• Ongoing consultations
   
  ECB Consultation on developing a euro unsecured overnight interest rate – response by 12 January
   
  Recent EACT publications
   
  Webinar – MiFID 2 impact on corporate treasurers
   
   
  Capital Markets Union – corporate bonds
   
  The European Commission Expert Group on corporate bond markets has delivered its final report and 22 recommendations to foster the development of corporate bond markets in the EU. The recommendations aim amongst others at making issuance easier for companies, increasing access and options for investors, ensuring the efficiency of intermediation and trading activities and fostering the development of new forms of trading. Importantly, the push for standardisation of issuance terms (such as maturities, coupons etc.), that the EACT has objected to, is not part of the recommendations made by the group. As the Expert Group is an independent group, the Commission is not bound by their recommendations and will conduct a further public consultation on the topic early next year, which is expected to lead to a Commission communication on corporate bond markets later in 2018.
   
   
   
  OTC derivatives - EMIR
   

• EU Member States agree on their negotiating position on EMIR REFIT

•  
  EU Member States in the Council have agreed on their position on the Commission’s proposal for EMIR REFIT review.
   
  The key points of the Council position relevant to corporate treasurers are:
   

• Extension of the proposed exemption for reporting intragroup transaction to include intragroup transactions with non-EU parts of the group; to be noted also that the exemption would apply only between two non-financial counterparties

• Clarification that financial counterparties are solely responsible and legally liable for the reporting done on behalf of non-financial counterparties

• An option for non-financial counterparties to continue reporting themselves

• Recognition that the obligation to post variation margin on physically-settled FX forwards should apply only to the most systemic counterparties

•  
  The Parliament now has to debate the EMIR REFIT proposal and agree on its position, which they are expected to do in the first months of 2018. After that the negotiations between the Member States, the Parliament and the Commission can start in view of a final agreement on the proposal.
   
  Read the EACT position paper on EMIR REFIT here.
   
   

• Margining obligation physically-settled FX​

​

• The European Supervisory authorities (ESAs) have announced flexibility in application of variation margin for physically-settled FX forwards. The variation margin requirements have applied to financial counterparties and non-financial counterparties above the clearing threshold (NFC+s) since 1 March but for physically-settled FX forwards the obligation will only be applicable from 3 January 2018. The ESAs state that they expect national competent authorities to enforce the obligation proportionately, indicating forbearance on counterparties such as NFC+s. Importantly, the ESAs also announced that they are developing revised Regulatory Technical Standards (RTSs) that would exclude counterparties such as NFC+s from the margining requirements for physically-settled FX forward transactions. These revised RTSs will have to be approved by the European Commission, the European Parliament and the Council and will therefore not be applicable before the start-date of 3 January 2018.
   
   
   
  Prudential requirements
   
  The Basel Committee has reached an agreement to finalise the Basel III reforms. The package includes revisions to both standardised and internal models for calculating credit risk, revisions to the credit valuation adjustment (CVA) framework and an aggregate output floor of 72.5% which means that a bank ‘s risk-weighted assets (RWA)  calculated with an internal model cannot be lower than 72.5% of RWAs as calculated with the Basel standard model. 
  The Basel standards are not legally binding and need to be implemented into national law by different jurisdictions. EU is likely to assess the impact of the Basel standards in the EU and potentially adjust accordingly.
   
   
   
  Benchmarks
   
  1. Euro risk-free rate working group – call for candidates
   
  ECB, ESMA, FSMA and the European Commission have issued a call for candidates for the euro risk free rates working group, that will be tasked with the identification and adoption of risk-free overnight rates which can serve as a basis for an alternative to current benchmarks used in a variety of financial instruments and contracts in the euro area. The deadline to submit applications is 12 January.
   
   
  2. LIBOR and SONIA
   
   
  The FCA has confirmed that the current 20 panel banks for LIBOR have agreed to stay as panel banks and support the benchmark at least until 2021. SONIA has previously been confirmed by the BoE as the preferred alternative to LIBOR. T he BoE has confirmed that the SONIA reforms will take effect of as 23 April 2018; as from this date the BoE will become the administrator of the benchmark, taking care of its calculation and publication.
   
   
  Bank Structural Reform
   
  The European Commission has officially withdrawn its proposal for bank structural reform on which the legislative process has stalled since 2015. The proposal could have split the biggest EU banks into separate retail and wholesale units. The Commission justifies this as the ‘financial stability rationale of the proposal has in the meantime been addressed by other regulatory measures in the banking sector’.