regulatory monitoring may 2021

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Regulatory monitoring Newsletter

May 2021

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Features

HORIZON SCANNING / REGULATORY MONITORING Identify new regulatory developments easily and tailored to the specific type of regulated firm, so that only relevant changes appear.

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FINANCIAL REGULATORY LAW SOURCEBOOK A categorised collection of all laws in the field of financial regulatory law for Europe and Germany (constantly being expanded), which can be compiled as an obligation register and commented on as desired.

CHANGE ANALYSIS AND PREVIEW OF RULES

RegGateway

Read the future versions of a law early, including the official explanatory memorandum, and identify any legislative changes.

More information under reggateway.com

https://www.reggateway.com/

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Contents

1. Bank regulation ..................................................................................... 9

1.1 Prudential regulation .......................................................................................................... 9

(a) General .............................................................................................................................. 9

BaFin: Supervisory focus 2021 ......................................................................................... 9

EC: Speech on European financial integration and stability ............................................. 9

(b) Solvency/Own funds issues ............................................................................................. 10

EBA: Final draft RTS on own funds and eligible liabilities ............................................ 10

EBA: Report on Member States’ reliance on external credit ratings .............................. 10

Commission Implementing Regulation (EU) 2021/763 laying down ITS for the application of the CRR and Directive 2014/59/EU with regard to the supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities .......................................................................................................................... 10

SRB: Updated Minimum Requirements for Own Funds and Eligible Liabilities (MREL) Policy under the Banking Package .................................................................................. 11

(c) Securitisation ................................................................................................................... 11

ESMA: Updated Q&As on Securitisation Regulation .................................................... 11

ESMA: Consultation on synthetic securitisations RTS and amendments to simple, transparent and standardised (STS) templates ................................................................. 11

ECB: Banking Supervision to supervise securitisation requirements for banks ............. 12

IOSCO: Industry surveys on conduct risks in leveraged loans (LLs) and collateralised loan obligations (CLOs) .................................................................................................. 12

(d) Authorisation and passporting ......................................................................................... 12

BaFin: Leaflet with notes on the facts of the operation of an organised trading facility (Hinweise zum Tatbestand der Tätigkeit des Betriebs eines organisierten Handelssystems) .............................................................................................................. 12

BaFin: Updated leaflet on the facts of operating a multilateral trading facility pursuant to section 1 para 1a sentence 2 no. 1b KWG (Tatbestand des Betriebs eines multilateralen Handelssystems gemäß § 1 Abs. 1a Satz 2 Nr. 1b KWG) ............................................... 13

(e) Risk management/SREP/Pillar 2/Outsourcing/NPL ....................................................... 13

EBA: Discussion paper on NPL data templates .............................................................. 13

(f) Qualifying holdings ......................................................................................................... 13

BaFin: Consultation 05/2021 on the Holder Control Regulation (Inhaberkontrollverordnung) .......................................................................................... 13

(g) Supervisory reporting ...................................................................................................... 14

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EC: EU financial system – Roadmap on supervisory data strategy ................................ 14

ECB: Regulation amending Regulation (EU) 2015/534 on reporting of supervisory financial information ....................................................................................................... 14

(h) Disclosure ........................................................................................................................ 15

EBA: Consultation on institutions’ Pillar 3 disclosure of interest rate risk exposures .... 15

1.2 Recovery and resolution .................................................................................................. 15

EBA: Report on the application of the BRRD early intervention (EI) framework ......... 15

SRB: Blueprint for CMDI framework review ................................................................. 15

ECB: Response to EC consultation on review of crisis management and deposit insurance framework ....................................................................................................... 16

2. Investment firms regulation .............................................................. 17 Law on the implementation of Directive (EU) 2019/2034 on the supervision of investment firms (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2034 über die Beaufsichtigung von Wertpapierinstituten) ..................................................................... 17

BaFin: Public consultation of the draft Mantle Regulation ............................................. 17

BaFin: FAQ regarding the IFR ........................................................................................ 18

3. Market regulation/Conduct rules ..................................................... 19

3.1 Benchmarks ..................................................................................................................... 19

ESMA: Updated Q&As on BMR .................................................................................... 19

EC: Commission Delegated Regulation (EU) …/... supplementing the Benchmark Regulation with regard to RTS specifying the criteria under which competent authorities may require changes to the compliance statement of non-significant benchmarks ......... 19

EC: Commission Delegated Regulation (EU) …/... supplementing the Benchmark Regulation with regard to RTS specifying the conditions to ensure that the methodology for determining a benchmark complies with the quality requirements ........................... 19

EC: Commission Delegated Regulation (EU) …/... supplementing the Benchmark Regulation with regard to RTS specifying the criteria for the competent authorities’ compliance assessment regarding the mandatory administration of a critical benchmark ......................................................................................................................................... 20

EC: Commission Delegated Regulation (EU) …/… supplementing the Benchmark Regulation with regard to RTS specifying the characteristics of the systems and controls for the identification and reporting of any conduct that may involve manipulation or attempted manipulation of a benchmark ......................................................................... 20

EC: Commission Delegated Regulation (EU) …/… supplementing the Benchmark Regulation with regard to regulatory technical standards specifying the requirements to ensure that an administrator’s governance arrangements are sufficiently robust ............ 20

ECB: Working Group on Euro Risk-Free Rates recommendations on EURIBOR fallbacks........................................................................................................................... 21

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3.2 Consumer protection rules ............................................................................................... 21

EC: Review of the Directive on Distance Marketing of Consumer Financial Services .. 21

EC: EU strategy for retail investors ................................................................................. 21

EBA: Report on mystery-shopping activities of national competent authorities (NCAs) ......................................................................................................................................... 22

3.3 Credit rating agencies ...................................................................................................... 22

ESMA: Public Consultation on Disclosure Requirements for Initial Reviews and Preliminary Ratings ......................................................................................................... 22

3.4 MiFID/MiFIR .................................................................................................................. 22

ESMA: Updated MiFID II Q&As on investor protection and intermediaries ................. 22

ESMA: Updated MiFIR data reporting Q&As ................................................................ 23

EC: Consultation on draft delegated act supplementing MiFID II specifying criteria for establishing when an activity is ancillary ........................................................................ 23

ESMA: Consultation on its MiFID II/MiFIR Annual Review Report ............................ 23

ESMA: Updated opinion on ancillary activity calculations under MiFID II .................. 23

IOSCO: Report on thematic review of trading venues and intermediaries’ business continuity plans ............................................................................................................... 24

3.5 Prospectus regulation ....................................................................................................... 24

BaFin: Leaflet on the prohibition of blind pool constructions in the Asset Investment Act (Merkblatt zum Verbot von Blindpool-Konstruktionen im Vermögensanlagengesetz) ............................................................................................... 24

ESMA: Updated Q&As on Prospectus Regulation ......................................................... 25

3.6 Securities financing transactions ..................................................................................... 25

ESMA: Updated Q&As on data reporting under SFTR .................................................. 25

ESMA: Final Report on Guidelines on the calculation of positions in SFTs by Trade Repositories (TRs) under the Securities Financing Transactions Regulation (SFTR) .... 25

3.7 Short selling ..................................................................................................................... 26

ESMA: Proposal on lowering the reporting threshold for net short positions to 0.1% on a permanent basis ............................................................................................................... 26

4. Market infrastructure .......................................................................... 27

4.1 Custody rules ................................................................................................................... 27

ESMA: Updated Q&As on CSDR .................................................................................. 27

ESMA: Letter providing proposals for the EC’s review of the CSDR............................ 27

4.2 EMIR ............................................................................................................................... 27

ESMA: Draft guidelines on data transfer between trade repositories under EMIR and SFTR ............................................................................................................................... 27



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ESMA: Updated Q&As on EMIR implementation ......................................................... 28

ESMA: Consultation on draft RTS for commodity derivatives ...................................... 28

EC: Commission Delegated Regulation (EU) …/... extending the transitional period referred to in Article 89(1), first subparagraph, of EMIR ............................................... 28

Commission Delegated Regulation (EU) 2021/732 amending Delegated Regulation (EU) No 667/2014 with regard to the content of the file to be submitted by the investigation officer to ESMA, the right to be heard with regard to interim decisions and the lodging of fines and periodic penalty payments ........................................................ 28

Commission Delegated Regulation (EU) 2021/731 supplementing EMIR with regard to rules of procedure for penalties imposed on third-country central counterparties or related third parties by ESMA ......................................................................................... 29

BCBS, CPMI and IOSCO: Survey clients and non-bank intermediaries on margin calls ......................................................................................................................................... 29

IOSCO: Speech on a global perspective on derivatives regulation ................................. 29

5. Anti-money laundering ...................................................................... 31 BMF: Minister’s bill of a regulation on enhanced due diligence requirements for the transfer of crypto assets (Kryptowertetransferverordnung – KryptoTransferV)............. 31

EBA: Consultation on guidelines on cooperation and information exchange in the area of anti-money laundering (AML) and countering the financing of terrorism (CFT) ...... 31

EC: Speech broadly outlining reforms in AML and CTF action plan ............................. 31

EBA: Consultation on RTS to establish an AML and CFT central database .................. 32

6. Payments .............................................................................................. 33

6.1 Payment and settlement systems ...................................................................................... 33

EP: Draft report on the proposal for a regulation on cross-border payments .................. 33

Regulation (EU) 2021/728 of the ECB amending Regulation (EU) No 795/2014 on oversight requirements for systemically important payment systems (ECB/2021/17) ... 33

Decision (EU) 2021/729 of the ECB amending Decision (EU) 2017/2098 on procedural aspects concerning the imposition of corrective measures for non-compliance with Regulation (EU) No 795/2014 (ECB/2021/18) ............................................................... 33

Decision (EU) 2021/730 of the ECB amending Decision (EU) 2019/1349 on the procedure and conditions for exercise by a competent authority of certain powers in relation to oversight of systemically important payment systems (ECB/2021/19) ......... 34

7. Banking union ..................................................................................... 35

7.1 Single Resolution Mechanism (SRM) ............................................................................. 35

BR: Draft law on the Convention of 27 January 2021 amending the Convention of 21 May 2014 on the transfer of contributions to the Single Resolution Fund and on the sharing of such contributions (Entwurf eines Gesetzes zu dem Übereinkommen vom 27.

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Januar 2021 zur Änderung des Übereinkommens vom 21. Mai 2014 über die Übertragung von Beiträgen auf den Einheitlichen Abwicklungsfonds und über die gemeinsame Nutzung dieser Beiträge) ............................................................................ 35

BR: Draft of a Second Act Amending the ESM Financing Act (Entwurf eines Zweiten Gesetzes zur Änderung des ESM-Finanzierungsgesetzes) .............................................. 35

8. Institutional supervisory framework ................................................ 36 BMF: Special Fees Regulation of the Federal Ministry of Finance on Financial Services Supervision (Finanzdienstleistungsaufsichtsgebührenverordnung – FinDAGebV) ........ 36

ESMA: Response to EC consultation on the functioning of the European Supervisory Authorities (ESAs) .......................................................................................................... 36

Commission Delegated Regulation (EU) 2021/822 amending Delegated Regulations (EU) No 1003/2013 and (EU) 2019/360 as regards the annual supervisory fees charged by the European Securities and Markets Authority to trade repositories for 2021.......... 36

EBA: Report on convergence of supervisory practices in 2020 and 2021 convergence plan .................................................................................................................................. 37

9. Investment funds ................................................................................ 38

9.1 Product regulation ............................................................................................................ 38

(a) AIF .................................................................................................................................. 38

ESMA: Updated Q&A on application of the AIFMD ..................................................... 38

ESMA: Updated opinion on the collection of information for the effective monitoring of systemic risk under Article 24(5), first subparagraph, of the AIFMD ............................ 38

(b) UCITS ............................................................................................................................. 38

BaFin: Updated List of approved stock exchanges and other organised markets in accordance with Section 193(1) sentence 1 Nos. 2 and 4 of the Capital Investment Code (KAGB) ........................................................................................................................... 38

ESMA: Updated Q&As on application of UCITS Directive........................................... 39

9.2 Prudential regulation ........................................................................................................ 39

(a) Compliance ...................................................................................................................... 39

ESMA: Final Report on its Guidelines under the Regulation on cross-border distribution of funds ............................................................................................................................ 39

10. Special rules for real estate financing and covered bonds............. 40

10.1 Mortgage credits .............................................................................................................. 40

EC: Report from the Commission to the European Parliament and the Council on the review of Directive 2014/17/EU on credit agreements for consumers relating to residential immoveable property (Mortgage Credit Directive – MCD) .......................... 40

10.2 Covered bonds ................................................................................................................. 40



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Law implementing Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2162 über die Emission gedeckter Schuldverschreibungen und die öffentliche Aufsicht über gedeckte Schuldverschreibungen) ................................................................................... 40

10.3 Building societies ............................................................................................................. 41

BaFin: Regulation amending the Building Societies Regulation (Verordnung zur Änderung der Bausparkassen-Verordnung) .................................................................... 41

11. Special topics ....................................................................................... 42

11.1 Covid-19 .......................................................................................................................... 42

(a) Prudential regulation ....................................................................................................... 42

EBA: Speech on the implementation of Basel III in the post-Covid-19 setting .............. 42

11.2 FinTech/Digital finance ................................................................................................... 42

BMF: Minister’s bill of a regulation on enhanced due diligence requirements for the transfer of crypto assets (Kryptowertetransferverordnung – KryptoTransferV)............. 42

BT: Adoption of the draft law on the introduction of electronic securities (Gesetz zur Einführung von elektronischen Wertpapieren)................................................................ 42

ESMA: Call for evidence on digital finance ................................................................... 43

ESMA: Guidelines on outsourcing to cloud service providers ....................................... 43

ECB: Speech on the necessity of using supervisory technology (suptech) ..................... 43

11.3 Sustainable finance .......................................................................................................... 44

EBA: Report on results of EU-wide pilot exercise on climate risk ................................. 44

EC: Obligation for certain companies to publish non-financial information .................. 44

12. German Omnibus Acts (Artikelgesetze)............................................. 45 Law on the implementation of Directive (EU) 2019/2034 on the supervision of investment firms (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2034 über die Beaufsichtigung von Wertpapierinstituten) ..................................................................... 45

Law implementing Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2162 über die Emission gedeckter Schuldverschreibungen und die öffentliche Aufsicht über gedeckte Schuldverschreibungen) ................................................................................... 45

13. Contacts ................................................................................................ 46

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1. Bank regulation

1.1 Prudential regulation

(a) General

(i) Germany

BaFin: Supervisory focus 2021 Status: Final BaFin published its supervisory focus 2021 (Aufsichtsschwerpunkte 2021). In the brochure, BaFin informs the public, as well as the financial institutions concerned, about the supervisory priorities BaFin has set for the year 2021 as part of its strategic planning and legal mandate. Two aspects seem to be key from BaFin’s perspective: the management of the Covid-19 crisis and the lessons learned from the Wirecard scandal.

