Dear All,


ICMA/AMIC activities

The AMIC Secretariat together with its Chair, Robert Parker, has issued its first podcast with a focus on Negative Yielding Bonds

ICMA has published a Distributed Ledger Technology (DLT) Regulatory Directory and Brief. The directory seeks to provide a non-exhaustive overview of recent DLT regulatory guidance, legislative initiatives, as well as related strategy papers and publications in selected jurisdictions across Europe, North America, and Asia-Pacific. Its aim is to provide a sense of the direction of travel, anticipating future regulatory DLT guidance and legislative change, which will pave the way for broader adoption of DLT.

The next AMIC Conference and Executive Committee meeting will take place in Paris on 11 March. We will let you know more details in due course.

NB. The next AMIC Regulatory update will be sent on Friday 3 January 2020. The AMIC Secretariat would like to thank you for reading our newsletter for this past year and to wish you Season's Greetings and a Happy New Year! 

Upcoming ICMA Courses

 30-31 March: Collateral Management
        2-3 April: Securitisation - An Introduction



Fund Liquidity
  • (16.12.2019) FPC, FCA and BoE statement on joint review of open-ended funds

In its latest Financial Stability Report, the Financial Policy Committee (FPC) has set out initial findings of a joint review by the Financial Conduct Authority (FCA) and the Bank of England (BoE) on open-ended investment funds and the risks posed by their liquidity mismatch.

The FPC has reviewed the progress of the work and identified that, if greater consistency between the liquidity of a fund’s assets and its redemption terms is to be achieved:
-Liquidity of funds’ assets should be assessed by reference to the price discount needed for a quick sale of a representative sample (or vertical slice) of those assets or the time period needed for a sale which avoids a material price discount. In the US, the Securities and Exchange Commission has recently adopted measures of liquidity based on this concept.

-Redeeming investors should receive a price for their units in the fund that reflects the discount needed to sell the required portion of a fund’s assets in the specified redemption notice period, ensuring fair outcomes for redeeming and remaining investors.
-Redemption notice periods should reflect the time needed to sell the required portion of a fund’s assets without discounts beyond those captured in the price received by redeeming investors.

The FCA will use the conclusions of the review which will be released in 2020 to inform the development of the FCA’s rules for open-ended funds.
  • (16.12.2019) EIOPA publishes a report on insurers’ asset and liability management in relation to the illiquidity of their liabilities

The European Insurance and Occupational Pensions Authority (EIOPA) has published a report on insurers' asset and liability management in relation to the illiquidity of their liabilities.

The report provides information on:
-insurance liabilities;

-the asset management of insurers;
-long-term guarantee measures, including matching adjustment, volatility adjustment, actual yield and dynamic volatility adjustment; and
-the market valuation of insurance liabilities.

In its analysis, EIOPA investigated the illiquidity of insurance undertakings from two different perspectives: a total balance-sheet approach with a focus on how undertakings can hold on to their investments and a liability perspective that focuses on the predictability of the timing of the cash flows.

On asset management, a key distinction is made between the length of an investment in individual assets and of an investment in an asset class when establishing the holding period of assets. Another distinction is made between actual observed investment practices in the past and undertaking's capacity to hold on to investment in times of distress.

Fund leverage
  • (13.12.2019) IOSCO launches framework for monitoring leverage in funds that may pose stability risks

The Board of the International Organization of Securities Commissions (IOSCO) has unveiled a two-step framework designed to facilitate monitoring of leverage in investment funds that could potentially pose risks to financial stability. 

For step 1, IOSCO recommends that regulators use Gross Notional Exposure (GNE) or adjusted GNE as baseline analytical tools. By collecting information on long and short exposure, on an asset class basis, the regulatory community will gain greater insight on the direction of leverage.

For step 2, IOSCO recommends that each regulator determine its approach to define appropriate risk based measures for analysing funds identified under Step 1 that may potentially pose significant leverage related risks to the financial system.

  • (13.12.2019) ESMA issues 2019 report on Accepted Market Practices under MAR

The European Securities and Markets Authority (ESMA) has published its second annual report on the application of accepted market practices (AMPs) in accordance with the Market Abuse Regulation (MAR).

ESMA’s report provides an overview on the establishment and application of AMPs in the EU after MAR became applicable, including the AMPs established under the Market Abuse Directive that remained applicable afterwards.
  • (13.12.2019) ESMA publishes responses received to its consultation on the MAR review

The European Securities and Markets Authority (ESMA) has published the responses it received by stakeholders on its consultation on the review of the Market Abuse Regulation (MAR). Responses are available on its website.

Financial Stability
  • (13.12.2019) CBI issues latest Financial Stability Note - Mapping Market-Based Finance in Ireland

The Central Bank of Ireland (CBI) has published a Financial Stability Note which explores growth in the market-based finance sector over the last decade, the composition of the sector domiciled in Ireland and the benefits and vulnerabilities associated with this form of financial intermediation.

