Although not the ‘bonfire of regulation’ that some had hoped for, the European Commission’s final report from the ‘Call for evidence’ review of financial regulation makes some important commitments to reduce regulatory burdens. As a key part of the flagship Capital Markets Union (CMU) initiative, the proposed changes are likely to be welcomed by the industry. However, with many key rules still being implemented, the benefits of any adjustments may not be felt for some time.
KPMG member firms made a broad contribution to the review, drawing upon our knowledge across financial regulation, and experience of the implementation of EU audit reform. Many of our recommendations are reflected in the Commission’s thinking. However, something still absent is a longer term capital markets regulatory roadmap, which would help firms plan ahead and increase Europe’s attractiveness to investors.
The timeline for the Commission’s action plan is rather vague, with a commitment to review progress during 2017. Brexit may be a factor as, depending on the direction of the negotiations, CMU might take different forms from that first envisaged by the Commission. Key areas of action from the review include:
Within the context of CMU, the ‘Call for evidence’ signaled a turning point from the ‘regulate everything’ approach that followed the financial crisis. The changes might be seen as not much more than tweaks, but taken as a whole, they add up to a significant adaptation of the EU regulatory approach. Perhaps most significant is the Commission’s commitment to assess any new regulation through a different lens, an approach already in evidence with the new capital rules for banks where the EU is taking a more cautious approach than it might have done in the past.
EU Banking Reform – Revising CRR, CRD4 and the BRRD.