European Commission
CSDR - European Commission adopts report on review - 1 July 2021
The European Commission has published its report (COM(2021) 348 final) to the European Parliament and the Council of the EU following a review of the EU rules on central securities depositories (CSDs) under the Central Securities Depository Regulation (909/2014/EU) (CSDR). The report concludes, in broad terms, that the CSDR is achieving its original objectives of enhancing the efficiency of settlement in the EU and the soundness of CSDs.
The Commission notes, however, concerns that have been raised regarding the implementation of specific CSDR rules. These concerns relate to the cross-border provision of services, access to commercial bank money, settlement discipline and the framework for third-country CSDs. The report also identifies areas where further action may be required to achieve the CSDR’s objectives in a more proportionate, effective and efficient manner. In view of the issues raised, the Commission is considering presenting a legislative proposal to amend the CSDR, subject to an impact assessment that will examine the most appropriate solutions in more depth. Such a proposal would aim to ensure an effective post-trading infrastructure, enhance competition among CSDs and strengthen cross-border investment, contributing to the development of a genuine single market for capital in the EU.
Report under Article 75 of Central Securities Depository Regulation (909/2014/EU) on improving securities settlement in the EU and on central securities depositories and amending Directive 98/26/EC and 2014/65/EU and Regulation (EU) 236/2012 (COM(2021) 348 final)
Press release
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European Green Bond standard - European Commission proposes Regulation - 6 July 2021
The European Commission has proposed a Regulation on a voluntary European Green Bond Standard (EUGBS). The EUGBS aims to set a ‘gold standard’ for how companies and public authorities can use green bonds to raise funds on capital markets to finance ambitious investments, while meeting tough sustainability requirements and protecting investors from ‘greenwashing’.
The new EUGBS will be open to any issuer of green bonds, including those outside the EU. There are four key requirements under the proposed framework:
- funds raised by the bond should be allocated fully to projects aligned with the EU Taxonomy;
- there must be full transparency, achieved through detailed reporting requirements, on how bond proceeds are allocated;
- all EU green bonds must be checked by an external reviewer to ensure compliance with the Regulation and that funded projects are aligned with the EU Taxonomy; and
- external reviewers providing services to issuers of EU green bonds must be registered with and supervised by the European Securities and Markets Authority (ESMA) as this will ensure the quality and reliability of their services and reviews, thereby protecting investors and ensuring market integrity.
Next steps involve the Commission submitting the proposal to the European Parliament and the Council of the European Union as part of the co-legislative procedure.
Proposal for a Regulation on European green bonds (COM(2021) 391 final)
Annexes (COM(2021) 391 final)
Impact assessment (SWD(2021) 181 final)
Summary of impact assessment (SWD(2021) 182 final)
FAQs
Regulatory Scrutiny Board Opinion: Proposal for a Regulation on European green bonds (SEC(2021) 390)
Press release (See section titled ‘A European Green Bond Standard (EUGBS)’)
Official Journal of the European Union
EMIR - European Commission Implementing Decisions on equivalence for third country derivatives regimes published in OJ - 5 July 2021
Six European Commission Implementing Decisions on the equivalence of the regulatory regimes of third countries under the European Market Infrastructure Regulation (648/2012/EU) (EMIR) have been published in the Official Journal of the European Union (OJ). The Commission has determined that the regulatory framework for non-EU central counterparties in the following jurisdictions meet the requirements under Article 11 of EMIR:
- Brazil (Commission Implementing Decision ((EU) 2021/1103);
- Canada (Commission Implementing Decision ((EU) 2021/1104);
- Singapore (Commission Implementing Decision ((EU) 2021/1105);
- Australia (Commission Implementing Decision ((EU) 2021/1106);
- Hong Kong (Commission Implementing Decision ((EU) 2021/1107); and
- United States (Commission Implementing Decision ((EU) 2021/1108).
The Decisions were adopted on 5 July 2021 and enter into force 20 days following publication in the OJ, which is 26 July 2021.
