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Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services industry in Europe.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.


Claire Cummings

020 7585 1406


ISDA publishes guide to navigating derivatives trading on US/EU trading venues

The paper sets out the steps US and EU persons would have to take when trading on an US or EU trading venue, and highlights complexities due to a lack of equivalence for clearing, reporting and registration requirements. It also includes a question and answer section to help market participants navigate the various regulatory requirements related to trading on recognized venues. The paper finds that while agreement last year between the US and EU on the mutual recognition of derivatives trading venues has removed an important barrier to cross-border trading, a number of compliance challenges remain due to the lack of a global regulatory cross-border recognition framework. The practical guide follows the publication of an earlier ISDA paper, which proposes a risk-based framework for cross-border comparability assessments, based on a set of risk-based principles. If a foreign jurisdiction meets the risk-based principles, ISDA believes a comparability determination should be granted in full.


Summary of discussions at FATF's private sector consultative forum: financial services aspects

FATF recently published a press release providing a summary of issues discussed at its private sector consultative forum. The forum is designed to give private sector representatives the opportunity to engage directly with the FATF and its members on AML and CTF issues. Issues discussed that may be of interest to financial services practitioners include the following: (i) combatting de-risking: this is a key priority for the FATF and potential next steps, include through co-ordinated action at the international level, and by national policy makers, supervisors, financial institutions and industry bodies; (ii) FinTech and RegTech: use of digital identities to identify and verify customers for the purposes of customer due diligence and the extent to which current FATF standards address the regulatory landscape for crypto-assets, including clarifying the different definitions used, the need for a co-ordinated global approach, and the importance of the private and public sector continuing to engage on these issues; (iii) risk-based approach for securities sector: the money laundering and terrorist financing risks that are unique to the securities sector; and (iv) risk-based approach for life insurance sector: the nature and level of money laundering and terrorist financing risks associated with different types of life insurance products and their risk mitigating factors and situations where simplified due diligence and enhanced due diligence could be applied.


Whistle-blowing: European Commission proposes Directive to protect EU whistleblowers

The EC recently adopted a package of measures, including a draft Directive and a Communication, to protect whistleblowers reporting breaches of EU law. The proposed new Directive will set minimum standards guaranteeing protection for whistleblowers who report breaches of a wide range of EU laws, including those relating to financial services, environmental protection, consumer protection, product and transport safety, data protection and privacy, as well as competition law and corporate tax (including VAT) rules. The Directive would require member states to establish safe channels for reporting both within an organisation and to public authorities. It would protect whistleblowers against dismissal, demotion and other forms of retaliation and require national authorities to inform citizens and provide training for public authorities on how to deal with whistleblowers.


ICE Benchmark Administration outlines plans for gradual transition of LIBOR panel banks to waterfall methodology

ICE Benchmark Administration Ltd (IBA) recently published a report on the evolution of LIBOR. IBA is the administrator of LIBOR. The report summarises the evolution of LIBOR to date, including an enhanced governance structure, improved code of conduct, oversight committee with representation from across the industry, and purpose-built technology and surveillance. In the report, IBA also outlines plans for the gradual transition of LIBOR panel banks to the waterfall methodology, as set out in the LIBOR output statement. The LIBOR output statement sets out a single LIBOR definition and a more standardised, transaction data-driven methodology for panel banks' submissions, replacing the existing LIBOR submission question. Each LIBOR panel bank's submissions in response to the LIBOR output statement will be determined through the use of a waterfall methodology. This utilises eligible transaction data where available, transaction-derived data otherwise, and, if neither is available, market and transaction data-based expert judgement, appropriately framed, using the bank's own internally approved procedure (based on a set of permitted inputs and agreed with IBA). The ultimate aim is to publish, in all market circumstances, a wholesale funding rate anchored in unsecured, wholesale funding transactions to the greatest extent possible.


European Commission to adopt sustainable finance proposals in May 2018

The EC recently published a speech given by Vice President Valdis Dombrovskis, European Commissioner for Financial Stability, Financial Services and Capital Markets Union (CMU) on the transatlantic economy ten years after the crisis: macro-financial scenarios and policy responses. Among other things, in the speech Mr Dombrovskis refers to the fight against climate change as a global task that the EU and US need to undertake together. He confirmed that in May 2018, the EC will table legislative proposals: (i) to develop a unified EU classification of sustainable economic activities. This will define what is green and what is not, enabling the EC to define EU-wide standards and labels for green bonds and other green financial products; and (ii) that will task asset managers, insurance companies and pension funds to incorporate environmental, social and governance factors into their investment decisions in order to increase the awareness of sustainability risks, and steer more funding towards green and sustainable projects.


Fifth money laundering directive: European Parliament resolution (corporate aspects)

The European Parliament recently adopted, with amendments, the EC’s proposal for a directive to amend the Fourth Money Laundering Directive Changes to the Commission's proposals on amending MLD4 include, among others: (i) deletion of the change to the definition of beneficial owner, which provided that those beneficial owners who have a 10% ownership in certain companies must be included in the registers. A new Article 65 provides that the Commission may, if appropriate, issue a report to assess the need to lower the percentage for identification of beneficial ownership of legal entities; and (ii) clarifying that information on beneficial ownership should be accessible to any member of the general public (which widens the access provided in MLD4, under which persons had to demonstrate a legitimate interest). The directive will enter into force 20 days after its publication in the Official Journal.


WP29 publishes final versions of guidelines on consent and transparency

The Article 29 Working Party (WP29) recently published final, adopted versions of its guidelines on transparency and consent. Regarding transparency, specific transparency requirements include the data subjects' right to receive information: (i) on the identity of the data controller and the nature of the processing; (ii) about whether or not their personal data is being processed and if so the nature and purposes of that processing; and (iii) about any personal data breach when that breach is likely to result in a high risk to their rights and freedoms. Regarding consent, the GDPR defines consent as a "freely given, specific, informed and unambiguous" indication of the data subject's wishes by which they, by a statement or by a clear affirmative action, signify agreement to the processing of their personal data. The guidelines cover the following areas in relation to consent including a number of examples of when consent will be deemed to have and have not been validly given.


We have taken great care to ensure the accuracy of this version of Euro Shorts. However, Euro Shorts is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from, action taken or refrained from on the basis of this publication. If you would like to be removed from the mailing list of this publication please click unsubscribe below. Nothing within this communication may be copied, re-printed or similar without prior written consent from Cummings.

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Tel: + 44 20 7585 1406
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Cummings Law
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25 05 2019

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