In a recent address to the Institute for International and European Affairs in Dublin, the Central Bank’s Head of Markets Policy, Martin Moloney, congratulated the Irish Presidency on its success in progressing key financial services regulation and, in particular, key securities markets-focused regulation, during its term.

At the start of the Presidency, Ireland took over 20 financial services files at different stages of completion. These represented many of the elements of the complex regulatory response of the EU to the financial crisis. By the end of the Presidency, 11 files had reached policy commitments in legislative form – the largest ever for any Presidency.

Banking Regulatory Reform
During the Presidency, agreement was reached on the Single Supervisory Mechanism, the Banking Recovery & Resolution Directive, the Mortgage Credit Directive and, most importantly, the Capital Requirements Directive IV (CRD IV), which covers prudential rules for banks, building societies and investment firms.

It was Mr. Moloney’s view that the three pillars of CRD IV – tougher liquidity rules, better quality capital holdings and a non-risk weighted leverage ratio – should assist regulators throughout the EU if and when another asset bubble emerges.

PRIPS Regulation
The Council’s general approach on the draft Packaged Retail Investment Products Regulation (PRIPS) was agreed during the Irish Presidency. The draft regulation which is aimed at improving market transparency for retail investors, covers investment funds, structured deposits and life insurance policies with an investment element. It requires key information documents to be drawn up for PRIPs and lays down uniform rules on the format and content of such documents and on their provision to retail investors.

Mr. Moloney noted that, throughout the history of the EU, investment funds and life policies have been regulated entirely separately. He stated that the PRIPS Regulation bridges that chasm in consumer protection and for that reason alone is a very welcome development.

Market Abuse Regulation
Under the Irish presidency, agreement was reached with the EU Parliament on the Market Abuse Regulation (MAR). Mr. Moloney noted that there has been an apparent move towards the use of EU Commission Regulations as the primary legislative tool which, he added, reflects a focused aspiration from an EU policy perspective to have, in as much as possible, maximum harmonisation of legislation and a single rule book, for products, services and activities that are traded across the EU.

Mr. Moloney also noted that part of the compromise to get MAR over the line involved affording certain discretions to EU Member States such as:

• A discretionary option for Member States to put criminal sanctions in place within 24 months of MAR coming into force
• Discretion as to what sanctions will apply for failure to cooperate or to comply with an inspection, investigation or request by the competent authority of a Member State – they are not specified in the MAR

Mr. Moloney’s expressed his hope that Member States will not use those discretions to step back from the original Market Abuse Directive.

MIFID
The Council’s general approach on MiFID II was agreed during the Irish Presidency. Mr. Moloney highlighted the benefits of MiFID II in as much as it responds to some of the unintended consequences of MIFID I, to the emergence of high frequency trading and to a perceived need to improve oversight of less regulated trading, introducing a new regulatory framework – the OTF (Organised Trading Facility) regime to regulate trading previously done off-market – and to introduce a harmonised third country regime and new consumer protection rules.

Contributed by Niall Crowley