Brazil - Commission Implementing Decision (EU) 2021/1103 (C/2021/4840)
Canada - Commission Implementing Decision (EU) 2021/1104 (C/2021/4845)
Singapore - Commission Implementing Decision (EU) 2021/1105 (C/2021/4846)
Australia - Commission Implementing Decision (EU) 2021/1106 (C/2021/4847)
Hong Kong - Commission Implementing Decision (EU) 2021/1107 (C/2021/4848)
United States - Commission Implementing Decision (EU) 2021/1108 (C/2021/4852)
European Banking Authority
IFD - EBA publishes final reports on technical standards on supervisory co-operation - 5 July 2021
The European Banking Authority (EBA) has published the following final reports on technical standards supplementing the Investment Firms Directive ((EU) 2019/2034) (IFD):
- Final Report on Draft Regulatory Technical Standards (RTS) and Draft Implementing Technical Standards (ITS) on information exchange between national competent authorities of home and host member states (EBA/RTS/2021/07, EBA/ITS/2021/05). The draft RTS and ITS concern information exchange between competent authorities in relation to an investment firm which operates either through a branch or through its freedom to provide services in one or more member states other than those in which it is incorporated; and
- Final Report on Draft RTS on colleges of supervisors for investment firm groups (EBA/RTS/2021/06). The RTS specify the conditions, established with a view to making supervision of cross-border investment firms more effective and efficient, under which colleges of supervisors exercise their tasks.
The draft RTS will be submitted to the European Commission for adoption. Following submission, they will be subject to scrutiny by the European Parliament and the Council of the European Union before being published in the Official Journal of the EU. The draft ITS will be submitted to the European Commission for endorsement before being published.
Final Report: Draft Regulatory Technical Standards on information exchange between competent authorities of home and host Member States under Article 13(7) of Directive (EU) 2019/2034 (Investment Firms Directive) and Draft Implementing Technical Standards on information exchange between competent authorities of home and host Member States under Article 13(8) of Directive (EU) 2019/2034 (EBA/RTS/2021/07, EBA/ITS/2021/05)
Final Report: Draft Regulatory Technical Standards on colleges of supervisors for investment firm groups under Article 48(8) of Directive (EU) 2019/2034 (Investment Firms Directive) (EBA/RTS/2021/06)
Press release: EBA publishes final draft technical standards to improve supervisory co-operation for investment firms
HM Treasury
UK prospectus regime - HM Treasury publishes consultation - 1 July 2021
HM Treasury has published a consultation on the UK’s prospectus regime as part of its stated commitment to improving the prospectus regime inherited from the EU. This consultation follows a recommendation from Lord Hill’s UK Listings Review, published in March 2021, that the government carry out a fundamental review of the UK’s prospectus regime.
Matters on which the government seeks views include, among other things:
- Overall approach: the government proposes that the two regulatory issues that the Prospectus Regulation ((EU) 2017/1129) deals with, admissions of securities and public offer rules, are dealt with separately in future so that they can be addressed on their individual merits;
- New FCA powers on admissions to regulated markets: the government is seeking views on whether the FCA should be granted discretion to set rules on whether or not a prospectus is required when securities are admitted to trading on a UK regulated market; and
- Junior markets: the government is proposing a number of options for companies admitted to multilateral trading facilities (MTF), including SME growth markets. These include a simple exemption from the restriction on public offerings of securities in section 85(1) of FSMA;
The consultation closes on 17 September 2021. Subject to the outcome of the consultation, the proposals in the consultation will be implemented by legislation and the FCA will review and consult on rules to replace the Prospectus Regulation.
Consultation paper: UK Prospectus Regime review
Webpage
Prudential Regulation Authority
Designating investment firms - PRA publishes consultation paper - 5 July 2021
The PRA has published a consultation paper (CP15/21) setting out proposals making minor changes to its policy on designating investment firms. The aim of the proposals is to ensure that the PRA’s policy reflects the impact of the new Investment Firms Prudential Regime (IFPR) proposed by the FCA. They also reflect HM Treasury’s proposals, published on 28 June 2021, to revise the Financial Services and Markets Act 2000 (PRA-Regulated Activities) Order 2013 (SI 2013/556) (PRA RAO).
The proposals in the consultation paper would amend the Statement of Policy, ‘Designation of investment firms for prudential supervision by the PRA’, to:
- reflect HM Treasury’s proposed amendments to the PRA RAO, including the change in the scope of the firms that can be designated;
- explain that there will usually be six months, rather than three months, between the Prudential Regulation Committee designating an investment firm and it becoming PRA-regulated; and
- note that the PRA, when making a designation decision, will take into account whether or not an investment firm is a clearing member of a central counterparty offering clearing services to other financial institutions.
The consultation paper also proposes to change the Definition of Capital Part of the PRA Rulebook to increase the base capital resources requirement for designated investment firms from EUR 730,000 to £750,000, and to denominate this in sterling. The changes are set out in the Draft CRR Firms: Investment Firms Prudential Regime Instrument 2021.
