Regulations: 4 areas the European Commission wishes to streamline ASAP (Part 1)

December 5, 2017

  

The European Commission released on the 1st of December 2017 a report aiming at rationalising financial regulations within the EU. After consulting with 300 stakeholders, the Comission decided that 4 areas in particular deserved a bit more of attention.

 

Read part 2 here

 

Post 2007-crisis regulations in the EU are often criticised for putting too much pressure on legal entities in the energy trading sector.

 

In addition, some regulatory iniciatives like EMIR and MiFID are overlapping in certain areas, making it confusing for businesses to comply with.

 

With this in mind, the European Commission launched a Call for Evidence on the regulatory framework for financial services, with the objective to verify whether EU legislation adopted since the financial crisis were working as intended.

 

 

According to this study, targeted follow-up measures are justified in four areas:

 

1. Reducing unnecessary regulatory constraints on financing the economy;

2. Making rules more proportionate while preserving prudential objectives;

3. Reducing undue regulatory burdens;

4. Making the regulatory framework more consistent and forward-looking.

 

 

1. Reducing unnecessary regulatory constraints on financing the economy

 

With the objective of stimulating job creation, growth and investment, the European Commission aims at reducing unnecesary regulations impeding or complexifying access to finance. Indeed, according to the Call for Evidence,

“some participants expressed concerns about the regulatory framework’s impact on banks’ ability to finance the economy, including SME finance, incentives for long-term sustainable investment, market liquidity and access to clearing.”

“Some participants expressed concerns about the regulatory framework’s impact on banks’ ability to finance the economy, including SME finance, incentives for long-term sustainable investment, market liquidity and access to clearing.”

Regarding this topic, the Commission will issue a few follow-up measures, including:

 

  • The Commission is preparing an amendment to the Solvency II implementing measures to ensure that insurers also can play their role as long-term investors in the STS market;

  • The Commission is advancing with its preparatory work on amendments to the Delegated Regulation supplementing Solvency II in 2018;

  • The 2020 Review of the Solvency II Directive will provide an opportunity to assess the long-term guarantees (LTG) package in order to further explore incentives for long-term investments by insurers;

  • Read all ongoing follow-up measures here.

 

2. Making rules more proportionate while preserving prudential objectives

 

Regulatory rules should be more proportionate to particular company types, on criteria such as:

 

According to the Commission, “more proportionate rules will help promote competition and increase the resilience of the financial system by safeguarding its diversity while preserving prudential objectives, financial stability and overall resilience.”

“More proportionate rules will help promote competition and increase the resilience of the financial system by safeguarding its diversity while preserving prudential objectives, financial stability and overall resilience.”

Regarding this topic, the Commission will issue a few ongoing measures like:

 

  • As proposed in the current banking package, the European Banking Authority (EBA) will launch an IT tool to promote further proportionality in banking regulation. This IT tool will guide banks through the applicable regulatory provisions, standards and templates in view of their specific size and business model;

  • As a part of the Alternative Investment Fund Managers Directive (AIFMD) review, the Commission is currently assessing the proportionality of AIFMD rules. An external AIFMD study (to be finalised in 2018) has been commissioned;

  • The 2018 Review of the Solvency II Delegated Regulation will explore how to simplify the methods, assumptions and calculations of certain modules in the standard formula and develop the framework for the use of alternative credit assessments, based on the technical advice from EIOPA;

  • Read all ongoing follow-up measures here.

 

Read part 2 here

 

With more than 40 pieces of EU legislation adopted since the financial crisis, the financial regulatory landscape is quite busy.

 

The 8th ETRC 2018 Summit (6-8 March 2018 | London) provides the best platform for legal and compliance officers to communicate directly with regulators and get a clear update on how to comply efficiently to financial regulations.

 

Sources:

 

 

Related sessions from ETRC 2018:

  • Update from financial regulators

    • MiFID II’s first feedback

    • Anti-abuse activity under MAR: Enforcement

    • Brexit: Potential consequences

    • EMIR review:

      • What is the timeframe?

      • What are the main potential changes?

    • What is new under CRD and SFTR?
       

  • Q&A with the Financial Regulators: Exclusive Q&A session between the Financial Regulators and audience to address issues and ask questions on around:

    • MiFID II: Position limit and position reporting challenges

    • Hedging policy: Definition and conditions

    • Enforcement of the regulations: Anti-abuse measures and investigation

    • Review of EMIR: Timeframe
       

  • The Market Abuse Directive best practices: Implementing trade surveillance

    • Overview of the different options:

      • Set of procedures, no system

      • Built-in system

      • Off-shelf system

    • Benchmarking the different approaches:

      • Investment

      • Efficiency

      • Are they future-proof?

 

 

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