Financial Services and Fintech Updates
Malta Financial Services Authority (MFSA) Updates
Circular to Credit Institutions on the EBA Guidelines on Uniform Disclosures
As per the MFSA's Circular of 28 October 2020, all credit institutions licensed in terms of the Banking Act (Chapter 371 of the Laws of Malta) are now to adhere to the uniform disclosure template established by the EBA guidelines (EBA/GL/2018/01) when disclosing own funds, capital and leverage ratios, with and without the application of transitional arrangements for IFRS 9 or analogous expected credit losses.
Moreover, credit institutions are also being required to observe amending EBA guidelines (EBA/GL/2020/21) in accordance with Regulation (EU) 2020/873, 'the CRR quick-fix', promulgated to amend the Capital Requirements Regulation (Reg EU 575/2013) in light of the COVID-19 pandemic. The amending EBA guidelines set out a comprehensive direction to credit institutions and users of information on the implementation of part of the disclosure requirements mentioned in the 'CRR quick-fix' and how credit institutions are to disclose the information required.
For more information: https://www.mfsa.mt/publication/circular-to-credit-institutions-on-the-eba-guidelines-on-uniform-disclosures-under-article-473a-of-regulation-eu-no-575-2013-as-regards-transitional-arrangements-for-mitigating-the-impact-of-the-int/
Upcoming Review of the Alternative Investment Fund Managers Directive (AIFMD)
The MFSA, in its Circular of 4 November 2020, has reminded all interested parties that the European Commission, in accordance with Article 69 of the AIFMD, is reviewing the said Directive by means of a public consultation following a report to the European Parliament and Council.
The consultation is divided into the following sections:
Functioning of the AIFMD regulatory framework, scope and authorisation requirement;
Investor protection;
International relations;
Financial Stability;
Investing in private companies;
Sustainability/ESG; and
While the public consultation's main focus is on suggested areas of "improvement" and harmonisation on areas of detail within the AIFMD, the EU Commission foresees some issues of contention related to the specific direction of travel on delegation, in particular, as well as the possible political dimension to an increased focus on delegation to third countries vis-à-vis Brexit.
The Commission's public consultation period is up to 29 January 2021.
For more information: https://www.mfsa.mt/wp-content/uploads/2020/11/Review-of-the-Alternative-Investment-Fund-Managers-Directive-AIFMD.pdf
European Securities and Markets Authority (ESMA) Updates
ESMA submits Draft Technical Standards under the Revised Market Abuse Regulation
The Final Report on the amendments to the Market Abuse Regulation (MAR) for the promotion of the use of SME Growth Markets (SME GMs), which concentrate on liquidity contracts and insider lists for SME GMs has been published by ESMA.
The report and draft RTS and ITS mainly reflect the main proposals included in the consultation paper, which focused on:
a. The RTS in liquidity contracts
The Final Report and the abovementioned proposals include relevant requirements applying to liquidity contracts set out in the body of the RTS. The proper contractual template however comprises specific parameters and criteria to ensure compliance with MAR requirements while allowing flexibility for investment firms and issuers. Moreover, the RTS further establish the requirement to operate a liquidity account dedicated to the contract and the limits to resources, as well as requisites to be adhered to for the trading activity of the liquidity provider.
b. The ITS on insider lists
ESMA is also pushing for a new template for insider lists which is to be used by SMEs in jurisdictions that include in them all persons who have access to inside information. This template is to only contain the minimum fields that are necessary for supervisory purposes.
For more information: https://www.esma.europa.eu/press-news/esma-news/esma-submits-two-draft-technical-standards-under-revised-market-abuse
Public Consultation on Guidelines under Article 21 of EMIR
Article 21(1) of Regulation (EU) 648/2012 ('EMIR') establishes an obligation for national competent authorities to assess any arrangement, strategies, processes and mechanisms in force by the central counterparties (CCPs), and to analyse risks those counterparties are or will potentially be exposed to. ESMA is, in turn, mandated by the same Regulation to issue guidelines to elaborate further on common procedures and methodologies for the supervisory review and evaluation processes of CCPs.
ESMA has thus launched a consultation paper in order to seek feedback from interested stakeholders on the 'Draft Guidelines on common procedures and methodologies on supervisory review and evaluation process of CCPs under Article 21 of EMIR'.
The consultation period will be open until 16 November 2020.
For more information: https://www.esma.europa.eu/press-news/consultations/public-consultation-guidelines-under-article-21-emir
ESMA sets out final position on Share Trading Obligation
In a public statement, ESMA has established the application of the EU's trading obligation for shares (STO) following the end of the UK's transition from the EU at the end of December 2020.
The trading of shares with a European Economic Area (EEA) ISIN on a UK trading venue in GBP by EU investment firms will not be subject to the EU STO.
The revised 'Impact of Brexit on the trading obligation for shares (Article 23 of MiFIR)' guidance of 2019 now comprises the particular situation of a small number of EU issuers whose shares are almost exclusively traded on UK trading venues in GBP. Considering that this type of trading by EU investment firms takes place on an irregular basis, such trades shall not be subject to Article 23 of MiFIR.
ESMA aims to minimise disruption as well as avoid overlapping STO obligations and any of their damaging effects. However, the scope of the UK STO after the end of the transition period, at this point in time, remains unclear. Nonetheless, despite the absence of an equivalence decision in respect of the UK, the Authority in its 29 May 2019 statement 'Impact of Brexit on the trading obligation for shares (Article 23 of MiFIR)' had already considered the potential adverse effects of the application of the STO after the end of the transition period on an equal footing with a no-deal Brexit scenario.
For more information: https://www.esma.europa.eu/press-news/esma-news/esma-sets-out-final-position-share-trading-obligation-0
European Central Bank (ECB) Updates
The Two Sides of the (Stable)Coin
Mr. Fabio Panetta, a member of the Executive Board of the ECB, delivered a speech on his belief that while global stablecoins could drive further innovation in payments, which would in turn allow for the possibility of cross-border payments and remittances that are cheaper and more efficient, they can still post several risks to our social and economic life.
One of such issues includes data-models that could risk the misuse of personal information for different purposes, threatening privacy, competition and vulnerable groups. Another risk is that wide acceptance of stablecoins offered by different foreign companies could make European payments dependent on technologies that are designed and regulated elsewhere, and this would pose a difficulty in the fight against money laundering, terrorist financing and tax evasion as well as external obstruction.
As ongoing transformation of the European payments landscape and potential risks of expansion of large foreign players are on the increase, Mr Panetta opines that European authorities need to further promote a competitive and innovative market and to complete the regulatory and oversight framework.
Indeed, the Eurosystem is presently pursuing comprehensive policy and complementary elements, such as a retail payments strategy and the creation of a digital euro. The ECB is also introducing an innovative payment oversight framework and has just launched a public consultation on a new framework for electronic payment instruments, schemes and arrangements (the PISA framework). In parallel, the European Commission has recently published a proposal for a Regulation on Markets in Crypto-Assets (MiCA).
The implementation of such oversight and regulatory initiatives, Mr Panetta believes, shall guarantee that the use of stablecoins to provide payment services within the EU will adhere to the same standards that presently exist for payment schemes and instruments. He further opines that introducing systemic products based on stablecoins, before a comprehensive policy has been implemented, would endanger the European financial system, rather than aid it. The ECB's focus is therefore that of promoting the safe and efficient development of EU payments that are fit to compete on a global market.
For more information: https://www.ecb.europa.eu//press/key/date/2020/html/ecb.sp201104~7908460f0d.en.html
For more information on the updates above please contact Dr Ian Gauci and Dr Cherise Abela Grech.
This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.