The consultation closes on 5 October 2021. The PRA proposes that the resulting changes would take effect on 1 January 2022.
Consultation paper: Designating investment firms (CP15/21)
Webpage
Financial Conduct Authority
LIBOR - FCA publishes speech by Director of Markets and Wholesale Policy, Edwin Schooling Latter - 5 July 2021
The FCA has published a speech by Director of Markets and Wholesale Policy, Edwin Schooling Latter, on LIBOR transition progress. Points of interest include:
- for LIBOR panels ending in 2021 (GBP, JPY, CHF and EUR), the central challenge remaining is ensuring that all legacy contracts that can be converted are converted by the end of 2021;
- firms must act now to move their new USD interest rates business to the Secured Overnight Financing Rate (SOFR);
- the FCA does not want to see transition to new so-called ‘credit-sensitive’ rates, such as Bloomberg’s Short Term Bank Yield index (known as BSBY) that some have suggested as a possible successor to LIBOR in some contracts; and
- any regulated UK market participants looking to use these credit sensitive rates - which share many of the same flaws as LIBOR because they are derived largely from transactions in commercial paper and certificate of deposit markets - in UK-based business should carefully consider the risks and raise this with their FCA supervisors before using such rates.
Speech by Director of Markets and Wholesale Policy, Edwin Schooling Latter: LIBOR – 6 months to go
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Listing regime - FCA publishes consultation on effectiveness of UK primary markets - 5 July 2021
The FCA has published a consultation paper on a series of proposed reforms to improve the effectiveness of UK primary markets (CP21/21), alongside a discussion of how it might continue to develop the regime to ensure that the UK remains a competitive and dynamic market. The FCA’s suggested reforms seek to address and build on proposals detailed in the recent UK Listing Review, chaired by Lord Hill and published in March 2021, and the Kalifa Review of UK FinTech published in February 2021.
The paper is divided into two parts. The first is a discussion of the purpose and value of the listing regime, which is intended to inform how the listing regime may be made more effective in the future. In particular, four potential models of how the listing regime could be structured are described.
The second part is a consultation on measures to remove barriers to listing, to ensure the listing regime continues to uphold the highest standards of market integrity and to improve the accessibility of the FCA rulebooks. To this end, the FCA is consulting on the following targeted measures:
- allowing a targeted form of dual class share structures within the premium listing segment to encourage innovative, often founder-led companies onto public markets sooner, thereby broadening the listed investment landscape for investors in the UK;
- reducing the amount of shares an issuer is required to have in public hands (i.e. free float) from 25% to 10%, reducing potential barriers for issuers created by current requirements;
- increasing the minimum market capitalisation (MMC) threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £50 million. Raising the MMC will give investors greater trust and clarity about the types of company with shares admitted to different markets; and
- making minor changes to the Listing Rules, Disclosure Guidance and Transparency Rules and the Prospectus Regulation Rules to simplify the FCA’s rulebooks and reflect changes in technology and market practices.
The FCA is consulting for 10 weeks on these proposals, with a closing date of 14 September 2021. Subject to consultation feedback and FCA Board approval, it will seek to make relevant rules before the end of 2021. On the discussion areas, the FCA will provide feedback and potentially consult further on wider listing regime changes in due course, if appropriate.
Consultation paper: Primary Markets Effectiveness Review (CP21/21)
Webpage
Press release
Financial Stability Board
LIBOR - FSB publishes report on transition issues - 6 July 2021
The Financial Stability Board (FSB) has published a progress report to the G20 on LIBOR transition issues. The transition away from LIBOR is a significant priority for the FSB, which strongly urges market participants to act now to complete the steps set out in its global transition roadmap, which was updated in June 2021.
The report emphasises that, with cessation timelines confirmed, there should be no remaining doubts about the urgency of the need to transition away from LIBOR by the end of 2021. The FSB observes that the continuation of some key USD LIBOR tenors through to 30 June 2023 is intended only to allow legacy contracts to mature, as opposed to supporting new USD LIBOR activity. Supervisory authorities are called upon to step up their efforts for active and adequate communication to increase awareness of the scope and urgency of relevant LIBOR transitions for all clients and other market participants. Financial and non-financial institutions are, moreover, urged to accelerate the adoption of risk-free rates in new contracts, the acceptance of newly developed products, as well as the active conversion of legacy LIBOR-referencing contracts to directly reference risk-free rates and/or insert robust fallback language.
Report: Progress Report to the G20 on LIBOR Transition Issues: Recent developments, supervisory issues and next steps
Webpage
Press release
