Capital Markets Union: Covered Bonds, Cross-border Distribution of Investment Funds and Cross-border transactions in Claims and Securities

The European Commission has published proposals intended to boost cross-border activity for Investment Funds…..

The European Commission has published proposals intended to boost cross-border activity for Investment Funds, increase the attractiveness of the European Union (EU) market for Covered Bonds as a source of long-term finance, ensuring greater certainty for Investors.

  • Covered bonds
    The Commission proposes common rules through a Directive and a Regulation for Covered Bonds, intended to enhance the use of these instruments as a means of funding for funding for credit institutions, including less developed markets. The proposed Directive:

    • Details the instruments’ structural features, including dual recourse, quality of the assets backing the instrument, liquidity and transparency requirements.
    • Defines the instrument with consistent reference for prudential regulation purposes;
    • Identifies the tasks and responsibilities for supervision
    • Defines the rules allowing the use of the ‘European Covered Bonds’ label.

The proposed Regulation aims to tighten the conditions for granting preferential capital treatment by adding further requirements. The proposal will be discussed by the European Parliament and the Council. It is anticipated that there will be an implementation period of 12 months.

  • Cross-border distribution of Investment Funds
    The Commission has also published legislative proposals, intended to facilitate distribution of Investment Funds cross-border, through improved transparency, achieved by aligning Member States’ National Marketing Requirements and Regulatory Fees. Processes and requirements for the verification of marketing material by Member State National Competent Authorities (NCAs) are harmonised, allowing the European Securities and Markets Authority (ESMA) to better monitor Investment Funds. A new Directive is proposed with the objective of harmonising the conditions under which Investment Funds may exit a Member State, giving Asset Managers the ability to cease marketing an Investment Fund in certain instances in one or several host Member States. European Union (EU) Asset Managers are also permitted to test potential Professional Investors’ appetite for new investment strategies by pre-marketing. The European Parliament and Council will discuss further.

 

  • Law applicable to Third-Party Proprietary effects of the Cross-border Assignment of Claims
    Proposals have also been made by the Commission in respect of applicable laws to third-party proprietary effects of the cross-border assignment of claims., a legal mechanism whereby a creditor (the assignor) transfers his right to claim a debt to another party. This gives a creditor the right to receive a monetary sum or to the performance of an obligation by the debtor. This provides liquidity and have provides companies with access to credit allowing them to optimise their capital (securitisation). Companies may assign a claim to a party in another Member State, which can lead to a conflict of applicable laws. Consequently, the Commission proposes a general rule that in conflict situations the law of the assignor’s habitual residence applies. The Commission also notes that special rules are required to provide for those sectors which may not be well served by the rule of the law of the assignor. Two types of claims are exempted from the general rule:

    • Claims derived from financial instruments e.g. Derivatives

For securitisation transactions, the Commission proposes a choice between the law of the Assigned Claim and law of the Assignor

    • Cash on the Account of a Credit Institution e.g. A Bank, where the Consumer is Creditor and the Credit Institution the Debtor

 

  • Communication on the law applicable to securities

The Commission has also outlined its views on the existing conflict of laws rules relating to securities transactions and the relevant conflict of law provisions of the Settlement Finality Directive, Financial Collateral Directive and the Wing-Up Directive and their current application. The Commission considers that differences in wording across the three Directives does not imply any difference in substance and without prejudice to potential future decisions of the Court of Justice of the European Union, the Commission believes that the various methods for determining where a security account is “located” or “maintained” under national law all appear valid.

The Commission will monitor developments over the next five years are review the evolution of national interpretations and market practices taking account of international and technological developments. Further legislative proposals will be presented by the Commission, completing the CMU by May 2018.As part of its Retail Banking Investigation, a rule change required by The Competition and Markets Authority (CMA) came into force on 02 February 2018

 

Further information:
To read more, please follow this link:
http://europa.eu/rapid/press-release_IP-18-1364_en.htm

Contact us here


Other Links

ESMA MiFID II and MiFIR

ESMA MiFID II and MiFIR regulatory update

 

ESMA on guidance cross-border investment services

ESMA on guidance cross-border investment services

 

AIF Managers Regulation 2018

Regulatory Update: AIF Managers

 

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

Source and credit: Compliancy Services

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Capital Markets Union: Covered Bonds, Cross-border Distribution of Investment Funds and Cross-border transactions in Claims and Securities

Capital Markets Union: Covered Bonds, Cross-border Distribution of Investment Funds and Cross-border transactions in Claims and Securities