RegBrief - Vol I, 2014

1 | ARTHUR COX
Group Briefing
January 2014
FINANCIAL REGULATORY
RegBrief - Vol I, 2014
KEY CONTACTS
IRISH DEVELOPMENTS
For further information
please speak to your usual
Arthur Cox contact or one of
the following lawyers:
CRD IV
ORLA O’CONNOR
PARTNER
+353 1 618 0521
[email protected]
ROBERT CAIN
PARTNER
+353 1 618 0246
[email protected]
CRD IV comprises a new Capital
Requirements Directive (2013/36/EU) and
related Capital Requirements Regulation
(575/2013)1. The Regulation was directly
effective in Ireland from 1 January 2014
and the deadline for transposing the
Directive into Irish law was the same
date. So far however, the statutory
instrument transposing the Directive
has not yet been published and we will
issue a further client update as soon as it
is available.
In November and December 2013, the
Department of Finance published two
consultations, the first proposing that
the Central Bank of Ireland (the Central
Bank) be the designated authority
for certain CRD IV purposes, and the
second proposing particular approaches
to remuneration-related areas where
Member States have discretion. The
approach to be taken as a result of these
consultations will become clear once the
transposing statutory instrument for the
CRD IV Directive is published.
A full corrigendum to the Regulation was published
in the Official Journal of the EU on 2 December 2013,
correcting a number of errors in the original version.
1
This document contains a general
summary of developments and is not
a complete or definitive statement of
the law. Specific legal advice should
be obtained where appropriate.
The Central Bank published a CRD
IV Consultation Paper 74 (CP 74) on
20 September 2013 seeking industry
feedback on competent authority
discretions available to it (separate to
the designated authority discretions
which were the subject of the first
Department of Finance consultation in
November 2013). The five key policy
areas identified by the Central Bank as
forming part of CRD IV were liquidity
standards, the definition of capital, the
leverage ratio, counterparty credit risk
and capital buffers. Following on from
this consultation, the Central Bank
published its Implementation Notice
on Competent Authority Discretions and
Options on 2 January 2014 (which will
need to be updated once the transposing
statutory instrument for the Directive
is published), together with a feedback
statement in relation to CP 74.
It is not yet clear whether CRD IV
discretions exercisable by competent
authorities in Member States will need to
be revisited once the European Central
Bank (the ECB) assumes its supervisory
role under the Single Supervisory
Mechanism (SSM) in November 2014.
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REVISED CORPORATE GOVERNANCE CODE
replacement, is uncertain. It is possible
that it will be replaced by Irish banks
signing up to the SEPA ‘B2B’ direct debit
scheme in due course.
»» Q3 2013 also saw 23,776 restructuring
arrangements agreed on PDH loans
and legal proceedings issued in
1,830 cases. 5,399 BTL loans were
restructured during the same period,
with lenders taking possession of
62 BTL properties (31 on the basis of
voluntary surrender/abandonment)
On 23 December 2013 the Central Bank
published the new Corporate Governance
Code for Credit Institutions and Insurance
Undertakings 2013 which will take effect
on 1 January 2015. In the meantime,
institutions will continue to be subject
to the requirements of the existing
Corporate Governance Code for Credit
Institutions and Insurance Undertakings
2011. A copy of our Financial Regulatory
Group’s Briefing on the revised Code is
available here.
SEPA – APPLICABLE FROM 1 FEBRUARY 2014 WITH
A 6 MONTH TRANSITION PERIOD
Under SEPA (the Single European
Payments Area), euro-denominated credit
transfers and direct payments (domestic
and international) across Europe are
subject to the same terms and conditions.
For credit transfers, the use of IBANs
and BICs to identify banks, payers and
payees will become the standard and
the SEPA ‘Core’ direct debit scheme will
allow consumers to pay for goods and
services in other European countries
without having to open accounts in those
countries. 1 February 2014 was the date
fixed for the existing credit transfer and
direct debit schemes of SEPA countries
(including Ireland) to be replaced by the
equivalent SEPA schemes. However, on 9
January 2014 the European Commission
(the Commission) announced a
transitional period from 1 February
2014 to 1 August 2014 during which
payments which differ from the SEPA
format can still be accepted with a view to
minimising disruption.
