ECB Opines on the Proposed Money Market Funds Regulation
On June 4, the European Central Bank (ECB) published an opinion on the European Commission's proposed regulation on Money Market Funds (MMF). The MMF regulation, which is aimed at enhancing the liquidity and stability of MMF, is part of a wider effort to develop a regulatory framework for shadow banking entities, over which concerns have been growing in relation to financial stability.
In the opinion, the ECB makes supporting observations towards the proposed regulation in the following areas:
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the interconnection of the regulation and the legal frameworks for undertakings for collective investment in transferable securities (UCITS) and alternative investment fund managers (AIFMs);
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financial stability;
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the constant net asset value of MMFs;
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the provision of external support;
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risk management of MMFs;
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the role of MMFs in intermediation;
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internal rating systems; and
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reporting requirements for MMFs.
In addition to those observations, the ECB also suggests a number of technical amendments to the proposed regulation. Opinion.
FMLC Publishes Response on Bail-in Powers
In response to a consultation by HM Treasury, the UK's Financial Markets Law Committee (FMLC) published a letter on June 4 relating to the bail-in powers introduced by the Financial Services (Banking Reform) Act 2013. This act expands the powers available to the Bank of England and HM Treasury to make "bail-in" resolutions in relation to certain classes of investor in failing banks and investment firms by writing down their claims or converting them to equity.
Commenting specifically on the Banking Act 2009 (Restriction of Special Bail-in Provision, etc.) Order 2014 and the Banking Act 2009 (Mandatory Compensation Arrangements Following Bail-in) Regulations, the FMLC remarks and advises on technicalities which should be reflected in draft implementing secondary legislation. FMLC Letter.
EBA Publishes Final Draft Technical Standards and Guidelines for G-SIIs
On June 5, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) and implementing technical standards (ITS) relating to global systemically important institutions (G-SIIs).
The RTS and ITS relate to the requirements in the CRD IV Directive (2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013) (CRR) concerning G-SIIs. Broadly, CRD IV requires that institutions designated as G-SIIs meet higher capital standards to reflect the potential impact their failure could have on the global financial system. Designation of GSIIs is expected to take place in January 2015, with the enhanced capital requirements becoming mandatory the following year. RTS. ITS.
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