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Regulation update: October-December 2018
Regulation update: October-December 2018
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Regulation update: October-December 2018

23/01/2019

Keeping pace with regulations impacting financial markets is critical to adapting banking activities on time. As usual, there were several important regulation updates from October to December 2018, both in Europe and at the international level. This article lists all ongoing regulatory developments and provides direct links to the regulatory texts. Regulations are ranked in alphabetical order, from AIFM/UCITs (European Commission’s proposals on safekeeping duties) to Sustainable Finance, not to mention EMIR

Alternative Investment Fund Managers Directive (AIFMD) and Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive

4 October 2018 - ESMA publishes updated Q&As

ESMA has published updated Q&As on the implementation of the Alternative Investment Fund Managers Directive (AIFMD). The document has been updated to include a new Q&A relating to notification of alternative investment fund managers.

30 October 2018 - Delegated Regulations on depositary safekeeping duties under AIFMD and UCITS Directive published in Official Journal

Commission Delegated Regulation (EU) 2018/1618 amending Delegated Regulation (EU) 231/2013 under the AIFMD and Commission Delegated Regulation (EU) 2018/1619 amending Delegated Regulation (EU) 2016/438 under the UCITS Directive have been published in the Official Journal. The regulations aim to clarify rules relating to the safekeeping of client assets by depositaries. Both regulations will enter into force on 19 November 2018 and will apply from 1 April 2020.

6 December 2018 – European Parliament’s Committee on Economic and Monetary Affairs (ECON Committee) publishes reports on proposals on cross-border distribution of collective investment funds

The European Union (EU) Parliament’s ECON Committee has published its final reports on legislative proposals for a Regulation and a Directive on the cross-border distribution of collective investment funds. The proposed Regulation sets out a harmonized framework concerning certain aspects of the cross-border distribution of funds, such as marketing communications and member states’ marketing requirements. The proposed directive contains amendments to the UCITS Directive and AIFMD relating to, among other things, pre-marketing and the discontinuation of marketing. Notable changes include:

  • Marketing: communications targeted at small investors in funds should present a detailed account of risks, a summary of investors’ rights and information about national collective redress mechanisms in case of litigation;
  • Pre-marketing: pre-marketing of a fund, , should not lead to any sales of investment units or shares. Moreover, prior to such activities, the manager should notify both its home Member State and the Member State in which the pre-marketing will take place.
  • De-notification: an investment fund should be able to cease its activities in a host Member State under certain conditions. The fund should make an offer to repurchase all UCITS units held by investors in such Member State, as well as make clear the consequences for investors, if they choose to continue to hold the units.

Benchmarks regulation

14 December 2018 - EU Council Presidency publishes compromise text on low carbon and positive carbon benchmarks amendment

The EU Council Presidency has published a new compromise text on the proposal for a Regulation amending the Benchmarks Regulation in relation to low carbon benchmarks and positive carbon impact benchmarks. The proposal amends the Benchmarks Regulation to create a new category of benchmarks that are low-carbon or 'decarbonised' versions of standard indices and the positive-carbon benchmarks, in order that investors have more information on the carbon footprint of their investments.

Capital Markets Union (CMU)

13 November 2018 - ESMA publishes technical standards and guidance on implementation of Securitisation Regulation

ESMA has published a set of documents intended to implement the new European Securitisation Regulation and to simple, standardised and transparent (STS) securitisations. In particular, ESMA has published:

  • A final report on draft RTS/ITS on securitisation repository application requirements, operational standards, and access conditions
  • Final technical advice on fees to be charged by ESMA for registering and supervising securitisation repositories
  • Reporting instructions to provide STS notifications for public securitisations and an interim STS notification template
  • A statement on various topics in relation to ESMA's near-term implementation activities under the Securitisation Regulation.

26 November 2018 -ECON Committee adopts reports on proposed Regulation and Directive on covered bonds

The proposed Regulation would amend the CRR (Capital Requirements Regulation) with regard to exposures in the form of covered bonds. The Directive would amend the UCITS IV Directive (2009/65) and BRRD (Bank Recovery and Resolution Directive) and lay down conditions that covered bonds should respect in order to be recognised under EU law.

