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    EU Adopts Rules on Supervisory Framework for Financial Institutions

    December 27, 2019

    EU published Regulations 2019/2175 and 2019/2176 and Directive 2019/2177 in the Official Journal of European Union. The finalized regulations reform tasks, powers, governance, and funding of ESAs and ESRB, to adapt the authorities to the changed context in which they operate. The finalized directive (2019/2177) amends Solvency II Directive (2009/138/EC), Markets in Financial Instruments Directive or MiFID (2014/65/EU), and Anti-Money Laundering Directive (EU 2015/849). The published regulations and the directive shall enter into force on the third day following that of their publication in the Official Journal of the European Union. For Regulation 2019/2175, Articles 1, 2, 3, and 6 shall apply from January 01, 2020 while Articles 4 and 5 shall apply from January 01, 2022.

    The finalized directive introduces certain amendments to the Solvency II Directive, which provides that, in accordance with the risk-oriented approach to the Solvency Capital Requirement, it is possible in specific circumstances for insurance and reinsurance undertakings and groups to use internal models for the calculation of that requirement, instead of using the standard formula. Solvency II Directive also provides for a country component in the volatility adjustment. To ensure that this country component mitigates exaggerations of bond spreads in the relevant country effectively, an appropriate threshold for the risk-corrected country spread should be set for the activation of the country component. Therefore, Solvency II Directive has been amended by Directive (EU) 2019/2177 accordingly. Additionally, Section 2A on notification and collaboration platforms has also been inserted in Title I, Chapter VIII of the Solvency II Directive.

    Additionally, Regulation 2019/2175 amends regulations establishing ESAs (Regulation 1093/2010, 1094/2010, and 1095/2010), Markets in Financial Instruments Regulation or MiFIR (EU No 600/2014), Benchmarks Regulation (EU 2016/1011), and Regulation (EU) 2015/847 on information accompanying transfers of funds. Regulation 2019/2176 amends Regulation (EU) No 1092/2010 on EU macro-prudential oversight of the financial system and establishing a ESRB. 


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    Effective Date: December 30, 2019

    Keywords: Europe, EU, Banking, Insurance, Securities, ESFS, Solvency II, SCR, Internal Model, Benchmarks Regulation, ESAs, ESRB, European Council

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