AIFMD 2.0

AIFMD 2.0 enters into force on 15 April 2024, and applies from 16 April 2026 (save for the provisions in Article 1(12) (AIFMD) and Article 2(7) (UCITS) on reporting to competent authorities which will apply from 16 April 2027).

For more information, read insights from our Asset Management and Investment Funds Group here.

AML: FINAL ENDORSEMENT UPCOMING

Now that the location of the planned new EU central AML / CFT supervisor (AMLA) has been confirmed (Frankfurt), the European Parliament's formal vote to endorse the AMLA Regulation, the new 'single rulebook' AML/CFT Regulation, and the related Directive is scheduled for 22 April 2024. Following that, each will need to be formally endorsed by the EU Council before being published in the Official Journal (most likely in late May/early June).

"The European Parliament is expected to vote on the draft report published by ECON on the Commission's legislative proposal for a regulation amending the Benchmarks Regulation during its 22-25 April 2024 plenary session."

BANK CRISIS MANAGEMENT AND DEPOSIT INSURANCE PROPOSAL (CMDI): PROGRESS UPDATE

The European Parliament is expected to vote on the draft reports published by its Economic and Monetary Affairs Committee (ECON) on the Commission's proposed CMDI framework for EU banks during its 22-25 April 2024 plenary session. ECON announced its adoption of those draft reports in March 2024.

Engagement with the EU Council, and trilogue negotiations, is expected to post-date the 6-9 June 2024 European elections.

Our briefing on the Commission's CMDI proposals is here: Bank Resolution: Commission CMDI proposal published. The proposals involve changes to the Bank Recovery and Resolution Directive (the draft ECON report is here), changes to the Single Resolution Mechanism Regulation (the draft ECON report is here) and changes to the Deposit Guarantee Schemes Directive (the draft ECON report is here).

BENCHMARKS REGULATION

The European Parliament is expected to vote on the draft report published by ECON on the Commission's legislative proposal for a regulation amending the Benchmarks Regulation during its 22-25 April 2024 plenary session.

The Commission's proposal involves limiting registration and authorisation requirements, and most of the Benchmark Regulation's substantive requirements, to critical benchmarks, significant benchmarks, EU climate transition benchmarks, EU Paris-aligned benchmarks and certain commodity benchmarks. Trilogue negotiations between the Parliament and EU Council will start after the June 2024 European elections.

CRR/CRD: PRUDENT VALUATION

The EBA's consultation paper on targeted amendments to the regulatory technical standards (RTS) on prudent valuation under Article 105(14) of the EU Capital Requirements Regulation (CRR) closes for feedback on 16 April 2024.

The existing RTS (Commission Delegated Regulation (EU) 2016/101) came into force in February 2016 and set out a common harmonised methodology for the valuation of fair valued assets for prudential purposes. The amendments set out in the consultation paper are designed to address existing implementation issues, and to address a related CRR3 mandate. If the EBA determines (by way of issuing an opinion) that 'extraordinary circumstances' exist, institutions may reduce the total additional value adjustments (AVAs) to be deducted from Common Equity Tier 1 capital. CRR3 will mandate the EBA to develop RTS setting out the conditions that the EBA shall use to determine the presence of 'extraordinary circumstances', and to specify the reduction of the total aggregated AVAs under those circumstances.

CRR 3 / CRD VI: EU BANKING PACKAGE UPDATES

The EBA's public consultation on two sets of draft implementing technical standards (ITS) amending Pillar 3 disclosures and supervisory reporting requirements for operational risk under the CRR 3/CRD VI EU banking package close for feedback on 30 April 2024.

Under the CRR (Articles 434a and 430(7)), the EBA must develop uniform disclosure and reporting requirements (currently set out in Commission Implementing Regulations (EU) 2021/637 and 2021/451). These Commission Implementing Regulations must be updated whenever prudential or supervisory requirements change, and the impending introduction of CRR 3/CRD VI will trigger such a change.