Date of publication: 04/05/2021

(ii) EU

EC: Speech on European financial integration and stability Status: Final The EC published a speech by Mairead McGuinness, European Commissioner for Financial Services, on European financial integration and stability. Mairead McGuinness notes that, following the Covid-19 pandemic, three main risks to financial stability remain: (i) disruptive repricing of assets – financial markets saw strong performance in the second half of 2020, as a result of monetary and fiscal support measures which ensured access to low-cost funding, though this risks a decoupling of valuations from fundamentals which might lead to volatility and sharp price corrections; (ii) the sustainability of debt; and (iii) possible stress in the banking sector – although the sector has proved resilient during the crisis, concerns about profitability and asset quality remain. Other key points of the speech include that: (a) part of the response to ensure that capital markets cater for the demand for risk capital is building a deep and integrated capital market – thus, the EC published the Capital Markets Union action plan last year, to tackle key obstacles to integration; (b) monitoring and supervision has become even more important, which needs to be consistent across member states as integrated capital markets need a common set of rules, consistently applied by all national regulators – therefore, converging supervision and coordination of national supervisors is vital; (c) the pandemic has shown that sustainability is not integrated enough in economies, and the recovery offers a chance to support sustainable finance – the EC will shortly be presenting its Renewed Sustainable Finance Strategy which will aim to make sure that climate and environmental risks become mainstream in the financial system; (d) digitalisation will need to be carefully considered in the EC’s retail investment strategy, which it is planning for early next year. The EC wants a framework that empowers retail investors to make the right decisions as well as one that protects them, encouraging their participation in capital markets – digitalisation can provide easier access to capital markets at a lower cost, including access to more complex or riskier products; and (e) the EC will also look at financial literacy, including digital financial literacy – it is crucial that consumers understand the risks and rewards of retail investing, as well as the different options that are available.


https://www.bafin.de/SharedDocs/Downloads/DE/Broschuere/dl_Aufsichtsschwerpunkte2021.pdf?__blob=publicationFile&v=2

https://ec.europa.eu/commission/commissioners/2019-2024/mcguinness/announcements/keynote-speech-european-financial-integration-and-stability-annual-joint-ec-and-ecb-conference-2021_en



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(b) Solvency/Own funds issues

(i) EU

EBA: Final draft RTS on own funds and eligible liabilities Status: Final The EBA published its final draft Regulatory Technical Standards (RTS) on own funds and eligible liabilities. Specifically, EBA states that the draft RTS: (i) align existing provisions to changes introduced in the revised CRR in the area of own funds – in particular, for provisions relating to the regime of supervisory prior permission for the reduction of own funds; and (ii) specify some of the newly introduced criteria for eligible liabilities instruments derived from the own funds regime – these include the absence of direct or indirect funding for the acquisition of ownership of eligible liabilities, the absence of incentives to redeem, and the need for the resolution authority’s prior permission for the reduction of eligible liabilities. Furthermore, the EBA notes that, following the feedback received during the consultation, the calibration of the threshold for determining the predetermined amount for the general prior permission for reducing eligible liabilities instruments was increased from 3% to 10% of the total amount of outstanding eligible liabilities instruments. Moreover, the final draft RTS have been revised in order to recognise some relief for the renewal of general prior permission both for own funds and eligible liabilities and for introducing a proportionate approach for liquidating entities for which their minimum requirement for own funds and eligible liabilities does not exceed the loss absorption amount.


EBA: Report on Member States’ reliance on external credit ratings Status: Final The EBA publishes a report, which analyses the extent to which Member States' national law relies on external credit ratings. The report was based on a survey among EU banking supervisors and found: (i) no mechanistic reliance on external credit ratings was identified; and (ii) that the use of external credit ratings in the calculation of risk-weighted exposure amounts under the standardised approach, and under the external ratings based approach of the securitisation framework, is limited. Based on these findings, together with developments in international regulation, namely the provisions to reduce mechanistic reliance on external credit ratings in the standardised approach of the credit risk framework in the final Basel III reforms, and in the new securitisation framework introduced in the CRR, the EBA recommends that this bi-annual report is no longer necessary. In addition, the report stresses that the “enhanced due diligence” introduced in the final Basel III framework should be implemented in the EU framework.


Commission Implementing Regulation (EU) 2021/763 laying down ITS for the application of the CRR and Directive 2014/59/EU with regard to the supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities Status: Published in the OJ Date of entry into force: 01/06/2021 Date of application: 01/06/2021 Commission Implementing Regulation (EU) 2021/763, laying down ITS for the application of the CRR with regard to the supervisory reporting and public disclosure of the MREL and the TLAC, was published in OJ. The ITS reflect mandates set out in Articles 430(7) and 434a of the CRR, as amended by the CRR II, and Articles 45i(5) and (6) of the BRRD, as amended by the BRRD II. The Regulation enters into force on 1 June, this being 20 days after its publication in the OJ. There are different application dates for the supervisory reporting and public disclosure requirements: (i) supervisory reporting requirements – these will apply from 28 June; and (ii) public disclosure requirements – in respect of disclosures made in accordance with Article 437a and point (h) of Article 447(h) of the CRR (disclosures relating to TLAC), these will apply from 1 June. Additionally, in respect of disclosures made in accordance with Article 45i(3) of the BRRD, these will apply from 1 January 2024, or from any later compliance deadline set by the relevant resolution authority.


https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Draft%20Technical%20Standards/2021/1012878/Final%20Report%20on%20draft%20RTS%20on%20OFs%20and%20ELs.pdf

https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2021/1001441/EBA%20Report%20on%20External%20Credit%20Ratings%20Reliance.pdf

https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=uriserv:OJ.L_.2021.168.01.0001.01.ENG



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(ii) Eurozone

SRB: Updated Minimum Requirements for Own Funds and Eligible Liabilities (MREL) Policy under the Banking Package Status: Final The SRB published its updated minimum requirements for own funds and eligible liabilities (MREL) policy under the Banking Package. In particular, the SRB notes that the updated policy introduces: (i) the MREL maximum distributable amount (MDA), allowing the SRB to restrict banks’ earnings distribution if there are MREL breaches; (ii) policy criteria to identify systemic subsidiaries for which granting of an internal MREL waiver would raise financial stability concerns; and (iii) the approach to MREL-eligibility of UK instruments without bail-in clauses. Furthermore, the updated policy refines the: (a) methodology to estimate the Pillar 2 requirements post-resolution; (b) MREL calibration on preferred vs variant resolution strategy, confirming that the SRB computes MREL in line with the preferred strategy; and (c) MREL calibration methodology for liquidation entities, where the SRB clarifies that the loss absorption amount may increase beyond the default adjustment in proportion to financial stability concerns. The SRB has also published its MREL dashboard covering the reporting period Q4 2020, setting out key findings in regard to: (1) MREL issuances; (2) the average final MREL target; (3) average MREL shortfalls against the final target; and (4) funding costs.


(c) Securitisation

(i) EU

ESMA: Updated Q&As on Securitisation Regulation Status: Final ESMA published an updated version of its Q&As on the Securitisation Regulation. As well as modifying some existing questions, the document addresses new questions relating to: (i) character limitations in template fields; and (ii) underlying auto exposures – registration date for used cars.


ESMA: Consultation on synthetic securitisations RTS and amendments to simple, transparent and standardised (STS) templates Status: Consultation Deadline for the submission of comments: 20/08/2021 ESMA published a consultation paper on its draft RTS implementing the amended Securitisation Regulation (SECR). The amended SECR requires that certain securitisations meeting pre-defined STS requirements must be reported using standardised templates for STS notification published on ESMA’s website. ESMA explains that the consultation sets out ESMA’s proposed draft RTS and implementing technical standards (ITS), specifying the content and the format of the standardised templates for STS notification of on-balance sheet (synthetic) securitisations – it builds on the existing technical standards for STS notification of traditional securitisations, while taking into account specific features of synthetic securitisations. The consultation also includes targeted technical amendments to the STS notification templates for traditional securitisations.

The draft RTS and ITS will be submitted to the EC for endorsement by 10 October.


https://srb.europa.eu/sites/default/files/mrel_policy_may_2021_final_web.pdf

https://srb.europa.eu/sites/default/files/mrel_policy_may_2021_final_web.pdf

https://srb.europa.eu/sites/default/files/srb_mrel_dashboard_q4-2020.pdf

https://www.esma.europa.eu/sites/default/files/library/esma33-128-563_questions_and_answers_on_securitisation.pdf

https://www.esma.europa.eu/sites/default/files/esma82-402-200_consultation_paper_sts_notification_on_balance_sheet_securitisation_final.pdf

https://www.esma.europa.eu/sites/default/files/esma82-402-200_consultation_paper_sts_notification_on_balance_sheet_securitisation_final.pdf



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(ii) Eurozone

ECB: Banking Supervision to supervise securitisation requirements for banks Status: Final The ECB announced its decision to start ensuring that the banks it directly supervises comply with the requirements for risk retention, transparency and resecuritisation, which are set out under Articles 6 to 8 of the EU Securitisation Regulation. The ECB explains that the decision follows recent clarifications in the amendments to the Regulation, which are part of the EU’s Capital Market Recovery Package. The amendments explicitly state that risk retention, transparency and the ban on resecuritisation requirements are of a prudential nature and, therefore, should be supervised by the competent prudential supervision authorities. Over the coming months, the ECB will define how exactly it intends to perform these supervisory tasks. It will then communicate further details on its supervisory approach and model, including obligations for banks to notify their supervisor of securitisation-related activities.


(iii) International

IOSCO: Industry surveys on conduct risks in leveraged loans (LLs) and collateralised loan obligations (CLOs) Status: Consultation Deadline for the submission of comments: 30/06/2021 IOSCO published four questionnaires for industry participants on conduct risks in LLs and CLOs. IOSCO notes that through its Committee on Regulation of Market Intermediaries and its Committee on Investment Management, it is conducting work to understand the potential conflicts of interest and misaligned incentives among participants in the LL and CLO markets across the chain of intermediation, from credit origination to the sale to end-investors. To help inform this analysis, the Committees are asking bank lenders, CLO investors, CLO managers and LL sponsors to complete surveys. IOSCO states that the purpose of the questionnaires is to support its project by furthering its understanding of the LL and CLO markets. In particular, the questionnaires seek to determine where potential conflicts of interest and conduct issues may exist and how they are managed by market participants.

• Bank Lender Survey • CLO Investor Survey • CLO Manager Survey • Leveraged Loan Sponsors Survey


(d) Authorisation and passporting

(i) Germany

BaFin: Leaflet with notes on the facts of the operation of an organised trading facility (Hinweise zum Tatbestand der Tätigkeit des Betriebs eines organisierten Handelssystems) Status: Final BaFin published a leaflet with information on the facts of the operation of an organised trading facility. The leaflet specifies the legal requirements and provides information on the interpretation of the facts of the operation of an organised trading facility by BaFin. Article 6 of the second law amending financial market regulations on the basis of European legal acts (Zweites Finanzmarktnovellierungsgesetz – 2. FiMaNoG) of June 23, 2017 has changed the catalogue of financial services in Section 1(1a) sentence 2 of the German Banking Act (Kreditwesengesetz – KWG) supplemented by the fact of operating an organised trading system. Companies that want to provide this service now need a permit from BaFin.


https://www.bankingsupervision.europa.eu/press/pr/date/2021/html/ssm.pr210514%7E3ee1e3e4a8.en.html

https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.iosco.org%2Fsurveys%2F2021%2Fbank-lender%2F%3Fpage%3Dsignup&data=04%7C01%7Cj.wennstrom%40iosco.org%7C0f3fb38d77854498561008d9193956fa%7Cbcc6c66cdb3b48328af2cc363a097444%7C0%7C0%7C637568556340954334%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=8Za%2BCxZc1D0%2BUo87YdeZEMf2iCZZQ2mRlu7uzTN61ao%3D&reserved=0

https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.iosco.org%2Fsurveys%2F2021%2Fclo-investor%2F%3Fpage%3Dsignup&data=04%7C01%7Cj.wennstrom%40iosco.org%7C0f3fb38d77854498561008d9193956fa%7Cbcc6c66cdb3b48328af2cc363a097444%7C0%7C0%7C637568556340964329%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=68ba1F83RBxMB%2FkdxVfM3ixxwjg8VLV82o3zClPXWmI%3D&reserved=0

https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.iosco.org%2Fsurveys%2F2021%2Fclo-manager%2F%3Fpage%3Dsignup&data=04%7C01%7Cj.wennstrom%40iosco.org%7C0f3fb38d77854498561008d9193956fa%7Cbcc6c66cdb3b48328af2cc363a097444%7C0%7C0%7C637568556340964329%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=1uXxUOfXKxyh5cVPoQTKzbwmnxWn1ug0IYcvnTBNOFI%3D&reserved=0

https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.iosco.org%2Fsurveys%2F2021%2Fleveraged-loan-sponsors%2F%3Fpage%3Dsignup&data=04%7C01%7Cj.wennstrom%40iosco.org%7C0f3fb38d77854498561008d9193956fa%7Cbcc6c66cdb3b48328af2cc363a097444%7C0%7C0%7C637568556340974323%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=L1WvItMq5gOgW3xx8Itqzu6RmzXlE889GllEnqzAevE%3D&reserved=0

https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Merkblatt/mb_210510_Betrieb_organisiertes_Handelssystem.html

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BaFin: Updated leaflet on the facts of operating a multilateral trading facility pursuant to section 1 para 1a sentence 2 no. 1b KWG (Tatbestand des Betriebs eines multilateralen Handelssystems gemäß § 1 Abs. 1a Satz 2 Nr. 1b KWG) Status: Final BaFin published an update on its leaflet on the facts of operating a multilateral trading facility pursuant to section 1 para 1a sentence 2 no. 1b KWG. With the update, the leaflet has been expanded and clarified. For example, the difference between a multilateral and a bilateral trading system is now explained and the concept of financial instruments is presented more comprehensively.

