Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers
Date: 2015-12-16
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: banking policy, commodities market, dealer, financial control, financial legislation, investment company, market supervision, trade information

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 16.12.2015  COM(2015) 648 final 2015/0295 (COD)   Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers (Text with EEA relevance)  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

The  term  'commodity  dealer'  covers  a  wide  spectrum  of  actors  in  energy  and  commodity 
markets: some trade exclusively in commodity derivative contracts and resemble investment 
firms in terms of functions and risks, whereas others trade commodity derivatives purely as an 
ancillary activity to commodities production. The requirements laid down in Regulation (EU) 
No 575/2013 (the 'Capital Requirements Regulation' or 'CRR') and in Directive 2013/36/EU 
(the  'Capital  Requirements  Directive'  or  'CRD')  apply  to  both  credit  institutions  and 
investment firms. The prudential regime applicable to  investment firms is  derived from that 
imposed  on  credit  institutions,  adapted  as  a  function  of  the  investment  services  that  they 
provide. 

Articles 493(1) and 498(1) of the CRR exempt commodity dealers ("investment firms whose 
main  business  consists  exclusively  of  the  provision  of  investment  services  or  activities  in 
relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I 
to  Directive  2004/39/EC  and  to  whom  Council  Directive  93/22/EEC  of  10  May  1993  on 
investment  services  in  the  securities  field  did  not  apply  on  31  December  2006")  from  large 
exposures requirements and from own funds requirements respectively. 

Both exemptions expire on 31 December 2017. This 'sunset clause' was originally included in 
the CRR in order to allow time for regulators to determine a prudential regulation adapted to 
the  risk  profile  of  commodity  dealers.1  To  this  end,  Articles  493(2)  and  498(2)  of  the  CRR 
mandate the Commission to prepare reports by the end of 2015. On the basis of those reports, 
the Commission may decide to submit proposals to amend the CRR. The Commission is also 
required  to  submit,  within  the  same  deadline,  a  report  on  an  appropriate  regime  for  the 
prudential supervision of investment firms in general. Here again, the report may be followed 
by a Commission proposal. 

Since the abovementioned reports are related, the Commission decided to undertake a single 
review (henceforth 'investment firms review') and prepare a single report on the above topics. 
This  was  deemed  necessary  in  order  to  ensure  the  development  of  a  coherent  prudential 
framework  for  all  types  of  investment  firms.  The  work  on  the  investment  firms  review  is 
already  underway:  the  Commission  asked  the  European  Banking  Authority  (EBA)  and  the 
European  Securities  and  Markets  Authority  (ESMA)  to  provide  technical  advice  on  the 
matter. The advice is expected by the end of September 2015. The Commission will then use 
the  advice  to  prepare  its  own  report.  Should  the  Commission  decide  to  change  the  existing 
prudential  framework  for  investment  firms,  the  report  will  detail  the  next  steps  of  the 
investment  firms  review  and  the  broad  outline  of  the  changes  the  Commission  is 
contemplating. 

The investment firms review is a complex project which will not be completed by the end of 
this  year.  It  is  therefore  highly  improbable  that  any  legislation  that  may  result  from  this 
review can be prepared, adopted and applied before the current exemptions expire (i.e. before 
the  end  of  2017).  This  has  implications  for  commodity  dealers:  if  no  specific  prudential 

1 

The  CRR  actually  extended  the  exemptions  that  were  already  contained  in  Directive  2006/48/EC 
because  there was  not sufficient  time  to  develop  an  appropriate  prudential  framework for  commodity 
dealers. 

EN 

2 

   EN 

                                                 
framework that may result from the investment firm review would be in place by then, they 
would be subject to the full CRR/CRD requirements starting from 1 January 2018. 

There  are  two  problems  related  to  this  scenario.  First,  commodity  dealers  would  become 
subject to the full CRR/CRD requirements without a conscious (and informed) decision that 
such  treatment  is  indeed  the  most  appropriate  one  for  them.  Second,  assuming  that  the 
investment  firm  review  would  result  in  a  tailor-made  prudential  framework  for  commodity 
dealers, they would be deprived of a stable regulatory framework. They would move from the 
current treatment where they are exempted from large exposures and own funds requirements, 
to  a temporary treatment  comprising the full CRR/CRD requirements, and eventually to the 
aforementioned tailor-made framework within a very short period of time (one to two years). 
This is not a desirable outcome. 

