October 21, 2014
EU-U.S. Financial Services:
Regulatory Disharmony And the Way
Forward
Dr. Christian Büche
Daniel F. C. Crowley
Sean P. Donovan-Smith
Dr. Ignasi Guardans
© Copyright 2014 by K&L Gates LLP. All rights reserved.
 Captures US and EU
financial services regulation
 Weekly updates on notices,
comment periods, and
agency meetings
 Subscriber access to
dedicated website
 Comprehensive resource
on regulatory developments
EU: Selected Legislative and
Regulatory Activity Since the Crisis
 Markets in Infrastructure Directive / Regulation (“MiFID / MiFIR”)
 European Market Infrastructure Regulation (“EMIR”)
 Capital Requirements Directive / Regulation (“CRD IV / CRR”)
 Alternative Investment Fund Managers Directive (“AIFMD”)
 Packaged Retail Investment and Insurance Products (“PRIIPs”)
 Undertakings for Collective Investments in Transferable Securities
(“UCITS”)
 Single Resolution Mechanism (“SRM”) / Single Supervisory
Mechanism (“SSM”)
 “Rulemaking” continues at FSB, IOSCO, and BCBS
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Derivatives Markets
MiFID II / MiFIR
EMIR
Trading and clearing access
Central counterparty and trade
repository requirements
Introduction of OTFs
Clearing of standardized OTC
derivative contracts
Expansion to commodity markets
Risk mitigation for uncleared trades
Position limits
Trade repository reporting
Automated trading
Consolidated tape
Key Issues:
• European recognition of CCPs under EMIR
• CFTC interpretive guidance and staff advisory to “personnel and agents of nonU.S. swap dealers located in the U.S.”
• Market fragmentation through U.S. SEFs, clearing, and reporting
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The EU Banking Union
 The SSM places the ECB as the central prudential supervisor of
financial institutions in the Euro area (approx. 6000 banks) and those
in non-euro EU countries that choose to join
 Banks covered by SSM are subject to the SRM. Bank resolution will
be managed through a Single Resolution Board and Single Resolution
Fund.
 A “single rulebook” will apply to the banking union, with rules relating
to capital requirements, deposit guarantee schemes, and bank
recovery and resolution
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Banking Union
Single Supervisory
Mechanism (SSM)
• Homogenous supervisory
standards across the euro area
• Direct supervision of 128
significant banks by ECB
• Tasks:
• Authorise and withdraw
authorisation
• Assess acquisition and
disposal of holdings of banks
• Ensure compliance with EU
Banking laws
• Comprehensive Assessment
(Asset Quality Review and
stress test – results to be
published on 26 October 2014)
• Fully operational by 4
November 2014
Single Resolution
Mechanism (SRM)
• Common restructuring and
resolution regime in order to
achieve a balance between
liability and control
• Starts 1 January 2015
• Bail-in and resolution
functions to apply from 1
January 2016
• Single Resolution Board
(SRB) and Single Resolution
Fund (SRF)
• SRB: members of Commission
and ECB participate in
meetings as permanent
observers
• SRF: bank levies gradually
raised as from 2016; Volume
EUR 55 bn by 2024
Single Deposit Guarantee
Scheme
• Not envisaged at this stage
• Object of further discussions
• Current level of deposit
protection: EUR 100.000
• Deposit Guarantee Scheme
Directive 2014/49/EG:
• Further reduction of the time
limit for paying out depositors
in the event of bank deposits
becoming unavailable, from the
current 20 working days to
seven working days by 2024
• Better access for depositors to
information about the
protection of their deposits
• Tasks:
• Plan resolution and assess
resolvability of banks
• Implement resolution of banks
• Administer SRF
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Representatives of
national authorities
Single
Resolution
Board SRM
ECB
(observer)
Commission
(observer)
4 full-time
members
chair
Representatives of
national authorities
chair:
Danièle Nuoy
Supervisory Board
SSM
3 ECB
representatives
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vice-chair: Sabine
Lautenschläger
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New Leadership in the EU
European Commission
President Jean-Claude
Juncker (S&D)
European Commission
Financial Services
Commissioner Jonathan
Hill (Conservative)
European Parliament
Economic and Monetary
Affairs Committee
Chair Roberto Gualtieri
(S&D)
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Looking Ahead: A Disharmonized Agenda
 Prudential regulation of SIFIs (G-SIIs, G-SIBs, etc.) and non-bank
resolution and recovery
 “Shadow banking”
 Money market funds
 Benchmarks (including reference rates and indices)
 Regulation of market infrastructure and CCPs
 Consumer protection
 Executive compensation \ corporate governance
 Capital Markets Union
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Questions & Answers
klgates.com
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