28 November 2018 - EU Council agrees negotiating stance on proposed Regulation and Directive on covered bonds

The EU Council has reached political agreement on its stance on a harmonised EU framework for covered bonds. The proposed Regulation and Directive would set minimum harmonisation requirements that all covered bonds across the EU will have to meet and seek to increase security for investors. The proposals form part of the EU Commission's Action Plan on Capital Markets Union (CMU). Alongside the announcement, the Council has published compromise texts on the proposal dated 23 November 2018.

14 December- EU Commission asks ESMA to revise draft technical standards on securitisation disclosures

The EC has sent a letter to ESMA stating its intention to endorse the draft RTS/ITS on securitisation disclosures that ESMA submitted in August 2018 only if certain amendments are introduced. In particular, the EC has asked ESMA to look at: (i) extending the use of the ‘No Data’ option to additional fields of the draft templates, particularly in the ABCP templates for which there are no similar harmonised disclosure templates currently in use; and (ii) monitoring the use of and need for these ‘No Data’ options in each template field until the Joint Committee issues its report on the functioning of the Securitisation Regulation.  ESMA has six weeks to resubmit the revised RTS/ITS to the EU Commission.

Capital Requirements Regulation and Capital Requirements Directive (CRR/CRD)

9 November 2018 - CRR: Commission implementing regulation regarding prudent valuation for supervisory reporting published in Official Journal

Commission Implementing Regulation (EU) 2018/1627 amending implementing regulation (EU) 680/2014 as regards prudent valuation for supervisory reporting has been published in the Official Journal. The regulation will enter into force on 29 November 2018 and will apply from 1 December 2018.

30 November 2018 - CRD4: the European Banking Authority (EBA) publishes overview of implementation and transposition

The EBA has published information disclosed by competent authorities under the ITS on supervisory disclosure under the Capital Requirements Directive (CRD4). The information provides an overview of the implementation and transposition of CRD4 and the CRR, the use of options and national discretions (ONDs) by each competent authority and information on the general criteria and methodologies used for the supervisory review and evaluation process (SREP). The information covers all EU jurisdictions, including information provided by the European Central bank (ECB) relating to Mail on 23 JAN

4 December 2018 –  EC publishes Commission  Implementing Regulation on the extension of the transitional periods related to own funds requirements for exposures to central counterparties

The European Commission has extended the transitional periods related to capital requirements for exposures to central counterparties until 15th June 2019. The implementing act can be found here.

Central Securities Depositories Regulation (CSDR)

12 November 2018 -ESMA publishes updated Q&As

The European Securities and Markets Authority (ESMA) has published updated questions and answers (Q&A) on the implementation of the CSDR. The latest batch of CSDR Q&As covers questions related to

  • The provision of services in another Member State
  • Settlement discipline.

20 December - ESMA consults on settlement fails reporting and standardised procedures and messaging protocols

ESMA has issued consultation papers on proposed guidelines on settlement fails reporting and standardised procedures and messaging protocols under CSDR. The draft guidelines on settlement fails reporting are intended to specify the scope of the requirement and certain characteristics of the standardised procedures and messaging standards which make up the arrangements which investment firms need to set up with their professional clients in order to limit the number of settlement fails. Comments to the consultation close 20 February 2019. ESMA will review the feedback it receives and expects to finalise both sets of guidelines by July 2019.

European Market Infrastructure Regulation (EMIR)

29 November 2018 - ESAs have published their final draft Regulatory Technical Standards (RTS) on the risk mitigation techniques for Over-The-Counter (OTC) derivatives not cleared by a CCP.