To prevent that this situation arises it is therefore opportune to extend the existing exemptions 
laid down in the CRR. The extension should take into account the amount of time that will be 
necessary  to  conclude  the  investment  firms  review  and  to  prepare,  adopt  and  apply  any 
legislation that may result from that review. 

• 

Consistency with existing policy provisions in the policy area 

This  proposal  is  fully  consistent  with  existing  provisions  in  the  CRR  (it  would  extend  an 
existing exemptions contained therein). It is also fully consistent with the general thrust of the 
investment firms review (finding the appropriate prudential framework for investment firms) 
mandated in that Regulation (it would allow maintaining the existing treatment of commodity 
dealers until he review is concluded and any potential legislative proposals resulting from it 
are implemented). 

• 

Consistency with other Union policies 

This proposal is related to implementing legislation under Directive 2014/65/EU ('MiFID 2'), 
which will identify those commodity dealers that will be classified as investment firms.2 It is 
also related to policies in the area of energy markets given that commodity dealers are active 
on those markets (they may even be part of large energy groups).3 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Since the proposal amends the CRR, the same legal basis was chosen. 

• 

Subsidiarity (for non-exclusive competence)  

The current exemptions  are contained in  Union law and in  particular in  the CRR. Since the 
CRR  does  not  grant  Member  States  the  possibility  to  extend  those  exemptions,  they  can  be 
extended only at Union level. 

• 

Proportionality 

This proposal is proportionate as it introduces a very limited change to existing legislation in 
order to address the problem described in Section 1. 

2 

3 

The link runs from MiFID 2 to the CRR/CRD: if a commodity dealer is categorised as an investment 
firm under the former, it would become subject to the requirements in the latter. 
An extension of the exemption will prevent any potential disruptions to those markets and will provide 
sufficient time to find an appropriate prudential framework for commodity dealers. 

EN 

3 

   EN 

                                                 
• 

Choice of the instrument 

A regulation was chosen because the extension requires amending the CRR. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

As  mentioned  above,  the  prudential  framework  applicable  to  investment  firms  (including 
commodity dealers) laid down in the CRR and the CRD is currently under review. The results 
of that review will determine the appropriate prudential treatment of commodity dealers. The 
purpose  of  this  proposal  is  to  extend  the  existing  treatment  of  commodity  dealers  until  the 
investment  firms  review  is  completed  and  any  potential  changes  to  the  existing  prudential 
framework stemming therefrom are implemented. 

• 

Stakeholder consultations 

No specific stakeholder consultations were carried out. 

• 

Collection and use of expertise 

No external expertise was sought or used. 

• 

Impact assessment 

No  impact  assessment  is  foreseen  for  this  proposal  as  it  will  not  have  any  significant 
economic, environmental or social impact. Rather, significant impacts could materialise if the 
exemptions would not be extended and commodity dealers would, as a consequence, become 
subject to the full requirements laid down in the CRR and the CRD (without any analysis of 
whether such treatment would be the appropriate one for them). 

• 

Regulatory fitness and simplification 

The proposal entails no changes for the regulatory burden of commodity dealers compared to 
the status quo. Assuming that the investment firms review will result in the development of a 
new prudential framework for commodity dealers, this proposal is rather intended to prevent 
that commodity dealers would become subject to the full requirements under the CRR and the 
CRD  (with  the  associated  regulatory  burden)  only  to  become  subject  to  the  aforementioned 
new framework shortly thereafter. 

In other words, this proposal aims at preventing a temporary increase in the regulatory burden 
of commodity dealers. 

• 

Fundamental rights 

The proposal does not have consequences for the protection of fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

This proposal does not have any budgetary implications. 

