Financial services updater

Welcome to the latest edition of our financial services updater.

Highlights this week include:

• CRD IV harmonised reporting
• ESMA publishes update on MiFID waivers from pre-trade transparency

To view know-how corner our video summary concerning this week's highlights please click here.

ARROW visit coming up? It is important that firms properly prepare themselves for an ARROW visit. There are many ways in which we can assist in this preparation to ensure that the process runs smoothly. For further information please contact either Jonathan Herbst or Peter Snowdon. 

Banking industry raises concerns over delay in legislative process towards implementation of CRD IV

The European Banking Federation (EBF) has issued a statement regarding the European Banking industry’s concern that the Council of the EU has suspended its work on the CRD IV until September 2012 and that the European Parliament has decided to vote on the legislative package only at the end of October 2012.

The EBF and other European banking industry federations within the European Banking Industry Committee have sent a letter to the EU institutions calling on them to consider allowing ‘a reasonable period of time between the final text and implementation’ in order to allow banks to put in place the necessary procedures to comply with the new rules.

View Banking industry raises concerns over delay in legislative process towards implementation of CRD IV, 2 August 2012

View European Banking Industry Committee letter to Othmar Karas concerning the implementation of the CRD IV, 3 August 2012

CRD IV harmonised reporting

The FSA has updated its web page concerning CRD IV harmonised reporting.

On the updated web page the FSA has added links to the following new web pages:

• Common reporting. The Guidelines on Common Reporting (COREP) that have been produced by the European Banking Authority (EBA) cover consolidated, sub-consolidated and solo reporting of capital requirements and own funds based on the existing Capital Requirements Directive. COREP is expected to become part of the EBA’s implementing technical standards on reporting. COREP will apply to all firms that are regulated under BIPRU.
• Financial reporting. Financial Reporting (FINREP) is a standardised EU-wide framework for reporting financial data. It comprises templates for reporting the income statement and the balance sheet, as well as breakdowns of other data. FINREP is expected to apply to credit institutions (consolidated groups) and unlisted groups applying IFRS. It no longer applies to firms reporting under national GAAP.
• Frequently asked questions. In the FAQs the FSA states that data items overlapping with COREP and FINREP will be deleted. Some data elements within these, however, may be retained. The FSA may decide to incorporate remaining data elements from multiple returns into a new data item. However, certain returns are not affected by the CRD IV and will therefore continue as FSA reports, e.g. FSA014 forecast data.

View CRD IV harmonised reporting, 7 August 2012

ISDA, AFME, BBA, Assosim response to ESMA Consultation Paper and draft Technical Standards on EMIR

The ISDA, AFME, BBA and Assosim (collectively the Associations) have published a joint response to the Consultation Paper and draft Technical Standards that the European Securities and Markets Authority (ESMA) has produced on the European Markets Infrastructure Regulation (EMIR).

Key points in the joint response include the Associations:

• Welcome the ESMA interpretation that an ‘equivalent’ level of protection under the EMIR Regulatory Technical Standard (RTS) for indirect clients does not mean the availability of the same protective structures particular to the central counterparty (CCP) clearing member-client relationship but that, rather, these structures should be replicated for indirect clients at the level of the clearing member (and not necessarily at the CCP level).
• Are particularly concerned about the international application of the requirements for indirect clearing set out in the proposed RTS to the extent that they conflict with, or come into conflict with, local regulation for financial intermediaries in jurisdictions outside the EU.
• Believe that further clarity is needed as to whether or not the clearing obligation for certain classes of OTC derivatives is triggered only by the granting of authorization to CCPs under EMIR.
• Believe that in relation to the clearing obligation further clarity is needed on the treatment of FX contracts.
• Welcome the improvements in the approach regarding non-financials and the hedging definition but still have a number of concerns.
• Have a number of concerns in relation to the RTS addressing the clearing threshold.
• Welcome guidance on the meaning of ‘practical and legal impediments’ in relation to the notification to regulators on intra-group transactions.
• Believe that some of the details addressing recognition of third country CCPs may be unnecessary.
• Believe that the ESMA proposals on disclosure establish a firm foundation going forward, but that a CCP's investment policy and account structure should also be made publicly available.
• Believe that CCPs - subject to regulatory approval – are best placed to decide on appropriate confidence levels for different products, including OTC derivatives.
• Welcome an explicit statement in the final RTS to confirm that Article 44 of EMIR does not relate to intraday liquidity requirements for the cash-clearing CCPs operating on a pan-European basis.
• Stress the importance of transparency by CCPs regarding their collateral policies, in order for clearing members and clients to be able to gauge associated risks.
• Highlight the need for consistency with other international regulators on the issue of trade repositories. This is not only on the principles-based level but also on the more detailed level.
• Continue to support the idea of reporting collateral/exposures, but believes this should be done via a single “Counterparty Exposure Repository”.