The final report published by the ESAs contains draft RTS proposing to amend the Commission Delegated Regulation on the risk mitigation techniques for OTC derivatives not cleared by a CCP (bilateral margin requirements) under EMIR. In order to address the situation where a UK counterparty may no longer be able to provide certain services across the EU post-Brexit, counterparties in the EU may want to novate their OTC derivative contracts by replacing the UK counterparty with an EU counterparty. However, by doing this, they may trigger the bilateral margin requirements for these contracts, therefore facing costs that were not accounted for when the contract was originally entered into.  The draft RTS proposes, under a no-deal Brexit scenario, to allow UK counterparties to be replaced with EU ones without triggering the new procedures defined in the bilateral margin RTS, with the goal of ensuring a level playing field between EU counterparties and preserving the regulatory and economic conditions under which the contracts were originally entered into. The window for the novation of OTC derivative contracts falling under the scope of this amending regulation would be twelve months following the withdrawal of the UK from the EU.

3 December 2018 - EMIR 2.2: EU Council agrees negotiating stance

The EU Council's Permanent Representatives Committee (COREPER) has endorsed the EU Council's negotiating stance on the proposed Regulation amending EMIR, as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs (EMIR 2.2). COREPER also endorsed the Council's position on a decision revising the statute of the European system of central banks and the ECB. Having endorsed the Council's negotiating mandates, COREPER has called on the EU Council Presidency to begin trilogue negotiations with the EU Parliament.

03 December 2018 - EMIR: ESMA publishes updated Q&As

ESMA has updated its questions and answers (Q&A) document on the implementation of the European Market Infrastructure Regulation. The document has been updated to include new Q&As on margin requirements.

18 December 2018 - Joint Committee publishes simple, transparent and standardised (STS) standards amending RTS on clearing obligation and risk mitigation techniques

The Securitisation Regulation amends EMIR with the aim of ensuring a level playing field between the regimes for covered bonds and for securitisation with respect to the clearing obligation and the risk mitigation techniques for non-centrally cleared OTC derivatives. EMIR, as amended by the Securitisation Regulation, requires that the ESAs develop draft RTS specifying the criteria for establishing which arrangements under covered bonds or securitisations adequately mitigate counterparty risk with regards to the clearing obligation. Both sets of RTS have been submitted to the EC. The Commission has three months to decide whether to endorse them.

19 December 2018 -  EU Commission extends dates of deferred application of clearing obligation for certain OTC derivative contracts

The EC has adopted a Delegated Regulation with regard to RTS on the clearing obligation to extend the dates of deferred application of the clearing obligation for certain OTC derivatives. Under EMIR, intragroup transactions may be exempted from the clearing obligation. Intragroup transactions with a third country entity may also be exempted if the Commission has adopted an equivalence decision under EMIR Article 13(2) for the third country where the group entity is established. To date no such decisions have been adopted. The three Delegated Regulations on the clearing obligation include a provision related to intragroup transactions with a third country entity, providing for a deferred date of application of up to three years in the absence of the relevant equivalence decision. The Delegated Regulation introduces a modification to the three existing RTS on the clearing obligation. The soonest deferral date is 21 December 2018.  The Delegated Regulation introduces a modification to the three existing RTS on the clearing obligation to:

  • Article 3(2) of Commission Delegated (EU) 2015/2205 regarding interest rate derivative classes, by extending the deferred date of application of the clearing obligation for intragroup transactions with a third country group entity from 21 December 2018 to 21 December 2020;
  • Article 3(2) of Commission Delegated Regulation (EU) 2016/592 regarding credit derivative classes, by extending the deferred date of application of the clearing obligation for intragroup transactions with a third country group entity from 9 May 2019 to 21 December 2020; and
  • Article 3(2) of Commission Delegated Regulation (EU) 2016/1178 regarding interest rate derivative classes, by extending the deferred date of application of the clearing obligation for intragroup transactions with a third country group entity from 9 July 2019 to 21 December 2020.
  • The Delegated Act will now pass to the EU Council and the Parliament for scrutiny and will enter into force on the day following that of its publication in the Official Journal.