EN 

4 

   EN 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The  purpose  of  this  proposal  is  to  extend  the  period  during  which  commodity  dealers  are 
exempted from certain requirements laid down in the CRR. No specific implementation plans 
are  needed  since  the  extension  is  directly  applicable  and  allows  for  the  continuation  of 
existing  practice.  For  the  same  reasons  there  is  no  need  for  specific  monitoring,  evaluation 
and reporting frameworks to be put in place. Those will rather need to be put in place in the 
context of any changes to the prudential framework applicable to commodity dealers that may 
result from the investment firms review. 

• 

Explanatory documents (for directives) 

Not applicable. 

• 

Detailed explanation of the specific provisions of the proposal 

The  provisions  contained  in  the  proposal  concern  only  the  extension  of  the  exemptions  for 
commodity  dealers  from  the  large  exposures  and  own  funds  requirements  laid  down  in  the 
CRR.  The  previous  sections  of  this  Explanatory  Memorandum  already  provide  a  detailed 
explanation of the reasons and logic behind the proposal and its provisions. 

EN 

5 

   EN 

2015/0295 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EU) No 575/2013 as regards exemptions for commodity dealers 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee1,  
Having regard to the opinion of the European Central Bank2, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

1 
2 
3 

4 

5 

Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council3 
exempts  investment firms whose  main business consists exclusively of the provision 
of  investment  services  or  activities  in  relation  to  the  financial  instruments  set  out  in 
points  5,  6,  7,  9  and  10  of  Section  C  of  Annex  I  to  Directive  2004/39/EC  of  the 
European Parliament and of the Council4 and to whom Council Directive 93/22/EEC5 
did  not  apply  on  31  December  2006  ('commodity  dealers')  from  large  exposures 
requirements  and  from  own  funds  requirements.  Those  exemptions  apply  until  31 
December 2017. 

Regulation  (EU)  No  575/2013  also  requires  the  Commission  to  prepare,  by  31 
December  2015,  a  report  on  an  appropriate  regime  for  the  prudential  supervision  of 
commodity dealers. Furthermore, that Regulation requires the Commission to prepare 
a report on an appropriate regime for the prudential supervision of investment firms in 
general  by  the  same  date.  Where  appropriate,  those  reports  are  to  be  followed  by 
legislative proposals. 

OJ C , , p. . 
OJ C , , p. . 
Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 
648/2012 (OJ L 176, 27.6.2013, p.1). 
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in 
financial  instruments  amending  Council  Directives  85/611/EEC  and  93/6/EEC  and  Directive 
2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC 
(OJ L 145, 30.4.2004, p. 1). 
Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ L 141, 
11.6.1993, p. 27). 

EN 

6 

   EN 

                                                 
(3) 

(4) 

(5) 

The review of the prudential treatment of investment firms ('investment firms review'), 
including  commodity  dealers  is  currently  underway  but  has  not  been  completed  yet. 
The finalisation of the review and the adoption of new legislation that may be required 
in light of that review will be concluded only after 31 December 2017. 

Under  the  existing  regime,  after  31  December  2017  commodity  dealers  will  become 
subject  to  the  large  exposures  requirements  and  own  funds  requirements.  This  could 
force them to significantly increase the amount of own funds that they need to have in 
order  to  continue  their  activities  and  could  therefore  increase  the  related  costs  of 
performing those activities. 

The  decision  to  apply  large  exposures  requirements  and  own  funds  requirements  to 
commodity  dealers  should  not  come  as  a  result  of  a  lapsed  exemption.  Instead,  that 
decision should be a thoroughly reasoned one, based on conclusions of the investment 
firms review, and clearly expressed in legislation. 

(6) 

A  new  time  limit  until  which  the  exemptions  apply  should  therefore  be  established. 
Regulation (EU) No 575/2013 should be amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Regulation (EU) No 575/2013 is amended as follows: 

(1) in Article 493(1), the second sentence is replaced by the following: 

Article 1 

"This  exemption  is  available  until  31  December  2020  or  the  date  of  entry  into  force  of  any 
amendments pursuant to paragraph 2 of this Article, whichever is the earlier."; 

(2) in Article 498(1), the second subparagraph is replaced by the following: 

"This  exemption  shall  apply  until  31  December  2020  or  the  date  of  entry  into  force  of  any 
amendments pursuant to paragraphs 2 and 3, whichever is the earlier.". 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 2 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

EN 

7 

   EN