The leaflet is relevant for operators of multilateral trading facilities only.


(e) Risk management/SREP/Pillar 2/Outsourcing/NPL

(i) EU

EBA: Discussion paper on NPL data templates Status: Consultation Deadline for the submission of comments: 31/08/2021 The EBA published a discussion paper on a review of its standardised data templates for non-performing loan (NPL) transactions. The EBA hopes to reinforce the dialogue with market participants with a view to making the existing NPL data templates more user‐friendly, less complex, and proportionate so that the NPL data templates strike the right balance between the cost of information provided and the ability of users of the data to effectively price the potential transaction. The discussion paper proposes a number of changes to the existing templates such as restructuring of the data categories, designing asset classes, reduction of data fields, categorisation of these data fields as critical and non‐critical, and presents proportionality considerations.

The EBA intends to prepare a revised version of the data templates and publish this revised version by December. However, the EBA notes that the adoption of the proposed Directive on credit servicers, purchasers and recovery of collateral may mandate the EBA to turn these data templates into implementing technical standards, for which the EBA would have to publish a consultation paper.


(f) Qualifying holdings

(i) Germany

BaFin: Consultation 05/2021 on the Holder Control Regulation (Inhaberkontrollverordnung) Status: Consultation Deadline for the submission of comments: 11/06/2021 BaFin has submitted the draft of the Third Regulation Amending the Regulation on the Control of Holders (Inhaberkontrollverordnung – InhKontrollV) for consultation. The reason for the revision are the joint guidelines of the European Supervisory Authorities for Banks, Insurers and Securities Trading (EBA, EIOPA and ESMA) on the supervisory assessment of the acquisition and increase of qualified participations in the financial sector. In addition, the InhKontrollV had to be adapted to the Act on the Supervision of Insurance Companies (Versicherungsaufsichtsgesetz – VAG). This law was also amended again, as was the German Banking Act (Kreditwesengesetz – KWG), as part of the Risk Reduction Act (Risikoreduzierungsgesetz – RiG).


https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Merkblatt/mb_091208_tatbestand_multilaterales_handelssystem.html

https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Merkblatt/mb_091208_tatbestand_multilaterales_handelssystem.html

https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Discussions/2021/Discussion%20on%20the%20review%20of%20the%20NPL%20transaction%20data%20templates/1000478/EBA%20Discussion%20Paper%20-%20Review%20of%20NPL%20transaction%20data%20templates.pdf

https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Konsultation/2021/kon_05_21_Dritte_VO_zur_Aenderung_der_InhaberkontrollVo.html

https://esas-joint-committee.europa.eu/Publications/Guidelines/JC_QH_GLs_DE.pdf



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(g) Supervisory reporting

(i) EU

EC: EU financial system – Roadmap on supervisory data strategy Status: Consultation Deadline for the submission of comments: 15/06/2021 The EC began consulting on a roadmap for its supervisory data strategy, contributing to both the European data strategy and digital finance strategy. The EC undertook a fitness check of supervisory reporting requirements, which concluded that while, overall, supervisory reporting in EU financial services is necessary and effective, there are some areas for improvement: (i) the current way of defining the reporting requirements and collecting data can be complex and lead to inefficiencies in the reporting process; (ii) there are some redundancies and inconsistencies in the requirements and cases where companies have to report very similar data to several authorities in parallel. Additional national reporting and ad hoc data requests by supervisors add to the complexities; and (iii) the requirements do not adequately reflect recent technological developments and are not well-suited to the use of modern IT tools. The supervisory data strategy will consider a number of coordinated sectoral and horizontal measures, which will likely be implemented over a number of years. The former may include: (a) the development of common data templates and provisions to facilitate data sharing; (b) rectifying inconsistent empowerments to the European Supervisory Authorities in defining reporting requirements at technical level; (c) mandating the reporting of common identifiers; (d) providing or clarifying specific definitions and scope of reporting; and (e) strengthening proportionality in sectoral reporting frameworks. Horizontal measures considered will focus on developing a common data dictionary (i.e. a repository of information about the data, including its meaning, relationships to other data, origin, usage, and format), enhancing data sharing and access, and improving the overall design of reporting requirements in EU legislation.

The EC intends to carry out further work in Q3 2021.


(ii) Eurozone

ECB: Regulation amending Regulation (EU) 2015/534 on reporting of supervisory financial information Status: Final The ECB published a Regulation amending Regulation (EU) 2015/534 on reporting of supervisory financial information (FINREP Regulation). The FINREP Regulation provides for the use, for its purposes, of templates developed by the EBA and enacted in Implementing Regulation (EU) No 680/2014, which was repealed and replaced by Implementing Regulation (EU) 2021/451. The references therefore need to be updated accordingly, as well as other updates to ensure alignment with the naming and structure of the templates in Implementing Regulation (EU) 2021/451. References also need to be updated with regards to CRR II.

The FINREP Regulation should apply from 28 June 2021.


https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13023-EU-financial-system-supervisory-data-strategy_en

https://www.ecb.europa.eu/pub/pdf/other/ecb.2021_24_f_sign%7E83026ee77a.en.pdf?5098357a6ad9b9030218a72fceaedb74

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(h) Disclosure

(i) EU

EBA: Consultation on institutions’ Pillar 3 disclosure of interest rate risk exposures Status: Consultation Deadline for the submission of comments: 30/08/2021 The EBA published a consultation paper on the disclosure of information on exposures to interest rate risk on positions not held in the trading book under the CRR, as amended by the CRR II.

Article 448 of the CRR requires institutions to disclose, from 28 June 2021, quantitative and qualitative information on the risks arising from potential changes in interest rates that affect both the economic value of equity and the net interest income of their non‐trading book activities referred to in Article 84 and Article 98(5) of the CRD IV. To implement this disclosure, the EBA has developed draft ITS amending Implementing Regulation (EU) 637/2021, which was published in the Official Journal of the European Union (OJ) on 21 April 2021.

The draft ITS propose qualitative disclosures on how institutions calculate their interest rate risk in the banking book (IRRBB) exposure values based on their internal measurement systems and on institutions' overall IRRBB objective and management. They also provide quantitative disclosures about the impact of changes in interest rates on institutions' economic value of equity and net interest income.


1.2 Recovery and resolution (i) EU

EBA: Report on the application of the BRRD early intervention (EI) framework Status: Final The EBA published a report on the application of the BRRD EI framework. The report follows the discussion paper launched in June 2020 to explore ways of enhancing crisis management tools available for competent authorities (CAs) in addition to well-established and widely used supervisory powers laid down in the CRD and in the Single Supervisory Mechanism Regulation (SSMR). The report concludes the EBA’s work on EI measures (EIMs) and also provides an overview of the feedback received from public consultations as well as the EBA conclusions, highlighting the key challenges faced by supervisors in the application of the current regulatory framework on the EIMs and various options for addressing them. The EBA notes that it observed supervisory consensus on the need to eliminate existing overlaps between EIMs and other supervisory powers, as well as to remove the formal sequencing of EIMs specified in Articles 27-29 of the BRRD. In addition, the EBA observed that CAs supported the importance of amending Article 27(1) of the BRRD that includes an example of a quantitative early intervention trigger. For EI triggers specified in regulatory technical standards, the EBA will conduct further work and amend its current guidelines on the EI triggers upon finalisation of the ongoing review of the BRRD.


(ii) Eurozone

SRB: Blueprint for CMDI framework review Status: Final The SRB published a blueprint (dated 18 March) setting out key considerations for the European Commission's review of its crisis management and deposit insurance (CMDI) framework, including: (i) the priority must be the completion of the banking union and establishment of the European Deposit Insurance Scheme (EDIS); (ii) the CMDI review should enshrine the hybrid model of EDIS into law, but with a time-bound transition period (e.g. five years) towards the steady state, i.e. full mutualisation, in order to avoid a never-ending transitional period; (iii) in the steady state, the SRB should act as the central authority with powers to manage all bank failures in the banking union, handling both EDIS and the Single Resolution Fund (SRF) (which

https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2021/Consultation%20on%20draft%20ITS%20on%20disclosure%20of%20information%20on%20exposures%20to%20interest%20rate%20risk%20on%20positions%20not%20held%20in%20the%20trading%20book/1012944/CP%20on%20draft%20ITS%20on%20IRRBB%20disclosure.pdf

https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2021/1012929/EBA%20Report%20on%20EIMs%20under%20the%20BRRD.pdf

https://srb.europa.eu/sites/default/files/2021-05-18_srb_views_on_cmdi.pdf



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could eventually be merged to exploit economies of scale); (iv) the SRB is enhancing its public interest assessment analysis and ensuring all relevant factors will be accounted for, in particular a system-wide stress scenario. This might expand the number of banks falling under resolution tools; (v) when it comes to the use of funds external to banks, there are two possible sources of additional funds in resolution: use of the SRF and using deposit guarantee scheme (DGS) funds. The use of DGS funds in resolution is severely restricted by the rigid conditions set out in the Single Resolution Mechanism Regulation (SRMR) and a review of these conditions seems warranted; (vi) there would be value in some harmonisation of administrative liquidation procedures, allowing for the transfer of covered deposits in the context of national insolvency proceedings for small entities; (vii) during the transitional period, clear governance arrangements within the SRM need to be implemented, to ensure that the SRB (plus national resolution authorities) and the DGS work jointly to use DGS funds in the most efficient way in resolution, or when supporting alternative measures. The latter would be harmonised in the transition period and then progressively centralised in parallel with the move to EDIS in the steady state; and (viii) updating the Banking Communication and aligning it with the BRRD/SRMR should be an urgent priority of the CMDI review. This is essential to ensure liquidation aid becomes a truly residual tool (e.g. for very small entities), and ultimately to minimise the use of public funds.


ECB: Response to EC consultation on review of crisis management and deposit insurance framework Status: Final The ECB published its response to the EC’s consultation on the review of the crisis management and deposit insurance framework. The ECB welcomes the review as an important opportunity for revision. Its general remarks include that: (i) improving the crisis management framework and completing the banking union need to be achieved in parallel, since the objectives support each other; (ii) progress in facilitating cross-border banking within the EU should remain a priority. Small-scale amendments to the current framework would encourage the use of existing legal options already in place, such as cross-border liquidity waivers, and allow incremental progress on cross-border integration; (iii) improvements to the crisis management framework should cover all the different stages of a bank’s crisis, providing tools and powers to authorities to deal with a crisis before a bank is deemed failing or likely to fail. The early intervention framework should be clarified to make practical implementation easier; and (iv) broader application of the resolution framework would enhance the level playing field and access to best-practice resolution tools, but this does not remove the need to revisit the liquidation framework, as some banks would still not have access to resolution. The ECB supports the creation of a European administrative liquidation framework supported by a European Deposit Insurance Scheme to harmonise and improve the effectiveness of the crisis management framework for banks where there is no public interest in resolution and which therefore go into liquidation.


https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.consultation_on_crisis_management_deposit_insurance_202105%7E0ac1f04e33.en.pdf?f72a2359f0e84b0c5677bd2d673e9480

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2. Investment firms regulation

(i) Germany

Law on the implementation of Directive (EU) 2019/2034 on the supervision of investment firms (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2034 über die Beaufsichtigung von Wertpapierinstituten) Status: Published in the Federal Gazette Date of entry into force: 26/06/2021 In December 2019, a new regime for investment firms was published at an EU level, consisting of a regulation (IFR) and a directive (IFD). With the publication of the Law on the implementation of Directive (EU) 2019/2034 on the supervision of investment firms (IFD) in the German Federal Gazette, the IFD has now been implemented into German law. At the core of the implementing law is the new Law on the supervision of investment firms (Gesetz zur Beaufsichtigung von Wertpapierinstituten – Wertpapierinstitutsgesetz – WpIG).

Until today, investment firms were, in principle, subject to a similar prudential regime as credit institutions, namely under CRR / CRD. In Germany, CRD is implemented, in particular, in the German Banking Act (Kreditwesengesetz – KWG). In contrast to credit institutions, however, investment firms have a business model with a different risk profile, as they do not accept deposits. In order to take account of the specific requirements for business models and different risk profiles of investment firms, specific requirements for supervision and capital requirements of investment firms were being developed by IFD / IFR. These requirements will vary in proportion to the size of the investment firms.

The German Ministry of Finance has decided to implement IFD not only by inserting amendments into the KWG, but by creating a completely new regime for investment firms, the WpIG. In proportion to the size and importance of investment firms for financial stability, the WpIG essentially contains: (i) requirements relating to initial capital; (ii) requirements relating to the organisation of business and certain notification obligations; (iii) supervisory powers of the competent supervisory authorities, in particular with regard to the solvency of investment firms and capital and liquidity requirements; (iv) criteria for assessing the appropriateness of internal capital requirements; (v) requirements for the executive board and supervisory bodies of investment firms with regard to internal corporate governance; and (vi) rules on remuneration policy for certain categories of investment firm employees.

The WpIG is relevant to all investment firms as they will first need to assess in which category of investment firms they fall and what new rules they need to comply with, if any.

We can provide you with Delta Views/markups (Lesefassung) of amendments of affected acts upon request. More generally, we can provide Delta Views of all existing key regulatory acts shortly after the publication of the draft versions on our RegGateway. Please ask for access.


