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Irish Presidency RoundUp H1 2013

  • MiFID/MiFIRR Review
  • Market Abuse Directive
  • Portability Directive
  • Anti-discrimination Directive
  • Data Protection Directive
  • Bank Recovery and Resolution
  • Packaged Retail Investment Products (PRIPS)

MiFID/MiFIR

On 21th June the Irish Presidency reached a general approach on MiFID II and MiFIR. This gives the Presidency a mandate on which to negotiate in trilogues (with the European Parliament, and the European Commission).

The main elements of the general approach include:

  • Enhanced transparency: member states have decided to limit 'dark pool' trading and introduce a new trade transparency regime for non-equities markets: The reference price waiver (RPW) and negotiated trade waiver (NTW) have been preserved, although subject to a double volume-cap ( capped at 4% of trading on a venue and at 8% of total trading in that instrument in the EU)
  • More robust and efficient market structures with the introduction of a new type of trading venue, the Organised Trading Facility (OTF), with all asset classes being retained for this new category and client facilitation will apply, but for non-equities only
  • Specific support to facilitate better access to capital markets for small- and- medium sized enterprises
  • Trading venues will have non-discriminatory access to CCPs (central counterparty) and CCPs are granted access to trading venues to provide clearing
  • New safeguards to take account of technological developments such as algorithmic trading or high speed trading
  • Stronger investor protection
  • New rules on corporate governance and managers ‘responsibility
  • Enhanced framework for derivatives markets
  • There were no last minute changes on the third country provisions, which means that business will continue being carried out under national access regimes under the Council text. This will allow Member States discretion on determining the treatment of interactions between third country firms and national professional and eligible counterparties. There are however minimum standards in place for retail firms

Trilogue negotiations between the European Commission, European Parliament and Council of Ministers can now commence. We understand that the European Parliament would like to hold the first trilogue meeting before the summer break, however given the tight timeframe this may not be possible.  The first trilogue meeting will focus on separating the technical issues from the political ones as well as setting a schedule of trilogue meetings going forward. As there are considerable differences between the Council and the Parliament’s texts, it will be challenging to reach agreement in the near future.

The texts can be found here:

Market Abuse Directive

June also saw an agreement reached on the Market Abuse Directive. The approach was endorsed on 27th June by COREPER (Ambassador level) in Council.

The agreement remains subject to a technical alignment following the outcome of the trilogue negotiations on the revised rules for markets in financial instruments (MiFID and MiFIR). This technical alignment relates to the cross references in MAR to MiFID/MiFIR, principally concerning scope and definitions.

The main points to note are:

  • Sanctions – the levels of sanctions and the prospect of criminal sanctions. A review clause has been introduced on this issue  
  • Insider information definition – this has been removed from the text, and replaced with a review clause.
  • There is still an adapted regime for SME’s whereby ESMA will issue guidelines to assist SME’s in complying with the market abuse rules.   
  • Reinstatement of the recitals from MAD I relating to takeovers and the use of research and estimates developed from publicly available data, should not be regarded in as inside information.

Implementation of MAR will take effect 2 years after publication in the official journal – this will be in sync with MiFID.  Consultations on the draft technical standards (by the European Securities and Markets Authority – ESMA) are expected in late 2014.

The text can be found here.

Portability Directive

Discussions of the Portability Directive (dating back to 2007) were reignited by the Irish Presidency early in 2013.  The Irish pushed very hard for agreement and sent the compromise text for agreement to the Employment, Social Policy, Health and Consumers Affairs Council.  It was not expected that agreement would be made due to the concerns about the legal basis, however, on 20 June 2013 Member States agreed to a "general approach" text. Key elements include:

  • Art 4 a: where a vesting period and/or a waiting period is applied the total combined period shall under no circumstances exceed three years for outgoing workers;
  • Art 2 (3): The Directive should have no retroactive effect, and should thus only apply to periods of employment falling after its entry into force;
  • Art 4 b: The minimum age in the scope of the Directive has been brought down from 25 to 21.

Most importantly, Member States would remain free to decide how to treat mobile workers within their own jurisdiction. However, the Commission encourages member states to apply similar conditions for internally and externally mobile workers, and the council acknowledges this as a further objective.

