News Update Financial Regulatory
Short-term measures from the financial regulatory point of view
09 April 2020
9 April 2020
The Houthoff Financial Regulatory team monitors the developments on the financial markets and within financial supervision closely. The most important recent developments are rounded up in this News Update.If you wish to stay informed, you can subscribe to these News Updates here.
There are continuous developments, which are currently focusing on facilitating the regular economy during the coronavirus crisis. Part of this is enabling financial enterprises to finance and assist consumers, other companies and each other. Supervisors and legislators are delaying submission dates for non-essential submissions, and providing relief from certain financial requirements. This gives financial enterprises the operational and financial flexibility they need to fulfil this role.
However, there are limitations to this. Clients that are already non-compliant debtors outside of the coronavirus context should not be allowed to benefit from this flexibility. Supervisory authorities indicate that it remains a high priority that e.g. banks prevent abuse of this more flexible financial system by criminals. Supervisory authorities are also hoping to prevent leakage of the newly-created financial legroom via dividends. This will require action from both distributing and recipient financial institutions.
Almost all of the measures are geared towards the short term. In the longer term, winding down these measures will no doubt require renewed attention from the financial regulatory point of view.
European Commission - Coronavirus: mobilisation of all resources to protect lives and livelihoodsOn 2 April 2020, the European Commission announced that it is further increasing its response by proposing to set up a EUR 100 billion solidarity instrument to help workers keep their incomes and businesses stay afloat. It is also proposing to redirect all available structural funds to the coronavirus response.
ECB – Extension of review of monetary policy strategy until mid-2021On 2 April 2020, the European Central Bank ("ECB") decided to extend the timeline for the review of its monetary policy strategy. In the current situation, the decision-making bodies and staff of the ECB and the national central banks of the Eurosystem are focusing all their efforts on addressing the challenges posed by the coronavirus pandemic. The conclusion of the strategy review will therefore be postponed to mid-2021.
EBA - Additional clarity on measures to mitigate the impact of the coronavirus on the EU banking sectorFollowing its call for flexibility in the prudential framework and supervisory approaches to support lending into the real economy, on 31 March 2020, the European Banking Authority ("EBA") clarified its expectations in relation to dividend and remuneration policies, provided additional guidance on how to use flexibility in supervisory reporting and recalled the necessary measures to prevent money laundering and terrorist financing (ML/TF).
EBA - Guidelines on treatment of public and private moratoria in light of coronavirus measuresOn 2 April 2020, the EBA published more detailed guidance on the criteria to be fulfilled by legislative and non-legislative moratoria applied before 30 June 2020. The aim of these Guidelines is to clarify the requirements for public and private moratoria, which, if fulfilled, will help avoid the classification of exposures under the definition of forbearance or as defaulted under distressed restructuring. The EBA sees the payment moratoria as effective tools to address short-term liquidity difficulties caused by the limited or suspended operation of many businesses and individuals resulting from the impact of the coronavirus.
EIOPA - Call to continue actions to mitigate the impact of the coronavirus on consumersOn 1 April 2020, the European Insurance and Occupational Pensions Authority ("EIOPA") emphasised that access to and continuity of insurance services for consumers should be considered essential in the context of the coronavirus outbreak. Insurers and intermediaries are asked to:
- provide clear and timely information to consumers on contractual rights;
- treat consumers fairly and be explicit in all communications;
- inform consumers about contingency measures taken;
- continue applying product oversight and governance requirements and, where neces-sary, carry out a product review; and
- consider the interests of consumers and exercise flexibility in how they are treated, where reasonable and practicable.
EIOPA - Update on other measures impacted by the coronavirus pandemicOn 2 April 2020, EIOPA gave an overview of new/additional measures. These concern adjustments of deadlines of currently open consultations/requests to the market, public consultations in the process of Board of Supervisors approval (including discussion notes) to the market and data requests to financial institutions to start in Q1-Q2.
EIOPA and DNB – Call to insurers and reinsurers to temporarily suspend all discretionary dividend distributions and share buy backsOn 2 April 2020, EIOPA urged insurers and reinsurers to temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. This suspension should be reviewed as the financial and economic impact of the coronavirus starts to become clearer. Read more
On the same day, De Nederlandsche Bank, the Dutch Central Bank ("DNB") indicated that it would fully endorse this recommendation. Read more
ESMA - Clarifications for best execution reports under MiFID IIThe European Securities and Markets Authority ("ESMA") issued a Public Statement on 31 March 2020 clarifying issues regarding the deadline for publication of the best execution reports required under RTS 27 and 28 of MiFID II. ESMA recommends that NCAs take into account the current circumstances by considering the possibility that:
- execution venues unable to publish RTS 27 reports due by 31 March 2020 may only be able to publish them as soon as reasonably practicable after that date and no later than by the following reporting deadline (i.e. 30 June 2020); and
- firms may only be able to publish the RTS 28 reports due by 30 April 2020 on or before 30 June 2020.
BCBS and IOSCO - Deferral of final implementation phases of margin requirements for non-centrally cleared derivativesDue to the coronavirus, on 3 April 2020, the Basel Committee on Banking Supervision ("BCBS") and the International Organization of Securities Commissions ("IOSCO") agreed to extend the deadline for completing the final two implementation phases of the margin requirements for non-centrally cleared derivatives by one year. Read more
BCBS - Additional measures to alleviate the impact of the coronavirusOn 3 April 2020, the BCBS announced that it will take additional measures to support the provision of lending by banks to the real economy and provide additional operational capacity for banks and supervisors to respond to immediate financial stability priorities. These measures complement previous measures published by the BCBS's oversight body, the Group of Central Bank Governors and Heads of Supervision.
SRB - Potential operational relief measures related to the coronavirus outbreakIn close cooperation with the national resolution authorities, the Single Resolution Board ("SRB") will apply a pragmatic and flexible approach in order to consider, where necessary, postponing less urgent information or data requests related to the upcoming 2020 resolution planning cycle for banks. The essential reports are: the Liability Data Report, the Additional Liability Report and the Minimum Requirement for own funds and Eligible Liabilities ("MREL") quarterly template. The SRB will assess possible leeway in submission dates for other reports. Read more
DNB - Update on coronavirus measures for banks, insurers, asset managers and pension fundsIn the sector newsletters published on 6 April 2020 for banks, insurers, asset managers and pension funds, DNB informed these sectors of the measures taken in connection with the coronavirus and explained them.
Read more: DNB - Banks, DNB - Insurers, DNB - Asset managers, DNB - Pension funds
Ministry of Finance - Deferral of insurance taxEntrepreneurs and self-employed people who get into financial difficulties because of the coronavirus crisis can ask for a postponement of payment. On 2 April 2020, the application for this was further eased, partly because it now applies to more taxes, including insurance tax. Read more
Ministry of Finance – Answer to parliamentary questions about possible liquidity problems in the financial sector due to corona virusIn the News Update of 25 March, we reported on the above-mentioned parliamentary questions. These questions were answered on 27 March. The answers include the possibility of a temporary ban on short selling, how DNB will deal with the extra flexibility as a result of the measures announced by the ECB and the monitoring of banks' liquidity.
Verbond van Verzekeraars - framework for entrepreneurs in needIn consultation with several other associations, the Dutch Association of Insurers, het Verbond van Verzekeraars, has developed a framework that provides insurers, authorised representatives and advisers/brokers with an overview of possible ways to adjust insurance cover, shorten the premium term and extend the payment term, for example. Solutions are being sought that prevent entrepreneurs from becoming indebted as a result of a.o. not paying premiums.