BaFin: Public consultation of the draft Mantle Regulation Status: Consultation Deadline for the submission of comments: 28/05/2021 The Law on the supervision of investment firms (Gesetz zur Beaufsichtigung von Wertpapierinstituten – Wertpapierinstitutsgesetz – WpIG) implements the European Investment Firms Directive (IFD). In future, all previous financial services institutions within the meaning of the German Banking Act (Kreditwesengesetz – KWG) that provide investment services will fall under the WpIG.

The envisaged Mantle Regulation (Mantelverordnung) serves to further implement the IFD and to execute the related directly applicable European Investment Firms Regulation (IFR). Articles 1 to 4 of the draft of the comprehensive Mantelverordnung consist of four new core regulations for investment firms, namely the Investment Firms Audit Report Regulation (Wertpapierinstituts-Prüfungsberichtsverordnung – WpI-PrüfbV), the Investment Firms Remuneration Regulation (Wertpapierinstituts-Vergütungsverordnung – WpI-VergV), the Investment Firms Holder Control Regulation (Wertpapierinstituts-Inhaberkontrollverordnung – WpI-IKV) and the Investment Firms Notification Regulation (Wertpapierinstituts-Anzeigenverordnung – WpI-AnzV).

For so-called large investment firms, the KWG regulations continue to apply to a large extent by virtue of a reference in the WpIG. In this respect, large securities institutions continue to be subject to the corresponding legal ordinances based on the

http://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl121s0990.pdf

https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Konsultation/2021/kon_04_21_wpig.html



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KWG, namely the Audit Regulation (PrüfbV) and the Remuneration Regulation for Institutions (InstitutsVergV) (and not Articles 1 and 2 of the Mantelverordnung). Article 5 makes the necessary consequential amendments to the relevant KWG regulations.


BaFin: FAQ regarding the IFR Status: Final The BaFin answers common questions about the new requirements for investment firms that will apply from 26 June 2021. These requirements consist of the new Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on "Prudential Requirements for Investment Firms" (IFR) as well as the German Law on the Implementation of Directive (EU) 2019/2034 (IFD) on the Supervision of Investment Firms (Wertpapierinstitutsgesetz – WpIG). The answers to frequently asked questions (FAQ) will be published on this website and will be updated on an ongoing basis.


https://www.bafin.de/DE/Aufsicht/BankenFinanzdienstleister/Neue_Vorgaben_Wertpapierinstitute.html?nn=9021442

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3. Market regulation/Conduct rules

3.1 Benchmarks (i) EU

ESMA: Updated Q&As on BMR Status: Final ESMA published an updated version of its Q&As on the Benchmarks Regulation (BMR). ESMA has updated the Q&A to include a new section on EU climate transition benchmarks, EU Paris-aligned benchmarks and sustainability-related disclosures for benchmarks.


EC: Commission Delegated Regulation (EU) …/... supplementing the Benchmark Regulation with regard to RTS specifying the criteria under which competent authorities may require changes to the compliance statement of non-significant benchmarks Status: Adopted by EC The EC adopted a Commission Delegated Regulation supplementing the Benchmark Regulation (BMR) with regard to RTS specifying the criteria under which competent authorities may require changes to the compliance statement of non-significant benchmarks. Article 1 defines the criteria at the level of the administrator on which a competent authority may require changes to a non-significant benchmark compliance statement if it considers that the statement does not clearly state why it is appropriate for the relevant administrator not to comply with one or more of the requirements referred to in Article 26(1) of the BMR. Article 2 defines the criteria at the level of the benchmark or family of benchmarks on which a competent authority may require changes to a non-significant benchmark compliance statement if it considers that the statement does not clearly state why it is appropriate for the relevant administrator not to comply with one or more of the requirements referred to in Article 26(1) of the BMR.

The Council of the EU and the EP will now scrutinise the draft Delegated Regulation. It will enter into force on the twentieth day following that of its publication in the OJ and will apply from 1 January 2022.


EC: Commission Delegated Regulation (EU) …/... supplementing the Benchmark Regulation with regard to RTS specifying the conditions to ensure that the methodology for determining a benchmark complies with the quality requirements Status: Adopted by EC The EC adopted a Commission Delegated Regulation supplementing the Benchmark Regulation (BMR) with regard to RTS specifying the conditions to ensure that the methodology for determining a benchmark complies with the quality requirements. Article 1 specifies the conditions to ensure that the methodology is robust and reliable. Article 2 specifies the conditions to ensure that the methodology has clear rules identifying how and when discretion may be exercised in the determination of the benchmark. Article 3 specifies the conditions to ensure that the methodology is rigorous, continuous and capable of validation including, where appropriate, back-testing against available transaction data. Article 4 specifies the conditions to ensure that the methodology is resilient and ensures that the benchmark can be calculated in the widest set of possible circumstances, without compromising its integrity. Article 5 specifies the conditions to ensure that the methodology is traceable and verifiable.



https://www.esma.europa.eu/sites/default/files/library/esma70-145-114_qas_on_bmr.pdf

https://ec.europa.eu/transparency/regdoc/rep/3/2021/EN/C-2021-3116-F1-EN-MAIN-PART-1.PDF








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EC: Commission Delegated Regulation (EU) …/... supplementing the Benchmark Regulation with regard to RTS specifying the criteria for the competent authorities’ compliance assessment regarding the mandatory administration of a critical benchmark Status: Adopted by EC The EC adopted a Commission Delegated Regulation supplementing the Benchmark Regulation with regard to RTS specifying the criteria for the competent authorities’ compliance assessment regarding the mandatory administration of a critical benchmark. Article 1 defines the criteria on which a competent authority shall base its assessment of how a critical benchmark is to be transitioned to a new administrator. Article 2 specifies the criteria on which a competent authority shall base its assessment of how a critical benchmark is to cease to be provided.

The Council of the EU and the EP will now scrutinise the draft Delegated Regulation. It will enter into force on the 20th day following that of its publication in the OJ and will apply from 1 January 2022.


EC: Commission Delegated Regulation (EU) …/… supplementing the Benchmark Regulation with regard to RTS specifying the characteristics of the systems and controls for the identification and reporting of any conduct that may involve manipulation or attempted manipulation of a benchmark Status: Adopted by EC The EC adopted the Draft Delegated Regulation (C(2021) 3125), which supplements the Benchmark Regulation (BMR) with regard to regulatory technical standards (RTS) specifying the characteristics of the systems and controls for the identification and reporting of any conduct that may involve manipulation or attempted manipulation of a benchmark. The draft Delegated Regulation specifies: (i) the adequate systems and effective controls that an administrator shall have in place to ensure the integrity of input data in order to detect, identify and report any conduct that may involve manipulation or attempted manipulation of a benchmark; and (ii) that an input data integrity policy shall be in place to document the systems and controls in place for ensuring the integrity of the benchmark.



EC: Commission Delegated Regulation (EU) …/… supplementing the Benchmark Regulation with regard to regulatory technical standards specifying the requirements to ensure that an administrator’s governance arrangements are sufficiently robust Status: Adopted by EC The EC adopted the Draft Delegated Regulation (C(2021) 3123), which supplements the Benchmark Regulation (BMR) with regard to RTS specifying the requirements to ensure that an administrator's governance arrangements are sufficiently robust. The draft Delegated Regulation specifies: (a) the content of an administrator’s governance arrangements, whose organisational structure is to contain the decision-making procedures, the allocation of functions and responsibilities, and the reporting lines; (b) the persons involved with the provision of a benchmark whose responsibilities are to be defined in the governance arrangements of the administrator; and (c) that an administrator’s governance arrangements are to ensure a clear definition of the responsibilities allocated to the persons involved with the provision of a benchmark and the procedures which must be followed for the proper discharge of those responsibilities.












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(ii) Eurozone

ECB: Working Group on Euro Risk-Free Rates recommendations on EURIBOR fallbacks Status: Final The ECB’s Working Group on Euro Risk-Free Rates published a paper containing its recommendations on EURIBOR fallbacks, discussing a variety of options relating to the introduction of fallback trigger events and fallback rates for contracts and financial instruments referencing EURIBOR. The paper includes a recommendation for a €STR-based EURIBOR fallback rate for specific use cases, including: (i) corporate lending products; (ii) retail mortgages, consumer loans and loans to SMEs; (iii) current accounts; (iv) trade finance; (v) export and emerging markets finance products; (vi) debt securities; (vii) securitisations; (viii) transfer pricing models; and (ix) investment funds.


3.2 Consumer protection rules (i) EU

EC: Review of the Directive on Distance Marketing of Consumer Financial Services Status: Consultation Deadline for the submission of comments: 25/06/2021 The EC published a roadmap on the distance marketing of consumer financial services for consultation. The EU legislation on distance marketing of financial services supports the free movement of financial services in the internal market by harmonising consumer protection rules for financial services sold at a distance (e.g. by phone, mail, Internet…).

This initiative aims at reviewing this legislation, following the results of a recent evaluation that has highlighted several issues hampering its correct functioning.

A public consultation on the proposal is planned for the third quarter of 2021 and the Commission adoption for the first quarter 2022.


EC: EU strategy for retail investors Status: Consultation Deadline for the submission of comments: 03/08/2021 The EC published a consultation paper on a retail investment strategy for the EU. In line with the EC’s stated objective of “an economy that works for people”, it is seeking to ensure that a legal framework for retail investments is suitably adapted to the profile and needs of consumers, helps to ensure improved market outcomes and enhances participation in the capital markets. The EC is looking to understand how the current framework for retail investments can be improved and is seeking views on different aspects, including: (i) the limited comparability of similar investment products that are regulated by different legislation and are hence subject to different disclosure requirements, which prevent individual investors from making informed investment choices; (ii) how to ensure access to fair advice in light of current inducement practices; (iii) how to address the fact that many citizens lack sufficient financial literacy to make good decisions about personal finances; (iv) the impact of increased digitalisation of financial services; and (v) sustainable investing. Other issues covered by the consultation include reviewing the framework for investor categorisation, suitability and appropriateness assessments, consumer redress, as well as views on the PRIIPs Regulation. The EC intends to adopt a retail investment strategy in early 2022.


https://www.ecb.europa.eu/pub/pdf/other/ecb.recommendationsEURIBORfallbacktriggereventsandESTR.202105%7E9e859b5aa7.en.pdf

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13048-Distance-Marketing-of-Consumer-Financial-Services-Review-of-EU-rules_en

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12755-Retail-Investment-Strategy/public-consultation_en



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EBA: Report on mystery-shopping activities of national competent authorities (NCAs) Status: Final The EBA reported on mystery-shopping activities of national competent authorities (NCAs) with a view to sharing experience, learning valuable lessons and identifying good practices for the benefit of the EBA and NCAs that use or intend to use mystery-shopping in the future. The report covers initiatives in respect of products that fall within the scope of action of the EBA’s consumer protection mandate, i.e. retail banking products and services (mortgages, deposits, payment accounts, payment services and electronic money). It summarises the most common approaches used by the NCAs, based on the information collated primarily covering the period from 2015 to 2020. It reviews the objective, subject matter and product scope of these activities, the methodologies used by NCAs and follow-up actions taken by NCAs following the mystery shopping. The report explains that mystery shopping allows NCAs to obtain greater insight into the conduct of financial institutions. This, in turn, encourages them to take corrective actions better to comply with applicable requirements, and eventually enhances the protection of consumers. Among the good practices identified by the NCAs, most of them concern common procedural aspects such as organising training for NCAs’ inspection and supervisory staff, identifying target customer profiles, and defining agreed ‘rules’ of customers’ behaviour.


3.3 Credit rating agencies (i) EU

ESMA: Public Consultation on Disclosure Requirements for Initial Reviews and Preliminary Ratings Status: Consultation Deadline for the submission of comments: 04/08/2021 ESMA published a consultation paper on disclosure requirements for initial reviews and preliminary ratings. ESMA explains that the Credit Rating Agencies Regulation (CRAR) includes a number of provisions that are designed to provide greater clarity to market participants as to whether entities or debt instruments have been subject to an initial review or a preliminary rating by CRAs before receiving a credit rating – the objective of the provisions is to mitigate against the effects of ratings shopping through greater transparency. Moreover, ESMA notes that the purpose of the consultation is to propose guidance that will address inconsistencies in the interpretation of these provisions, and it contains the following proposals that aim to clarify: (i) how the term “initial review and preliminary rating” should be understood for the purposes of the CRAR’s public disclosure requirements; (ii) the content and timing of CRAs’ public disclosures for interactions that meet the standard of “initial review and preliminary rating”; and (iii) the steps to ensure that these public disclosures are more accessible for investors and the market. ESMA will consider the responses it receives in Q3 and expects to publish a final report by the end of Q4.


3.4 MiFID/MiFIR (i) EU

ESMA: Updated MiFID II Q&As on investor protection and intermediaries Status: Final ESMA published an updated version of its Q&As on investor protection and intermediaries under MiFID II and MiFIR. A new Q&A relating to information on costs and charges has been added.


https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2021/1000492/EBA%20Report%20on%20the%20mystery%20shopping%20activities%20of%20National%20Competent%20Authorities.pdf

https://www.esma.europa.eu/sites/default/files/library/esma_33-9-413_consultation_paper_on_disclosure_requirements_for_initial_reviews_and_preliminary_ratings.pdf

https://www.esma.europa.eu/sites/default/files/library/esma35-43-349_mifid_ii_qas_on_investor_protection_topics.pdf

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ESMA: Updated MiFIR data reporting Q&As Status: Final ESMA published an updated version of its Q&As on data reporting under MiFIR. ESMA has added Q&A 18, which relates to reporting reference rates not included in RTS 23 (Supply of financial instruments reference data) and 22 (Reporting of transactions to competent authorities).