The European Commission, European Parliament and Council will now enter into trilogue discussions. The European Parliament’s position on the proposal dates back to 2007, and was drafted by Dutch MEP Oomen-Ruijten (EPP). It calls for full portability of pensions rights, which is a view not supported by the Member States in their text. Given the differing starting points of the institutions, it is difficult to predict the outcome of these negotiations at this stage.

The text can be found here.

Anti-discrimination Directive

The Irish Presidency did not prioritise work on the Directive on implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation (the Anti-discrimination Directive). However, some meetings of the working group have taken place in the first half of 2013, with discussions focusing primarily on access and on education, as well as on possible amendments to the proposed definition of ‘discrimination’.  There were no discussions on the provisions related to financial services.  A progress report was issued by the Irish on the 7th June.

The Lithuanian Presidency indicated that they will focus on ‘access to education’ and ‘social security’, and possibly progress of the definition of ‘discrimination’. The ABI, therefore, does not believe that financial services will be discussed this year. However, the ABI will follow closely any discussions that might take place on the definition of ‘discrimination’ and on any other relevant developments, and lobby HMT, GEO and the UK Attaché accordingly, as well as contributing to any Insurance Europe lobbying.

The text can be found here.

Data Protection Directive

The Irish Presidency prioritised work on the Data Protection Regulation with Council Working Groups taking place on an almost weekly basis. The Irish Presidency hoped to reach a ‘partial general approach’, however, at the Justice and Home Affairs Council (JHA) on 6th June an agreement was not reached. The Ministers held a lengthy debate on the Regulation and it was concluded that the amended text of chapters I to IV provided a good basis for further discussions under the Lithuanian Presidency.

We were pleased to see that most of our concerns have been addressed by the Irish Presidency’s text. There are some positive changes with attempts to make the text more risk based and proportionate. We are encouraged by the changes to profiling which reduces the risk of unintended consequences and the deletion of ‘significant imbalance’ in Article 7.  Changes have also been made to Data Portability (Article 18) which refers to safeguarding intellectual property rights. Whilst this is an improvement we remain concerned that this redraft still poses challenges from a competition perspective. Overall, we maintain that an outright deletion of this Article is preferable. There are also improvements to breach notification proposals and subject access requests.

The full progress text can be found here

Bank Recovery and Resolution

EU finance ministers have agreed the Directive on Recovery and Resolution for banks.   After intense negotiations, EU finance ministers have come to an agreement on the Directive on Recovery and Resolution for banks (RRD).  The deal does not look particularly favourable to investors since shareholders, bondholders and savers with deposit over 100000 euros will have to bear the costs of bank failures. Under the agreement, countries will retain some flexibility about when and how they will be able to impose losses on a failing bank's creditors. The Council agreed that a minimum of 8% of total liabilities must be bailed-in before resolution funds can be used. 

In the negotiations, the UK has pushed for a Directive that awards considerable flexibility to national resolution authorities, whereas the ABI has been making the case for common and clear rules on bail in as well as limited flexibility for resolution authorities. Ministers agreed that the new bail in rules will enter into force in 2018.

As the European Parliament agreed its report/negotiating text on 20th May, the agreement in Council paves the way for the trilogue process among the European Commission, the European Parliament and the Council which the ABI will continue to monitor and provide input in co-operation with Insurance Europe.

Packaged Retail Investment Products (PRIPS)

After much negotiation, the Packaged Retail Investment Products Regulation (PRIPS) has been approved by Member States. The Irish Presidency pushed extremely hard for an agreement holding bilateral meetings with Members States to work up a revised text that would be suitable for all.  The key points to note from the text are:

  • Scope: all pensions, non-life insurance and life insurance products with no investment component are excluded from the scope.
  • KID: there is some flexibility granted to produce a second KID for products which offer a range of investments, however, providers would still have produce both documents with all of the information listed in Article 8 of the Regulation.
  • UCITS will become subject to the Regulation after five years.
  • A review will be carried out after four years to take into account market developments and to decide whether a wider scope should be applied.

The next step is for trilogue negotiations between the European Parliament, European Commission and Council to begin. These negotiations will be led by the Lithuanian Presidency who takes over the next EU Presidency from July to December. Once agreed the requirements in the Regulation will be applicable two years after entry into force in the Official Journal.

The Council text can be found here.


Last updated 01/07/2016