View ISDA, AFME, BBA, Assosim response to ESMA Consultation Paper and draft Technical Standards for the Regulation on OTC Derivatives, CCPs and Trade Repositories, 5 August 2012

Our implementation assumptions

The FSA has published a web page which provides revised implementation assumptions for the Solvency II Directive. The FSA explains what the revised implementation assumptions mean for firms intending to use the standard formula or apply to use an internal model and are currently in the FSA’s Internal Model Approval Process.

The FSA has split the information about its implementation assumptions into the following sections:

• Revised implementation assumptions overview.
• Internal model and standard formula firms.
• Non-Directive firms.
• Q&A covering the FSA’s implementation assumptions.

View Our implementation assumptions, 3 August 2012

ESMA publishes update on MiFID waivers from pre-trade transparency

The European Securities and Markets Authority (ESMA) has updated its waiver document which provides information on the pre-trade transparency of trading systems already set up in the EU and informs on the compliance of such systems with the Markets in Financial Instruments Directive (MiFID).

The updated parts of the waiver document are set out in red and cover:

• “Trailing Stop Orders” which are stop orders with an additional feature. This is an absolute or percentage distance between the stop limit and the current reference price is entered. The stop limit adjusts automatically to the development of the reference price.
• “One-cancels-others” orders which operate by the simultaneous placement of a stop order and a limit order within one order.

View ESMA publishes update on MiFID waivers from pre-trade transparency, 8 August 2012

Charging for our work: Modernising our case fee arrangements from 2013

The Financial Ombudsman Service (FOS) has published a Feedback Statement to its January 2012 Consultation Paper entitled Charging for our work: Modernising our case fee arrangements from 2013. The Feedback Statement sets out in summary the responses to the consultation and how the FOS intends to take its proposals forward.

The FOS will be working on further detail on its proposals in the coming months with a view to implementing them from April 2013. The FOS intends to consult on further details, including potential changes to the FEES rules in the FSA Handbook, in autumn 2012. This will pave the way for further consultation in January 2013, on the final shape of its funding proposals as part of its corporate plan and budget for 2013/2014.

View Charging for our work: Modernising our case fee arrangements from 2013, 7 August 2012

Formation and launch of the FSB LEI Private Sector Preparatory Group

Earlier this year the Financial Stability Board (FSB) published a report entitled A Global Legal Entity Identifier for Financial Markets. In this report the FSB set out high level principles for a global legal entity identifier (LEI) system and 35 recommendations for the development of a unique system for parties to financial transactions.

To take the work forward the FSB established an LEI implementation group consisting of experts from the global regulatory community. To support the implementation group the FSB issued a call on 3 July 2012 for interested parties from the private sector to participate in the LEI Private Sector Preparatory Group (PSPG).

The FSB has now issued a press statement that the PSPG held its inaugural meeting in New York City, USA on 25 July 2012. Work will be taken forward in three work streams:

• Governance and legal work stream: Assist and contribute to the work of the LEI implementation group on the development of the legal framework and necessary legal documents for the establishment of the global LEI foundation.
• Operations work stream: Under the guidance of the LEI implementation group, develop options for a plug-in architecture for the central operating unit that supports the federated nature of the LEI system and allows integration of local operating units.
• Ownership and relationship data work stream: Support the LEI implementation group in developing recommendations for the early introduction of additional reference data for corporate ownership, relationships and hierarchies.

View Formation and launch of the FSB LEI Private Sector Preparatory Group, 3 August 2012

OTC derivatives international roundtables

Norton Rose Group will be hosting a series of international roundtables on the European Market Infrastructure Regulation (EMIR).

In August / September there will be two roundtables in London, one for buy-side clients and another for energy clients.