FINTECH and New Technologies

3 October 2018: EU Parliament adopts non-legislative resolution on distributed ledger technology (DLT) and blockchains
The resolution sets out a number of policies intended to boost DLTs in Europe, by:

  • Stressing that any regulatory approach toward DLT should be innovation-friendly, enable passporting, be guided by the principles of technology neutrality and business-model neutrality
  • Underlining that the EU should not regulate DLT per se, but should try to remove existing barriers to implementing blockchains
  • Calling on the EC to assess and develop a European legal framework in order to solve any jurisdictional problems that may arise in the event of fraudulent or criminal cases of DLT exchange
  • Asking the EC to undertake policy initiatives that promote the competitive position of the EU in the field of DLT
  • Emphasising that the EU has an opportunity to become the global leader in the field of DLT and to be a credible actor in shaping its development and markets globally, in collaboration with international partners.

The EU Parliament has instructed its President to forward this resolution to the EC and the EU Council.

19 October 2018 - ESMA's Securities and Markets Stakeholder Group publishes advice on initial coin offerings (ICOs) and crypto-assets
The Securities and Markets Stakeholder Group has published advice to ESMA on mitigating the risks posed by ICOs and crypto-assets. The report provides an overview of recent ICOs and market developments in respect of crypto-assets, as well as a summary of the key existing regulations on ICOs, crypto-assets, sandboxes and innovation hubs in the EU, EEA Member States, Gibraltar, Switzerland, Jersey, Guernsey and the Isle of Man. The second part of the report focuses on whether and how ICOs and crypto-assets should be regulated.

5 November 2018 - ECON Committee agrees stance on proposed crowdfunding framework
The proposed framework sets out rules for European crowdfunding service providers (ECSPs) aimed at helping them function smoothly across borders and in the internal market. The ECON Committee also agreed on two changes to the EU Commission's proposals, namely that:

  • The regulation should cover crowdfunding offers up to EUR 8,000,000 rather than EUR 1,000,000
  • The authorisation of prospective ECSPs should be carried out by the National Competent Authority (NCA) in its Member State rather than by ESMA.

The proposal will now be considered in trialogue negotiations with the EU Commission and Council.
9 November 2018 - ECON Committee publishes reports on proposed crowdfunding framework
The proposal for a Crowdfunding Regulation is the first deliverable of the EU Commission’s Action Plan on how to harness the opportunities presented by fintech. The ECON Committee has also published its report on the related Commission proposal for a Directive which would amend MiFID2 so that it does not apply to persons authorised as crowdfunding service providers as defined in the proposed regulation on European crowdfunding services providers.

International regulations

16 November 2018 - FSB publishes annual list of G-SIBs
The Financial Stability Board (FSB) has published its annual list of global systemically important banks (G-SIBs). Groupe BPCE has been added back to the list after being removed in 2017, and Nordea and the Royal Bank of Scotland have been removed, reducing the overall number of G-SIBs to 29, one fewer than the 2017 list. Several banks have also been allocated to different buckets, which determine the level of capital buffers they require.
19 November 2018 - FSB, Basel Committee, CPMI and IOSCO publish final report on incentives to centrally clear OTC derivatives
The report sets out the findings of work undertaken by the four standard-setting bodies to re-examine whether adequate incentives to clear OTC derivatives were in place. While the analysis suggests that overall the reforms are achieving the goal of promoting central clearing, it has also found that the treatment of initial margin in the leverage ratio can be a disincentive for banks to offer or expand client clearing services. In this regard, the BCBS issued a consultation in October 2018 on options for adjusting, or not, the leverage ratio treatment of client cleared derivatives. Any decisions for amending a standard or policy will remain with the body responsible for issuing that standard or policy.

Markets In Financial Instruments Directive (MIFID 2) / MIFIR

1 October 2018 - MiFID2: ESMA writes to Commission on third-country regimes in the context of Brexit
The letter follows up on a first letter dated 20 November 2017, which set out concerns relating to:

  • The MiFID2 third country regime with respect to firms dealing on own account
  • The lack of an EU-wide regime for third country trading venues accessing the EU market and placing trading screens
  • The lack of a suspension regime for the trading obligation for derivatives. 

The follow-up letter sets out four additional issues that have been identified in the context of the discussion on the risks arising from the UK withdrawal from the EU.

