Regulatory trends under CMU, what is on our plate? ICMA Conference - - PowerPoint PPT Presentation

Regulatory trends under CMU, what is on our plate?

ICMA Conference 9th November, Luxembourg

Benoit Sauvage Senior Adviser ABBL

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Agenda

• The starters

– Regulations soon to be live

• The Meal

– Regulations under development

• The Desert

– Regulations not yet released

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Starters

• MIFID II

– Texts are final at EU level, but there are constant releases – Key focus on the ESMA Target Market – Impact of S.I. rules on medium sized Investment Firms

• PRIIPS

– A very welcomed project that missed a key turn somewhere – Delay or not delay? What is the impact?

• SFTR

– Third pillar of transaction reporting

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Starter MIFID II

• State the obvious: It is definitely more than MIFID I

– It forces documentation of processes at an unseen level – From a macro-perspective: how will the provisions of financial services evolve => reduction of risks means less products, less services – Wrongly calibrated SI rules implies that more IF than expected will fall under SI status and unexpectedly more when dealing in illiquid instruments – The transparency menu for costs and charges may lead to a redistribution of cards – Raises the bar, notably through training and qualification – Quid of interactions with new tools (robot-advice…)

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Starter PRIIPS

• Delay or not delay
• We assume that 80 to 90 % of RTS will remain
• Size of the project is huge and requires new tools to

comply on a continuous basis, could “old finance” support it?

• Issues would remain on the production side:

– Access to data, instantaneity of production

• Issues would remain on the distribution:

– Access to the KIID (from 3rd parties)

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Starter SFTR

• Securities financing transaction reporting Regulation
• For regulators to have a full picture of each and every financial

transaction

• Expend the success of EMIR Trade Repositories to track the

reuse of assets (REPO among others)

• One caveat: interactions with a NCB in the context of monetary

policy

• There are more fields to report than under MIFIR/EMIR

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Meal

• Prospectus
• Securitisation

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Meal – Prospectus regulation

• 3 key areas:

– Digital age prospectus – SME financing access to market – Wholesale finance

• Focus for Luxembourg and EU

– Freedom of choice of place of issuance – A sustainable model for wholesale stakeholders on the issuing and buying side

• Trilogues have started!

– With bit of luck will close soon

A battle for triggers & level playing field What’s happening on 2ndary markets

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Meal Securitisation

• A big EU project!

– Supported by ECB, financial industry, EU Com, MS ! – Conceptually: free some balance sheet to lend more and spread risks

• Issue: how to reconcile pro-business with high risk

avoidance?

– Like for highways: speed limit at 130 km/H or 10 km/H? – EU Com text – EU Council – EP text

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Meal Securitisation

• Securitisation in the EP still so-so in favour:

– No differentiation of origin/quality of loans – Basis assumption seems to be that the STS scenario is the new minimum normal, but treated like it is barely acceptable – May have a retention ratio above 10% – Drags on for months

• From pragmatic point of view how to reconcile the 3

versions of the EU texts in trilogue?

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Desert

• Warning this part is based on estimates, best guesses and oral

communications

• Recovery and Resolution of FMIs
• Report on financial services consultation
• EMIR II
• AIFMD II

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Desert FMI Recovery and Resolution

• Proposal Should be released before year end

– Focus on preparing a plan for recovery and resolution, but highly uncertain (how many CCPs have failed?) – Build on the BRRD template – Some surprises:

• A committee of supervisory authorities should be set up to manage the

crisis, but may be composed of >100 participants

• The supervisory authority has to get involved in the drafting of the plan

in a kind of sign-off of the proposals

• Plans should not expect (assume) any form of tax payer intervention or

NCB access

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Desert Financial Service Conclusions

• Should build a programme for review of regulations
• Ensure that there is consistency across regulations…
• Delivery of concrete results may be challenging:

– Solve the equation: jobs + growth =/≥ risk taking

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Desert CRD V, EMIR II and AIFMD II…

• CRD V, Basel IV for end of year in theory

– Impact on the loan book

• EMIR II scheduled at best for end of Q1

– Could tackle scope of EMIR (focus on systemic risks) – Improve reporting mechanism – Increase global convergence/coherence

• AIFMD II probably somewhere around end of Q2

– Depositary requirements, CSDs interactions – Clustering by fund types

• Soon will start the reviews of the regulatory wave + potentially

regulations in crowd funding, peer-to-peer…

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Pousse café

• What impact for the EU Acquis?
• What impact on figures (MIFID II reporting, market

transparency, EMIR…)

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Thank you, questions?

Benoit Sauvage Senior Adviser ABBL Sauvage@abbl.lu