Market-based finance has grown rapidly in Ireland in recent years and is large relative to international standards and the size of the domestic economy. The sector domiciled in Ireland comprises a number of diverse business models and has more than doubled in value from approximately €1.8 trillion at the end of 2009 to approximately €4.5 trillion in the second quarter of 2019. While the sector has predominantly an international focus, it has also become increasingly linked to parts of the domestic economy, especially the commercial real estate market.
  • (18.12.2019) EIOPA outlines key financial stability risks of the European insurance and pensions sector

The European Insurance and Occupational Pensions Authority (EIOPA) has published its December 2019 Financial Stability Report of the (re)insurance and occupational pensions sectors in the European Economic Area.

This Financial Stability Report also includes two thematic articles, focusing on i) a climate risk assessment of the sovereign bond portfolio of European insurers and ii) the impact of variation margining on EU insurers' liquidity.
  • (18.12.2019) ESMA proposes strengthened rules to address undue short-termism in securities markets

The European Securities and Markets Authority (ESMA) has published its findings on potential undue short-term pressures in securities markets. The European Commission (EC) had asked the three ESAs (ESMA, EBA and EIOPA) to investigate potential sources of undue short-termism on corporations and provide advice on areas which regulators should address. 
  • (18.12.2019) FSB sets out 2020 work programme

The Financial Stability Board (FSB) has published its work programme for 2020. The FSB’s work priorities for 2020 reflect the evolving nature of the global financial system and associated risks to financial stability. The FSB will reinforce its forward-looking monitoring of developments to identify, assess and address new and emerging vulnerabilities. At the same time, the FSB will continue its work to finalise and operationalise the remaining elements of post-crisis reforms; monitor and assess the implementation of reforms; and evaluate their effects in order to ensure that reforms work as intended.

  • (16.12.2019) Speech by Luis de Guindos (ECB) on the European approach to financial innovation for inclusive growth 

Speech by Luis de Guindos, Vice-President of the European Central Bank (ECB), on the European approach to financial innovation for inclusive growth. 

In the speech, de Guindos spoke about incentivising firms to ensure that technological progress is to be fostered so that its benefits have manage to reach all corners of society - in particular underprivileged populations and vulnerable groups, for whom financial innovation has not yet made a difference.

  • (18.12.2019) FSB report sets out need to reduce risks to financial stability from LIBOR transition

The Financial Stability Board (FSB) has published its annual progress report on implementation of recommendations to reform major interest rate benchmarks. The report emphasises that the continued reliance of global financial markets on LIBOR poses risks to financial stability and it calls for significant and sustained efforts by the official sector and by financial and non-financial firms across many jurisdictions to transition away from LIBOR by end-2021.

The report sets out progress on implementing the FSB recommendations and finds that:
-There is a common view across FSB jurisdictions that the use of overnight risk-free rates should be encouraged across global interest rates markets where appropriate, and that contracts referencing IBORs should have robust fallbacks.

-There has been good progress in many derivatives and securities markets, but transition in lending markets has been slower, and needs to accelerate.
-Firms undertaking their transition away from LIBOR should not delay their programmes until the emergence of possible forward-looking term versions of risk-free rates.
-The parallel efforts on transition across multiple jurisdictions and currencies are an opportunity to align conventions and other practices across currencies and products.
-Transition requires significant commitment from the official sector, working alongside market participants.
-Given the degree of risk arising from the continued reliance on LIBOR, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches

Sustainable finance
  • (18.12.2019) BoE consults on its proposals for stress testing the financial stability implications of climate change

The Bank of England (BoE) has published a discussion paper which sets out its proposed framework for the 2021 Biennial Exploratory Scenario (‘BES’) exercise. The objective of the BES is to test the resilience of the largest banks and insurers (‘firms’) to the physical and transition risks associated with different possible climate scenarios, and the financial system’s exposure more broadly to climate-related risk.

Whilst climate-related risks will materialise over decades, actions today will affect the size of those future risks. It is therefore important that firms, and other stakeholders such as the Bank, continue to develop innovative approaches to measure climate-related risks before it is too late to ensure resilience to them. The BES will use exploratory scenarios to size these future risks and to explore how firms might respond to them materialising, rather than testing firms’ capital adequacy.
  • (18.12.2019) The European Council and the European Parliament reached a political agreement on the Taxonomy Regulation

The European Council and the European Parliament have reached a political agreement on the Taxonomy Regulation. The Taxonomy Regulation will introduce a complex classification system of sustainable activities based on contributions to environmental objectives and technical criteria, as well as wider social and sustainability factors. It also recognises transition and enabling activities. The Taxonomy Regulation will not only apply to sustainable financial products, but also stipulates mandatory disclaimers for mainstream fund and pension products that are not using the Taxonomy as well as reporting requirements for large firms already subject to the Non-Financial Reporting Directive.

Kind regards,


The AMIC Secretariat



Tel: +44 20 7213 0348



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