EC: Consultation on draft delegated act supplementing MiFID II specifying criteria for establishing when an activity is ancillary Status: Consultation Deadline for the submission of comments: 24/06/2021 The EC published for consultation a draft delegated act supplementing MiFID II by specifying the criteria for establishing when an activity is to be considered to be ancillary to the main business at group level. MiFID II exempts persons dealing on own account, or providing investment services to clients, in commodity derivatives, emission allowances or derivatives thereof, provided this is an ancillary activity to their main business on a group basis and the main business is not the provision of investment services within the meaning of MiFID II or banking activities under CRD IV (the Ancillary Activity Exemption). Directive (EU) 2021/338 revisited the Ancillary Activity Exemption and empowered the Commission to adopt a Delegated Regulation to replace CDR 2017/592 (RTS 20). The EC explains that this draft delegated act is based on the provisions of the current RTS 20. The changes triggered by the amended Ancillary Activity Exemption are the deletion of the Overall Market Size Test of Article 2 of RTS 20 and the introduction of the new De-Minimis Threshold Test. The amended Ancillary Activity Exemption does not change the established calculation methodology of the Trading Test and Capital Employed Test as described in RTS 20. The only change to these two tests is the level of the corresponding threshold as set out in Directive (EU) 2021/338. Therefore, this Delegated Regulation continues to apply the established calculation methodologies and principles of RTS 20. These are already implemented by non-financial firms and accordingly supervised by financial regulators and did not raise any concerns. In order to address the legal uncertainty that would arise for those non-financial groups that do not have a complete and representative set of data covering their main and ancillary activities, a calculation period of three years is also maintained from RTS 20. Additionally, in order to address the practical issue of an "oscillator" group, the calculations to be undertaken to verify whether non-hedging trading is ancillary or not should cover a rolling average of three years.


ESMA: Consultation on its MiFID II/MiFIR Annual Review Report Status: Consultation Deadline for the submission of comments: 11/06/2021 ESMA published a consultation paper seeking input from market participants on its MiFID II/MiFIR annual review report under Commission Delegated Regulation (EU) 2017/583 (RTS 2). ESMA notes that the consultation provides for the annual assessment of the operation of the thresholds for the liquidity determination of bonds and the trade percentiles determining the pre-trade SSTI-threshold which is currently subject to a four-stage phase-in regime under RTS 2. The consultation proposes to: (i) move to stage 3 for the liquidity assessment of bonds; (ii) move to stage 3 for the SSTI percentile of bonds; and (iii) not move to stage 2 for the SSTI percentile of non-equity instruments other than bonds. ESMA states that these proposals are designed to increase the transparency available to market participants in the bond market. ESMA will consider the feedback and expects to publish a final report and submit, if necessary, regulatory technical standards to the EC for endorsement in July – following such endorsement, the RTS are then subject to a non-objection procedure by the EP and the Council of the EU.


ESMA: Updated opinion on ancillary activity calculations under MiFID II Status: Final ESMA updated its opinion on ancillary activity calculations under MiFID II. The opinion provides the estimation of the market size of commodity derivatives and emission allowances for 2020. Market participants, under MiFID II are required to measure their own activity against total market sizes in commodity derivatives in order to assess whether they exceed the ancillary activity

https://www.esma.europa.eu/sites/default/files/library/esma70-1861941480-56_qas_mifir_data_reporting.pdf

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13040--Delegated-Act-on-the-Ancillary-Activity-Exemption_en

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13040--Delegated-Act-on-the-Ancillary-Activity-Exemption_en

https://www.esma.europa.eu/file/119433/download?token=3rg56rhS

https://www.esma.europa.eu/sites/default/files/library/esma70-156-478_opinion_on_market_size_calculation.pdf



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thresholds in MiFID II and consequently would have to apply for authorisation as an investment firm. ESMA has prepared these estimations based on data reported to the ESMA Financial Instruments Transparency System FITRS as well as data reported to trade repositories under EMIR.


(ii) International

IOSCO: Report on thematic review of trading venues and intermediaries’ business continuity plans Status: Final IOSCO published the final report on its thematic review of business continuity plans (BCPs) for trading venues and intermediaries. The review assessed the extent to which IOSCO member jurisdictions have implemented regulatory measures consistent with the recommendations and standards set out in IOSCO’s 2015 Trading Venues Report and BCP Report. The two recommendations state that regulators should require trading venues to: (i) have in place mechanisms to help ensure the resiliency, reliability and integrity of critical systems; and (ii) establish, maintain and implement as appropriate a BCP. The two standards state that regulators should require market intermediaries to: (a) create and maintain a written BCP identifying procedures relating to an emergency or significant business disruption; and (b) update their BCP in the event of any material change to operations, structure, business, or location and conduct an annual review of it to determine whether any modifications are necessary in light of changes to the market intermediary's operations, structure, business, or location. IOSCO found that 13 of the 33 participating jurisdictions have been found to be “fully consistent” with the two recommendations and the two standards.

The review concludes with a number of recommendations for regulators to consider to improve consistency of regulatory frameworks with the recommendations and standards. These include that IOSCO members: (1) include in regulatory frameworks the necessary or appropriate powers for the regulator to set and enforce requirements or clear expectations on the establishment and proper maintenance and update of BCPs by trading venues and intermediaries; (2) enhance their regulatory frameworks to include more specific and detailed guidance to address the issues and topics raised in the Trading Venues Report and the BCP Report; (3) ensure regulatory frameworks require enterprise-wide BCPs for both trading venues and intermediaries, rather than only disaster recovery or contingency measures for IT systems; (4) adopt measures to require or encourage industry or market-wide scenario or stress testing of BCPs; (5) ensure that requirements aimed at critical systems sufficiently cover all aspects of business that fall within the definition of “critical systems” in the recommendations; and (6) provide regulators with the ability to obtain a copy of the BCP as well as the power to challenge the trading venues’ Board and/or senior officers in relation to material deficiencies of the BCP arrangements or in relation to the Board or senior management responsibility for the establishment and maintenance of the BCP.


3.5 Prospectus regulation (i) Germany

BaFin: Leaflet on the prohibition of blind pool constructions in the Asset Investment Act (Merkblatt zum Verbot von Blindpool-Konstruktionen im Vermögensanlagengesetz) Status: Consultation Deadline for the submission of comments: 04/06/2021 BaFin has published a draft leaflet on the prohibition of blind pool constructions in the Asset Investment Act (Vermögensanlagengesetz – VermAnlG) for consultation. The leaflet is intended to support the future blind pool ban for asset investment sales prospectuses (Vermögensanlagen-Verkaufsprospekte) and asset investment information sheets (Vermögensanlagen-Informationsblätter – VIB). The ban is part of the planned Investor Protection Strengthening Act (Anlegerschutzstärkungsgesetz) and is to be anchored in Section 5b (2) of the VermAnlG.

Based on certain criteria, the leaflet will determine which structures will be covered by the blind pool prohibition in the future or which information will be expected in prospectuses and VIBs in the future in order for a disclosure to be considered "specific" within the meaning of Section 5b (2) of the VermAnlG in conjunction with the Asset Investment Sales Prospectus Regulation

https://www.iosco.org/library/pubdocs/pdf/IOSCOPD675.pdf

https://www.bafin.de/SharedDocs/Downloads/DE/Konsultation/2021/dl_kon_07_21_Merkblatt.pdf?__blob=publicationFile&v=3

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(Vermögensanlagen-Verkaufsprospektverordnung – VermVerkProspV) or in conjunction with Section 13 of the VermAnlG for asset investment information sheets.

It is intended to ensure that uniform criteria are provided to the market and that only those prospectuses and asset investment information sheets are submitted to BaFin that meet these criteria.

The leaflet is aimed at providers and issuers involved in asset investment issues as well as business and consumer associations.


(ii) EU

ESMA: Updated Q&As on Prospectus Regulation Status: Final ESMA updated its Q&As on the Prospectus Regulation. It includes three new Q&As providing clarification as to: (i) the application of Article 4(1) of the CRA Regulation to credit rating disclosure in prospectuses; (ii) how to determine home Member State in the context of global depository receipts over shares; and (iii) the publication of supplements to prospectuses when new audited annual financial information is published by a non-equity issuer.


3.6 Securities financing transactions (i) EU

ESMA: Updated Q&As on data reporting under SFTR Status: Final ESMA published updated Q&As (dated 20 May 2021) on complying with reporting requirements under the Regulation on reporting and transparency of securities financing transactions (SFTR). A new Q&A has been added relating to reporting changes to the reference rate in a securities financing transaction.


ESMA: Final Report on Guidelines on the calculation of positions in SFTs by Trade Repositories (TRs) under the Securities Financing Transactions Regulation (SFTR) Status: Final Date of application: 31/01/2022 ESMA published its final report on its guidelines on the calculation of positions in SFTs by TRs under the SFTR. ESMA notes that the guidelines aim to ensure consistency of position calculation across TRs, with regard to the: (i) time of calculations; (ii) scope of the data used in calculations; (iii) data preparation; (iv) recordkeeping of data; and (v) calculation methodologies. The guidelines contain relevant clarifications to TRs as to: (a) the calculations carried out by TRs and the format of provision of access to data pursuant to Article 80(4) of EMIR as referred to in Article 5(2) of SFTR and detailed under Article 5 of RTS on data aggregation; and (b) the level of access to positions provided by TRs to the entities included in Article 12(2) of SFTR with access to positions in line with Article 3 of RTS on data access.


https://www.esma.europa.eu/sites/default/files/library/esma31-62-1258_prospectus_regulation_qas.pdf

https://www.esma.europa.eu/sites/default/files/library/esma74-362-893_qas_on_sftr_data_reporting.pdf

https://www.esma.europa.eu/sites/default/files/library/esma74-362-1986_final_report_and_guidelines_on_calculation_of_positions_in_sfts_by_trade_repositories.pdf

https://www.esma.europa.eu/sites/default/files/library/esma74-362-1986_final_report_and_guidelines_on_calculation_of_positions_in_sfts_by_trade_repositories.pdf



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3.7 Short selling (i) EU

ESMA: Proposal on lowering the reporting threshold for net short positions to 0.1% on a permanent basis Status: Final ESMA published an opinion recommending that the EC permanently lower the threshold to notify net short positions on shares to national competent authorities (NCAs) from 0.2% to 0.1%. ESMA has examined the evidence gathered after its successive emergency decisions, beginning in March 2020, which lowered, for the first time, the notification threshold to 0.1% on a temporary basis. The analysis showed that a substantial amount of additional and essential information became available to NCAs due to the reporting of net short positions at the level of 0.1%. This additional transparency to NCAs of the real level of net short positions established in the market translates into an improved ability by NCAs to conduct market oversight. ESMA therefore considers it essential to lower the reporting threshold to 0.1% on a permanent basis. Considering the continued uncertainty of the current financial market conditions – which do not justify the adoption of emergency measures by ESMA under Article 28 of SSR but require nevertheless the availability of relevant information to promptly identify and react quickly to any threats to orderly markets, markets integrity or financial stability – ESMA proposes to the EC to adopt the relevant delegated act pursuant to Article 5(4) of SSR as soon as possible.


https://www.esma.europa.eu/sites/default/files/library/esma70-156-4262_opinion_for_the_adjustment_of_the_threshold_set_out_in_article_52_of_ssr_0.pdf

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4. Market infrastructure

4.1 Custody rules (i) EU

ESMA: Updated Q&As on CSDR Status: Final ESMA published an updated version (dated 20 May 2021) of its Q&As on the implementation of the Central Securities Depositories Regulation (CSDR). ESMA has added a Q&A in Part III (Settlement discipline) relating to the scope of cash penalties.


ESMA: Letter providing proposals for the EC’s review of the CSDR Status: Final ESMA published a letter (dated 20 May) addressed to Mairead McGuinness, European Commissioner, on the review of the CSDR. The letter highlights ESMA’s views on a number of key points that should be addressed in the review, and brings forward proposals on the following topics: (i) status of TARGET2-Securities (T2S) – ESMA believes that it is no longer appropriate to entirely exclude this systemic settlement platform completely from the CSDR's scope; (ii) arrangement for the supervision/oversight of T2S – ESMA considers that the CSDR should be amended to ensure the legislative framework provides for a cooperative arrangement for the supervision and oversight of T2S, with clear roles for the participating authorities, taking the form of a college of supervisors; (iii) third-country CSD (TC-CSD) recognition regime – ESMA supports an enhanced regime that requires TC-CSDs to notify ESMA regarding services provided in the EEA and broadens the scope of the TC-CSD recognition regime by also covering the provision of settlement services in the EEA; and (iv) the frequency of ESMA reports to the EC on CSDR implementation – ESMA highlights the need to recalibrate the frequency of the reports, and introduces a proposal on reducing the frequency of the reports under Article 74 of CSDR included in the Annex.


4.2 EMIR (i) EU

ESMA: Draft guidelines on data transfer between trade repositories under EMIR and SFTR Status: Consultation Deadline for the submission of comments: 27/08/2021 ESMA published a consultation paper on guidelines for the transfer of data between trade repositories (TRs) under EMIR and the Regulation on reporting and transparency of securities financing transactions (SFTR). ESMA proposes changes to three of its existing guidelines on data transfer between TRs under EMIR (see Legal update, ESMA final report on guidelines on transfer of data between trade repositories under EMIR), together with the addition of nine new guidelines to provide additional clarification.

It also proposes a set of new guidelines under the SFTR. These build on the existing (and proposed new) EMIR guidelines. The changes are designed to: (i) enhance the quality of data available to authorities, including the aggregations carried out by TRs, including when the TR participant changes the TR to which it reports and irrespective of the reason for such a change; (ii) ensure that the competitive multiple-TR environment is guaranteed, and that TR participants can benefit from competing offers; and (iii) safeguard a consistent and harmonised way to transfer records from one TR to another.


https://www.esma.europa.eu/sites/default/files/library/esma70-708036281-2_csdr_qas.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-156-4519_letter_to_ec_-_csdr_review.pdf

https://www.esma.europa.eu/file/119657/download?token=uL6d-EvK



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ESMA: Updated Q&As on EMIR implementation Status: Final ESMA published an updated version of its Q&As (dated 20 May 2021) on the implementation of EMIR. ESMA has amended two questions in the trade repositories section relating to access to data by the authorities and reporting of reference rates not included in Commission Implementing Regulation (EU) 2017/105. It has also added a new Q&A on reporting of the field "delivery type" for credit derivatives.


