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Article (105/221)
European regulation update: long-term investment initiatives
European regulation update: long-term investment initiatives

European regulation update: long-term investment initiatives


Focus on the latest European regulatory developments as of  February 2018

Pan-European Personal Pension Product (PEPP)

On 29 June 2017 the European Commission published a regulation proposal (in English) concerning the Pan-European Personal Pension Product (PEPP) as part of the CMU project, in order to increase long-term financing of the economy while preparing future pensioners for a decline in the amounts paid under basic pension schemes (in the backdrop of an ageing population) - The text aims to allow the marketing, under a European label, of personal pension products that respect the measures stipulated by the regulation. The draft regulation was accompanied by a proposal for all Member States on the tax treatment of personal pension products. The proposal aims primarily to encourage Member States to apply the same taxation rules to future PEPPs as those applied to similar existing national personal pension products and to exchange best practices in order to bring the various tax regimes closer to each other for this type of product.

European Post Trade Forum (EPTF)

From 3 August to 15 November 2017, the European Commission consulted market participants on the topic of post-trade in general (particularly on clearing, custody, settlement and collateral management activities). This consultation contained two parts. One of the most interesting questions of the first part concerned market development factors and more specifically, the impact of new technologies on businesses. The second part concerned the current remaining barriers to post-tradeand the best ways to address them. In conjunction with the consultation, the European Post Trade Forum (EPTF) report was published on 15 May 2017. It covers the following main aspects:

  • General review of the current state of post-trade
  • Presentation of all of the barriers identified (both Giovannini and EPTF barriers)
  • A detailed presentation of each barrier

Framework applicable to the European Supervisory Authorities (ESAs)

On 20 September 2017, the European Commission published a proposal for a European regulation aimed at adjusting and improving the framework applicable to European Supervisory Authorities (ESAs) such as the European Banking Authority, the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA). These modifications aim to:

  • Extend the powers of ESAs
  • Strengthen governance
  • Organise funding to help these authorities best take their responsibility in terms of financial markets supervision

The Commission re-examined the scope of ESA mandates to align it with the CMU initiative’s strategic objectives and following the UK’s decision to leave the European Union (EU).

The main changes proposed consist of extending ESMA’s supervisory powers such that it is entitled to:

  • Authorise and control the main EU benchmarks and approve non-EU benchmarks for European Union inside use
  • Approve certain prospectuses published by EU-based entities and all prospectuses published by non-EU entities, but written in compliance with applicable EU rules
  • Authorise and supervise certain investment funds, namely European Venture Capital Funds, European Social Entrepreneurship Funds and European Long-Term Investment Funds
  • Coordinate market abuse investigations
  • Make ESAs responsible for verifying the consistency of the work programmes of the various supervisory authorities with EU priorities, and monitor the authorities’ practices in allowing banks, fund managers, investment firms and other market players to delegate certain business functions to non-EU countries.
  • Give EIOPA a more important role in the approval process for internal risk assessment models adopted by insurance and reinsurance companies in order to avoid the risk of discrepancies between the standards adopted by supervisory authorities and the results obtained
  • Set up executive committees to allow ESAs to make decisions independently of national interests
  • Define the contributions of financial players to the ESAs budgets to allow them to be independent from national supervisory authorities
  • Promote fintech companies as a priority and coordinate national initiatives aimed at promoting innovation and strengthening cybersecurity

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