In the past month, we’ve celebrated the holiday season and brought in the new year, but there has been no rest for the wicked and regulators have been busy scrambling to meet deadlines and push out new regulatory documents. In the period before Christmas, we witnessed a lot of developments and it’s safe to say that all of those involved in the regulatory process will be feeling the heat despite the winter weather.
ESMA, in particular, has been indefatigable with a streak of crucial new releases, including some connected to the implementation of MiFID II. Perhaps the most important of these were the guidelines on transaction reporting, reference data, order record keeping and clock synchronisation. At over 270 pages, excluding the annexes, digesting these is sure to have kept MiFID teams busy into the new year as they struggle to get to grips with the listed scenarios which are accompanied by precise technical formats and schema to be used to represent specific reportable values. Along with these, guidelines on cross-selling practices were also delivered, and these seek to ensure that investors are treated fairly when an investment firm offers two or more financial products or services as part of a package.
As well as this output, we’ve also seen the final publication of important new regulations in the Official Journal of the EU, including SFTR, Payment Services Directive 2 and the third group of implementing regulations on Solvency II. This definitive action is bound to create additional strain, as it sets in stone additional implementation timelines that will only intensify the compliance burden faced by the financial services industry.
Before the break, we also saw the FCA’s Consultation Paper on the implementation of MiFID II as well as a consultation on consequential changes to the Senior Managers Regime. The EBA also got in on the action with their draft guidelines covering remuneration policies in the retail banking sector.
The European Parliament has been busy with its report on stocktaking and challenges of EU financial services regulation. Compiled by the Committee on Economic and Monetary Affairs (ECON), the report assesses the best way towards a more efficient and effective EU framework for financial regulation and a Capital Markets Union. One of its main recommendations is to protect the exemptions in EMIR for non-financial companies which it states have been contradicted by the Capital Requirements Directive and Regulation with regard to the application of the Credit Valuation Adjustment charge. It has, therefore, called for more consistency in policies across different legislative proposals. However, with new year’s resolutions being made across the regulatory sector in the dawn of 2016, it remains to be seen whether this idealistic view can be realised by regulators in the upcoming year.
On the other side of the pond, US regulators have been of a similar proclivity with the Board of Governors of the Federal Reserve System releasing guidance that consolidates capital planning expectations for all large financial institutions and clarifies differences in those expectations based on firm size and complexity. We also had the US Federal Reserve Board reaching out for public opinion on a proposed policy statement regarding countercyclical capital buffers. The SEC have published their 2015 summary report of commission staff’s examinations of each nationally recognised statistical rating organisation, while the Office of the Investor Advocate completed its review of the fiscal year report on activities. Meanwhile, the CFTC’s gift to J.P. Morgan Chase was a $100 million fine for failure to disclose conflicts of interest just before the break. Along with this, they provided time-limited no-action relief for Swap Execution Facilities (SEFs) from the requirements to capture post-trade allocation information in their audit trail data.
IOSCO released an international report on trading venue business continuity plans that looks at the mechanisms to effectively manage electronic trading risks and plans for business continuity. Strides have also been made by the German regulator, BaFin, with their publication of indicator values, time series and indicator descriptions concerning the countercyclical capital buffer.
This is just a condensed insight demonstrating the depth and breadth of the regulatory developments that were churned out around the holidays. With thousands of pages of regulatory documents appearing over this busy period across the world, the financial services industry has a lot of catching up to do. All this progress and productivity within such a short space of time signifies a busy year ahead for all industry players.