ESMA: Consultation on draft RTS for commodity derivatives Status: Consultation Deadline for the submission of comments: 23/07/2021 ESMA published a consultation paper on its draft RTS for commodity derivatives, as part of the post-Covid MiFID II Recovery Package. ESMA’s proposals relating to the application of position limits to commodity derivatives focus on: (i) developing procedures for financial entities undertaking hedging activities and for liquidity providers to apply for an exemption from position limits; and (ii) suggesting other technical adjustments to improve the application of the position limit regime in practice. In addition, the consultation also contains ESMA’s proposals for technical standards on position management controls.


EC: Commission Delegated Regulation (EU) …/... extending the transitional period referred to in Article 89(1), first subparagraph, of EMIR Status: Adopted by EC The EC adopted a Commission Delegated Regulation extending the transitional period referred to in Article 89(1), first subparagraph, of EMIR until 18 June 2022.

Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) provides for a temporary exemption from the clearing obligation for Pension Scheme Arrangements (PSAs) meeting certain criteria. This transitional period is set out under Article 89(1) of EMIR and provides further time for central counterparties (CCPs), PSAs and clearing members to develop viable technical solutions which would allow PSAs to meet the cash variation margin calls of CCPs. The temporary exemption has been extended over the years, since no viable technical solution has emerged. The recent review of EMIR (Regulation (EU) No. 834/2019, “EMIR Refit”) prolonged the exemption until 18 June 2021. In accordance with Article 85(2) it is possible to further extend it by two years maximum through two Commission delegated acts, while the ultimate aim of the Regulation remains central clearing for PSAs.

The Commission is proposing to prolong the existing exemption by an additional year, by means of this Delegated Act.


Commission Delegated Regulation (EU) 2021/732 amending Delegated Regulation (EU) No 667/2014 with regard to the content of the file to be submitted by the investigation officer to ESMA, the right to be heard with regard to interim decisions and the lodging of fines and periodic penalty payments Status: Published in the OJ Date of entry into force: 07/05/2021 Date of application: 07/05/2021 Commission Delegated Regulation (EU) 2021/732 was published in the OJ. The Delegated Regulation amends Delegated Regulation (EU) No 667/2014, which supplements EMIR with regard to the rules of procedure for penalties imposed on trade repositories by ESMA. The amendments are with regard to the content of the file to be submitted by the investigation officer to ESMA, the right to be heard with regard to interim decisions and the lodging of fines and periodic penalty payments. This is to take account of the changes introduced by the EMIR Refit Regulation.

The Delegated Regulation is relevant for trade repositories.


https://www.esma.europa.eu/sites/default/files/library/esma70-1861941480-52_qa_on_emir_implementation.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-156-4067_consultation_paper_-_technical_standards_for_commodity_derivatives_-_mifidii_recovery_package.pdf



https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX%3A32021R0732&from=EN



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Commission Delegated Regulation (EU) 2021/731 supplementing EMIR with regard to rules of procedure for penalties imposed on third-country central counterparties or related third parties by ESMA Status: Published in the OJ Date of entry into force: 07/05/2021 Date of application: 07/05/2021 Commission Delegated Regulation (EU) 2021/731 was published in the OJ. This Delegated Regulation supplements EMIR with regard to rules of procedure for penalties imposed on third-country central counterparties (CCP) or related third parties by ESMA. The Delegated Regulation further specifies the rules of procedure for the exercise of ESMA’s power to impose fines or periodic penalty payments on third-country CCPs and related third parties to whom third-country CCPs have outsourced operational functions or activities. In particular, the rules of procedures should include provisions on the rights of the defence, temporal provisions, and the collection of fines or periodic penalty payments and the limitation periods for the imposition and enforcement of penalties.

The Delegated Regulation is relevant for central counterparties.


(ii) International

BCBS, CPMI and IOSCO: Survey clients and non-bank intermediaries on margin calls Status: Consultation Deadline for the submission of comments: 17/05/2021 BCBS, CPMI and IOSCO published a voluntary survey on margin calls which is open to clients (i.e., entities that participate in these markets through an intermediary) and non-bank intermediaries. The survey looks at both initial and variation margins in derivatives and securities markets and covers: (i) margin in cleared and uncleared markets during the March 2020 market turmoil, including clearing member-client dynamics; (ii) margin practice transparency, predictability and volatility during the March market turmoil across various markets, jurisdictions and margining models; and (iii) liquidity management preparedness of market participants (especially non-banks) to meet margin calls. Separately the Committees are collecting data from central counterparties and bank intermediaries. As part of the work programme to enhance the resilience of the non-bank financial intermediary (NBFI) sector, the G20 agreed that the FSB should coordinate with the Committees to look at issues around margin calls during the early stages of the Covid-19 pandemic. The results of the survey will feed into the overall FSB NBFI work and will be delivered to the G20.

• Survey for clients • Survey for non-bank intermediaries


(iii) International

IOSCO: Speech on a global perspective on derivatives regulation Status: Final IOSCO published a speech by Ashley Alder, its CEO, on global issues relating to derivatives regulation: (i) IOSCO and the FSB will be consulting the market on questions relating to non-bank financial intermediation (NBFI) resilience over the next few months. An overriding consideration is how to ensure that these NBFI activities are sufficiently resilient, but to do so in a way which does not stifle investment flows and hence their contributions to the real economy, especially during times of stress; (ii) IOSCO, the CPMI and BCBS will more closely examine the dynamics of margin calls in derivatives markets during the market turmoil last March and April. One concern is whether sudden changes in margin rates can have strong procyclical effects, particularly if previous margin models did not sufficiently account for extreme scenarios. This also raises questions about whether efforts to access liquidity may have affected other parts of the financial system and how easily assets which are held for the purpose of meeting liquidity needs can be monetised in times of major stress; (iii) Mr Alder is working with the Chairs of the FSB, CPMI and the FSB Resolution Steering Group to tackle questions on CCP resolution including whose resources should be used to support CCP resolution, and in what proportion, and whether the CCP rule books provide sufficient incentives for all stakeholders to facilitate an orderly resolution; (iv) IOSCO is carrying out work on questions raised by the Archegos incident,



https://www.iosco.org/surveys/2021/jwgm-ws3/

https://www.iosco.org/surveys/2021/jwgm-ws2/

https://www.sfc.hk/-/media/EN/files/ER/PDF/Speech---CEO-at-ISDA-AGM_13-May.pdf



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including whether the full implementation of BCBS-IOSCO margin requirements would have reduced the losses; (v) the Archegos incident also provides a good opportunity for IOSCO to assess the degree to which trade repositories (TRs) are achieving their original objectives, namely, the ability of regulators to use information in TRs to quickly detect an untoward build-up of risk before any blow-up; and (vi) IOSCO fully supports the transition away from LIBOR. In view of the risks associated with a failure to prepare adequately for the transition, the onus is on firms to take immediate action.


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5. Anti-money laundering

(i) Germany

BMF: Minister’s bill of a regulation on enhanced due diligence requirements for the transfer of crypto assets (Kryptowertetransferverordnung – KryptoTransferV) Status: Consultation Deadline for the submission of comments: 14/06/2021 The Federal Ministry of Finance (Bundesfinanzministerium – BMF) published a Minister’s bill of a regulation on enhanced due diligence requirements for the transfer of crypto assets (Referentenentwurf einer Verordnung über verstärkte Sorgfaltspflichten bei der Übertragung von Kryptowerten) on the basis of Section 15 (10) sentence 1 number 1 of the Money Laundering Act (Geldwäschegesetz – GwG).

The BMF intends to order by way of regulation that the parties involved in the transfer of crypto values transmit information on the ordering party and beneficiary so that – as in the case of money transfers – the transactions can also be traced with regard to the beneficiaries in order to prevent misuse for the purposes of money laundering or terrorist financing. This data transmission will allow, in addition to the traceability of the transaction participants, the checking for persons affected by sanctions and a more risk-oriented approach by the service providers involved. The proposal serves to implement the standards of the Financial Action Task Force (Recommendation 15 - Interpretative Note 7b, so-called "travel rule" for crypto assets).

The regulation also orders that information on the beneficiary or ordering party of a crypto value transfer must be collected and stored if the transfer is made from or to an electronic wallet that is not managed by a crypto custodian (self-managed electronic wallet, "unhosted wallet"). This also implements current FATF recommendations in this area. Furthermore, findings from this can also become relevant with regard to the circumvention of sanctions, e.g. in the area of proliferation financing.


(ii) EU

EBA: Consultation on guidelines on cooperation and information exchange in the area of anti-money laundering (AML) and countering the financing of terrorism (CFT) Status: Consultation Deadline for the submission of comments: 27/08/2021 The EBA published a consultation paper on new guidelines on cooperation and information exchange in the area of AML and CFT, in line with provisions laid down in the CRD. The EBA explains that the guidelines put in place the practical modalities of cooperation and information exchange among prudential supervisors, AML/CFT supervisors and financial intelligence units (FIUs). Furthermore, the guidelines facilitate and support the cooperation and information exchange throughout the supervisory life cycle covering authorisations of new institutions, ongoing supervision including the risk assessment, and, where relevant, the imposition of supervisory measures and sanctions, including the withdrawal of the authorisation. In particular, the guidelines help authorities exchange information in a more effective way and bring clarity on which information to exchange with whom and at what stage.

The guidelines complement the European Supervisory Authorities AML/CFT Colleges Guidelines, which were published in 2019.


EC: Speech broadly outlining reforms in AML and CTF action plan Status: Final The EC published a speech by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, in which she outlines elements of the reforms the EC intends to present further to its May 2020 AML and CTF action plan. The EC plans: (i) to publish a package of legislative proposals in July; (ii) to create more harmonised rules

https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/Abteilungen/Abteilung_VII/19_Legislaturperiode/2021-05-26-Kryptowertetransfer-Verordnung/1-Referentenentwurf.pdf?__blob=publicationFile&v=3


https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2021/Guidelines%20on%20cooperation%20and%20information%20exchange%20between%20prudential%20supervisors%2C%20AML-CFT%20supervisors%20and%20financial%20intelligence%20units/1012943/Consultation%20Paper%20on%20draft%20AML-CFT%20Cooperation%20Guidelines.pdf

https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2021/Guidelines%20on%20cooperation%20and%20information%20exchange%20between%20prudential%20supervisors%2C%20AML-CFT%20supervisors%20and%20financial%20intelligence%20units/1012943/Consultation%20Paper%20on%20draft%20AML-CFT%20Cooperation%20Guidelines.pdf

https://ec.europa.eu/commission/commissioners/2019-2024/mcguinness/announcements/speech-aml-intelligence-boardroom-series_en



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and a new AML Authority at EU level. The idea is to have common standards, common application and common supervision of the rules. The AML Authority will: (a) be the direct supervisor of certain financial sector entities which operate cross-border and are in the highest risk category; (b) act as a coordinator and overseer of national supervisors for other entities, including entities outside the financial sector; (c) coordinate and provide support to Financial Intelligence Units; and (d) prepare technical standards and guidelines and advise the EC. The EC expects the Authority to start carrying out direct supervision in 2026; (iii) for rules for the private sector to be laid down in a directly applicable EU regulation. The EC will also review the list of sectors covered by AML rules. The first step will be to align it with the latest FATF standards and cover all types of Virtual Asset Service Providers as obliged entities. This also means ensuring the traceability of transfers of virtual assets and so they will be added to the scope of the existing Transfer of Funds regulation; (iv) to increase the detail in some areas already included in the AML Directive such as Customer Due Diligence and beneficial ownership; and (v) to set an EU-wide upper limit for cash purchases of €10,000. In terms of non-legislative action, the EC plans to: (1) launch a consultation on information exchange and public-private partnerships, in order to publish guidance by the end of the year; (2) deepen its involvement in FATF and step up EU coordination on global AML issues; and (3) carry out enforcement where the AML framework is not being implemented in Member States. A key priority is making sure that beneficial ownership registers are up and running and fully populated.


EBA: Consultation on RTS to establish an AML and CFT central database Status: Consultation Deadline for the submission of comments: 17/06/2021 The EBA is consulting on draft regulatory technical standards (RTS) to establish an AML and CFT central database. It has also published a summary of the draft data protection impact assessment on the database, which analyses the risks arising from the processing of personal data and establishes the controls that will be put in place by the EBA to mitigate the risks identified. The revised EBA Regulation that came into effect in January 2020 requires the EBA to establish and keep up to date a central database with information on AML/CFT weaknesses that competent authorities (CAs) have identified in respect of individual financial institutions. The database will also contain information on the measures CAs have taken to rectify those material weaknesses. Information from this database will be used by individual CAs and the EBA to make the fight against ML/TF in the EU more targeted and effective in the future.

The draft RTS specify: (i) the definition and the materiality of weaknesses identified by CAs; (ii) the type of information collected and how such information will be communicated to the EBA; (iii) how the EBA will analyse and disseminate the information contained in the central database; and (iv) the rules to ensure the effectiveness of the database, the confidentiality of the data contained in the database, as well as how the database will interact with other notifications that competent authorities are required to provide to the EBA and the provisions to ensure the protection of personal data.


https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2021/Consultation%20on%20draft%20RTS%20on%20a%20central%20database%20on%20AML-CFT%20in%20the%20EU/1000642/Consultation%20Paper%20RTSs%20AMLCFT%20central%20database.pdf

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6. Payments

6.1 Payment and settlement systems (i) EU

EP: Draft report on the proposal for a regulation on cross-border payments Status: Draft The EP’s Legal Affairs Committee (JURI) published a draft report on the EC’s legislative proposal for a Regulation on cross-border payments in the EU, codifying and replacing the existing Regulation. This contains the EP’s draft legislative resolution, as well as the opinion of the consultative working party, the Council of the EU and the EC. The legislative resolution explains that the proposal contains a straightforward codification of the existing texts without any change in their substance. Thus, the EP has adopted its position at first reading, taking over the EC proposal, as adapted to the recommendations set out in the consultative working party’s opinion. The EP has also instructed its President to forward its position to the Council, the EC and the national parliaments. The next stage is for the draft report to be adopted.