In October 2013, following negotiations
between the Irish banks and the Irish
Payment Services Organisation, the
SEPA ‘Core’ direct debit scheme as
implemented in Ireland was amended to
allow business customers of a business
to opt-out of the right to a no questions
asked refund by signing a one-page
waiver of the expanded SEPA refund
rights (i.e. the right to an 8 weeks ‘no
questions asked’ refund which is available
to consumers under the SEPA ‘Core’
direct debit scheme). This arrangement,
known as the ‘SEPA Business Service’,
is expected to be temporary but its
duration, or the nature of its eventual
Separately, the European Payments
Council updated its three SEPA
Rulebooks on 27 January 2014, together
with its Model Disclosure Letters.
MORTGAGE ARREARS
On 13 February 2014 the Department
of Finance published data on mortgage
restructures to the end of December
2013 by reference to the March 2013
Mortgage Arrears Resolution Targets (the
Targets) set for 6 Irish lenders2. Key
points noted as part of that data were
that, by the end of December 2013, 51,188
permanent mortgage restructures had
been implemented for mortgages over
primary residences (PDHs) with 10,148
having been implemented for buy-to-let
(BTL) mortgages.
It should be borne in mind that the data
issued by the Department of Finance
differs from the data issued by the
Central Bank as the Department reports
only on the banks which are subject to
the Targets, whereas the Central Bank’s
statistics on residential mortgage arrears
and repossessions (last published on
28 November 2013) apply in respect of
the entire residential mortgage lending
sector. The Central Bank’s most recent
statistics (for Q3 2013) indicated that:
»» the number of mortgage accounts
for PDHs in arrears fell from 142,892
(18.5%) to 141,520 (18.4%) during Q3
2013 however the number of PDH
properties in > 90 days arrears had
increased by 1,315 on Q2 2013
»» the number of BTL mortgage accounts
in arrears rose from 39,948 (26.9%) to
40,426 (27.4%) in Q3 2013 however
this increase was driven by longerterm arrears, with the number of BTLs
in < 90 days arrears actually declining
The 6 banks are AIB, Bank of Ireland, permanent TSB,
ACC, KBC Ireland & Ulster Bank and they were requested
by the Department to provide data on the restructuring of all
mortgages of principal private residences, both in arrears and
not in arrears, in their bank on a monthly basis. The data
is provided without having gone through the lenders’ quality
control processes and is unaudited, but it is published by the
Department on the basis of the demand for data.
2
On 5 December 2013 the Central Bank
confirmed that, as regards its Targets, it
requires sustainable solutions to have
been offered to at least 75% of customers
in >90 days arrears by 30 June 2014, and
for concluded sustainable solutions to
have reached 35% by that date.
On 13 January 2014 the Department
of Justice published the Report of the
Expert Group on Repossessions which,
while it contained a number of key
recommendations regarding the process
for taking repossession proceedings, did
not recommend legislative change.
In its updated Legislation Programme,
published on 15 January 2014, the
Government signalled its intention to
introduce a draft bill in 2015 dealing
with the sale of loan portfolios by
regulated financial institutions to
unregulated financial institutions.
Following recent media coverage
regarding the possibility that the sale of
the INBS residential mortgage portfolio
to one or more unregulated entities
could result in consumers losing the
protections of the Central Bank’s Code of
Conduct on Mortgage Arrears, the Central
Bank and the Department of Finance
are understood to be working together
to consider possible solutions, and it
remains to be seen whether earlier
regulation of unregulated purchasers of
residential mortgage portfolios or their
servicers results from these discussions.
REFORM OF BANKRUPTCY LAWS
On 3 December 2013, reforms to Irish
bankruptcy law were commenced by
way of five statutory instruments. From
that date onwards, as part of the revised
personal insolvency regime introduced
by the Personal Insolvency Act 2012 (the
PIA), the automatic discharge period
from bankruptcy has been reduced from
12 years to 3 years, the debt threshold
to be reached before a bankruptcy
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application can be made has been
increased to €20,000 and the ‘look-back’
periods for fraudulent preferences and
the avoidance of certain transactions
have been extended from 1 year to 3
years. For further detail, see our Finance
Group’s recent update on the PIA,
available here.