These consultation papers are linked to the EBA's Consultation Paper on business indicator-related mandates in CRR 3, which closes on 21 May 2024. That consultation papers contains two sets of draft RTS and one set of ITS which aim to clarify the composition of the new business indicator at the centre of the operational risk capital requirements calculation. See here for more information.

CRYPTO/MICA: CRYPTOASSETS AS FINANCIAL INSTRUMENTS

ESMA's consultation paper on draft guidelines on the conditions and criteria for the qualification of cryptoassets as financial instruments under the regulation on markets in cryptoassets (MiCA) closes for feedback on 29 April 2024.

ESMA has emphasised that the consultation paper is not expected to clarify the entire scope of what constitutes a financial instrument, but only products that comply with both the cryptoasset definition in MiCA and the financial instrument definition in the MiFID II Directive.

CRYPTO/MICA: REVERSE SOLICITATION

ESMA's consultation paper on draft guidelines on reverse solicitation under MiCA also closes on 29 April 2024. Under MiCA, ESMA must issue guidelines which specify the situations in which a third-country firm is deemed to solicit clients established or situated in the EU, and which set out supervisory practices to detect and prevent circumvention of the reverse solicitation exemption.

In the related press release, ESMA highlighted that the "proposed guidance confirms ESMA's previous message that the provision of crypto-asset services by a third-country firm is limited under MiCA to cases where the client is the exclusive initiator of the service. This exemption should be understood as very narrowly framed and must be regarded as the exception. A firm cannot use it to bypass MiCA."

The draft guidelines focus on the means of solicitation, what "exclusive initiative" means, when a cryptoasset or a cryptoasset service is of the same type as another one, and supervision practices.

ESMA plans to publish a final report in Q4 2024.

"The deadline for providing feedback on the joint report from IOSCO and the CPMI on examples of effective practices for streamlining variation margin (VM) in centrally cleared markets has been extended from 14 April 2024 to 14 May 2024."

DERIVATIVES AND MARGIN: INITIAL MARGIN IN CENTRALLY CLEARED MARKETS

The Basel Committee on Banking Supervision (BCBS), the BIS Committee on Payments and Market Infrastructures (CPMI) and IOSCO have sought feedback by 16 April 2024 on their joint consultative report on the transparency and responsiveness of initial margin (IM) in centrally cleared markets.

The report sets out 10 policy proposals designed to improve central clearing participants' understanding of IM calculations and potential future margin requirements. The report proposes that central counterparties (CCPs) should provide additional public disclosures on their margin models and increase the sophistication and accessibility of margin simulation tools.

DERIVATIVES AND MARGIN: VARIATION MARGIN IN CENTRALLY CLEARED MARKETS

The deadline for providing feedback on the joint report from IOSCO and the CPMI on examples of effective practices for streamlining variation margin (VM) in centrally cleared markets has been extended from 14 April 2024 to 14 May 2024.

The report gives 8 examples of effective practices for central counterparties and their clearing members regarding VM processes and transparency. The practices cover areas such as scheduled and ad hoc intraday VM calls, the use of excess collateral held at CCPs to meet VM requirements, the pass-through of variation margin by CCPs, and CCP-clearing member and clearing member-client transparency regarding VM processes.

DERIVATIVES AND MARGIN: VM IN NON-CENTRALLY CLEARED MARKETS

IOSCO and the BCBS are also seeking feedback by 17 April 2024 on a joint consultation report on streamlining VM processes in non-centrally cleared markets, and the responsiveness of IM models in non-centrally cleared markets.

The report sets out 8 recommendations to participants in non-centrally cleared markets to encourage the widespread implementation of good market practices related to VM processes, and the responsiveness of IM models.

The first four recommendations aim to address challenges that could inhibit a seamless exchange of VM during a period of stress. The other four highlight good practices for market participants to smoothly implement initiatives to ensure the calculation of IM is consistently adequate for contemporaneous market conditions. It also proposes that supervisors should monitor whether these developments are sufficient to make this model responsive enough to extreme market shocks.