As stated in the updated procedure file, the Regulation is currently awaiting committee decision, and it will be considered in plenary on 23 June.


(ii) Eurozone

Regulation (EU) 2021/728 of the ECB amending Regulation (EU) No 795/2014 on oversight requirements for systemically important payment systems (ECB/2021/17) Status: Published in the OJ Date of entry into force: 25/05/2021 Date of application: 25/05/2021 The Regulation (EU) 2021/728 amending Regulation (EU) No 795/2014 on oversight requirements for systemically important payment systems (SIPS Regulation) was published in the OJ. The amendments introduced in the SIPS Regulation: (i) allow, where a pan-European payment system has been overseen by a national central bank (NCB) for five years or more prior to becoming an SIPS, for the designation of both the NCB and ECB as competent authorities; (ii) put in place alongside the existing criteria for the classification of a payment system as an SIPS, an additional forward-looking methodology; (iii) lay down due process procedures that need to be respected both before and after a payment system has been identified as an SIPS; and (iv) set out the procedure for the declassification of a payment system as an SIPS.


Decision (EU) 2021/729 of the ECB amending Decision (EU) 2017/2098 on procedural aspects concerning the imposition of corrective measures for non-compliance with Regulation (EU) No 795/2014 (ECB/2021/18) Status: Published in the OJ Date of entry into force: 25/05/2021 The ECB Decision (EU) 2021/729 was published in the OJ. It makes consequential amendments to ECB Decision (EU) 2017/2098 on procedural aspects concerning the imposition of corrective measures for non-compliance with the SIPS Regulation, which reflect the latest amendments to the SIPS Regulation by Regulation (EU) 2021/728 (see entry above).


https://www.europarl.europa.eu/doceo/document/JURI-PR-693563_EN.pdf

https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32021R0728

https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32021R0728






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Decision (EU) 2021/730 of the ECB amending Decision (EU) 2019/1349 on the procedure and conditions for exercise by a competent authority of certain powers in relation to oversight of systemically important payment systems (ECB/2021/19) Status: Published in the OJ Date of entry into force: 25/05/2021 The ECB Decision (EU) 2021/730 was published in the OJ. It makes consequential amendments to ECB Decision (EU) 2019/1349 on the procedure and conditions for exercise by a competent authority of certain powers in relation to oversight of SIPS, which reflect the latest amendments to the SIPS Regulation by Regulation (EU) 2021/728 (see above).


https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32021D0730



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7. Banking union

7.1 Single Resolution Mechanism (SRM) (i) Germany

BR: Draft law on the Convention of 27 January 2021 amending the Convention of 21 May 2014 on the transfer of contributions to the Single Resolution Fund and on the sharing of such contributions (Entwurf eines Gesetzes zu dem Übereinkommen vom 27. Januar 2021 zur Änderung des Übereinkommens vom 21. Mai 2014 über die Übertragung von Beiträgen auf den Einheitlichen Abwicklungsfonds und über die gemeinsame Nutzung dieser Beiträge) Status: Draft The European Union has established a Single Resolution Mechanism (SRM) with Regulation (EU) No 806/2014 (SRM Regulation) with the necessary powers to ensure that banks in participating Member States can be resolved in an orderly manner using appropriate tools to ensure financial stability and avoid recourse to state aid. The Single Resolution Mechanism is supported by a Single Resolution Fund (SRF).

The draft treaty law published by the German government (Bundesregierung – BR) is intended to create the conditions required on the German side for the entry into force of the intergovernmental convention signed by the Federal Republic on 27 January 2021 amending the convention of 21 May 2014 on the transfer of contributions to the Single Resolution Fund and on the sharing of such contributions (hereinafter: IGA Amendment Convention). The IGA Amendment Convention will establish rules for the communitisation of ex post contributions to the SRF. The amendments to the IGA serve to effectively and early implement the common backstop before the end of the transition period by providing additional funds for the repayment of European Stability Mechanism (ESM) credit lines to the SRB in the event that the backstop is used to finance a resolution action. The ultimate protection refers to the ESM's authorisation to make the ultimate protection facility available to the SRB in the form of a revolving credit line. The repayment of any drawn funds under the ultimate security is ensured in particular through ex post contributions.


BR: Draft of a Second Act Amending the ESM Financing Act (Entwurf eines Zweiten Gesetzes zur Änderung des ESM-Finanzierungsgesetzes) Status: Draft The Agreement amending the Treaty establishing the European Stability Mechanism (ESM Amendment Agreement), signed by the Federal Republic of Germany on 27 January 2021, further develops the European Stability Mechanism (ESM) as a crisis management instrument at various levels. The Act on the Agreement of 27 January 2021 amending the Treaty of 2 February 2012 establishing the European Stability Mechanism (see previous entry) declares the consent of the legislative bodies pursuant to Article 59(2), first sentence, in conjunction with Article 23(1), second sentence, of the Basic Law. The ESM Amendment Agreement is thus transformed into domestic law.

With the present draft law of the Federal Government (Bundesregierung – BR), the aforementioned treaty amendments to the ESM Treaty are implemented in the ESM Financing Act (ESMFinG) and the parliamentary rights of participation and information are adapted accordingly.


https://dserver.bundestag.de/btd/19/295/1929566.pdf





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8. Institutional supervisory framework

(i) Germany

BMF: Special Fees Regulation of the Federal Ministry of Finance on Financial Services Supervision (Finanzdienstleistungsaufsichtsgebührenverordnung – FinDAGebV) Status: Draft The German Ministry of Finance (Bundesfinanzministerium – BMF) published a Draft Special Fees Regulation on Financial Services Supervision. The Special Fees Regulation, in connection with the obligation of the fee creditor regulated in Section 1 of the Federal Fees Act (Bundesgebührengesetz – BGebG) to provide for fees for individually attributable public services of federal authorities in accordance with the BGebG and the fee regulations pursuant to Section 22 (3) and (4) of the BGebG, determines all fee elements in one of the areas of responsibility of the BMF, namely the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). This implements the regulatory mandate under Section 22(4) sentence 1 of the BGebG to issue department-specific Special Fees Regulations for this area of responsibility of the BMF. In this regulatory context, the regulation determines the arrangement of fixed and time-based fees pursuant to Section 11 of the BGebG (Section 22, paragraph 1, sentence 2 of the BGebG) as well as fees in special cases pursuant to Section 10, paragraph 1, sentence 3 of the BGebG.


(ii) EU

ESMA: Response to EC consultation on the functioning of the European Supervisory Authorities (ESAs) Status: Final ESMA published a letter containing its response to the EC’s targeted consultation on the functioning of the ESAs. ESMA notes that the response reflects the views of the Board of Supervisors on some existing issues and limitations that could be addressed in the ESMA Regulation, and other relevant EU financial services legislation. Specifically, the recommendations focus on: (i) reinforcing ESMA’s approach to supervisory convergence; (ii) considering the merits of EU level direct supervision; (iii) building ESMA’s data capabilities; (iv) ensuring the single rulebook remains fit-for-purpose; and (v) alleviating funding issues.


Commission Delegated Regulation (EU) 2021/822 amending Delegated Regulations (EU) No 1003/2013 and (EU) 2019/360 as regards the annual supervisory fees charged by the European Securities and Markets Authority to trade repositories for 2021 Status: Published in the OJ Date of entry into force: 26/05/2021 Commission Delegated Regulation (EU) 2021/822, amending Delegated Regulations (EU) 1003/2013 and (EU) 2019/360 as regards the annual supervisory fees charged by ESMA to TRs for 2021, was published in the OJ. The text explains that fees paid to ESMA by TRs are calculated using a methodology established in Delegated Regulations (EU) No 1003/2013 and (EU) 2019/360 – the reference period for the applicable turnover in those Delegated Regulations is the year previous to the year in which the revenues are paid. Following the UK’s withdrawal from the EU, two TRs established in the UK transferred part of their services and activities to the EU to be able to continue providing their services and activities to counterparties established in the EU. The new EU TRs effectively started their activity in the EU in January 2021, their level of activity in 2020 being almost non-existent, meaning that their annual supervisory fee for 2021 would be negligible, although their activities are likely to be significant. To ensure that they pay a fee which is proportionate to their actual turnover in the EU, their annual supervisory

https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/Abteilungen/Abteilung_VII/19_Legislaturperiode/2021-05-10-FinDAGebV/1-Referentenentwurf.pdf?__blob=publicationFile&v=2

https://www.esma.europa.eu/sites/default/files/library/esma22-328-603_-_letter_to_the_commissioner_-_response_to_esas_review_consultation.pdf




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fee for 2021 should be calculated on the basis of their applicable turnover during the first half of 2021. Thus, the Delegated Regulation changes the reference period for the calculation of annual fees paid by trade repositories to ESMA in 2021.

The Regulation is relevant for Trade Repositories only.


EBA: Report on convergence of supervisory practices in 2020 and 2021 convergence plan Status: Final The EBA published a report on the convergence of supervisory practices in 2020. Overall, the EBA’s report finds that, in 2020, increased supervisory attention was given to the assessment of profitability and business models, as well as to selected areas of ICT risk and operational resilience, while loan origination received less supervisory attention – therefore, loan origination practices should remain an area of attention for supervisors in 2021 and onwards. The EBA also observed continued efforts by competent authorities to cooperate with their resolution authority counterparts and prudential supervisory practices have been converging in the context of money laundering and terrorist financing risk – nevertheless, some differences remain in supervisory practices. Another key element of the report is the convergence in supervisory colleges, where the EBA observed increased interaction in 2020, compared to 2019. In addition, the report sets out the four key topics identified for the 2021 convergence plan for prudential supervisory purposes: (i) asset quality and credit risk management; (ii) ICT and security risk, and operational resilience; (iii) profitability and business model; and (iv) capital and liability management.


https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2021/1001195/EBA%20Report%20on%20convergence%20of%20supervisory%20practices%20in%202020.pdf



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9. Investment funds

9.1 Product regulation

(a) AIF

(i) EU

ESMA: Updated Q&A on application of the AIFMD Status: Final ESMA published an updated version of its Q&As on the application of the Alternative Investment Fund Managers Directive (AIFMD). ESMA has updated the Q&As relating to reporting to national competent authorities under Articles 3, 24 and 42 of the AIFMD and its guidelines on performance fees in UCITS and certain types of alternative investment funds (AIFs). It has also added new Q&As relating to: (i) the risks measured by NET DV01, NET CS01 and Net Equity Delta; (ii) the guidelines on performance fees in UCITS and certain types of AIFs, which came into force on 5 January 2021; and (iii) setting performance reference periods.


ESMA: Updated opinion on the collection of information for the effective monitoring of systemic risk under Article 24(5), first subparagraph, of the AIFMD Status: Final ESMA updated its Opinion Collection of information for the effective monitoring of systemic risk under Article 24(5), first subparagraph, of the AIFMD, in the context of AIFMD reporting. The ESMA Opinion provides details on a set of additional information that, in ESMA’s view, national competent authorities (NCAs) could require AIFMs to report on a periodic basis pursuant to Article 24(5), first subparagraph of the AIFMD. In particular, the updates aim at providing clarifications to three risk measures (Value-at-Risk, Net FX delta and Net commodity delta) already included in the Opinion in the section “Information on risk measures”. This section has been amended to provide guidance to AIFMs, with definitions of the abovementioned risk measures and practical examples for the reporting. The content of the Opinion that does not refer to these measures is maintained as published in 2013.


(b) UCITS

(i) Germany

BaFin: Updated List of approved stock exchanges and other organised markets in accordance with Section 193(1) sentence 1 Nos. 2 and 4 of the Capital Investment Code (KAGB) Status: Final BaFin updated its list of approved stock exchanges and other organised markets in accordance with Section 193 Paragraph 1 Sentence 1 Nos. 2 and 4 of the Capital Investment Code (Kapitalanlagegesetzbuch – KAGB). Pursuant to Section 193 (1) sentence 1 nos. 2 and 4 KAGB, the UCITS capital management company may acquire securities for the account of the UCITS which are admitted to or included in stock exchanges and organised markets outside the European Union and the European Economic Area, or whose admission or inclusion has been applied for, only if these stock exchanges or organised markets have been approved in this respect by the Federal Financial Supervisory Authority.

BaFin uses the list to provide information on these approved stock exchanges and organised markets.


https://www.esma.europa.eu/sites/default/files/library/esma34-32-352_qa_aifmd.pdf

https://www.esma.europa.eu/sites/default/files/library/esma50-164-4605_opinion_risk_metrics.pdf

https://www.esma.europa.eu/sites/default/files/library/esma50-164-4605_opinion_risk_metrics.pdf

https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Auslegungsentscheidung/WA/ae_080208_boersenInvG.html

https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Auslegungsentscheidung/WA/ae_080208_boersenInvG.html

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(ii) EU

ESMA: Updated Q&As on application of UCITS Directive Status: Final ESMA published an updated version of its Q&As on the application of the UCITS Directive. Two new Q&As have been added relating to the performance reference period for the benchmark model and the performance reference period in case of funds' mergers.


9.2 Prudential regulation

(a) Compliance

(i) EU

ESMA: Final Report on its Guidelines under the Regulation on cross-border distribution of funds Status: Final ESMA published its final report on its guidelines under the Regulation on cross-border distribution of funds. ESMA notes that the purpose of the guidelines is to clarify the requirements that funds’ marketing communications must meet. The report contains a feedback statement summarising the responses that ESMA received to its consultation on the guidelines, highlighting the amendments and clarifications introduced in the final guidelines in consideration of the feedback. ESMA states that while stakeholders generally agreed with the draft guidelines, the responses included certain recurring comments – in particular, a majority of respondents were concerned by the responsibility of fund managers to ensure that all marketing communications, even those issued by third-party distributors, meet the requirements set out in the draft guidelines. The majority of stakeholders also agreed that the online aspects of marketing communications were not sufficiently taken into account and asked that the draft guidelines are amended to facilitate online marketing. The feedback statement explains how these points have been addressed in the draft guidelines.