November, its intention to comply and all
affected firms are now expected to have
been in compliance with the guidelines
from 28 January 2014 and to be taking the
guidelines into account when formulating
their remuneration arrangements. It
remains to be seen how this will interplay
with the remuneration requirements under
CRD IV, however the guidelines do provide
some guidance as to the relationship with
the existing CRD III requirements relevant
at the time of publication.
DEBT MANAGEMENT FIRMS
NEW CREDIT REPORTING ACT 2013
The Credit Reporting Act 2013 (the
CRA 2013) was signed into law on
23 December 2013. Under the Act, a
central credit register will be established,
to be managed by the Central Bank
(the Register). The Register will hold
information about credit applications,
credit agreements and parties to credit
agreements. A credit reporting system
will also be implemented whereby
lenders will be required to report
information on credit applications and
credit agreements to the Central Bank.
Regulated financial services providers,
NAMA, local authorities and other
credit providers (with the exception of
central banks and pawnbrokers) are all
in scope, as are most types of credit. Key
regulations expected in 2014 under the
CRA 2013 will cover the type of personal
information and credit information to
be provided, which is expected to vary
depending on the class of borrower
(consumers, corporates etc.) It is
expected that the Register will become
fully operational in 2016.
In January 2014, following industry
consultations and a review of its process
for the authorisation of investment
firms under MiFID, the Central Bank
issued details of a more transparent and
efficient two-track authorisation process
for these firms. This process went live
on 8 January 2014 and was accompanied
by an application form tailored to match
the risk of an applicant firm’s business
model or strategy.
CREDIT UNIONS
DIRECTIVE (MIFID)
On 11 October 2013 further provisions
of the Credit Union and Co-Operation with
Overseas Regulators Act 2012 (the 2012
Credit Union Act) were commenced.
Following this, the Central Bank wrote
to credit unions on 15 and 18 October
2013 confirming that Section 15(1) of
the 2012 Credit Union Act (which was
to have commenced on 11 October 2013
and which deals with a credit union’s
board of directors) will now commence
on 3 March 2014, together with the
remaining un-commenced provisions of
the 2012 Credit Union Act.
On 11 June 2013 Guidelines on Remuneration
Policies and Practices (MiFID) were published
by the European Securities and Markets
Authority (ESMA) relating to MiFID
investment firms, credit institutions that
provide investment services, and UCITS
management companies and external
alternative investment funds when
they are providing individual portfolio
management services or non-core
investment services. National competent
authorities (including the Central Bank)
were required to confirm whether or
not they intended to comply with these
guidelines by 29 November 2013. The
Central Bank confirmed to ESMA, in
On 23 December 2013 the Central Bank
issued Consultation Paper 76 on the
introduction of a two-tiered regulatory
approach for credit unions, seeking views
on its proposed approach to tiering, the
high level operation of the tiers and the
appropriate timing for the introduction
of such an approach. The closing date
for this consultation has been extended
from 28 February 2014 to 31 March 2014
and the Central Bank has indicated that
a further consultation paper, which will
include a regulatory impact analysis, will
also be issued on the draft regulations
which are intended to give effect to the
proposed two-tiered regulatory approach.
MARKETS IN FINANCIAL INSTRUMENTS On 11 October 2013 the Central
Bank issued the final versions of its
Authorisation Requirements and Standards
for Debt Management Firms, its Application
Form for Authorisation and its Guidance
Note on Completing an Application Form
for Authorisation. The Central Bank also
published Consultation Paper 75 on 26
November 2013 on a set of proposed
additional consumer protection
requirements that will apply to debt
management firms, with a particular
focus on the provision of information
generally (and in relation to charges),
a standardised method of financial
assessment and the provision of a
suitability statement. The consultation
period closes on 18 February 2014.
MONEYLENDERS
In November 2013 the Central Bank
published a Report on the Licensed
Moneylending Industry following research
that it had undertaken to identify
consistent trends and new issues. Among
the main conclusions identified were:
»» a majority of customers (84%)
know the cost of credit on their loan
and 69% understand the amount
of interest charged on their loans.