Further roundtables will take place in our offices in Amsterdam, Hong Kong and Singapore.

The roundtables in Hong Kong and Singapore will give participants the chance to get an insight into EMIR and draw comparisons with local regulatory developments.

The invitation to the international roundtables can be found here.

If you can not access this link, please copy and paste the address below into your web browser.

http://www.nortonrose.com/invitations/2012/otc-oracle-an-international-overview-of-the-new-clearing-and-collateralisation-requirements-for-otc-derivatives-67515.aspx

40 minute briefing series - May to September 2012

We are pleased to announce that the invitation for the next series of 40 minute briefings is now available.

If you can not access this link, please copy and paste the address below into your web browser.

www.nortonrose.com/invitations/2012/your-guide-to-the-key-regulatory-challenges-in-2012-65614.aspx

Financial services regulatory products: Phoenix, Pegasus, OTC Oracle and AIFMD expert

Having difficulty keeping up with the pace of the Government's regulatory reform proposals?

Phoenix is our new financial services product that is an online resource designed to help those who are starting their UK regulatory reform projects. It sets out the latest developments and timing of the Government's reform programme plus the key resource papers from the Treasury, Bank of England, FSA and the ICB. The latest Norton Rose LLP briefing notes, videos and webcasts are also available.

The Phoenix main page can be found here.

Behind the curve on the MiFID review?

We have launched a second online resource product called "Pegasus". Pegasus is a new financial services product that is an online resource designed to assist those starting work on MiFID review projects.

The Pegasus main page can be found here.

G20 commitment on clearing

Our third online resource product is OTC Oracle. OTC Oracle is designed to assist clients track the implementation of the G20 commitment to have all standardised OTC derivatives traded on exchanges or electronic trading platforms, where appropriate, and cleared through CCPs by the end of 2012. OTC Oracle sets out the latest developments and timing plus the key resource papers from each of the EU, Canada, Hong Kong and Singapore.

The OTC Oracle main page can be found here.

AIFMD expert

Our fourth online resource product is AIFMD expert. AIFMD expert is designed to assist clients and contacts of Norton Rose LLP when conducting their projects on the Alternative Investment Fund Managers Directive. It sets out the latest developments and timing of the AIFMD plus the key resource papers from the Commission, ESMA and the FSA. Clients and contacts are also given access to the latest Norton Rose LLP briefing notes, slides and webcasts.

The AIFMD expert main page can be found here.

Financial services Fireside Fridays

Please click on the links below:

• The Government's white paper on banking reform (22 June 2012)
• Update on UK regulatory reform (8 June 2012)
• The Queen's Speech (18 May 2012)
• FSA Business Plan - 2012/13 (27 April 2012)
• EMIR Part II (5 April 2012)
• Twin Peaks - The FSA operational changes (16 March 2012)
• AIFMD Update (2 March 2012)
• EMIR (17 February 2012)
• AIFMD Update (3 February 2012)
• The regulatory year ahead (20 January 2012)
• The regulatory year in review (16 December 2011)
• MiFID review and third country issues (25 November 2011)
• The MiFID Review (21 October 2011)
• The regulatory regime for energy and commodity companies (7 October 2011)
• The final report of the Independent Commission on Banking (23 September 2011)

Financial services & markets webinars

We are currently experiencing significant changes in the European financial services regime that could have a particular impact on both financial firms and non-financial firms that trade energy, commodities and emissions. To assist our clients we have produced a series of short webinars which will look at the forthcoming regulatory changes and their impact on the financial regulation of trading.

• Capturing commodities (February 2012)

Financial services webcasts

Please click on the links below:

• European and domestic reform: The distribution chain examined (4 July 2012)
• Domestic reform: Lessons from recent FSA enforcement cases (2 May 2012)
• Financial services 40 minute briefing entitled 'Domestic reform: The RDR final countdown'(1 February 2012)
• Financial services 40 minute briefing entitled ‘European reform: AIFM Directive - the latest on implementing measures’ (7 December 2011)
• Financial services 40 minute briefing entitled 'European reform: MiFID and MAD: tying the legislative proposals together (November 2011)
• Financial services 40 minute briefing entitled 'European reform: MiFID and MAD: The next pieces in the puzzle' (July 2011)
• Financial services webcast directory