The final guidelines are set out in Annex IV of the report and will be translated into the official languages of the EU and published on ESMA's website. They will apply six months after the date of the publication of the translations.


https://www.esma.europa.eu/sites/default/files/library/esma34_43_392_qa_on_application_of_the_ucits_directive.pdf

https://www.esma.europa.eu/sites/default/files/library/esma34-45-1244_-_final_report_on_the_guidelines_on_marketing_communications.pdf



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10. Special rules for real estate financing and covered bonds

10.1 Mortgage credits (i) EU

EC: Report from the Commission to the European Parliament and the Council on the review of Directive 2014/17/EU on credit agreements for consumers relating to residential immoveable property (Mortgage Credit Directive – MCD) Status: Final The EC published a report on the review of the MCD. First, the report covers the impact on consumer protection, specifically: (i) consumer trust and satisfaction with mortgages; (ii) effectiveness of the rules on advertising and pre-contractual information; (iii) period of reflection and/or withdrawal; (iv) bundling and tying practices; (v) creditworthiness assessment; (vi) knowledge and competence of staff; (vii) foreign-currency loans; (viii) right to early repayment; (ix) arrears and foreclosure; (x) assignment of the credits to a third party; and (xi) new post-contractual rights. Secondly, the report covers the impact on the single market, covering: (a) scope of the MCD; (b) access to credit databases; (c) customer mobility/switching of providers; (d) EU passport for credit intermediaries; (e) mortgage lending by non-credit institutions; and (f) enforcement. Finally, the report also addresses the impact on financial stability. An annex to the report was also published, which sets out data relating to the role of credit intermediaries in mortgage lending.


10.2 Covered bonds (i) Germany

Law implementing Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2162 über die Emission gedeckter Schuldverschreibungen und die öffentliche Aufsicht über gedeckte Schuldverschreibungen) Status: Published in the Federal Gazette Date of entry into force: 01/07/2021 The Law implementing Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision has been published in the German Federal Gazette. The Law contains mainly amendments to the German Pfandbrief Act (Pfandbriefgesetz). Beyond that, it amends the German Investment Code (Kapitalanlagegesetzbuch – KAGB), the German Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz – SAG) and the German Financial Services Supervision Act (Finanzdienstleistungsaufsichtsgesetz – FinDAG).

The Directive aims to harmonise at least the different rules in the EU. The minimum harmonisation shall strengthen the European capital market union, create more transparency for investors and improve the marketing opportunities for the Pfandbrief.


https://ec.europa.eu/transparency/regdoc/rep/1/2021/EN/COM-2021-229-F1-EN-MAIN-PART-1.PDF



https://ec.europa.eu/transparency/regdoc/rep/1/2021/EN/COM-2021-229-F1-EN-ANNEX-1-PART-1.PDF



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10.3 Building societies (i) Germany

BaFin: Regulation amending the Building Societies Regulation (Verordnung zur Änderung der Bausparkassen-Verordnung) Status: Consultation Deadline for the submission of comments: 07/06/2021 BaFin has published a draft regulation amending the Building Societies Regulation for consultation. The draft amends Section 9 (large-scale bauspar contracts) and Section 12 (loans against a declaration of commitment, unsecured loans) of the Building Societies Regulation by increasing the maximum amounts anchored therein.

Background: In recent years, demand and prices on the real estate market have increased. The demand for modernisation measures has also increased. The adjusted regulation is intended to enable the Building Societies to react to these developments and to remain competitive in this area.


https://www.bafin.de/SharedDocs/Downloads/DE/Konsultation/2021/dl_kon_06_21_VO.pdf?__blob=publicationFile&v=5



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11. Special topics

11.1 Covid-19

(a) Prudential regulation

(i) EU

EBA: Speech on the implementation of Basel III in the post-Covid-19 setting Status: Final The EBA published a speech by its Chair Jose Manuel Campa, on implementation of Basel III in the post-Covid-19 setting. The speech covers: (i) a look back on the measures taken in relation to Covid-19; (ii) the Basel III implementation, outlining that a swift implementation of Basel III in the EU is desirable; and (iii) what is needed to support the recovery after Covid-19 – in particular how banks, supervisors and regulators can play a key role in both managing the risks of non-performing loan (NPL) losses, but also highlighting that the EBA has a responsibility to ensure that the corporate restructuring of firms hit by Covid-19 is done in a proper manner to ensure a sound recovery. The speech concludes that the key challenge from a macroeconomic perspective will be to help a sound recovery by facilitating the restructuring of firms affected by the crisis in a viable and sustainable manner – the role of the banking sector is crucial in this regard, by relying on sound credit judgements and adequate lending.


11.2 FinTech/Digital finance (i) Germany

BMF: Minister’s bill of a regulation on enhanced due diligence requirements for the transfer of crypto assets (Kryptowertetransferverordnung – KryptoTransferV) Status: Consultation Deadline for the submission of comments: 14/06/2021 The Federal Ministry of Finance (Bundesfinanzministerium – BMF) published a Minister’s bill of a regulation on enhanced due diligence requirements for the transfer of crypto assets (Referentenentwurf einer Verordnung über verstärkte Sorgfaltspflichten bei der Übertragung von Kryptowerten) on the basis of Section 15 (10) sentence 1 number 1 of the Money Laundering Act (Geldwäschegesetz – GwG).

For more information, please see above section 5 above.


BT: Adoption of the draft law on the introduction of electronic securities (Gesetz zur Einführung von elektronischen Wertpapieren) Status: Final The German Parliament (Bundestag – BT) adopted the draft law on the introduction of electronic securities. The introduction of electronic securities is intended to make the German financial market more viable in the future and, at the same time, to protect the integrity, transparency and functioning of the markets. The eWpG will enter into force on the day after its promulgation.

In line with other European countries, Germany will now also make it possible to issue electronic securities – including cryptosecurities based on the blockchain technology. The central point of the new provisions is the abandonment of the requirement of the documentary securitisation of securities, which can be replaced henceforth by an entry in an electronic

https://www.eba.europa.eu/sites/default/documents/files/document_library/Calendar/EBA%20Management%20Speeches/2021/Jose%20Manuel%20Campa%20speech%20at%20the%2035th%20General%20Annual%20Meeting%20of%20ISDA/1001190/Jose%20Manuel%20Campa%20speech%20at%20the%20ISDA%2035%20AGM%2012%20May.pdf



https://dip21.bundestag.de/dip21/btd/19/293/1929372.pdf

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securities register. To preserve the legal certainty of the acquisition and transfer of securities which has grown in practice and theory over the decades, electronic securities will be legally equated with securities securitised in documentary form.

The eWpG will in a first step allow the issuance of electronic bearer bonds as well as, in a limited form, of unit certificates for special assets, and it does allow for a future extension to cover other bearer instruments, e.g. stocks. At the same time it will remain possible to issue securities securitised in a documentary form. Issuers will thus have the choice to either securitise newly issued securities in a documentary form or to issue electronic securities.

We have compiled all relevant information on the eWpG for you in a client bulletin. Click on the link below to find out more about the background and content as well as our evaluation and outlook:

• Client Bulletin in German • Client Bulletin in English


(ii) EU

ESMA: Call for evidence on digital finance Status: Consultation Deadline for the submission of comments: 01/08/2021 ESMA launched a call for evidence on digital finance. ESMA notes that the call for evidence aims to gather relevant information on particular issues including value chains, platforms and groups’ provision of financial and non-financial services. ESMA is requesting information on three topics: (i) more fragmented or non-integrated value chains, arising as a result of financial firms increasingly relying on third parties for the delivery of their services and of technology companies entering financial services; (ii) digital platforms and bundling of financial services; and (iii) mixed activity groups providing both financial and non-financial services. The feedback will contribute to ESMA’s technical advice to the EC.


ESMA: Guidelines on outsourcing to cloud service providers Status: Final ESMA published the final Guidelines on outsourcing to cloud service providers after the translation into all official languages of the EU.


(iii) Eurozone

ECB: Speech on the necessity of using supervisory technology (suptech) Status: Final The ECB published a speech by a Member of its Supervisory Board, Pentti Hakkarainen, on the necessity of using suptech. The speech explains how banks and supervisory authorities are enhancing the way that they work with advanced IT solutions, emphasising that suptech is a necessity for effective banking supervision. The speech provides reasoning for the ECB Banking Supervision not only making use of modern technology, but also aiming to become a suptech pioneer. The speech states that the ECB Banking Supervision is in the process of becoming a digital innovation house, and provides detail on the four building blocks for this vision: (i) an effective innovation model; (ii) a digital culture; (iii) an innovation ecosystem; and (iv) successful delivery of business-related use cases.


https://comms.allenovery.com/e/2ckeovx8vjsgg/41211b59-0dbc-4b69-a230-cf4a0f463fee

https://comms.allenovery.com/e/xz0yzg3lf4sauuw/41211b59-0dbc-4b69-a230-cf4a0f463fee

https://www.esma.europa.eu/sites/default/files/library/esma-50-164-4518_call_for_evidence_digital_finance.pdf

https://www.esma.europa.eu/sites/default/files/library/esma_cloud_guidelines.pdf

https://www.bankingsupervision.europa.eu/press/speeches/date/2021/html/ssm.sp210527%7E8b69fbb1de.en.html



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11.3 Sustainable finance (i) EU

EBA: Report on results of EU-wide pilot exercise on climate risk Status: Final The EBA published a report on the findings of its first EU-wide pilot exercise on climate risk, which has the main objective of mapping banks’ exposures to climate risk and providing an insight into the green estimation efforts banks have carried out so far. The EBA states that the findings give a clear picture of banks’ data gaps and highlight the sense of urgency to remedy them if they are to achieve a meaningful and smooth transition to a low-carbon economy – a more harmonised approach and common metrics are needed to ensure that banks’ efforts will prove meaningful in addressing and mitigating the potentially disruptive impacts of environmental risks. Furthermore, the EBA notes that: (i) regarding the EU taxonomy classification, banks are currently in different development phases to assess the greenness of their exposures – two estimation techniques, banks’ bottom-up estimates and a top-down tool, are considered in the exercise and the report highlights the differences in outcomes; (ii) given the outlined constraints and based on a first estimate coming from a top down tool, an EU aggregated green asset ratio (GAR) stands at 7.9%; and (iii) the scenario analysis shows that the impact of climate-related risks across banks has different magnitudes and is concentrated in some particular sectors – tools for scenario analysis are quickly developing and further progress should be made on modelling the transmission channels of climate risk shocks to banks’ balance sheets. The EBA states that the findings are a key starting point in view of building up consistent and comparable climate risk assessment tools, and it will continue to work actively on measuring and assessing climate-related risks in the banking sector.


EC: Obligation for certain companies to publish non-financial information Status: Consultation Deadline for the submission of comments: 02/06/2021 The EC published a call for public feedback on its draft Delegated Regulation supplementing Article 8 of the Taxonomy Regulation by specifying the content and presentation of information to be disclosed by undertakings subject to Article 19a or 29a of Directive 2013/34/EU (the Accounting Directive) concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation. In addition, the EC has also published an FAQ on Article 8 of the Taxonomy Regulation, and how it will work in practice.


https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2021/1001589/Mapping%20Climate%20Risk%20-%20Main%20findings%20from%20the%20EU-wide%20pilot%20exercise%20on%20climate%20risk.pdf

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12440-Sustainable-finance-obligation-for-certain-companies-to-publish-non-financial-information_en

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12. German Omnibus Acts (Artikelgesetze)

(i) Germany

Law on the implementation of Directive (EU) 2019/2034 on the supervision of investment firms (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2034 über die Beaufsichtigung von Wertpapierinstituten) Status: Published in the Federal Gazette Date of entry into force: 26/06/2021 The Law on the implementation of Directive (EU) 2019/2034 on the supervision of investment firms (IFD) has been published in the German Federal Gazette. For more information, please see section 2 above.


Law implementing Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision (Gesetz zur Umsetzung der Richtlinie (EU) 2019/2162 über die Emission gedeckter Schuldverschreibungen und die öffentliche Aufsicht über gedeckte Schuldverschreibungen) Status: Published in the Federal Gazette Date of entry into force: 01/07/2021 The Law implementing Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision has been published in the German Federal Gazette. For more information, please see section 10.2 above.







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13. Contacts

Financial Services Regulatory

Dr Alexander Behrens Key contact | Partner Tel +49 69 2648 5730 [email protected]

Stephan Funck Of Counsel Tel +49 69 2648 5791 [email protected]

Dr Frank Herring Of Counsel Tel +49 69 2648 5310 [email protected]

Lennart Dahmen Counsel Tel +49 69 2648 5901 [email protected]

Woldemar Haering Counsel Tel +49 69 2648 5541 [email protected]

Valeska Karcher Senior Associate Tel +49 69 2648 5312 [email protected]

Kai Schadtle Senior Associate Tel +49 69 2648 5768 [email protected]

Dr Daniela Schmitt Senior Associate Tel +49 69 2648 5475 [email protected]

Niklas Germayer Associate Tel +49 69 2648 5973 [email protected]

Betuel Kohlhaeufl Associate Tel +49 69 2648 5788 [email protected]

Lukas Wagner Associate Tel +49 69 2648 5906 [email protected]

Georg Luetkenhaus PSL Tel +49 69 2648 5861 [email protected]

Derivatives, Structure Finance and Financial Services Regulatory

Derivatives and Structured Finance, Debt Capital Markets

Dr Stefan Henkelmann Partner Tel +49 69 2648 5997 [email protected]

Martin Scharnke Head of ICM Germany Tel +49 69 2648 5835 [email protected]

FOR MORE INFORMATION PLEASE CONTACT

allenovery.com

Frankfurt

Bockenheimer Landstraße 2 60306 Frankfurt am Main Germany

Tel +49 69 2648 5000 Fax +49 69 2648 5800

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regulatory monitoring may 2021

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