2 October 2018 - MiFID2: ESMA updates Q&As on commodity derivatives topics
ESMA has provided new or modified answers relating to:

  • Position limits, specifically whether position limits also apply to positions in contracts that were entered into prior to 3 January 2018 and are traded on a trading venue, including an OTF, or are economically equivalent OTC contracts to those traded on a trading venue
  • Ancillary activity
  • Position reporting, relating to types of firm that fall within each of the ITS 4 categories for the purposes of the weekly Commitment of Trader reports.

One question on the ancillary activity test (Q.13) has been deleted.

3 October 2018 - ESMA repeals MiFID1 guidelines on automated trading
ESMA has announced a decision of its Board of Supervisors on 26 September 2018 to repeal MiFID1 guidelines on systems and controls in an automated trading environment for trading platforms, investment firms, and competent authorities. ESMA is of the view that the subject matter of the guidelines, which were adopted in December 2011, has been incorporated into MiFID2 and its implementing measures.

4 October 2018 - MiFID2: ESMA updates Q&As
The market structures Q&A has been updated with new answers to questions on:

  • Direct Electronic Access (DEA) and algorithmic trading
  • Multilateral and bilateral systems.

The transparency topics Q&A has been updated with one modified question and two new questions in the sections on non-equity transparency, and the Q&A on investor protection and intermediaries has been updated with two new questions relating to best execution and investment advice on an independent basis.

9 November 2018 - MiFIR: ESMA updates Q&As on temporary product intervention measures
ESMA has updated its Q&As document regarding temporary product intervention measures on the marketing, distribution or sale of CFDs (contract for differences) and binary options to retail clients based on Article 40 of MiFIR. The document has been updated with new Q&As on the application of the temporary product intervention measures in relation to the prominence of the risk warning and what are considered 'payments for the purpose of entering into a CFD'.

13 November 2018 - MiFID2: ESMA publishes supervisory briefing on suitability requirements
ESMA has published an updated version of its supervisory briefing on MiFID2 suitability requirements. In December 2012 ESMA published a supervisory briefing in relation to suitability to provide guidance to national competent authorities (NCAs) in relation to the MiFID1 suitability rules.

14 November 2018 - MiFID2: ESMA updates Q&As on market structures and transparency
ESMA has updated its MiFID2 Q&A documents on market structures and transparency topics. The market structures Q&A has been updated with a new Q&A on direct electronic access (DEA) algorithmic trading, and Q&As on request-for quote (RFQ) systems, publication of post-trade data and the systematic internaliser (SI) regime have been added to the transparency issues Q&As.

12 December 2018 - MiFIR: EU Commission adopts amendment to RTS 1 transparency requirements
The EC has adopted a Delegated Regulation amending and correcting regulatory technical standards under MiFIR on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments (Delegated Regulation (EU) 2017/587 – RTS 1). The adopted delegated regulation is intended to further specify the notion of 'prices reflecting prevailing market conditions' in Article 10 of RTS 1 and also remove the reference to securities financing transactions in Articles 2 and 6 of RTS 1.

13 December 2018 - MiFID2: EU Commission adopts Delegated Regulation on SME (Small and Mid-sized Enterprises) growth market requirements
The Delegated Regulation amends Delegated Regulation (EU) 2017/565 in order to:

  • Introduce a less restrictive definition of non-equity SME issuer based on issuance size
  • Allow SME growth market operators to exempt non-equity issuers from the requirement to publish half yearly financial reports
  • Introduce a new free float requirement as a condition for admission to trading for the first time.

14 December 2018 - MiFID2: ESMA publishes final report on amendments to tick size regime
ESMA has published its final report on amendments to the tick size regime under Commission Delegated Regulation (EU) 2017/588 (RTS 11). The proposed amendments to RTS 11 will allow National Competent Authorities (NCAs) of EU trading venues where third-country shares are traded to decide on an adjusted average daily number of transactions (ADNT) on a case-by-case basis, in order to take into account the liquidity available on third country venues in the calibration of tick sizes.

