News Update Financial Regulatory

2 April 2020

The Houthoff Financial Regulatory team is monitoring the developments in the financial markets and within financial supervision closely. In this News Update, we round up the most important developments from a financial regulatory perspective.

If you wish to stay informed, you can subscribe to these News Updates via this button.

BCBS – Delayed implementation of new capital standards

Due to the coronavirus pandemic, the Basel Committee on Banking Supervision ("BCBS") announced on 27 March 2020 that some implementation dates will be postponed by a year. This concerns the delayed application of the package of measures that is generally referred to as Basel IV, new market risk standards and transparency requirements. The parts that have already been copied into EU regulations and the Dutch Act on financial supervision (Wet op het financieel toezicht ('Wft')) will still require a change in the law. The intent is that supervisors and banks will have more free operational capacity to deal with the consequences of the coronavirus pan-demic.

ECB and DNB – Recommendation to banks not to pay dividends

On 27 March 2020, the European Central Bank ("ECB") updated its recommendation to significant banks. Banks should not pay dividends for the financial years 2019 and 2020 until at least 1 October 2020 so that they can boost their capacity to absorb losses and support lending to households, small businesses and companies during the coronavirus pandemic. Banks should also refrain from share buy-backs aimed at remunerating shareholders. De Nederlandsche Bank, the Dutch Central Bank ("DNB") has promulgated the same policy for less significant banks. ABN AMRO, ING and Rabobank have already indicated that they will not pay any dividend until 1 October 2020.

EBA – Impact study postponed and guidance financial crime

The European Banking Authority ("EBA") has clarified the various measures that supervisors such as the ECB and DNB can take on dividends and delayed reporting and publication dead-lines. The EBA supports these measures. On 31 March 2020, the EBA mentioned that the quanti-tative impact study based on June 2020 data is postponed. Lastly, the EBA notes that the im-portance of combating financial crime including money laundering is undiminished (also see below on client identification).

ESMA - Guidance on accounting implications of coronavirus

On 25 March 2020, the European Securities and Markets Authority ("ESMA") issued a public statement on some accounting implications of the economic support and relief measures adopted by EU Member States in response to the coronavirus outbreak. The measures, includ-ing moratoria on repayment of loans, have an impact on the calculation of expected credit loss-es in accordance with IFRS 9. The Statement provides guidance to issuers and auditors on the application of IFRS 9 Financial Instruments, specifically as regards the calculation of expected credit losses and related disclosure requirements.

ESMA - Clarifying position on SFTR backloading

In response to feedback received from financial market participants and stakeholders, on 26 March 2020, ESMA issued a revised version of its 19 March 2020 public statement on coordinated supervisory actions on the application of the Securities Finance Transactions Regulation ("SFTR"). It clarified that securities finance transactions ("SFTs") concluded between 13 April 2020 and 13 July 2020 and SFTs subject to backloading under the SFTR also fall within those issues which competent authorities are not expected to prioritise in their supervisory actions towards counterparties, entities responsible for reporting and investment firms in respect of their reporting obligations under the SFTR or MiFIR. It also clarifies that competent authorities should generally apply their own risk-based approach in exercising supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.

ESMA - Confirmation application date equity transparency calculations

ESMA has decided not to change the date of application of the transparency calculations for equity instruments of 1 April 2020. Having consulted with various market participants, ESMA considers that delaying the application of the new transparency results would in itself entail some risks and might even create additional operational burdens for all the market participants that have already planned for them. Read more

ESMA - Guidance on financial reporting deadlines

Issuing institutions are required to disclose their financial statements for the previous year (in this case 2019) by 30 April at the latest and deposit them with the Netherlands Authority for the Financial Markets (the "AFM"). In view of the special circumstances of the coronavirus outbreak, ESMA suggested in its statement of 27 March 2020 that national supervisory authorities should enforce the deadline rules with less rigour, in so far as any delay is caused by the consequences of the coronavirus. At the same time, the Statement underlines that issuers should keep their investors informed of the expected publication delay and that requirements under the Market Abuse Regulation still apply. Read more

EIOPA – Publication of extraordinary information for Solvency II Relevant Risk Free Interest Rate Term Structures and Symmetric Adjustment to Equity Risk

Due to the coronavirus outbreak, the European Insurance and Occupational Pensions Authority ("EIOPA") will carry out extraordinary calculations in the coming weeks on a weekly basis to monitor the evolution of the relevant risk-free interest rate term structures ("RFR") and the sym-metric adjustment to equity risk ("EDA"). EIOPA is publishing this information in order to support insurance and reinsurance undertakings in the monitoring of their solvency and financial position.

The information will be published on a specific area of the website created for this purpose both for RFR and EDA named “Extraordinary weekly updates”.

DNB - Postponement of insurers' reporting deadlines due to coronavirus

DNB has welcomed and will follow EIOPA's recommendation of 20 March 2020 to national regu-lators for flexibility with regard to reporting periods for supervisory reports and public reporting. DNB has sent letters to Dutch insurers regarding the Solvency II and the Solvency II Basic re-ports. Read more

DNB - Postponement of reporting period for annual statements of pension funds

Pension funds must publish their annual statements for the preceding year by 30 June at the latest. However, the coronavirus outbreak poses major operational challenges for pensions. For this reason, DNB is granting pension funds three extra months to submit their annual statements, until 30 September 2020. In this way, DNB is offering pension funds a scope comparable to that agreed at European level for the insurance sector. Read more

DNB – Consultation on amendment Regeling specifieke bepalingen CRD IV and CRR 2019

On 23 March 2020, DNB launched a public consultation on an amendment to the Regeling specifieke bepalingen CRD IV and CRR 2019. The amendment relates to DNB's decision of 17 March 2020 to reduce the systemic risk buffer requirement in connection with the coronavirus crisis. The consultation runs until 6 April 2020. Read more

AFM – Data requests partly suspended until 1 June 2020

Due to the exceptional circumstances currently confronting the financial sector as a result of the coronavirus, the AFM has decided to suspend large data requests to financial enterprises until 1 June 2020. By doing so, the AFM wants to give the financial sector room to fully focus on the challenges of this crisis and on client needs. Read more

Remote client identification

Now that the Dutch government has called on everyone to stay at home as much as possible, client identification under the Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme, "Wwft") will be more complicated. If no original proof of identity can be viewed, a client's identity can sometimes be verified remotely. In this way, a practical solution may be found in certain situations. For example, a client sends a colour scan or photo of their identity card by email. In a video-call with the client, the client then shows their original identity card, on the basis of which the data of the received scan or photo can be verified. On a printout of the copy received by email, it is noted that the verification took place via the video call, by whom and on what date. The verified copy of the identity card is then stored in the file of the client concerned.

We are available to discuss whether such practical solutions are workable for you.