As we approach the start of summer and the end of the first half of 2019, things have been heating up across major European capitals… and that’s before one even starts to look at the weather or over at warring factions in Westminster. With all eyes still focused on whether Brussels will Spitz or not Spitz in terms of various EU presidential appointments or fall into institutional dysfunction, financial regulatory reforms have been progressing ahead of the new members of the European Parliament taking up their seats in July. As discussions drag on, the Romanian Consilium Presidency handed over the reins to the Finns who will hold the Presidency for the next six months. Sustainability, green finance and the finalization of the Banking and Capital Markets Unions will be at the heart of that programme along with key decisions on Brexit as well as EU-Swiss market access. The chief development in the regulatory race to the finish line in the outgoing parliament is of course the publication and entry into force of the EU’s Banking Package on CRR 2 /CRD V, SRM II and BRRD II. These reforms along with revisions to EMIR and derivatives rules, as well as the EU’s push to make financial services play its part in combatting climate change, which we look at in closer detail in our dedicated coverage, are likely to require coordinated and concentrated action by policymakers but also market participants.    

Other announced changes may benefit from the continued steering by incumbent commissioners, such as Valdis Dombrovskis over at DG-FISMA, who have expressed an interest in staying on. This is welcome as the upcoming priorities that are to be announced on completing, but equally on expanding, the EU’s Banking and Capital Markets Union projects are quite technical, so consistency will be key. One such area is the EBA’s “roadmap” on new market and counterparty credit risk approaches. This stems from the wide-reaching Fundamental Review of the Trading Book. Other connected changes to MREL will need to be advanced over the summer, as will planning for the changes to how MiFID investment firms are supervised. More wider reaching changes, such as the EBA’s regulatory Guidelines (read rules) on loan origination and monitoring, the ECB’s plans on reducing legacy and preventing future non-performing loans, as well as the pending rules on credit servicing, are also running at full steam.  Then there are the ambitious projects that seek to fast track financial integration through institutional solutions, such as the European Debt Distribution Initiative (EDDI), as explored here.  

Lastly, while the race over at the ECB to replace “Super Mario” remains open, the ECB has been busy with a number of key messages, ranging from further details on TLTRO III operations, which start in September 2019  and run to the end of March 2021, or the outlook for financial integration after Brexit, which remains high on the agenda, as does the ECB’s concerns over cyclical factors and future profitability challenges in the banking sector, which still includes some bad apples, despite increased supervisory scrutiny and the improving compliance culture and risk governance. 

On the eve of the 20th anniversary of the ECB’s “The Effects of Technology on the EU Banking Systems” Working Paper, the ECB, which had forecast a number of technological developments that have been since implemented, continues to press ahead with its cyber-resilience priorities and to encourage financial services to digitize in a sustainable fashion – please see our dedicated series of coverage on these issues.  

With ESMA also stepping up its own reinvigorated approach to a “Common Supervisory Action” across the EU on standards in securities selling, you will need to make even more preparations than at the start of the 2019 supervisory cycle if you want to keep cool this summer. 

We hope you enjoy this month’s edition and also this quarter’s edition of the Global Regulatory Review. Please stay tuned to our Eurozone Hub for further periodic updates, including thematic deep dives on developments from European and national authorities that are likely to have considerable “change the business” but also “change the compliance” impacts.