EU Financial Regulation
From Open Risk Manual
Financial Regulation Initiatives in the European Union
Financial Regulation in the European Union is developed under the wikipedia:European Union legislative procedure
Broad Legislative Initiatives
In the European Union there are several ongoing large scale legislative and regulatory projects that transform the context within which individual, firms and the public sector interact economically. While financial and Regulatory Reform is an ongoing process in all jurisdictions globally, the size and supra-national nature of the European Union makes those projects particularly interesting. This section aims to provide a brief overview of ongoing projects / initiatives. More in-depth coverage when those projects have implications for Risk Management is provided in separate entries.
The catalog below groups legislative / regulatory areas in the broadest domains
| Initiative | Objective | Relevant Areas | Challenges | Status |
|---|---|---|---|---|
| Capital Markets Union (CMU) | Develop a more diversified financial system complementing bank financing with deep and developed capital markets | Equity markets (including venture capital), Debt markets (Corporate bonds, Securitized products). Both primary markets (originating securities) and secondary markets (trading platforms) | Lack of harmonization in national legislation around company structures and capital market regulations, ability to control leverage, complexity, rapid technological advances | Initial Stages |
| Banking Union | The Banking Union is a collection of efforts to create a single rulebook governing the banking system in the 28 EU countries | Stronger prudential requirements for banks, Improved protection for depositors, Rules for managing failing banks | Articulation of risk sharing between member countries, lack of risk-free assets, proportionality of regulatory requirements for smaller banks | Several Milestones Reached |
| Insurance and Pensions Union | Overcome the fragmentation in insurance industry supervision and ensure a joined-up view of the large cross-border insurance groups, enhancing the effectiveness of supervision | Insurance Industry | The European Insurance and Occupational Pensions Supervisory Authority (EIOPA) currently plays a coordinating role in supervision, with final authority remaining with the national supervisors. | Conceptual Stage |
| Fintech / Insurtech Union | Uniform licensing / regulation of new fintech business models across the EU | Existing financial / insurance segments | Still Nascent Area | On Sep 21 2017 the ECB published for consultation draft guides to bank licensing and fintech bank licensing |
| Sustainable (Green) Finance | Integrate sustainability considerations into financial policy frameworks in order to mobilise finance for sustainable growth | Broad scope across the financial industry | Political endorsement | Emerging |
| Digital Single Market | Open up digital opportunities for people and business and enhance Europe's position as a world leader in the digital economy | Broad scope across the economy | Adoption speed of legislative initiatives, Effectiveness of solutions on the face of fast changing technology landscape | Many significant milestones (e.g., GDPR) |
Specific Initiatives
A number of distinct named initiatives around EU financial regulation (or closely related topics) are listed here. NB: The scope of the initiatives / projects varies. Some are captured within a specific legislative effort, some are spread over several (or constitute subsets).
| Initiative | Description / Risk Management Context | Reference |
|---|---|---|
| CRR | Capital Requirements Regulation | REGULATION (EU) No 575/2013 |
| PSD 2 | Payment Services Directive | DIRECTIVE (EU) 2015/2366 |
| Mifid II | Markets in Financial Instruments Directive is a cornerstone of the EU's regulation of financial markets focusing on actively traded markets. Limit regimes, high-frequency trading, market data disclosures, central clearing counterparties | DIRECTIVE 2014/65/EU |
| CRA Regulation | A common approach to the Regulation and Supervision of credit rating agencies within the European Union | REGULATION (EC) No 1060/2009 |
| Prospectus | An initiative to standardize securities prospectuses | REGULATION (EU) 2017/1129 |
| STS | Simple, Transparent and Standardized Securitisation: An initiative to simplify securitisation structures | REGULATION (EU) 2017/2402 |
| CRD IV | The applicable capital requirements framework for banking institutions (Basel inspired) | REGULATION (EU) No 575/2013 |
| SSM | The Single Supervisory Mechanism, a new system of banking supervision for Europe. It comprises the ECB and the national supervisory authorities of the participating countries. It encompasses many existing or new processes | REGULATION (EU) No 806/2014 |
| SREP | The Supervisory Review and Evaluation Process for Banking Institutions | |
| TRIM | A project to assess whether the internal models currently used by banks comply with regulatory requirements, and whether they are reliable and comparable | ECB TRIM Website |
| FRTB / SA-CCR | Revised Market Risk and Counterparty Risk frameworks | EBA Website |
| SRM | Single Resolution Mechanism. A central institution for bank resolution in the EU. The Single Resolution Board (SRB) is the central resolution authority within the Banking Union. The Single Resolution Fund (SRF) is composed of contributions from credit institutions and certain investment firms in the 19 participating Member States within the Banking Union | REGULATION (EU) No 806/2014 |
| EDIS | A proposed (not adopted) European Deposit Insurance Scheme (EDIS) and the currently in force national Deposit Guarantee Schemes (DGS) Directive | DIRECTIVE 2014/49/EU |
| IFRS 9 | New accounting standards. While this is a global accounting standards initiative, there it has been adopted in EU-wide legislation. This regime will in turn the interact with other aspects EU banking regulation, e.g., the EBA 2018 EU-Wide Stress Test | COMMISSION REGULATION (EU) 2018/498 |
| Solvency II | Umbrella legislation governing the regulation of insurance and reinsurance businesses | DIRECTIVE 2009/138/EC |
| Fintech License | Guidance to assessments of licence applications for banks and fintech credit institutions | ECB Website |
| EMIR | European Market Infrastructure Regulation. Lays down clearing and bilateral risk-management requirements for over-the-counter (‘OTC’) derivative contracts, reporting requirements for derivative contracts and uniform requirements for the performance of activities of central counterparties (‘CCPs’) and trade repositories | REGULATION (EU) No 648/2012 |
| EU Taxonomy | Technical screening criteria for economic activities that can make a substantial contribution to climate change mitigation or adaptation, while avoiding significant harm to the four other environmental objectives | European Commission Website |
| eIDAS | Electronic Identification and trust services for electronic transactions in the internal market | REGULATION (EU) No 910/2014 |
| ENISA | EU Cybersecurity Agency and on Information and Communication Technology cybersecurity certification (Cybersecurity Act) | REGULATION (EU) 2019/881 |
| ePrivacy | Electronic Privacy (Delayed Proposal) | |
| GDPR | General Data Protection Regulation to protect and empower all EU citizens data privacy | REGULATION (EU) 2016/679 |
| Free Flow on Non-personal Data | REGULATION (EU) 2018/1807 |
