European Supervisory Authorities
Review of the securitisation prudential framework - ESAs publish joint advice to the European Commission - 12 December 2022
The European Supervisory Authorities (ESAs) comprising the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), have published joint advice to the European Commission on the review of the securitisation prudential framework. The advice consists of an executive summary (JC/2022/65) and the following two parts: banking advice (JC/2022/66), which assesses the recent performance and appropriateness of the rules on capital and liquidity requirements for banks; and insurance advice (JC/2022/67), which reviews the securitisation capital framework that applies to insurers.
Among other things, the ESAs recommend some technical quick fixes aimed at improving the bank capital framework's consistency and clarity. They also conclude that the current liquidity framework for banks does not require recalibration. Separately, the ESAs' advice concludes that the Solvency II framework does not seem to influence insurance activity in EU securitisation. The ESAs do not recommend changes to the current Solvency II framework on the prudential treatment of securitisation.
EBA press release: ESAs publish joint advice to the EU Commission on the review of the securitisation prudential framework
UK Parliament
Wholesale markets reform - Investor reporting and other measures announced - 9 December 2022
As part of the changes to the regulatory framework for wholesale markets announced in the Edinburgh Reforms, the government has laid before Parliament the Markets in Financial Instruments (Investor Reporting) (Amendment) Regulations 2022 (SI 2022/1297). These Regulations amend Commission Delegated Regulation (EU) 2017/565 as onshored into UK law (the UK MiFID Org Regulation). The purpose of this instrument is to implement changes to the investor reporting regime that the government consulted on as part of the wholesale markets review.
Separately, the government has confirmed that it will bring forward secondary legislation in the first quarter of 2023 to remove burdens for firms trading commodities derivatives as an ancillary activity. A regulatory regime to support a consolidated tape for market data is also expected to be established by 2024, bringing together market data from multiple platforms into one continuous feed to improve market efficiency, lower costs for firms and investors, and make UK markets more competitive. Finally, there will be an independent review of investment research and a new industry-led Accelerated Settlement Taskforce to explore the potential for faster settlement of financial trades in the UK.
The Markets in Financial Instruments (Investor Reporting) (Amendment) Regulations 2022 (SI 2022/1297)
Webpage
Explanatory memorandum
HM Treasury
Review of the Short Selling Regulation - HM Treasury publishes call for evidence - 9 December 2022
HM Treasury has published a call for evidence on the Short Selling Regulation Review as part of its Edinburgh Reforms, noting that:
“The first principle of a regulatory regime for short selling … is facilitating short selling and the benefits it provides to the orderly and effective functioning of the market, whilst protecting against risks. This call for evidence seeks information to ensure that this balance is correctly met in the UK regulatory framework.”
The government intends to repeal the retained EU law version of the UK Short Selling Regulation (2012/236) (UK SSR) following the outcome of the Future Regulatory Framework Review. The call for evidence considers a number of topics, including whether the current arrangements for covering securities in the UK SSR and the arrangements for settlement discipline adequately protect against settlement risks and disorderly markets. It also addresses disclosure requirements and the operation of the market maker exemption. In addition, it asks whether the FCA should retain powers to be able to apply short selling bans and whether there are alternative arrangements to short selling bans that could be put in place.
The call for evidence closes on 5 March 2023. Other provisions in the UK SSR, including the short selling regime for UK sovereign debt and UK sovereign credit default swaps, will be considered later as part of the process to repeal retained EU law in this area.
Call for evidence on Short Selling Regulation Review
Webpage
Financial Conduct Authority
Primary Market Bulletin - published by the FCA - 12 December 2022
The FCA has published its Primary Market Bulletin No. 42, covering the following topics:
- climate-related financial disclosures: among other things, the FCA reminds companies in all sectors to undertake a detailed assessment of their disclosures against the TCFD’s Guidance for All Sectors and, where relevant, the Supplemental Guidance for the Financial Sector and Non-Financial Groups in determining whether they are consistent with the TCFD’s recommendations and recommended disclosures;
- interaction between the National Security and Investment Act 2021 (NSI Act) and the UK version of the Market Abuse Regulation (596/2014/EU) (UK MAR): issuers are reminded that they need to continue to consider their obligations under UK MAR to disclose inside information when acquisitions are subject to review or assessment, and in relation to interim or final orders under the NSI system;
- unlawful disclosure of inside information: the Bulletin refers to the financial penalty imposed by the FCA on Sir Christopher Gent, former Chairman of Convatec Group plc, for unlawfully disclosing information. It describes some key features of the FCA’s decision in this case;
- cash shells and special purpose acquisition companies (SPACs): the FCA has written to directors of shell companies with securities listed on the Official List to remind them of the FCA’s rules around reverse takeovers; and
- digital reporting: the FCA encourages listed companies and their advisers to examine the findings in the Financial Reporting Council’s (FRC) report, ‘Structured digital reporting - improving quality and usability’.
The Bulletin also covers the arrangements for updating the list of exempted shares under the UK Short Selling Regulation.
FCA: Primary Market Bulletin No. 42
LIBOR cessation - FCA publishes notice of first decision to IBA - 14 December 2022
The FCA has published a notice of first decision, dated 23 November 2022, issued to ICE Benchmark Administration Limited (IBA) under Article 21(3) of the UK Benchmarks Regulation (EU/2016/1011). The notice states that the FCA has decided to compel IBA to continue publishing 3-month sterling LIBOR (LIBOR Version) for a period of 12 months starting immediately after the final publication of the LIBOR Version on 30 December 2022 and before the LIBOR Version would otherwise cease.
Subject to the reviews required by Article 21(3) of the Benchmarks Regulation, the FCA intends to use its powers to compel IBA to continue to publish the LIBOR Version for a final period until the end of March 2024, but not beyond that date.
FCA Notice of First Decision