DERIVATIVES: POST-TRADE RISK REDUCTION SERVICES

IOSCO's consultation on post-trade risk reduction services (PTRRS), closed on 1 April 2024. The consultation identified potential policy considerations and risks associated with the use and offering of PTRRS in over-the-counter (OTC) derivatives trades, and set out good practice for IOSCO members and regulated PTRRS users. IOSCO is hoping to better assess the risks associated with the increased use of PTRRS and concentration of PTRRS providers, with a particular focus on the areas of portfolio compression and counterparty risk optimisation.

EMIR: REPORTING CHANGES

Material EMIR reporting changes take effect from 29 April 2024.

For more information, read our insights here: Are you EMIR-reporting ready? Material reporting changes take effect on 29 April 2024 and note the Central Bank's updates to the EMIR section of its website.

EMIR: TRADE REPOSITORY RTS

A number of RTS under EMIR apply from 29 April 2024:

  • Commission Delegated Regulation (EU) 2022/1855: RTS specifying the minimum details of the data to be reported to trade repositories (TRs) and the type of reports to be used.
  • Article 1(4), points (c) and (d) of Commission Delegated Regulation (EU) 2022/1856: amending RTS further setting out the procedure for accessing details of derivatives as well as the technical and operational arrangements for their access.
  • Commission Delegated Regulation (EU) 2022/1857: amending RTS regarding the details of applications for registration as a TR and applications for extensions of registrations as TRs.
  • Commission Delegated Regulation (EU) 2022/1858: RTS setting out the procedures for the reconciliation of data between TRs and the procedures to be applied by the TR to verify the compliance by the reporting counterparty or submitting entity with the reporting requirements and to verify the completeness and correctness of the data reported.

EMIR: RECOVERY AND RESOLUTION OF CENTRAL COUNTERPARTIES (CCPS)

ESMA's on the assessment of resolvability, and Guidelines on the summary of resolution plans of CCPs, each under the Regulation on the Recovery and Resolution of CCPs, apply from 9 April 2024.

PAYMENTS: INSTANT EURO CREDIT TRANSFERS REGULATION

Regulation (EU) 2024/886 on instant euro credit transfers enters into force on 8 April 2024. Keep an eye out for our analysis of this Regulation later this week.

PAYMENTS: PSD3 AND PSR UPDATE

ECON has confirmed its adoption of draft reports with its negotiating positions on the European Commission's legislative proposals for a new directly effective Payment Services Regulation and a related Directive. A formal plenary vote on the draft reports is pencilled in for 10/11 April 2024. Trilogue negotiations with the EU Council will post-date the European elections this summer.

RETAIL INVESTMENT PACKAGE - PROGRESS ON COMMISSION PROPOSAL

The European Parliament is expected to vote on the draft report published by ECON on the Commission's proposed retail investment package during its 22-25 April 2024 plenary session. ECON announced the adoption of its draft report in March 2024.

The retail investment package proposes changes to the existing rules set out in the MiFID II Directive, the Insurance Distribution Directive, Solvency II, the UCITS Directive, the AIFMD and the PRIIPs Regulation

Engagement with the EU Council, and trilogue negotiations, is expected to post-date the 6-9 June 2024 European elections.

Our briefing on the Commission's proposals is here.

SECURITISATION: NEW RTS (CALIBRATION OF PERFORMANCE-RELATED TRIGGERS FOR STS ON-BALANCE SHEET SECURITISATIONS)

Under the EU Securitisation Regulation, STS on-balance-sheet securitisations must feature a sequential amortisation system to be eligible for the STS label. However, by way of derogation, an STS on-balance-sheet securitisation featuring non-sequential priority of payments could be eligible for the STS label if payment priority reverts to sequential payments in order of seniority on the occurrence of certain triggers relating to the performance of the underlying exposures. Commission Delegated Regulation (EU) 2024/920 contains RTS under the EU Securitisation Regulation regarding the performance-related triggers and the criteria for the calibration of those triggers. It enters into force on 11 April 2024.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.