This is a significant improvement
from 2007, when 71% of customers
did not understand the amount of
interest being charged on their loans
»» while some customers felt under
pressure to make repayments on
time, the majority felt that they were
treated fairly by their moneylender if
they missed scheduled repayments
»» 63% of moneylenders agreed that the
level of attention from the Central
Bank as regulator had increased over
the previous 24 months
CPC - ADVERTISING
On 18 October 2013 the Central Bank
published Guidance on the Advertising
Requirements of the Consumer Protection
Code 2012. While the guidance was
issued for information purposes only,
and does not amend or form part of
the Consumer Protection Code 2012, it is
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notable that the guidance stemmed from
research carried out by the Central Bank
with a view to better understanding the
attitude of consumers to financial services
advertising. Key findings arising out of
that research included the existence of a
demand for specific key information to
be “clearly displayed in high profile text in
the main body of print advertisements” but,
balanced against that, a concern that the
focus must remain on key information
to avoid over-burdening consumers
and causing confusion, in particular
as regards online ads. The guidance
also sets out recommended systems
and control checks to be carried out by
regulated entities when formulating new
advertising campaigns, and reiterated that
the compliance function in a regulated
entity should work closely with the
relevant advertising/marketing agency.
ANTI-MONEY LAUNDERING
the service standards for processing
Individual Questionnaires in respect of
persons proposed to hold Pre-Approval
Controlled Functions. The report
indicated that all targets for that period
were exceeded.
AIFMD AND SECURITISATION SPVS
INSURANCE
On 8 November 2013, the Central Bank
updated its Q&A on the Alternative
Investment Fund Managers Directive
(AIFMD). The updated Q&A clarifies
that, as a transitional arrangement,
registered financial vehicle corporations
within the meaning of Article 1(2) of the
FVC Regulation (ECB Regulation 24/2009)
or financial vehicles engaged solely in
activities where economic participation
is by way of debt or other corresponding
instruments which do not provide
ownership rights in the financial vehicle
as are provided by the sale of units are
shares, do not need to seek authorisation
as, or appoint, an alternative investment
fund manager unless the Central Bank
issues a replacement answer on this
point. For further detail, see our Capital
Markets Group’s November 2013
Briefing, available here.
Following the publication by the
European Insurance and Occupational
Pensions Authority on 27 September
2013 of its Solvency II Guidelines, the
Central Bank published its Guidelines on
preparing for Solvency II on 4 November
2013 and hosted an industry briefing on
Solvency II on 25 November 2013. For
further detail, see our Insurance Group’s
November 2013 Bulletin, available here.
On 4 February 2014 the Central Bank
updated its AIFMD Q&A and confirmed
that the MiFID services listed in Article
6(4) of AIFMD (i.e. discretionary
portfolio management on a client-byclient basis and investment advice)
will benefit from an AIFMD passport.
Previously, the Central Bank’s position
was that MiFID firms would not have
been able to passport those services
under the AIFMD passport if they were
to convert to AIFMs.
On 24 January 2014 the Department
of Finance published the Anti-Money
Laundering Sectoral Guidelines for
Investment Funds, which had been
agreed in December 2013 between
the Central Bank and the Irish Funds
Industry Association.
COLLECTIVE ASSET MANAGEMENT VEHICLES
The Minister for Finance published a
general scheme in relation to an Irish
Collective Asset-management Bill on
20 December 2013 under which it is
proposed to establish a new type of
corporate vehicle for investment funds.
A copy of the Briefing issued by our
Asset Management and Investment
Funds Group on the general scheme is
available here.
REVISED AUDITOR PROTOCOL
On 23 December 2013 the Central Bank
published a revised Auditor Protocol (the
Protocol) between the Central Bank and
auditors of regulated financial services
providers. The Protocol’s scope has
been broadened to capture all meetings
between auditors and the Central Bank
including meetings regarding non-High
Impact firms. The Protocol has also
been updated to reflect the limitation
on auditors’ liability set out in Section
58 of the Central Bank (Supervision and
Enforcement) Act 2013.
