Financial Regulatory Developments (FReD) - 21 June 2013

Headlines

Presidency achieves MiFID 2 agreement Council responds to EP on reform progress Commission on Banking Standards recommends reforms Mansion House speech reveals bank shortfalls Chancellor addresses banking reform at Mansion House

European Union and International

Council of the European Union (Council)

Presidency achieves MiFID 2 agreement: The Council and the Irish Presidency have announced a breakthrough in negotiations on the revised Markets in Financial Instruments Directive (MiFID 2) and Regulation (MiFIR). The Permanent Representatives Committee (COREPER) agreed the position on behalf of the Council, which was expected to approve the position on 21 June. The Presidency said it was delighted to have paved the way for the trilogue process with the European Parliament to begin. (Source: COREPER Agrees MiFID 2, Presidency Delighted at MiFID 2 Progress, MIFID 2 General Approach and MiFIR General Approach)

Contact: Rosali Pretorius or Luca Salerno

Council responds to EP on reform progress: During last week's debate on the European Parliament's (EP) resolution on the slow progress on key financial regulatory initiatives, the Council responded to questions raised by EP. The Council said it would not sacrifice quality for speed and that it was giving priority to banking initiatives because of the importance of the sector. The proposals for a Single Resolution Mechanism, which the Commission has yet to table, will also be a priority file with a view to adopting the legislation by the end of the current parliamentary term. It also plans that the fourth Capital Requirements Directive (CRD4) and Regulation (CRR) will be formally adopted before July. The Council went on to announce imminent agreements on the Council's general approach for the bank Recovery and Resolution Directive (RRD), the Directive on the Key Information Document for packaged retail investment products (KID) and the Central Securities Depositories (CSD) Regulation. Political agreement with EP over the new market abuse legislation is also within reach. On 21 June, the meeting of the Economic and Financial Affairs Council (ECOFIN) is set to consider a Presidency proposal for a general approach to RRD. (Source: Financial Services: Lack of Progress - Debate at the EP Plenary Session and Council - Main Topics for the Coming Fortnight)

Contact: Emma Radmore or Juan Jose Manchado

European Commission (Commission)

Commission confirms substituted compliance request: The Commission and ESMA have confirmed their intention to ask the US Commodity Futures Trading Commission (CFTC) to undertake a substituted compliance assessment on EU rules in respect of the CFTC's entity level and transaction level requirements for swaps. (Source: Commission Confirms Substituted Compliance Request)

Contact: Rosali Pretorius or James Brennan

New CRA legislation comes into force: On 20 June the amended credit rating agencies (CRA) Regulation and the Directive on non-mechanistic reliance of fund managers on credit ratings came into force. Commissioner Michel Barnier highlighted that the process had taken just one and a half years since the Commission made its original proposals. (Source: Stricter Rules for CRAs to Enter into Force)

Contact: Rosali Pretorius or Edward Hickman

Commission extends EMIR third country equivalence deadline: The Commission has extended the deadline for ESMA to deliver technical advice on the equivalence between third country derivatives regulations and the European Market Infrastructure Regulation (EMIR). Advice on the US and Japan is now due by 1 September and, for the remaining countries, by 1 October. The Commission also noted this extension does not affect the deadline of 15 September for third country central counterparties (CCPs) to make applications to continue providing services to EU clearing members until ESMA makes its recognition decisions. (Source: Updated Mandate on EMIR Equivalence)

Contact: Rosali Pretorius or James Brennan

European Parliament (EP)

ECON votes on FTT and bank structural reform: The Economic and Monetary Affairs Committee (ECON) in EP has adopted its reports on the enhanced cooperation procedure for a Financial Transaction Tax (FTT) and on EP's own-initiative procedure for a motion on reforming the structure of the EU banking sector. Regarding the FTT, where EP is limited to expressing an opinion, ECON supported the Commission's original proposals, although it wants to introduce a transitional period until 2017 where trades in sovereign bonds and trades of pension funds would be subject to a reduced tax rate. ECON also inserted a principle whereby acquisition of legal ownership rights is linked to payment of the tax. The final text of the reports adopted are not available yet. The adoption of EP's position in plenary session vote should take place before the summer recess. (Source: Banking Reform: Banks Should Operate on Behalf of the Real Economy, FTT: MEPs Push Wide Scope and Attention to Pension Funds, OEIL File for FTT and OEIL File for Bank Structural Reform)

Contact: Emma Radmore or Juan Jose Manchado

EP brings forward IMD2 plenary vote: EP has brought forward the date when it expects to vote on the revisions to the Insurance Mediation Directive (IMD2) in plenary session. This is in line with the Council's announcement of an imminent general approach on the related KID Regulation proposal. (Source: OEIL File for IMD2)

Contact: Emma Radmore or Andrew Barber

European Supervisory Authorities (ESAs)

ESAs publish their annual reports: The ESAs (ESMA, EBA and EIOPA) have published their respective annual reports for 2012. (Source: ESMA Annual Report, EBA Annual Report and EIOPA Annual Report)

Contact: Emma Radmore or Juan Jose Manchado

European Securities and Markets Authority (ESMA)

ESMA issues CRA scope guidelines: ESMA has issued guidelines and recommendations on the scope of the CRA Regulation. (Source: Guidelines on the Scope of the CRA Regulation)

Contact: Rosali Pretorius or Edward Hickman

UK to disregard SSR market making exemption guidelines: ESMA has published a table showing whether national regulators intend to comply with the guidelines on the exemption for market makers from the Short Selling Regulation (SSR). Denmark, France, Germany, Sweden and the UK have said they do not intend to comply with the guidelines. In the case of the UK, FCA has decided not to comply with the requirement that a market maker must be member of a trading venue where the shorted financial instrument is admitted to trading. FCA says that the guidelines go beyond the SSR, and this requirement could pose a barrier to market makers in OTC derivatives that need to hedge their position by trading in the underlying stock. Also, FCA will not comply with the limitations to the scope of products eligible for the...