AMIC Regulatory Update

Latest developments

ICMA sustainable finance team has published a Compendium intended to provide stakeholders with an easy reference point to the numerous national and international developments in the field of sustainable finance. The publication will be regularly updated. For more information about ICMA’s sustainability work please see our website.

The next AMIC Conference will take place in Paris, on 11 March, in partnership with AF2I and will be hosted by BNP Paribas Asset Management. The conference will have a keynote speech from Steffen Kern, Chief Economist and Head of Risk Analysis, ESMA. It will also feature panels on fund liquidity and leverage, challenges and opportunities in the current investment environment, sustainable finance and asset allocation. The event is free to attend for all but registration in advance is essential.

The next AMIC Executive Committee meeting will also take place in Paris on 11 March.


ICMA Asset Management and Investors Council (AMIC) Regulatory Update

Sustainable Finance

20 February 2020 European Commission launches public consultation on the review of the Non-Financial Reporting Directive

The Commission has launched a public consultation on the review of the Non-Financial Reporting Directive (NFRD). 

This Directive requires certain large companies to include a non-financial statement (e.g. on environmental or social issues) as part of their annual public reporting obligations. The main focus of this consultation is to collect views from across the EU on different possible reforms or improvements that could be made to the Directive.

As set out in the European Green Deal Communication and the European Green Deal Investment Plan, the European Commission has committed to reviewing the NFRD in 2020 as part of its strategy to strengthen sustainable investment in Europe. Meeting the objectives of the European Green Deal will require additional investments across all sectors of the economy, the bulk of which will need to come from the private sector. Reviewing this Directive is, therefore, an essential part of the Commission's effort to scale up sustainable finance by improving corporate transparency and providing all stakeholders with more comparable and relevant information on sustainable business activities.

20 February 2020 FRC assesses company and auditor responses to climate change

The UK Financial Reporting Council (FRC) announced a major review of how companies and auditors assess and report on the impact of climate change. The FRC will review the extent to which UK companies and auditors are responding to the impact of climate change on their business to ensure reporting requirements are being met. The review will consider how the quality of information can be improved to support informed decision-making by investors and other stakeholders.

The FRC will monitor how companies and their advisers fulfill their responsibilities, and encourage better practice. The FRC will also consider how investors are addressing the climate challenge in the stewardship of their investments and in their response to systemic and market risks when it monitors the first reports under the new UK Stewardship Code, which will be issued from the beginning of 2021.


20 February 2020 European Commission's High Level Forum on CMU publishes a report

The European Commission’s High-Level Forum on CMU published an interim report on the way forward for the CMU. This report addresses the effects of the measures taken so far, the remaining obstacles in completing the CMU, and the ways to overcome them.

The report addresses the effects of the measures taken so far, the remaining obstacles in completing the CMU, and the ways to overcome them. The High-Level Forum calls for strong and immediate political support and coordination among all EU institutions to push forward bold reforms so that the CMU can deliver on its promises.


17 February 2020 EC publishes consultation on Mifid II/R

The European Commission has launched a public consultation on the review of MiFID II and MiFIR. The consultation paper is divided into two main sections: Section 1 covering general questions on the overall functioning of the MiFID II and MiFIR regulatory framework (Qs 1 – 6.1) and Section 2 covering specific questions on the existing regulatory framework (Qs 7 – 93). Section 3 includes one “catch-all” question where the Commission asks stakeholders to identify any additional issues.

Notably, part one of Section 2 lists priority areas for review and includes:

  • The establishment of an EU consolidates tape;
  • Investor protection;
  • Research unbundling rules and SME research coverage; and
  • Commodity markets

In addition, part two of the Section 2 covers areas identifies as non-priority for review and includes:

  • Derivatives trading obligation;
  • Multilateral systems;
  • Double volume cap;
  • Non-discriminatory access;
  • Digitisation and new technologies; and
  • Foreign exchange.

The consultation runs until 20 April 2020.

