EU & UK Reg Round Up: 27/11/2024
European Banking Authority
EBA updates list of CET1 instruments - 27 November 2024
The EBA has released an updated list of capital instruments classified as Common Equity Tier 1 (CET1). This update incorporates several significant changes since the last publication in December 2022. Notably, references to grandfathered instruments have been removed, as the grandfathering provisions under the Capital Requirements Regulation (CRR) expired on December 31, 2021. The update also includes the addition of new instruments, the removal of those no longer in use, and adjustments reflecting updates to relevant national legislative provisions.
ESAs outline timeline for designating critical ICT third-party providers under DORA - 15 November 2024
The European Supervisory Authorities (EBA, EIOPA, and ESMA) have announced a framework for designating critical ICT third-party providers under the Digital Operational Resilience Act (DORA). Competent authorities must report contractual arrangements with these providers by April 30, 2025. With oversight starting in January 2025, financial entities are encouraged to prepare registers early, leveraging draft templates and guidelines shared in May 2024. A finalized reporting package, including updated rules, will be released in December 2024.
EBA responds to commission’s amendments on ITS for supervisory reporting and disclosures - 14 November 2024
The EBA supports the European Commission's proposed amendments to its draft technical standards for CRR3 disclosures and reporting, viewing them as a flexible interim step. While preferring templates and instructions to remain on its website for adaptability, the EBA agrees to their inclusion in the Official Journal. Collaboration between the EBA and the Commission will continue to refine the ITS framework.
EBA updates list of third-country groups and branches in EU/EEA - 13 November 2024
The EBA’s 2024 update lists 439 third-country groups and 95 branches from 50 non-EU/EEA nations operating in the region, including 8 groups with intermediate EU parent undertakings. This transparency initiative clarifies foreign ownership structures in the EU/EEA, bolstering market stability and oversight.
EBA consults on propionate retail diversification guidelines - 12 November 2024
The EBA opened a consultation on draft Guidelines defining criteria for diversified retail portfolios to qualify for preferential risk weights under the Standardised Approach for credit risk, as per the CRR. The Guidelines propose a flexible granularity standard: while Basel's 0.2% exposure cap applies, up to 10% of a portfolio may exceed this threshold. This proportionate method balances simplicity and accessibility, especially for smaller EU institutions. Consultation ends February 12, 2025.
European Securities and Markets Authority
ESMA issues guidance on CTP selection criteria - 25 November 2024
ESMA outlined the exclusion criteria and documentation needed for selecting Consolidated Tape Providers (CTPs). Applicants must provide declarations of honour and evidence of eligibility during the initial assessment stage. The guidance includes an overview of relevant certificates by Member State, with additional details available in the Guidance and on the eCertis webpage.
ESMA responds to EC consultation on non-bank financial intermediation - 22 November 2024
ESMA supports enhanced liquidity management, particularly urging stricter rules for open-ended funds investing in illiquid assets. It recommends completing the MMF Regulation reform, harmonizing risk analysis frameworks, and implementing EU-wide stress tests for NBFIs and banks. ESMA also proposes stronger data sharing, enhanced coordination through a reciprocation mechanism for leverage limits, and granting ESMA powers to enforce stricter macroprudential measures at the EU level.
ESMA launches consultation on active account requirement (AAR) under EMIR - 3 - 22 November 2024
ESMA seeks feedback on the Active Account Requirement for derivatives counterparties under EMIR 3. The consultation addresses operational conditions, representativeness criteria for active counterparties, and compliance reporting obligations for clearing accounts at EU-authorized CCPs.
ESMA proposes transition to T+1 settlement cycle by October 2027 - 18 November 2024
ESMA has published its Final Report advocating for a transition to a T+1 settlement cycle in the EU by October 11, 2027. The move aims to enhance settlement efficiency, align with global practices, and support EU market integration and the Savings and Investment Union objectives. The proposal outlines the benefits of risk reduction, margin savings, and decreased costs from global misalignment. However, it highlights challenges, including required amendments to the CSDR, the settlement discipline framework, and investments in harmonisation and modernisation. ESMA recommends coordinated efforts across jurisdictions and robust governance to ensure a smooth transition.
Bank of England
BOE Consults on fundamental rules for UK financial market infrastructures - 19 November 2024
The Bank of England has launched a consultation on proposals to introduce a set of Fundamental Rules for UK Financial Market Infrastructures (FMIs), including central counterparties (CCPs), central securities depositories (CSDs), and payment systems operators. These rules aim to enhance transparency by clearly defining the Bank’s expectations of FMIs and its supervisory role. The consultation is the first use of the Bank’s new rulemaking powers for CCPs and CSDs and covers areas such as governance, financial resilience, and the impact of FMIs on the broader financial system. The proposals align with international standards and support the Bank’s secondary objective of facilitating innovation in FMI services. The consultation is open until 19 February 2025, and feedback will help shape the Bank’s approach to FMI regulation moving forward.
PRA publishes final rules replacing Solvency II assimilated law - 15 November 2024
The Prudential Regulation Authority (PRA) has published Policy Statement 15/24, finalising new rules and policy materials that will replace the Solvency II assimilated law. This marks the completion of the PRA's phased consultation on the Solvency II Review, which began after the UK government’s 2020 announcement. The new framework aims to ensure the safety and soundness of insurance firms while also promoting competitiveness and growth by offering a more flexible and streamlined regulatory approach. The new regime will be fully implemented by the end of 2024. Looking ahead, the PRA will continue to develop the regulatory framework for the insurance sector in 2025 and beyond.
PRA proposes reforms to UK ISPV regulatory framework - 15 November 2024
The Prudential Regulation Authority (PRA) has published Consultation Paper (CP) 15/24 and Policy Statement (PS) 15/24, proposing reforms to the UK Insurance Special Purpose Vehicle (ISPV) framework. The proposed changes aim to enhance insurance sector safety and diversify reinsurance capital, while streamlining the approval process. A key reform is the introduction of an accelerated pathway for certain ISPVs, such as catastrophe bonds, reducing approval time from 4-6 weeks to 10 working days. These changes are designed to boost growth and competitiveness in the UK insurance market while maintaining regulatory standards.