17 December 2018 - MiFID2/MiFIR: EU Commission proposes six month extension of Swiss equivalence decision
The EC has announced a proposal to temporarily extend its equivalence decision on the recognition of trading venues in Switzerland as eligible for compliance with the trading obligation for shares set out in the MiFID2/MiFIR. The Commission has announced that a precondition of extending the decision beyond a six-month extension would be full and final endorsement of the Institutional Framework Agreement text by the Swiss Federal Council. The Commission is consulting Member States on its proposal to extend the equivalence decision and intends to adopt a decision to take effect from 1 January 2019 for six months

Money Market Funds (MMFs)

31 October 2018 - EU Commission responds to ESMA letter on publication of opinion on compatibility of the reverse distribution mechanism (RDM)The Vice-President of the EC in charge of Financial Stability, Financial Services and Capital Markets Union. Mr. Dombrovskis, has written to advise Mr. Maijoor that the opinion of the Legal Service, that the RDM is incompatible with the legal framework of the MMF Regulation, has already been shared with many market participants who requested access to it, and that the Commission will continue to distribute the opinion on request.

13/11 - ESMA consults on future disclosure guidelines
ESMA has issued a consultation on draft guidelines on reporting to competent authorities under Article 37 of the Money Market Funds (MMF) Regulation. Following the publication of implementing technical standards (ITS) establishing a reporting template that managers of MMFs must use to send information to the relevant national competent authority (NCA) in April 2018, ESMA worked on guidelines and IT guidance to complement the ITS.

Packaged Retail and Insurance-based Investment Products (PRIIPs)

8 November 2018 - ESAs consult on proposed changes to key information document
The European Supervisory Authorities (ESAs) have issued a consultation paper on targeted amendments to the Delegated Regulation covering the rules for the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs). In particular, the consultation paper addresses amendments to the information regarding investment products' performance scenarios.Comments are due by 6 December 2018.

Securitisation regulation

30 November 2018 - ESAs publish statement on disclosure requirements and consolidated application of securitisation rules for credit institutions
The statement relates to the ESAs being made aware of several operational challenges for reporting entities in complying with transitional provisions under the Securitisation Regulation (2017/2402). The statement also highlights challenges faced by EU banking entities with regard to complying with specific provisions of the Capital Requirements Regulation Amending Regulation relating to the scope of the Chapter 2 requirements in the Securitisation Regulation.

12 December 2018: the European Banking Authority (EBA) publishes final guidelines on interpreting simple, standardised and transparent (STS) criteria
The guidelines are primarily focused on both non-asset-backed commercial paper (ABCP) and ABCP securitisation. Among other aspects, the guidelines are intended to ensure a common understanding of all STS criteria in relation to:

  • The expertise of the originator and servicer
  • The underwriting of standards
  • Exposures in default and credit impaired debtors
  • Predominant reliance on the sale of assets.

The guidelines will apply from 15 May 2019, but the EBA expects competent authorities to follow this approach as of the application date of the EU securitisation framework on 1 January 2019

Securities Financing Transactions Regulation (SFTR)

13 December 2018 - EU Commission adopts Delegated Regulation on access to details of SFTs held in trade repositories
The EU Commission has adopted a Delegated Regulation with regard to regulatory technical standards (RTS) on access to details of securities financing transactions (STFs) held in trade repositories (TRs). The Delegated Act will now pass to the EU Council and the Parliament for scrutiny and will enter into force on the twentieth day following that of its publication in the Official Journal.

13 December 2018 - EU Commission adopts Delegated Regulations
The EC has adopted three Delegated Regulations regarding trade repositories under SFTR. The three Delegated Regulations adopted:

13 December 2018 - EU Commission adopts Implementing Regulations
The EC has adopted two Implementing Regulations under SFTR. The Implementing Regulations lay down implementing technical standards (ITS) with regard to:

  • The format and frequency of reports on the details of securities financing transactions (SFTs) to trade repositories in accordance with the SFTR and amending Implementing Regulation (EU) 1247/2012 with regard to the use of reporting codes in the reporting of derivative contracts
  • The procedure and forms for exchange of information on sanctions, measures and investigations in accordance with the SFTR.

