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

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


European Commission blueprint for asset management companies for member states' banking sectors

The EC has recently published a blueprint for national asset management companies (AMCs). Since the financial crisis, a number of member states have used AMCs to address problems in their banking sectors, typically to remove troubled assets from banks' balance sheets, to accelerate the restructuring of banks with high levels of distressed debts and to address financial stability concerns in countries with high levels of non-performing loans. The blueprint sets out guidance on (i) the conditions that should be met before a member state establishes a centralised AMC, including the initiation of reforms to the banking sector relating to NPLs; (ii) the conditions that should be met before an asset transfer to an AMC; (iii) the design and set-up of a centralised AMC, including principles on the governance of an AMC, its asset perimeter and size and safeguard mechanisms for taxpayers; (iv) effective operations in an AMC, including internal controls and transparency; and (v) disposal strategies for an AMC, including that the lifespan of an AMC must be finite and defined in its business plan.


FCA policy statement on compulsion powers for LIBOR contributions

The FCA has recently published a policy statement on its powers to require banks to contribute to LIBOR. The policy statement sets out the approach, criteria and methodology the FCA proposes to apply if it needs to use these powers, for example if the agreement with the current panel banks was not in place, or if the agreed period in which to transition to other rates was not available. However, the FCA stresses that these proposals are based on current circumstances and market conditions, which may change. Therefore, if there was a future compulsion decision, it would need to take into account the relevant circumstances and market conditions at that time. Given this, the FCA might need to adapt the approach, selection criteria or the methodology in the light of the relevant circumstances or market conditions. The FCA would not expect to re-consult on such changes as it would need to make decisions urgently. However, it would expect to provide any compelled firm(s) with the reasons for its compulsion decision.


FCA update on review of closet tracker funds

ESMA recently published a webpage relating to its ongoing review of potential closet tracker funds and closet constrained funds. On the webpage, the FCA explains that closet tracker funds and closet constrained funds look like and charge fees similar to funds that strive to beat a benchmark (active funds) but are managed in a way that is similar to funds that strive to track a benchmark (passive funds, which traditionally charge a much lower fee). The FCA expects fund managers to communicate fund investment objectives and policies clearly, including changes to these, even if they are merely clarifying existing disclosures. Investors need clear information and the best possible understanding of the funds they are looking to invest in or are invested in.


Cash and digital payments in the new economy: call for evidence

HM Treasury issued a call for evidence on cash and digital payments in the new economy. While acknowledging that certain sectors of the population continue to be reliant on cash, the government remains concerned about the role of cash in tax evasion and money laundering. In particular, it believes that cash businesses may experience difficulties in keeping accurate tax records and be more likely to be involved in deliberate non-compliance. The call for evidence seeks information on those sectors in which cash continues to be important and in which it is likely to increase tax evasion, barriers to using digital payments in place of large cash transactions, other actions that the government might take to reduce cash-related tax evasion (such as mandating receipts or imposing a cash transaction limit) and examples of the successful reduction of cash-related tax evasion from other jurisdictions. Specifically, the call for evidence seeks comments on (i) supporting digital payments; (ii) the future role of cash and (iii) understanding the role of cash in facilitating tax evasion and money laundering.


EC publishes action plan on financing sustainable growth

The EC recently published an action plan on financing sustainable growth. The action plan builds upon the recommendations set out in the final report of the Commission's high-level expert group (HLEG) on sustainable finance published in January 2018 and sets out a roadmap for further work and upcoming actions on sustainable finance. As regards corporate disclosure, governance and short-termism in capital markets, the action plan includes proposals to (i) publish conclusions of the fitness check on public corporate reporting that has been launched by the Commission; (ii) revise the guidelines on non-financial information as regards climate-related information to further align them with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures; (iii) request the EFRAG, where appropriate, to assess the potential impact of new or revised IFRS standards on sustainable investments; (iv) promote corporate governance that is more conducive to sustainable investments; and (v) collect evidence of undue short-term pressure from capital markets on corporations.


ESMA publishes double volume cap data under MiFID II

ESMA recently published trading volumes and calculations relating to the double volume cap (DVC) under MiFID II and MiFIR. The DVC mechanism is intended to limit the amount of trading under certain equity waivers to ensure that the use of those waivers does not harm price formation for equity instruments. It does this by limiting the mount of dark trading under the reference price waiver and the negotiated transaction waiver. ESMA reminds national competent authorities (NCAs) that they should suspend, within two working days, the use of waivers in those financial instruments where the caps have been exceeded. This means that the use of the waivers should be suspended for these instruments for a period of six months starting from 12 March 2018. ESMA intends to publish the DVC data for March 2018 on 9 April 2018, including any data received after the cut-off date for data submissions of 1 March 2018.


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Tel: + 44 20 7585 1406
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Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

06 06 2020

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