Ready for the ‘summer of 39’ aftermath?
By Alaric Gibson, research analyst, JWG Group
This summer, regulatory pressure on financial services firms has
ratcheted up to unprecedented levels. Many may have breathed a sigh of
relief as Dodd-Frank rule-making slowed … but the respite was only
fleeting. Since July, the industry has been bombarded with 39 new consultation
papers (in the EU and UK alone)
just as the EU returned
its 584 responses to the Mifid II consultation
in August.
JWG research
has picked up consultations on Remit, CRD IV, SSM, SRM, FICOD, UCITS, investor
protection, remuneration, accountability, clawbacks, pensions and more.
In short, the EU financial
services industry has 2,357 pages to read and 331 questions to answer by
Q3. Welcome back – if you start now you have a fighting chance to
finalise the 19 that are due in October.
Beware though, some of the answers could rock, not only the
front-office, but middle and back as well. We’ve pulled out a few of the
highlights below.
Key consultations in the UK include remuneration, clawbacks and
accountability in financial services. Core changes being consulted upon
include a new approval regime for the most senior individuals and new rules on
remuneration to strengthen the alignment between long-term risk and reward in
the banking sector.
The PRA and FCA proposals
include a new senior managers’ regime, which is designed to clarify the lines
of responsibility at the top of banks, enhance the regulators’ ability to hold
senior individuals in banks to account and will require banks to regularly vet
their senior managers for fitness and propriety … oh, my!
A new set of conduct rules, which take the form of brief
statements of high level principles, set out the standards of behaviour for
bank employees, as well as rules on “delayed variable remuneration” (i.e., bonuses) for a
minimum of five or seven years, depending on seniority. These ‘clawback’
rules grant firms much more power to recover money given to senior managers
(even if already paid out or vested) if risk management or
conduct failings come to light at a later date – dear, dear!
Four consultations on market abuse are now open; two from the
Agency for the Cooperation of Energy Regulators (ACER) and two from the
European Securities and Markets Authority (Esma). These are as a result
of the two key market abuse rule-sets being introduced in 2014/15 – The
Regulation on Energy Market Integrity and Transparency (Remit) and the Market
Abuse Directive (Mad) and Regulation (Mar).
Esma’s draft RTS/ITS and TA detail the application of Mar to new
products, venues and trading techniques and address transparency and governance
issues. Both consultation papers are open for feedback until 15 October
2014.
Remit’s primary focuses are market abuse and market manipulation
in the commodities market. As a result, new transparency requirements are
asked for, in the form of transaction reports, to enable monitoring.
These consultations on the Transaction Reporting User Manual (Trum) and reporting
mechanisms are vital in determining the precise standards by which Remit will
be implemented. The deadline for its two documents is 2 September – ouch!
Potentially one of the most important consultations out at the
moment, the EBA consultation
on the criteria for intervention on structured deposits under Mifir
lays out the criteria by which the EBA can “temporarily prohibit” the sale of structured deposits.
Mifir establishes
an identical framework for the intervention powers of Esma (they
consulted on this in May) on financial instruments. The EBA has
based its own work on the criteria identified by ESMA. However, the EBA considered
that some of the criteria used for financial instruments were not applicable to
structured deposits, while others needed to be adapted and, in some cases, new
guidelines had to be introduced to take into account characteristics specific
to structured deposits.
In the consultation
paper, the EBA proposes a set of 12 high-level criteria (with a subset of 68),
by which they, and banks, can assess the risk of structured deposits to market
stability, investor protection or market abuse. These range from “the type and
transparency of the underlying” to the “degree of innovation” to the financial crime risk of
the product. Deadline for the submission of comments is 5 October
2014. Data managers, start your engines …
Content belongs to JWG and RegTechFS. For the original please visit: http://regtechfs.com/ready-for-the-summer-of-39-aftermath/
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