18 February 2020 ESMA updates Q&As on MiFID II and MiFIR investor protection topics

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

The new Q&As provides clarification on:

  • Sales of subordinated eligible liabilities and the assessment of suitability;
  • Whether Article 44a of BRRD 2 should be apply only if there is an active offering on the part of the firm;
  • Information to be collected from clients in order to comply with Article 44a(1) and 44a(2) of BRRD 2;
  • Calculation of 10% threshold referred to in Article 44a(2)(a) of BRRD 2;
  • What happens if a transaction relating to subordinated eligible liabilities is deemed unsuitable by the firm, but the retail client wishes to proceed anyway; and
  • Monitoring of 10% threshold referred to in Article 44a(2)(a) of BRRD 2.


19 February 2020 European Commission presents strategies for data and Artificial Intelligence

The European Commission has unveiled its ideas and actions for a digital transformation, to create a Europe fit for the digital age, noting among other things that digital is a key enabler to fighting climate change and achieving the green transition. As first steps towards achieving its goals, the Commission presented communications on the European data strategy and the policy options to ensure the human-centric development of AI. 

Within the data strategy, building on ongoing experience, the Commission will support the establishment of nine common European data spaces, including a common European financial data space – to stimulate, through enhanced data sharing, innovation, market transparency, and sustainable finance, as well as access to finance for European businesses and a more integrated market. 

The Commission will set out concrete initiatives on this in its upcoming Digital Finance Strategy, in Q3 2020.  This will include consideration of further facilitation of access to public disclosures of financial data or supervisory reporting data, currently mandated by law, eg by promoting the use of common pro-competitive technical standards.

Risk management

18 February 2020 ECB publishes working paper on Simulating fire sales in a system of banks and asset managers

The European Central Banks has published a working paper on Simulating fire sales in a system of banks and asset managers.

The paper finds that:

  • First, banks which are active in both the interbank and securities markets may channel financial distress between the two markets;
  • Second, while higher bank capital requirements decrease default risk and funding costs, they make
    it also more profitable to invest into less-liquid assets financed by interbank borrowing;
  • Third, asset managers absorb small liquidity shocks, but they exacerbate contagion when their voluntary liquidbuffers are fully utilised; and
  • Fourth, a system with larger and more interconnected agents is more prone to contagion risk stemming from funding shocks.

18 February 2020 OECD publishes report on Corporate Bond Market Trends, Emerging Risks and Monetary Policy

The Organisation for Economic Co-operation and Development (OECD) has published a report Corporate Bond Market Trends, Emerging Risks and Monetary Policy.

The new data in this OECD report, Corporate Bond Market Trends, Emerging Risks and Monetary Policy, shows that, in addition to its growing size, the quality and dynamics of the outstanding stock of corporate bonds have also changed. Compared with previous credit cycles, today’s stock of outstanding corporate bonds has lower overall credit quality, higher payback requirements, longer maturities and inferior covenant protection. These are features that may amplify the negative effects that an economic downturn would have on the non-financial corporate sector and the overall economy.

18 February 2020 FCA highlights its area of concern in financial services markets

The Financial Conduct Authority (FCA) has published its annual Sector Views, an assessment of the risks and potential harm to consumers across financial services markets.

The report sets out what factors are driving harm, as well as considering how the harm may develop over time.

The kinds of harms the FCA is concerned about, include:

  • Although the FCA has seen a number of positive corrections in the credit market, our Financial Lives data shows that 7.4 million UK adults are over-indebted and find their financial commitment a burden;
  • Pricing practices in insurance still penalise loyal customers – the ‘loyalty penalty’ in home and motor insurance cost 6 million longstanding consumers an extra £1.2 billion in 2018, and the FCA is finalising remedies following its market study;
  • High-risk retail investment products are exposing consumers to more risk than they can absorb – some of the highest risk products are often marketed directly to retail consumers with poor communication of the risks involved and implications that the investments are regulated, when this is not the case; and
  • Many new payments firms have been able to enter the market and grow quickly, but some of their products don’t have protection in place for consumers, for example e-money services advertised as ‘current accounts’ aren’t covered by the Financial Services Compensation Scheme.