FITNESS AND PROBITY
On 30 January 2014 the Central Bank
published its Fitness and Probity Service
Standards Performance Report for JulyDecember 2013, giving details of the
Central Bank’s performance against
ADMINISTRATIVE SANCTIONS AND ENFORCEMENT
On 6 November 2013 the Central Bank
published its revised Outline of the
Administrative Sanctions Procedure and
Inquiry Guidelines following two previous
consultations (May 2013 (CP 65) and
November 2011 (CP 57)) on those Inquiry
Guidelines. The Central Bank’s Director
of Enforcement also issued a statement
on 19 December 2013 confirming that,
in 2013, the number of settlement
agreements concluded with regulated
entities numbered 16, with €6.35 million
in fines imposed as a result.
EUROPE – 2014 PRIORITIES
Greece assumed the EU Council Presidency
in January and, as the European Parliament
(Parliament) elections are scheduled for
May 2014, Greece’s Minister for Finance
indicated that Greece intends to frontload
key workstreams with a view to concluding
them by April 2014. Notably, those
workstreams include the adoption of the
proposed regulation establishing the Single
Resolution Mechanism (SRM), continuing
the work necessary to ensure that the SSM
is up and running by November 2014,
reaching agreement on the proposed Fourth
Money Laundering Directive (MLD4) and
completing work on the proposed MiFID II
directive and regulation.
EUROPE - STEPS TOWARDS
BANKING UNION
BANKING STRUCTURAL REFORMS
On 29 January 2014 the Commission
published a legislative proposal for
a regulation designed to introduce
structural reforms to the EU banking
sector. The regulation will apply to
EU banks that are regarded as being of
global systemic importance or exceeding
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certain specified thresholds (i.e. banks
which are ‘too big to fail’). Where a bank
comes within the scope of the regulation,
the Commission proposes to introduce
a ban on proprietary trading from 1
January 2017 and give supervisors, from
1 July 2018, the power to require banks
to separate certain trading activities
from their deposit-taking function. It is
expected that the regulation will not be
adopted until mid-2015 at the earliest.
RECOVERY AND RESOLUTION DIRECTIVE
SRM
On 11 December 2013 the Parliament
and EU Council reached political
agreement on the proposed Recovery and
Resolution Directive (RRD) which is now
expected to enter into force on 1 January
2015 once the text of the directive
has been finalised and approved in a
plenary session of the Parliament. The
provisional compromise text was then
agreed between the Parliament and EU
Council on 20 December 2013. The
RRD will introduce a ‘bail-in’ mechanism
under which shareholders and creditors
will be the first to bear losses, with
smaller depositors protected. Once at
least 8% of the bank’s total liabilities
have been ‘bailed-in’, the expectation is
that resolution funds (comprising bank
contributions) will be capable of being
accessed, with government stabilisation
tools available as a last resort.
On 18 December 2013 the EU Council
announced that it had agreed a general
approach on the SRM, and called on
the EU Council Presidency to begin
negotiations with the Parliament with
a view to agreeing the SRM before May
2014. The SRM proposal comprises a
draft SRM regulation and a commitment
by EU Member States to agree, by
1 March 2014, an Intergovernmental
Agreement (IGA) in relation to the single
resolution fund (the Fund). Key points
to note are:
SINGLE SUPERVISORY MECHANISM
On 29 October 2013 the two regulations
comprising the SSM were published in
the Official Journal of the EU (the OJ).
The first, conferring specific tasks on
the ECB in relation to the prudential
supervision of credit institutions, came
into force 5 days later and the second,
amending the regulation governing
the operation of the European Banking
Authority (EBA), came into force on
30 October 2013. The ECB is expected
to assume its supervisory role on 4
November 2014.
The Inter-Institutional Agreement between
the Parliament and the ECB was published
in the OJ on 30 November 2013, having
come into force on 7 November 2013. A
Memorandum of Understanding between
the EU Council and the ECB was also
announced on 2 December 2013, setting
out cooperation procedures between the
two organisations.
On 23 October 2013 the ECB announced
details of the assessment that it is
carrying out, in advance of its SSM role
commencing in full, on a number of
large banks. The assessment (which
began in November) consists of a
supervisory assessment of liquidity,
leverage and funding risks, a review
of the quality of bank assets including
the adequacy of asset and collateral
valuation, and a stress test. The
outcome will be published prior to
the ECB fully assuming its SSM role in
November 2014 and the following five
Irish institutions are in scope: AIB, Bank
of Ireland, permanent tsb, Merrill Lynch
International Bank Limited and Ulster
Bank Ireland Limited.
