FS regulatory, accounting and audit bulletin - 10th edition 2013

Being better informed

Recent months saw significant movement towards the EU’s Banking Union, with the European Parliament (EP) adopting the Single Supervisory Mechanism (SSM) legislation, assisted by the Inter-Institutional Agreement. The Agreement gives the EP far-reaching access to information, including the Supervisory Board’s minutes and was needed for the EP to be happy about the democratic accountability of the European Central Bank (ECB). However, the Council has yet to formally adopt the text and the lack of a legal base is beginning to create some impediments to the ECB’s preparatory work. That said, the ECB has made progress on developing its supervisory rule book, and in preparations for the asset quality review of Eurozone banks that it needs to undertake before the EBA 2014 stress tests and before it assumes supervisory responsibility. In other news:

  • The G20 held its annual meeting at the start of September in St Petersburg. Whilst events were dominated by the Syrian conflict, leaders made time to discuss the ongoing progress towards implementing the key global changes they set out at previous meetings.
  • The European Securities and Markets Authority (ESMA) submitted its first set of advice on third country equivalence assessments on the European Markets Infrastructure Regulation (EMIR) to the European Commission (EC). According to the timetable set by the EC, this first set of advice was due assess US and Japanese equivalence to EMIR rules.
  • The EC was also busy, publishing new proposals for money market funds (MMFs) and benchmarks. The MMF Regulation is the first piece of legislation focusing exclusively on ‘shadow banking’: however, the Communication on Shadow Banking which the Commission released at the same time, suggests there will be more to follow. If adopted as proposed, this proposal will fundamentally change the configuration and role of MMFs in the EU financial markets, shifting the whole industry irrevocably away from constant NAVs. The Benchmark Regulation will capture all benchmarks used to reference financial instruments, including benchmarks underpinning commodity markets as well as the usual suspects: LIBOR and EURIBOR. The proposals largely follow those already in place in the UK.
  • These two proposals add to more than 25 financial services legislative texts already under negotiation in Brussels. With the EP elections in May next year and the changeover in the European Commission, files that have not progressed sufficiently in the legislative process in good time before then face an uncertain future. Some may be carried over to the new Parliament, some may not. Some would argue ‘its better the devil you know’: some may prefer the current proposals to go back to the drawing board. However, if they are not progressed, regulatory gaps and uncertainties may persist for many years to come.

Our feature article this month focuses on one of the texts still to be agreed by EP and the Council: the second iteration of the Markets in Financial Instruments Directive (MiFID II). The debate around what should (and should not) be included in MiFID II has been long and hard-fought. Our feature analyses these issues in more detail as well as setting out the likely timetable for agreement.

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