Featured Product

    EC Vice President Speaks on Completing CMU and Managing Brexit

    April 24, 2018

    While addressing the audience at City Week in London, the EC Vice President Valdis Dombrovskis offered a snapshot of the work of EC toward breaking down barriers and further integrating the EU single market for capital. He also discussed how EC can manage the risks related to Brexit.

    With regard to the work on Capital Markets Union (CMU), he stated that, “… we have made it cheaper and simpler to raise capital on public markets with our new Prospectus Regulation. And we have agreed on a new framework for Simple, Transparent and Standardized securitization.” Other proposals include the proposal for a Pan-European Personal Pensions Product that would help to put to more productive use, the savings that currently lie on low-interest rate accounts. The goal is to have in place the building blocks of CMU by 2019. He then discussed the two types of risks associated with Brexit:

    • The first risk is linked to the remaining uncertainty on the withdrawal agreement. EC has reached an agreement on a joint legal text that covers large parts of the future withdrawal agreement, including a transition period until December 31, 2020. However, important negotiation issues still remain to be dealt with before the agreement can be finalized, such as the Irish border and the governance of the withdrawal agreement. “As Vice President in charge of financial stability, my message to all parties—firms and supervisors—is that they need to continue their work to prepare for all scenarios,” said the EC Vice President. He added that the current discussions confirm that companies can alleviate the main risks by repapering contracts and adapting operational models.
    • The second risk is linked to the future relationship with the UK. Until now, the UK and the other EU member states have managed risks jointly by setting common rules and the European Court of Justice has guaranteed that they are enforced against operators from all member states. Therefore, countries are willing to accept that operators from across the EU export financial services—and also risks—into their territory, without supervising those operators themselves. With Brexit, the UK will move away from this system. Consequently, each side will have to set and implement its own rules to protect investors and ensure financial stability. 

    However, EU has a long history of relying on the regulation and supervision of third countries via equivalence. EU has over 200 equivalence decisions benefiting over 30 non-EU jurisdictions. EU’s risk-based approach and proportionate application of equivalence means that it can work for third countries with different levels of interaction with the EU financial system. “The EU27 Member States recently recognized this in a statement when discussing the future relationship with the UK. They also reiterated their support to build on and further improve equivalence. And that is what we are currently doing.” Despite the improvements, there are some clear limits to equivalence. First, equivalence decisions are, and will, remain unilateral and discretionary EU acts. Second, equivalence rules do not cover all parts of the financial sector. Third, equivalence is only possible if there is a close convergence of rules and supervision. If the EU and a third country should happen to go different ways, the conditions for equivalence would fall. This means that equivalence may be changed or—as a last resort—withdrawn. To make this less likely to occur, supervisors must work together. In conclusion, he added: “equivalence is not perfect, neither for firms nor for supervisors. But one should not make the perfect be the enemy of good. Equivalence has proven to be a pragmatic solution that works in many different circumstances, and it can work for the UK after Brexit as well.”

     

    Related Link: Speech

    Keywords: Europe, EU, Securities, Brexit, Passporting Regime, Equivalence, Capital Markets Union, EC

    Related Articles
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 848 and 470

    FASB proposed taxonomy improvements for the proposed Accounting Standards Update on topic 848 on facilitation of effects of reference rate reform on financial reporting.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Statement on Recalculating Transitional Measures Under Solvency II

    BoE notified that it will be willing to accept applications from firms to recalculate transitional measure on technical provisions (TMTP) as at September 30, 2019.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Hosts Conference to Discuss Issues from Emergence of Stablecoins

    BIS hosted a conference in Basel to discuss policy and regulatory issues posed by the emergence of stablecoin initiatives backed by financial institutions and large technology companies.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Paper on Embedded Supervision of Blockchain-Based Financial Market

    BIS published a working paper that investigates ways to regulate and supervise blockchain-based financial markets.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Paper on Market-Implied Systemic Risk and Shadow Capital Adequacy

    BoE published a working paper that presents a forward-looking approach to measure systemic solvency risk.

    September 13, 2019 WebPage Regulatory News
    News

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Publishes Waiver by Consent of Continuity of Access Rules

    PRA published a new waiver by consent to waive the Continuity of Access requirements contained in the Depositor Protection Part of the PRA Rulebook (DPP).

    September 13, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for September 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions.

    September 13, 2019 WebPage Regulatory News
    News

    BoE Publishes Update on Meeting of Working Group on Risk-Free Rates

    BoE published the minutes of the July meeting of working group on sterling risk-free reference rates.

    September 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3827