DEPOSIT GUARANTEE SCHEME
On 17 December 2013 it was announced
that political agreement had been reached
on the proposed directive to recast the
existing Deposit Guarantee Schemes Directive
(94/19/EC). Key points to note are that:
»» the coverage level will remain
€100,000 per depositor per
institution, funded by banks rather
than by taxpayers
»» the level of contributions from banks
will be determined in accordance
with their risk profiles and each fund
must reach an amount equal to 0.8%
of covered deposits within 10 years
»» the repayment deadline, currently
20 working days, will be gradually
reduced to 7 working days by 1
January 2024
»» banks will be required to provide
more detailed information to
depositors regarding key aspects of
deposit protection
The EU Council and the Parliament will
now begin work towards finalising the
form of the directive, and the expectation
is that Member States will be required to
transpose it into national law within 12
months of the directive entering into force.
»» the Fund will be financed by bank
levies raised at national level
which will initially be transferred
into “national compartments” and
eventually mutualised
»» while the Fund is being built up,
bridge financing will be available
from national sources backed by
bank levies or by the European
Stability Mechanism
A single resolution board will also be
established which will, once notified
by the ECB that a bank may fail, adopt a
resolution scheme which must then be
implemented by the relevant national
competent authority.
The IGA is to be entered into first and the
SRM is currently expected to come into
force on 1 January 2015. The aim of the
SRM is to ensure that the supervision
and resolution of banks is exercised at
the same level for all SSM countries (i.e.
the eurozone Member State and the
non-eurozone countries that opt to join
the SSM).
While the SRM is currently scheduled
to be considered by the Parliament in
February 2014 , MEPs issued a press
release on 9 January 2014 expressing
their dissatisfaction with the EU
Council’s general approach. This was
followed by a letter from the Parliament
dated 16 January 2014 where concerns
were expressed that the IGA on the
operation of the Fund would jeopardise
the establishment and functioning
of the SRM due to both the perceived
infringement of the principle of
equal treatment of all banks in the
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participating Member States, irrespective
of their place of establishment, and
impediments to the efficient functioning
of the decision-making process. The
Parliament highlighted that due to the
divergent negotiating positions of the
EU Council and the Parliament, it might
not be possible to reach agreement on
the SRM before the Parliament elections
in May 2014.
published in the OJ and Member States
will then have 2 years to transpose it
into national law. The MCD is designed
to create a single market in residential
mortgage credit for consumers, creditors
and credit intermediaries, and ensure
that consumers are provided with
consistent and comparable information
when applying for residential mortgages
across the EU. On 19 December 2013
the EBA published a consultation paper
on draft regulatory technical standards
(RTS) relating to the minimum
monetary amount of payment
protection insurance that mortgage
intermediaries must hold, setting a
response deadline of 18 March 2014.
EMIR
EUROPE – OTHER KEY DEVELOPMENTS
MIFID II
On 14 January 2014 it was announced
that a deal had finally been reached,
following trialogue discussion between
the Commission, the Parliament
and the EU Council, on the MiFID II
package (comprising a directive and
a regulation, amending both MiFID
and the European Markets Infrastructure
Regulation (EMIR)). The press release
indicated that agreement was reached
on market structure, investor protection,
commodities (in particular, the power
of competent authorities to limit the
size of a net position that a person
may hold in commodity derivatives),
high-frequency algorithmic trading in
financial instruments and the use of an
‘EU passport’ by third countries whose
rules are equivalent to the MiFID II
rules. MiFID II is now expected to enter
into force in the second half of 2014 and
firms are likely to be required to comply
by the end of 2016. The form of both
the directive and regulation, reflecting
the agreement reached in trialogue, are
expected to be available shortly. Our
Financial Regulatory Group will be
issuing a more detailed updated briefing
on MiFID II very shortly.
