Regulatory convergence across Europe comes under the microscope following the start of formal negotiations on 19 June for the UK’s exit from the European Union.
Earlier this year, ESMA’s chair, Steven Maijoor, began to express concern about the risks of supervisory arbitrage. We look at the nine principles ESMA has issued to foster consistency in authorisation, supervision and enforcement related to the relocation of entities, activities or functions from the UK. In this regard ESMA, have also just published their sector specific opinion on supervisory convergence in the investment management sector. EIOPA is considering issuing its own opinion for insurance companies. And in mid-June the EU announced a draft law calling for a new system to oversee the clearing of euro-denominated derivatives, in particular where this takes place outside the EU.
MiFID II implementation continues to gather pace. ESMA has been very active, in the lead up to and the immediate aftermath of the transposition date of 3 July 2017 and has issued final guidelines on product governance and target market assessment. We analyse the five categories that must be considered by product manufacturers and distributors, using both quantitative and qualitative criteria. ESMA has also issued a consultation paper: Guidelines on certain aspects of the MiFID II suitability requirements and submissions need to be made by 13 October 2017. Furthermore ESMA has issued further Q&A's on other MiFID II investor protection provisions, some of which are causing particular concern in the industry.
The Irish transposition of the Directive has been delayed. The Irish Department of Finance has published a feedback statement to its public consultation on the national discretions contained in the Markets in Financial Instruments Directive (“MiFID 2”) and elements of the Insurance Distribution Directive (“IDD”). The purpose of this feedback statement (available here) is to bring greater transparency and clarity to the transposition process by way of:
Meanwhile, international and European policy makers have been busy in a number of areas. Towards the end of May, the FX Global Code was launched, establishing common guidelines for good practice developed jointly by Central Banks and market participants from 16 global jurisdictions. In Ireland the FX Code has been endorsed by the Central Bank of Ireland and it is encouraging firms to adopt it.
We look at the resolution of Banco Popular Espanol, which is the first resolution action taken by the Single Resolution Board (SRB).
News under the Capital Markets Union (CMU) initiative is that there has been progress with agreements on revised rules for securitisation and on EuVECA and EuSEF, plus the mid-term review report is expected any day now. The European Commission also aims to improve the functioning of the single market for EU investment funds by reducing national regulatory barriers to their cross-border distribution. It has just published its inception impact assessment.
Estonia takes over the Council Presidency in July and has said it will focus on four themes: an open and innovative European economy, a safe and secure Europe, a digital Europe and the free movement of data, and an inclusive and sustainable Europe. Financial services legislation and reviews that we expect to be a priority include capital requirements, recovery and resolution for banks and for clearing houses, and derivatives clearing. They will also seek to progress work on accounting and tax issues, such as IFRS 9, common consolidated corporate tax base and a tax havens blacklist.
We are pleased to announce the release of KPMG’s seventh annual report on regulation in the global investment management industry: Evolving Investment Management Regulation: Succeeding in an uncertain landscape. In this year’s report, KPMG professionals look around the globe at how the investment and fund management industry is having to implement new requirements and respond to supervisory requests and reviews. And more changes loom on the horizon, as some jurisdictions face a pipeline of new regulatory initiatives.
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