value (NAV) calculations. ▪ The PwC report also found that crypto hedge funds had median returns of -46 percent during 2018.