SECURITIES FINANCING
On 29 January 2014 the Commission
published a proposed regulation on the
reporting and transparency of securities
financing transactions. Proposals
include a requirement that financial or
non-financial counterparties of securities
financing transactions report details of
those transactions to trade repositories;
that UCITS management companies,
UCITS investment companies and
AIFMs provide information to investors
on their use of securities financing
transactions and other financing
structures; and that counterparties
looking to engage in rehypothecation
ensure that certain conditions are
satisfied before they have the right to
rehypothecation. The regulation is
expected to enter into force towards
the end of 2015, with the requirements
relating to reporting to fund managers
applying 6 months later, and the
reporting requirement for securities
financing transactions applying 18
months later.
MIFID
MORTGAGE CREDIT DIRECTIVE
On 10 December 2013 the Parliament
announced that it had voted to adopt
the proposed Mortgage Credit Directive
(the MCD) which will now need to be
formally adopted by the EU Council. It
will enter into force 20 days after it is
On 6 January 2014 ESMA issued its final
draft RTS and final draft implementing
technical standards (ITS) under Article
10a(8) of MiFID on the assessment of
acquisitions and increases in qualifying
holdings in investment firms. The
Commission now has 3 months within
which to endorse the final draft standards.
While ESMA had put forward a draft
ITS proposing that the reporting start
date for exchange traded derivatives
(ETDs) to trade repositories be delayed
until 1 January 2015 to give ESMA more
time to develop related guidelines and
recommendations, the Commission
refused to endorse that proposal and
EMIR reporting requirements start on 12
February 2014. For further information
on the EMIR reporting requirements,
see our Capital Markets Group’s EMIR
Update available here.
Registrations of the first trade
repositories under EMIR were approved
by ESMA on 7 November 2013, with
those registrations taking effect on 14
November 2013 in advance of the 12
February 2014 start-date for the EMIR
reporting obligation.
ESMA’s EMIR Q&A was also updated
on 11 November 2013 and 20 December
2013 with a view to enabling consistent
supervisory practices as between
national competent authorities, and
assisting market participants and
investors. The particular focus of the
December update was the addition of
a new Part V concerning the reporting
of ETDs to trade repositories. In the
meantime, the Commission has also
updated its own FAQs, focussing on the
concept of “undertaking” in the definition
of a “non-financial counterparty” and the
extent to which municipalities are
subject to EMIR requirements.
On 4 February 2014 the Central Bank
published its first EMIR FAQs, focussing
on FX forwards, reporting to trade
repositories and LEI codes. As regards
FX forwards, the Central Bank clarified
that all FX transactions with settlement
beyond the spot date (generally T+3 or
greater) are to be considered as forward
contracts falling within the definition
of a derivative, and subject to the EMIR
reporting obligation.
UCITS V
On 3 December 2013 the EU Council
announced that its Permanent
Representatives Committee had agreed
7 | ARTHUR COX
FINANCIAL REGULATORY
the EU Council’s position on the draft
UCITS V Directive. While it is still
liable to change, the agreement enables
negotiations with the Parliament to start
with the aim of adopting the proposed
directive at its first reading. On 11
December 2013, an addendum was
published by the EU Council Presidency
containing declarations from Member
States, including Ireland and the UK,
in which they expressed concerns in
relation to Article 52(1) of the UCITS
Directive and its impact on the use of
over-the-counter derivatives that are
cleared through central counterparties.
CURRENT KEY DATES – Q1 2014
REGBRIEF - VOL I, 2014
Date
Development
24-27 February
Date for consideration
of revised Insurance
Mediation Directive by
the Parliament in plenary
session
10-13 March
2014
The Parliament plenary
session at which it is
expected to consider the
Omnibus II Directive, the
proposed Benchmarks
Regulation, MiFID II,
MLD4 and the proposed
new Wire Transfer Regulation.
AIFMD
On 20 December the Commission
published the text of the delegated
regulation it had adopted
supplementing the AIFMD regarding
RTS for determining types of alternative
investment fund managers (AIFMs).
The RTS specify the characteristics
of AIFMs who manage open-ended
alternative investment funds. The
Parliament and EU Council now have a
3 month period within which they can
object to the delegated regulation.
SHORT SELLING
The United Kingdom had challenged the
ability of ESMA to impose a ban on short
selling in emergencies. The European
Court of Justice’s Advocate-General had
issued a preliminary opinion siding
with the UK however, in January 2014,
the European Court of Justice rejecting
the UK’s challenge and upheld ESMA’s
ability to impose such bans.
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