AMIC Regulatory Update
 


Latest developments
 

AMIC secretariat published on 13 May  its weekly COVID-19 market update podcast in which Robert Parker, Chairman of AMIC, reviewed the market events of the last week, with a specific focus on  on lockdown easing measures, the state of the economic recovery and debt restructuring of some emerging countries.
 
AMIC Sustainable Finance Working Group met virtually on 14 May to discuss on-going consultations: the EC consultation on the NFRD review, the EC consultation on the renewed sustainable finance strategy, the ESAs consultation on the Sustainable Finance Disclosure Regulation's RTS.
 
AMIC secretariat published on 15 May an updated version of the AMIC COVID 19 regulatory grid. It provides an overview of policy measures related to the buy-side taken by several European securities regulators in the context of the global pandemic.

ICMA published on 11 May a document proposing high-level definitions in the sustainable finance field, for example climate finance, impact finance, green finance and social finance. The objective is to ensure that all participants and stakeholders are using a common and transparent vocabulary. It is also designed as a contribution to other ongoing efforts in the financial industry to develop a consensus around key terms and definitions in sustainable finance.
 
ICMA has launched on 12 May a new suite of its market leading foundation courses on a new digital platform. You can register now for these completely redesigned and interactive programmes, which are certified and suitable for those in the front, middle or back office functions.
 

 


ICMA Asset Management and Investors Council (AMIC) Regulatory Update

Risk management-COVID-19

11 May 2020
ESRB issues note on liquidity in the corporate bond and commercial paper markets, the procyclical impact of downgrades and implications for asset managers and insurers

The coronavirus (COVID-19) pandemic and the measures necessary to contain it have brought a severe and unprecedented shock to Europe’s economies. Against this background, the General Board of the European Systemic Risk Board (ESRB) decided at its meeting on 2 April 2020 to focus its attention on five priority areas where coordination among authorities or across the EU is likely to be particularly important in order to safeguard financial stability. 1 One of those five priority areas concerns issues around market liquidity and illiquidity, with a particular focus on the implications for asset managers and insurers. Another priority area is concerned with the procyclical impact that downgrades of corporate bonds have on markets and entities across the financial system.

13 May 2020 CSSF updates its COVID-19 FAQ for fund managers
 
The updated version of the FAQ has specifies that reports to be submitted by UCIs, SIFs, SICARs investment fund managers, pension funds and securitisation undertakings may be extended provided that the CSSF is informed thereof. Nevertheless, submission on time is encouraged, where the submission can be made within the usual time limits without compromising the quality of the reporting and in line with the health rules to contain the spread of Covid-19.

13 May 2020 CSSF launches a new tool (eDesk) to report fund issues and large redemptions 
 
On 10 March 2020, the CSSF has implemented a specific monitoring of the largest investment fund managers (“IFM”) in view of the specific circumstances and risks to which these companies were exposed to as a result of the prevailing market conditions. All IFMs concerned by the notification on fund issues and/or large redemptions (hereafter “IFM Notification”) have been contacted by the CSSF. An IFM Notification has now to be transmitted to the CSSF via eDesk only if the following events occur:

  • significant events/issues affecting the functioning of the investment funds managed by the IFM;
  • larger redemptions at the level of Luxembourg regulated investment funds (UCITS, Part II UCI, SIF) managed by the IFM (i.e. daily net redemptions exceeding 5% of the NAV, net redemptions over a calendar week exceeding 15% of the NAV and/or application of gates/ deferred redemptions).
 

13 May 2020 ESMA highlights challenges for rating collateralised loan obligations

ESMA has published a Thematic Report on Collateralised Loan Obligations (CLOs) credit ratings in the European Union (EU). The report provides an overview of CLO rating practices and identifies the main supervisory concerns, and medium-term risks, in this asset class which include credit rating agencies’ (CRAs) internal organisation, their interactions with CLO issuers, operational risks, commercial influence on the rating process and the need for proper analysis of CLOs.


14 May 2020 AMF udpdates its COVID-19 FAQ for fund managers

 

The updated version of the FAQ (only available in French at this stage) brings clarification on the implementation of anti-dilution levies, side pockets and redemption notice periods. It also invites fund managers to adjust their VaR methodology and positions considering market volatility and update their KID if Synthetic Risk Indicator are now substantially different since the market stress episode in March/April.

14 May 2020 ESMA supports ESRB actions to address COVID-related systemic vulnerabilities

ESMA has published a statement supporting the recommendations issued by the General Board of the European Systemic Risk Board (ESRB). In its recommendation ESRB invites ESMA  to undertake, in coordination with national competent authorities, a focused piece of supervisory exercise with investment funds that have significant exposures to corporate debt and real estate assets to assess the preparedness of these two segments of the investment funds sector to potential future adverse shocks, including any potential resumption of significant redemptions and/or an increase in valuation uncertainty.

14 May 2020 ESMA sees potential decoupling of financial market performance and underlying economic activity

ESMA has published the first complete risk dashboard for 2020, and highlights the very high risks in all areas of ESMA’s remit. The assessment remains at the same level as the separate risk update published on 2 April.

Homeworking-COVID-19

11 May 2020 FCA update following the Prime Minister’s statement on Sunday 10 May

The financial services industry has continued to operate during the coronavirus (Covid-19) crisis with homeworking and some workers operating in locations such as branches and call centres.
 

The FCA have previously published advice on the steps financial services firms should take, for example identifying key workers and the responsibilities of senior managers, and there is no change to those statements at this stage.

14 May 2020 Recommendations to supervised entities on telework and a possible return to the office
 

The recent easing of the lockdown by the Luxembourg government has not signaled the end of the COVID-19 pandemic. Given the number of staff directly employed in financial services, in excess of 50,000, CSSF has firmly recommended to supervise entities to remain extremely careful when considering allowing the return to the office, so as to contribute keeping the infections at a low rate and to ensure business continuity. It is thus recommended that:
 

  • Teleworking continues, wherever possible;
  • The return to the workplace is limited to a minimum, e.g. when tasks cannot be performed remotely. One example would be branches with a client interaction; and
  • External meetings are held by video or audio conferencing, rather than physical meetings.
 

 

Deposit Guarantee Schemes - COVID 19

12 May 2020 EBA updates data on Deposit Guarantee Schemes across the EU

EBA has published 2019 data relating to two key concepts in the Deposit Guarantee Schemes Directive (DGSD): available financial means, and covered deposits. The EBA publishes this data on a yearly basis to enhance the transparency and public accountability of deposit guarantee schemes (DGSs) across the EU to the benefit of depositors, markets, policymakers, DGSs and Members States.



 
 

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amic@icmagroup.org
www.icmagroup.org/amic


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