13 December 2018 - EU Commission adopts further Delegated Regulations
The three Delegated Regulations supplement the SFTR with regard to:

  •  RTS on the collection, verification, aggregation, comparison and publication of data on securities financing transactions (SFTs) by trade repositories (TRs)
  •  fees charged by ESMA to TRs
  • RTS specifying the details of SFTs to be reported to TRs. The three Delegated Acts will now pass to the EU Council and the EP for scrutiny and will enter into force on the twentieth day following that of their publication in the OJ.

Short selling regulation

14 November 2018 - ESMA updates Q&As
The European Securities and Markets Authority (ESMA) has published updated Q&As on the Short Selling Regulation (SSR). The document has been updated to include a new Q&A relating to the identification of the relevant competent authority for financial instruments mentioned in Article 2(1)(j) of the SSR following the application start date of MiFID2 and MiFIR.

Solvency 2

9 November 2018 - EU Commission consults on amendments to Delegated Regulation
The EC has launched a consultation on a draft Delegated Regulation to amend Commission Delegated Regulation (EU) 2015/35, which supplements the Solvency II Directive. The proposed amendments are intended to enhance the proportionality of the Solvency II framework and its consistency with other EU financial legislation, improve the risk sensitivity of the solvency capital requirement (SCR) standard formula, remove unjustified constraints on the financing of the economy and increase transparency and reliability.

13 November 2018 - Implementing Regulation on technical information for calculation of technical provisions and own funds published in Official Journal
The Regulation lays down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September until 30 December 2018 in accordance with Solvency II. The Regulation lays down technical information on relevant risk-free interest rate term structures, fundamental spreads for the calculation of the matching adjustment and volatility adjustments for every reference date. Commission Implementing Regulation (EU) 2018/1699 entered into force on 14 November 2018 and will apply from 30 September 2019.

Sustainable finance

9 November 2018 - ECON Committee publishes report on proposed regulation on disclosures relating to sustainable investments
The ECON Committee has published its report on the proposal for a regulation on disclosures relating to sustainable investments and sustainability risks amending the IORP II Directive (2016/2341). The proposed regulation would introduce disclosure obligations on how institutional investors and asset managers integrate environmental, social and governance (ESG) factors in their risk processes.

28 November 2018 - EIOPA consults on integration of sustainability risks and factors in Solvency II and Insurance Distribution Directive delegated acts
EIOPA has launched a consultation on its draft technical advice to the EU Commission on possible amendments to or the introduction of delegated acts under Solvency II and the Insurance Distribution Directive (IDD) to integrate sustainability risks and factors. Comments are due by 30 January 2019.

19 December 2018 - ESMA consults on measures to promote sustainability in EU capital markets
The first two consultations seek stakeholders’ input on draft technical advice for the integration of sustainability risks and factors into the Markets in Financial Instruments Directive II (MiFID II) (securities trading) and the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings in Collective Investment in Transferable Securities (UCITS) Directive (investment funds). While the third consults on CRA guidelines aimed at improving the quality and consistency of disclosures of environmental, social and governance (ESG) factors when considered as part of a credit rating action. The consultations focus on environmental, social and good governance considerations with regards to investment firms, investment funds and CRAs. The draft advice and proposed guidelines touch upon organisational requirements, operating conditions, risk management, conflicts of interest, product governance and disclosure requirements. In order to ensure consistency, ESMA’s draft advice was developed in cooperation with the European Insurance and Occupational Pensions Authority (EIOPA), which has received a similar mandate regarding Solvency II and the Insurance Distribution Directive (IDD).

19 December - EU Council agrees negotiating position on low carbon benchmarks and disclosure requirements
COREPER has endorsed the EU Council's negotiating position on the EC’s proposals regarding disclosure obligations and low carbon benchmarks. The proposals are intended to make finance greener and more in line with the objectives of the Paris agreement on climate change and include:

  • A proposal introducing disclosure obligations on how financial companies integrate environmental, social and governance factors in their investment decisions

A proposal creating a new category of financial benchmarks aimed at giving greater information on an investment portfolio's carbon footprint.

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