It received hundreds of responses from stakeholders, which confirmed that the overall framework is working well and supports financial stability, increased transparency and protection of investors and consumers. The results of the Call for Evidence will build on this framework to support growth and help legislation work better. The feedback received has supported some key reforms to improve access to finance for SMEs and investment projects.
In response to the financial crisis, the EU undertook a complete overhaul of its rules on financial services, adopting 40 pieces of legislation since 2009. These reforms stabilised the markets, made banks better capitalised, restored trust and made the financial system in the EU stronger and more resilient. At the same time, it is important to check whether the new rules are working as intended and to have the confidence to propose changes where they are not. In its Call for Evidence, the European Commission assessed the interaction between the individual rules and their combined economic impact, and addressed unintended consequences, inconsistencies and gaps in the regulatory framework.
Today's Communication is also accompanied by a separate report on the European Market Infrastructure Regulation (EMIR), looking at how rules for over-the-counter derivatives, central counterparties and trade repositories should be improved.
Vice-President Valdis Dombrovskis, in charge of Financial Stability, Financial Services and Capital Markets Union as well as the Euro and Social Dialogue, said: "Europe needs rules that protect consumers and ensure financial stability, but also allow financial companies to lend, invest and support growth. The Call for Evidence responses show that the rules put in place after the crisis are sound but could be made more proportionate. We will make adjustments to get the balance right and increase funding for the wider economy. We want legislation that commands respect and underpins a safe but dynamic financial services sector."
Jyrki Katainen, Vice-President responsible for Jobs, Growth, Investment and Competitiveness, noted: "The Commission is serious about better regulation. The Call for Evidence on the cumulative impact of financial services reforms has been a hugely important exercise. It showed us that the overall framework is sound, and it helped us target key themes in legislation where improvements can be implemented. The responses to the public consultation have been valuable in strengthening the Commission's policies, and in ensuring that our framework supports European growth and investment."
Based on a thorough review and analysis of all responses received to the Call for Evidence and discussions during the public hearing in Brussels in May 2016, the Commission has concluded that overall the financial services framework does not need to be changed. However, targeted follow-up actions to fine-tune the framework are proposed in the following four areas:
Removing unnecessary regulatory constraints on financing the economy. In some cases, the same prudential objectives can be achieved in a more growth-friendly way. For example, while the CRR2 package adopted today will reduce risks in the banking sector, the Commission is proposing to implement the rules in a way that ensures banks' capacity to finance SMEs and other parts of the economy. It enables a proper functioning of EU trade finance activities and derivative markets designed to help end users manage their risks. The Commission will also review the prudential treatment of infrastructure and other long-term investment by insurance companies.
Enhancing the proportionality of rules. More proportionate rules will help promote competition and enhance the resilience of the financial system by safeguarding its diversity and dynamism. The Commission is today proposing to ease reporting burdens for small and non-complex banks and to review EMIR clearing and margining requirements for non-financial companies, pension funds and small financial institutions (see below). The Commission will also look at ways to enhance the proportionality of rules without compromising prudential objectives in other areas, such as insurance and asset management.
Reducing undue regulatory burdens. Rules should achieve their objectives at minimum cost for firms and, ultimately, end users and the wider economy. Among other measures, the Commission is committed to reducing duplication and excessive reporting requirements and will in due course undertake a comprehensive review how burdens can reduced and reporting consolidated and streamlined, without compromising regulatory objectives.
Making rules more consistent and forward-looking. The call for evidence highlighted a number of unintended interactions and inconsistencies between individual rules. An example is the interaction between the bank leverage ratio and EMIR clearing obligation, which may undermine our objective to promote reduction of risks through central clearing, is addressed in today's CRR2 proposal. As part of closing remaining gaps in the regulatory framework, the Commission will shortly adopt a proposal for the recovery and resolution of central counterparties (CCPs). To enhance investor and consumer protection, the Commission will publish an Action Plan in 2017 setting out steps to build a deeper single market for retail financial services.
The detailed follow-up actions are set out in a Commission Communication and an accompanying Staff Working Document that the Commission is presenting today. The Commission will monitor progress in the implementation of the respective policy commitments and will publish its findings and next steps before the end of 2017. The call for evidence should not be seen as a one-off exercise. The Better Regulation principles will continue to be applied rigorously when developing the Commission's legislative proposals by assessing their impact, minimising compliance costs and ensuring proportionality.
Complementing the follow-up to the Call for Evidence, the Commission has today also published a report on the review of EMIR, the Regulation on Over-The-Counter (OTC) derivatives, central counterparties and trade repositories.
The core objective of EMIR is to manage and monitor the risks arising from derivatives markets for financial stability. The report is part of a process that may lead to some targeted amendments of EMIR in early 2017. It explains issues that stakeholders have identified relating to the implementation of those requirements which already apply (namely, reporting to trade repositories and operational risk mitigation requirements) as well as issues encountered in preparing for the clearing and margin requirements. It also provides a summary of the areas where consultation responses and specific input received from EU bodies and authorities have shown that action could be necessary to ensure that the objectives of EMIR are met in a more proportionate, efficient and effective manner. A REFIT revision of EMIR is planned for early 2017 in order to eliminate disproportionate costs and burdens to small companies in the financial sector, corporates and pension funds and to simplify rules without putting financial stability at risk.
The approach to the Call for Evidence is supported by the European Parliament and Member States. It forms a key contribution to the Commission's Better Regulation agenda and the Regulatory Fitness and Performance (REFIT) programme, which ensures that EU legislation delivers results for citizens and businesses effectively, efficiently and at minimum cost. It is the first example of such an exercise globally. The G20, the Financial Stability Board and the Basel Committee on Banking Supervision are also undertaking initiatives to assess the overall coherence of the reforms that have been undertaken globally.
For More Information
See our Q&A
Call for Evidence – Communication & Staff Working Document
EMIR review report
CRR2 package proposal – press release