Updates are coming from the European regulators on a seemingly daily basis.
Updates are coming from the European regulators on a seemingly daily basis. Looking back on this past month, we’ve seen global leaders meet at this year’s G20 summit where, from a financial services perspective, existing commitments were reaffirmed with emphasis placed on safeguarding an open and resilient financial system based on agreed international standards and regarded as crucial in supporting sustainable growth.
Amidst the flurry of regulatory news, in this issue we focus on a number of articles where the views and efforts of regulators look to be converging. EIOPA and ESMA look at the impact of Brexit in relation to relocation and the EU’s evolving approach to third country regimes. Under the Capital Markets Union, ESMA wants issuers, investors and advisers to work through the finer details of the new simplified ‘EU Growth’ prospectus. Also, the European Commission has unveiled its proposal for the new pan-European Personal Pension. Both share the aim of creating stronger, bigger European capital markets.
In the UK in banking, the second consultation paper on Pillar 2 liquidity has been issued, with the PRA expected to set out proposals on calibration in a third consultation paper in early 2018. The implementation of the new Pillar 2 methodologies is envisaged to commence shortly thereafter. The FSB has published its assessment on shadow banking looking at which risks have decreased, and which are on the rise. The same assessment in relation to asset management, does not identify the need for any additional regulatory action at global level, but recommends some enhancements and strengthening of data collection and oversight. Meanwhile, IOSCO has issued further papers on liquidity management in investment funds.
KPMG’s latest thought leadership paper Recovery planning. What more do banks need to do? was published in July. Although this paper focuses on banks, there is a read across to other types of financial institution – including insurance companies and asset managers – and to financial market infrastructure such as central clearing houses.
Also, the framework is time and resource-intensive, requiring detailed assessments of other countries’ regimes and lengthy negotiations if a country is not initially adjudged equivalent. ESMA says that areas such as access to information and timely identification of changes in third-country regimes, practices and supervisory approaches should be strengthened. It also believes there should be the possibility of supervision at EU level.
ESMA’s contributions further underline that the EU’s evolving approach to third countries is a business risk for firms around Europe, which will increase as the UK moves towards its exit from the EU and the future EU-UK trading relationship is negotiated. Firms need to assess, decide and act now, or risk serious disruption to their business models and loss of clients.