What the Commission has in store for the banks by the end of the year

Crisis management and depositary insurance, AIFMD review, supervisory convergence… Over the last few months, the European Commission has been busy with quite a number of consultations, conferences with stakeholders and the like. The ABBL and its members have been putting in extra hours to produce quality input and help the legislator tackle sometimes complex issues.

When between today and the end of the year the Commission will come forward with a number of legislative proposals, these will be among others the fruit of the above consultations and responses by stakeholders. There will be reviews of existing legislation (e.g. the consumer credit directive), attempts at finalising others (the banking union) and new initiatives in the context of existing projects (e.g. Green Bonds).

The first of these legislative proposals is still expected in June: the review of the Consumer Credit Directive. The original directive goes back to 2008 and aimed at harmonising regulation across Member States and ensuring common consumer protection. The upcoming review is expected to extend the scope to loans under 200 euros and other credits that currently are not included. It might also introduce simplified rules on well-timed pre-contractual information and possibly rules for assessing credit-worthiness.

The adoption of an AML-package is scheduled for July 2021. This set of proposals comes in the wake of a number of AML scandals in the last two years and would include a review of the directive, the introduction of a regulation as well the establishment of an EU authority.

In parallel the Commission is to adopt a renewed sustainable finance strategy building on the 2018 actions of the first strategy. This would a.o. include completing the taxonomy on the environmental side and financing decarbonizing ways, extending it with a social pillar, and the creation of ecolabels, standards and green financial products such as green loans and mortgages or sustainable non-equity securities. The adoption of a proposal on Green Bonds, a standard in the matter, is also expected that same day.

The European Commission’s proposal on the transposition of the (temporarily) final set of the Basel texts has been long awaited. Postponed by the economic effects of the COVID pandemic, the legislative proposal is currently expected in October. The crux for European banks is how these rules will in the end materialise in prudential requirements in particular regarding capital, how the Commission proposes to take into account European specificities and the needs of the post-pandemic years.

November is currently scheduled to see the adoption of two further legislative proposals. The first is the review of the Alternative Investment Fund Managers Directive (AIFMD). At first glance this might be an asset management directive exclusively if it wasn’t for the expected changes to requirements for depositary banks. In its consultation the Commission had also brought up the issue of a passport although a significant majority of respondents showed little to no enthusiasm for the concept.

The second legislative proposal for November is the review of the Markets in Financial Instruments Regulation. Separated from its directive counterpart, the review of the regulation is in particular expected to focus on the markets side and in particular the consolidated tape project. The directive is scheduled for 2022 and would focus more on the investor protection side.

In terms of legislative proposals, the year is set to be rounded off with a package on crisis management and deposit insurance. The Commission has held a consultation and a high level stakeholder conference on the issue. The expectations are modifications a.o. on the Bank Recovery and Resolution Directive (BRRD) as well as competition texts in order to allow for an orderly resolution of medium sized banks that are currently not covered by a European framework. The need for the reform has been evidenced by examples of the recent past a.o. in Italy and Portugal.

The second element of this project to complete the banking union is the creation of a European Deposit Insurance Scheme (EDIS). Such a proposal has been on the table for a few years although opposition from a number of mostly Northern Member States has not allowed much progress to be made. Currently the idea of a hybrid EDIS that would at least in a first phase cater for potential liquidity issues of national deposit guarantee schemes has been widely discussed as a compromise. The Deposit Guarantee Schemes Directive is also under a scheduled review.

By Antoine Kremer