European Regulation: What lies ahead for 2017?

European Regulation: What lies ahead for 2017?

The European Commission, the three European Supervisory Authorities (ESAs) and the Joint Committee of the ESAs have all published their work programmes for 2017. Regulation remains work in progress. There are several common themes emerging across the different work programmes, including: promoting supervisory convergence; improvements around data collection, analysis and dissemination; and consumer protection.

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The Commission’s work programme (PDF 320 KB) is focused mostly on Capital and Markets Union (CMU), including plans for a simple, efficient and competitive EU personal pension product; an action plan for retail financial services to break down the national barriers which prevent consumers from getting the best value, choice and prices and to benefit from new financial technologies; the accelerated adoption of proposals on securitisation and prospectuses; developing a strategy on sustainable finance; measures to facilitate the funding of infrastructure corporates; and legislation on business restructuring and “second chance”.

The Commission will also:

  • Take forward a CRR2/CRD5 package to incorporate final Basel Committee standards on the leverage ratio, net stable funding ratio, market risk framework, large exposures, and total loss-absorbing capacity (TLAC) for global systemically important banks (G-SIBs);
  • Seek to find an agreement on the proposal for a common European Deposit Insurance Scheme; and
  • Implement the EU Action Plan on tackling terrorism financing.

CMU and the multiple revisions to the CRR have direct implications for the work programmes of the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) – in inputting to policy development and in producing technical standards and guidelines to support the new legislation. Meanwhile, the European Insurance and Occupational Pensions Authority (EIOPA) will be developing technical advice on the Insurance Distribution Directive.

The ESAs’ work programmes contain three other key common themes.

First, promoting supervisory convergence.

In part this will be through reviewing the supervisory implementation of existing legislation and market practices. The ESMA work programme (PDF 559 KB) refers explicitly to conduct of business, product governance and best execution under MiFID 2, market integrity and secondary market trading under MiFIR and MAR, and CCPs under EMI. The EBA work programme (PDF 690 KB) refers to credit risk modelling, recovery planning and early intervention, and the setting of Pillar 2 capital requirements. The EIOPA work programme (PDF 1.31 MB) refers to the review and evaluation of long term guarantees, the standard formula, internal models good practice, and the delivery of a risk free interest rate term structure under Solvency 2.

The other aspect of supervisory convergence mentioned by all three ESAs is the more active and interventionist participation of the ESAs in supervisory colleges (and resolution colleges in the case of the EBA).

Second, data collection, analysis and dissemination. All three ESAs refer to developing their roles in this area, for the purposes of supervisory benchmarking, systemic risk analysis and transparency, with ESMA taking a particular interest in the management of data sets arising from various types of pre- and post-trade reporting.

Third, consumer protection.

The three ESAs and the Joint Committee work programme (PDF 121 KB) all highlight aspects of consumer protection. The impact on consumers of financial innovation and technology (“Fintech”) is a common theme here, while complaint handling, retail payment services and the use of “big data” by financial institutions are also mentioned. EIOPA sets out nine consumer-related topics from which it will select two or three as the basis for undertaking thematic reviews during 2017.

In addition, ESMA’s work programme includes the development of its direct supervision of credit rating agencies and trade repositories, with a particular focus on their ancillary activities given the trend of combining ancillary and core services; EIOPA will undertake research on pensions regulation; and the ESAs Joint Committee will continue its work on anti-money laundering and take forward any work arising from the Commission’s Regulatory Fitness and Performance (REFIT) review of the Financial Conglomerates Directive.

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