EU Adopts Rules on Supervisory Framework for Financial Institutions
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.
Related Links
Effective Date: December 30, 2019
Keywords: Europe, EU, Banking, Insurance, Securities, ESFS, Solvency II, SCR, Internal Model, Benchmarks Regulation, ESAs, ESRB, European Council
Featured Experts
Adam Koursaris
Asset and liability management expert; capable modeler; risk and capital specialist
Cassandra Hannibal
IFRS 17 subject matter expert; actuary; risk management and capital projection specialist
Jerome Ogrodzki
Insurance asset and liabilities modeling specialist; stochastic modeling expert
Previous Article
FED Revises and Extends Reporting Form on Systemic RiskRelated Articles
BCBS Amends Guidelines on Sound Management of AML/CFT Risks
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS Publishes List of Internationally Active Insurance Groups
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC Launches Consultation on Review of Solvency II Directive
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB Consults on Supervisory Approach to Consolidation in Banking
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
PRA Letter Sets Expectations on Approach to Managing Climate Risks
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
US Agencies Finalize Amendments to Swap Margin Rule
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
IAIS on Package for 2020 Data Collection on ICS and Aggregation Method
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.