19 February 2020 ESRB publishes report on systemic cyber attacks

The ESRB published a report on cyber incidents, such as cyber attacks, which also summarises the latest estimates of the costs of cyber incidents and shows that a cyber incident could indeed evolve into a systemic cyber crisis that threatens financial stability – the key tipping point would occur when confidence in the financial system was so severely weakened that important financial institutions would cease all lending activity because they were no longer willing to lend, as opposed to being (technically) unable to lend.

The ESRB has identified cyber risk as one of the sources of systemic risk to the financial system, which could have serious negative consequences for the real economy, and therefore intends to use its broad institutional composition and network to evaluate the costs and benefits of different policy options aimed at reducing systemic cyber risk. Cyber risk is characterised by three key features which, when combined, fundamentally differentiate it from other sources of operational risk: the speed and scale of its propagation as well as the potential intent of threat actors.

19 February 2020 ESMA finds continued high risks as financial markets remain highly volatile

The European Securities and Markets Authority (ESMA) has published the first Trends, Risks and Vulnerabilities (TRV) report of 2020.

ESMA identifies continued high risks and a weaker economic outlook as markets remain highly sensitive to geopolitical events. The risk outlook is stable, however risks are high, particularly in the securities markets and for retail investors.
This TRV is the first report since the entry into force of the new ESA Regulation on 1 January 2020 and, in line with ESMA’s new mandate, includes new sections about sustainable finance and consumer protection.

20 February 2020 EIOPA publishes a Supervisory statement on ultra-low/negative interest rate environment

The European Insurance and Occupational Pensions Authority (EIOPA) has published a Supervisory Statement on the impact of the ultra-low/negative interest rate environment.

This environment is significantly impacting the insurance sector in the EU, in terms of asset allocation, reinvestment risk, profitability and solvency. It constitutes one of the most important sources of systemic risk for insurers for the coming years.



14 February 2020 ESMA seeks candidates to represent the interests of all types of financial markets stakeholders

The European Securities and Markets Authority (ESMA) is seeking candidates to represent the interests of all types of financial markets stakeholders as members of its Securities and Markets Stakeholders Group (SMSG).

Strong stakeholder engagement has hugely contributed to ESMA’s successful contribution to the development of a single rulebook for financial services and ensuring its consistent application. ESMA particularly values its relationship with the SMSG as it facilitates consultation between ESMA and its stakeholders on ESMA’s areas of responsibility and provides advice on its policy development. This helps to ensure that stakeholders can contribute to the formulation of policy from the beginning of the process.The deadline for applications is on the 29th March 2020.


17 February 2020 ESMA updates the CSDR Q&As

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers regarding the implementation of the Central Securities Depositories Regulation (CSDR).

The updated Q&As provide answers to questions regarding practical issues on the implementation of the new CSDR regime. The latest set of seven CSDR Q&As approved by the Board clarify the implementation of the settlement discipline regime.

18 February 2020 ESMA updates its Q&As relating to the prospectus regulation

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers on the Prospectus Regulation with two new Q&As. 

The two Q&As provide clarification on the following issues in relation to the Prospectus Regulation:

  • The number of additional pages that can be included in a summary where there is more than one guarantor; and
  • The number of additional pages that can be included in a summary relating to several securities, as per Article 7(7) of the PR.

IBOR transition

19 February 2020 ECB publishes a press release on Working Group on euro risk-free rates issues recommendations to support smooth transfer of EONIS's liquidity to €STR

The European Central Bank (ECB) has published a press release on Working Group on euro risk-free rates issues recommendations to support smooth transfer of EONIS's liquidity to €STR.

The report supplements a previous report from the working group on the impact of the transition from EONIA to the €STR on cash and derivatives products (published in August 2019) and provides clarifications around specific topics that have been discussed since then.



Upcoming ICMA Courses

Collateral Management London, 30-31 March
Inflation-Linked Bonds and Derivatives London, 2-3 April
Fixed Income Certificate (FIC) Amsterdam, 18-22 May
Fixed Income Portfolio Management & Construction London, 27-29 May
Financial Markets Foundation Qualification (FMFQ) London, 3-5 June 
Securitisation: An Introduction London, 16-17 September



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