The EU Commission has been anything but idle over the past five years. From September 2019, the current European Commission has proposed 42 legislative acts related to financial services, which encompass a range of packages, regulations, and directives. Additionally, they’ve put forward 10 broader acts impacting the financial sector. The European Parliament and Council have also made progress in this area, adopting 11 financial service acts from the previous Commission’s tenure (2014-2019), they have given approval to 10 and provisionally agreed on 11 more from the current Commission’s, and are continuing to work through the remaining proposals.
Amidst this deluge of regulatory change some files are clearly more important than others. Where have the main thrusts been? The initiatives being prioritized include the Digital Finance package, which features regulations such as MiCA and DORA, a revision of Consumer Credits, a comprehensive AML package, amendments to funds transfer regulations, and the Capital Markets Package. Further areas of focus encompass AIFMD2, ELTIF2, the European Single Access Point regulation, and various sustainability-related initiatives, including CSDDD and ESG ratings. This concerted legislative action reflects a significant push towards modernizing and strengthening the European financial services landscape.
The final countdown (but not leaving for Venus)
We’re now entering into the final countdown for the current period, and so even more than ever the Commission has to have a laser focus on what needs to get done as soon as possible…In October, the European Commission released its 2024 program, notably emphasizing the progress of the Capital Markets Union. Critical aspects include enhancing legal frameworks for insolvency and simplifying business access to capital markets, alongside strengthening the long-term investment capacity of insurance companies. A continued push towards a comprehensive Banking Union is also highlighted, focusing on crisis management and deposit insurance.
Digital finance remains a priority, with the Commission stressing the need to fortify payment service rules and facilitate access to financial data through Open Finance. Additionally, the establishment of a legal framework for a digital euro is an important agenda item. These initiatives are pivotal in enhancing the EU’s financial market’s sustainability and competitiveness.
Reducing the weight of reporting…
Although the European Commission does not mention any significant financial initiatives for 2024, it highlights a series of proposals adopted since March 2023, which will impact its 2024 program. These legislative initiatives are set to influence the financial industry:
The COM (2023) 227 proposal, focusing on reducing banks’ reporting burdens and enhancing authorities’ information sharing to streamline early intervention, resolution conditions, and financing of resolution actions.
The EU Commission’s Implementing Regulation 2023/895, applied to the Solvency II Directive, introduces simplified reporting and disclosure procedures for insurance and reinsurance companies, streamlining the process and making it more proportionate.
A proposal of regulation amending the regulations establishing the EBA, the EIOPA, the ESMA, and the ESRB, to simplify and enhance data exchange between financial supervisory authorities: This aims to reduce the redundancy in reporting, benefiting financial entities and European and national authorities.
A proposal to amend Regulation 2016/1011 on indices used as benchmarks in financial instruments and financial contracts, or to measure the performance of investment funds, seeking to limit the scope to significant indices, narrowing the range of indices that can be used for these purposes.
All of these taken together seem to indicate a direction of travel focused on simplifying and reducing the operational workload for financial services institutions in their disclosure and reporting requirements.
… but cracking down hard on AML
Financial Crime still clearly remains a Commission priority, with advances in fight in AML and CTF including:
A proposal for a directive, known as the sixth AML Directive (AMLD 6), detailing mechanisms for Member States to prevent the financial system’s misuse for money laundering or terrorism financing.
A proposal for a regulation to establish the Anti-Money Laundering Authority (AMLA).
A proposal for a regulation, referred to as the AML Regulation (AMLR), on preventing the financial system’s use for money laundering or terrorism financing.
Last sprint or out of time?
In preparation for the European elections in June 2024, efforts are ramping up to finalize approximately 25 financial services related legislative proposals. This includes the Clearing Package, amending regulations like EMIR and the Capital Requirements Regulation, and the Listing Package, which aims to enhance the attractiveness of public capital markets. Other significant proposals cover the Retail Investment Strategy, revising the PRIIPs Regulation for investor protection, the Sustainable Finance Package focusing on ESG rating transparency, and the Payment Services Strategy and Data Access Package, designed to update payment services and financial data access in the Internal Market. We’ll have to see here if some proposals may be carried over for agreement under the next legislative period.
Indeed, the Commission is yet to address certain pending proposals, including one for a European Deposit Insurance Scheme and another for a recovery and resolution framework for insurers. In Digital Finance, a forthcoming proposal aims to set up a framework governing Financial Data Access. The clock is ticking…