Quarterly Bulletin Q3 2013

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78 Developments in EU Financial Services Legislation during the Irish Presidency of the Quarterly Bulletin 03 / July 13 Council of Ministers January - June 2013 current Parliament’s term, with elections in May 2014 (see table of legislative progress since 2009). The substantial progress on key dossiers under the Presidency has loosened the logjam of dossiers and enabled a necessary catching up by the EU institutions. The progress was the result of effective preparation, technical expertise, professionalism and experience in negotiation and a strong prioritisation of dossiers. Over 40 officials from the Central Bank of Ireland were heavily involved in providing support to the Department of Finance in the lead up to, and the conduct of the Presidency. Main Developments Banking Union Absolute priority was given to this file in line with the conclusions of the European Council of December 2012. Banking Union shifts supervision of banks to the European level, and combined with a common system for deposit protection and integrated crisis management aims to reassure citizens and markets that a common, high standard of prudential regulation is being consistently applied. With an appropriate fiscal backstop it is an important element in breaking the vicious circle between banks and the sovereign. Its five elements are CRDIV, SSM, BRRD, DGSD and SRM, which are further explained below. CRR/CRDIV (Capital Requirements Regulation and Directive) which transpose the Basel III requirements as endorsed by the G20 leaders, greatly strengthen the prudential requirements for banks, and ensure that they hold enough good quality capital and sufficient liquidity to withstand future economic and financial shocks. They also improve governance and remuneration practices. After an intensive series of meetings the Irish Presidency concluded long running Trilogue discussions with an agreement in March. CRDIV will enter into force in January 2014. SSM Regulation creates a Single Supervisory Mechanism for the Euro area with the ECB taking on key prudential supervisory tasks relating to major credit institutions. It is accompanied by an amendment to the European Banking Authority regulation to avoid fragmentation of the Single Market for banking services. There is also provision for non-euro area member states to opt into the SSM The Presidency initiated Trilogues on the EBA regulation and brought them to a successful conclusion in March. Extensive preparations are well under way in the ECB to take responsibility for supervision within 12 months of formal adoption which is expected in September 2013. BRRD (Bank Recovery and Resolution Directive) aims at providing a common framework of rules and powers to allow national authorities to intervene decisively before problems occur and to ensure that the cost of restructuring and resolving failing banks falls on the owners and creditors and not on taxpayers. This highly technical and politically sensitive dossier was first tabled by the Commission in June 2012. The Presidency conducted a protracted series of meetings to clarify the issues and to explore possible compromises. After 2 discussions at ECOFIN a special ECOFIN meeting was convened on 26 June at which agreement was reached on a Council General Approach. Trilogues can now begin under the Lithuanian Presidency. The agreement on BRRD will also allow Trilogue discussions on DGSD (Deposit Guarantee Scheme Directive) to recommence. This Directive aims to significantly increase depositors’ confidence by introducing a higher level of coverage, faster
Developments in EU Financial Services Legislation during the Irish Presidency of the Council of Ministers January - June 2013 Quarterly Bulletin 03 / July 13 79 pay-out and more credible funding of schemes. Progress on this dossier has had to await the decisions on the financing issues reached in the BRRD. The BRRD agreement also clears the way for the Commission to present its proposals on SRM (Single Resolution Mechanism) (expected in July). This will establish a Single Resolution Board and a Single Bank Resolution Fund for institutions subject to the Single Supervisory Mechanism. The Lithuanian Presidency will give priority to this dossier. including derivatives markets and to introduce an OTF (Organised Trading Facility) regime and a harmonised third country regime. However the complexity and sensitivity of the proposal led to strong divisions between member states and agreement had eluded successive Presidencies. After nine Council Working Party meetings, the development of successive compromise texts and intensive bilateral discussions hosted by the Presidency, a Council General Approach was agreed in June. In summary the Irish Presidency concluded Trilogue discussions on two of the five elements of Banking Union and achieved a Council General Approach on a third. It should also be noted that during the Presidency the economic and fiscal context within which Banking Union will operate was strengthened by the Trilogue agreement on the ‘Two Pack’ on budgetary and economic surveillance and coordination. Markets Reform Outside of the Banking sector there was a wide ranging series of proposals from the Commission aimed at improving the stability and efficiency of the Single Market in financial services and the Presidency faced a significant build-up of dossiers. From the outset the Presidency focused on two files in particular - MiFID/R and MAR. MiFID had been in effect since 2007 and had increased competition, reduced costs and provided greater choice for investors. The Commission introduced proposals in October 2011 MiFID/R (Markets in Financial Instruments Directive and Regulation) to update the legislation in line with G20 commitments and to take account of new trading venues, products and technology (such as high frequency trading). It also aimed to improve oversight of less regulated markets, MAR/D (Market Abuse Regulation and Directive) strengthens the existing regime on market abuse and insider trading with a Regulation covering the administrative regime and supplemented by a Directive on criminal sanctions. The regime is extended to cover new trading platforms and OTC (Over the Counter) trading and introduces tougher sanctions. Concern about the manipulation of benchmarks (such as LIBOR) increased the pressure for progress on the file and Trilogue agreement on the Market Abuse Regulation was reached in June. It was agreed with the Parliament to temporarily suspend discussions on the Market Abuse Directive until progress was made on the Regulation. Negotiations on the Directive will resume under the Lithuanian Presidency. During the second half of the Presidency priority was also given to Trilogue negotiations on the Transparency Directive where the Commission proposal dated from October 2011.This Directive sets minimum requirements for the disclosure of periodic and on-going information by issuers of securities and on the disclosure of major shareholdings and voting rights. Agreement was reached in June. It was possible to reopen negotiations on this Directive because of Presidency success in the related Company Law (Accounting) Directive where Trilogue agreement was reached between the Parliament and the Competitiveness Council.
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JULY 13 Q3 Central Bank Quarterly B
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Contents Section 1 Forecast Summary
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Section 1 Quarterly Bulletin 03 / J
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7 Comment Annual National Accounts
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9 The Domestic Economy Overview n A
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The Domestic Economy Quarterly Bull
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Page 33 and 34: 31 An Timpeallacht Gheilleagrach Le
Page 35 and 36: 33 Financing Developments in the Ir
Page 37 and 38: Financing Developments in the Irish
Page 55 and 56: 53 Developments in the Internationa
Page 57 and 58: Developments in the International a
Page 73 and 74: 71 EU-IMF Financial Assistance Prog
Page 75 and 76: EU-IMF Financial Assistance Program
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Page 79: 77 Developments in EU Financial Ser
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Page 87 and 88: Analysis of Recent Monetary Operati
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Quarterly Bulletin Q3 2013

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