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European regulation update: long-term investment initiatives
European regulation update: long-term investment initiatives
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European regulation update: long-term investment initiatives

23/10/2017

Focus on the latest European regulatory developments

Capital Market Union (CMU)

On 29 June 2017, the European Commission published its proposal for a Pan-European Personal Pension Product (PEPP), in order to increase the long-term financing of the economy while preparing future pensioners to face a decrease in pensions from basic schemes (in the context of an ageing population). This text proposes to allow the commercialisation, under a European label, of funded personal retirement savings products that respect the provisions of the regulation.

The draft regulation is accompanied by a proposal to the Member States on the tax treatment of the retirement savings products. This proposal essentially aims to encourage Member States to apply to future PEPPs the same tax treatment as similar domestic retirement savings products and to exchange best practices in order to converge the different tax regimes for this type of product.

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On 23 August 2017, the EU Commission consults on post-trade services. The EC has published a consultation paper on post-trade services used in financial transactions, including clearing, settlement and collateral management. The consultation is divided into two sections:

  • The first considers EU and global trends, new technologies and competition in post-trade markets
  • The second considers post-trade barriers and the actions that could be taken to remove them

The consultation is accompanied by a report by the European Post Trade Forum (EPTF), the expert group established by the EU Commission to assist the review of post-trading developments. The report provides, amongst other things:

  • An overview of the current state of post-trade reform
  • An assessment of the dismantling of barriers (both Giovannini and EPTF Barriers)
  • An abstract of its analysis of the current European post-trade landscape
  • Descriptions of the individual barriers and proposed solutions

The consultation closes on 15 November 2017. The responses will contribute to a communication on post-trade planned for the end of 2017 and future legislative reviews.

 

On 20 September 2017, the EU Commission issues legislative proposals to strengthen financial supervision.

The EU Commission has adopted a package of legislative proposals that aims to adjust and upgrade the framework of the European Supervisory Authorities (ESAs), comprising:

  • The European Banking Authority (EBA)
  • European Insurance and Occupational Pensions Authority (EIOPA)
  • And European Securities and Markets Authority (ESMA).

The amendments are intended to equip the ESAs with new powers, governance and funding in order to support their enhanced responsibility for financial market supervision. The Commission has reconsidered the scope of the ESAs' mandate in light of the policy objectives of the Capital Markets Union (CMU) project and the UK's decision to leave the EU.

Key features of the proposed changes include:

  • Extending ESMA's supervisory powers to include responsibility for:
    • Authorising and supervising the EU's critical benchmarks and endorsing non-EU benchmarks for use in the EU
    • Approving certain EU prospectuses and all non-EU prospectuses drawn up under EU rules
    • Authorising and supervising European venture capital funds (EuVECA), social entrepreneurship funds (EuSEF) and long-term investment funds (ELTIFs)
  • Coordinating market abuse investigations
  • Giving the ESAs responsibility for reviewing the consistency of the work programmes of individual supervisory authorities and monitoring authorities' practices in allowing banks, fund managers, investment firms and other market players to delegate business functions to non-EU countries
  • Giving EIOPA a greater role in coordinating the authorisation of insurance and reinsurance companies' internal risk measurement models to avoid the risk of divergent supervisory standards and outcomes
  • Creating executive boards that will allow the ESAs to take decisions independently from national interests
  • Making ESAs independent from national supervisors with budgets to be partly funded by contributions from the financial sector
  • Prioritising fintech and coordinating national initiatives to promote innovation and strengthen cybersecurity

The legislative proposals will be sent to the EU Parliament and Council for consideration and adoption.

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