COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Call for Evidence - EU regulatory framework for financial services
Date: 2016-11-23
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU law, bank, consumer protection, economic growth, financial legislation, financial services, financing policy, investment, job creation, law of banking

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 23.11.2016  COM(2016) 855 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Call for Evidence - EU regulatory framework for financial services {SWD(2016) 359 final}  
 
 
Commission Communication on the call for evidence: 
 EU regulatory framework for financial services 

1. INTRODUCTION 

In the 2016 State of the Union address, President Juncker emphasised the commitment of the 
Commission to a thorough review of all existing European legislation to ensure it delivers real 
value and results. The call for evidence on the EU regulatory framework for financial services 
is  an  important  example  of  such  an  exercise.    It  is  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. 

The  call  for  evidence  is  also  the  first  example  of  such  an  exercise  internationally.  Rules  on 
financial  services  should  help  to  create  an  environment  that  protects  consumers,  promotes 
market integrity and supports investment, growth and jobs. The financial crisis triggered the 
adoption of more than 40 new pieces of EU legislation to restore financial stability and market 
confidence. These include: 

increased protections for consumers and increased transparency; 

 
  an improved regulatory framework for banks, insurance, securities markets and asset 

managers;  

  a single supervisory mechanism for large and systemic banks; and 
  new tools for bank resolution and more effective deposit protection.  

Overall, these reforms have made the financial system more stable and resilient. At the same 
time,  it  is  important  to  monitor  the  continuing  development,  early  implementation  and 
functioning  of  the  new  rules  to  check  that  they  are  delivering  as  intended,  and  consider 
appropriate changes if they are not. This is an important part of democratic accountability and 
will ensure that those affected by the rules, including end users, have confidence in them. The 
call  for  evidence  includes  assessing  the  interaction  between  the  individual  rules,  and  their 
combined  economic  impact.  It  should  ensure  that  unintended  consequences,  inconsistencies 
and  gaps  in  the  current  regulatory  framework  are  addressed.  Developments  in  the  financial 
sector and the economy more broadly, including rapid technological change, also need to be 
taken into account when checking that the rules remain suited to the changing realities.  

This is an approach that is supported by the European Parliament and the Council. In line with 
the  European  Parliament  Resolution  on  ‘Stocktaking  and  Challenges  of  the  EU  Financial 
Services  Regulation’1,  the  Commission’s  call  for  evidence  invited  external  stakeholders  to 
share  their  experience  with  implementing  EU  financial  regulations  and  to  provide  data, 
evidence and arguments to support the assessment of their combined impact.  

1 http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A8-2015-
0360+0+DOC+PDF+V0//EN  

2 

 
 
 
                                                            
The  majority  of  respondents  signalled  support  for  the  financial  reforms  undertaken  in 
response to the crisis. They took the view that the rules have enhanced the resilience of the 
financial  system  and  improved  protections  for  investors  and  consumers.  However, 
stakeholders  also  identified  examples  of  possible  friction,  overlap  and  other  forms  of 
unintended  interaction  between  different  rules.  These  examples  show  the  importance  of 
considering  and  analysing  the  combined  impact  of  rules.  Some  respondents  also  expressed 
concerns about rules stemming from the implementation of international agreements, such as 
the  impact  of  upcoming  measures  being  considered  by  the  Basel  Committee  on  Banking 
Supervision  (BCBS),  and  how  aspects  of  those  rules  interact  with  existing  ones.  The 
Commission  has  channelled  the  most  relevant  feedback  on  global  standards  to  the  relevant 
international bodies.  

In  other  areas  where  stakeholders  raised  concerns,  the  evidence  submitted  did  not  currently 
warrant  change.  Nevertheless,  the  Commission  will  continue  to  monitor  developments  and 
welcomes further evidence from stakeholders on issues that should be analysed further.  

Based on a thorough review and analysis of all the responses to the call for evidence and the 
discussions  during  the  public  hearing  held  in  Brussels  in  May  2016,  the  Commission  has 
concluded that overall the financial services framework in the EU is working well. However, 
targeted follow-up action is required in the following areas:   

reducing unnecessary regulatory constraints on financing the economy; 

 
  enhancing the proportionality of rules without compromising prudential objectives; 
 
  making rules more consistent and forward-looking. 

reducing undue regulatory burdens; 

Where appropriate and possible, the results of the call for evidence have been integrated into 
existing reviews and legislative initiatives. The feedback submitted by stakeholders has been 
incorporated  into  forthcoming  legislative  proposals  and  actions,  including  the  review  of  the 
Capital  Requirement  Regulation  and  Directive  (CRR/CRD  IV)23  which  resulted  in  the  so-
called  "CRR2  package"4  proposed  by  the  Commission  on  23  November  2016,  the 
development  of  future  actions  contained  in  the  Capital  Markets  Union  (CMU)  Action  Plan 
and  the  forthcoming  REFIT  revision  of  the  European  Market  Infrastructure  Regulation 
(EMIR)5. The feedback provided will also be taken into account in upcoming fitness checks 
and evaluations that will be conducted once more data on the results and longer term impacts 

2 Regulation (EU) No 575/2013  
3 Directive 2013/36/EU  
4 The "CRR2 package" describes the combination of risk reduction measures in the following proposals: 
"Proposal for a Regulation of the European Parliament and the Council amending Regulation (EU) No 575/2013 
and Regulation (EU) No 648/2012", "Proposal for a Directive of the European Parliament and of the Council 
amending Directive 2013/36/EU", "Proposal for a Directive of the European Parliament and of the Council 
amending Directive 2014/59/EU" and "Proposal for a Regulation of the European Parliament and the Council 
amending Regulation (EU) No 806/2014". 
5 Regulation (EU) No 648/2012  

3 

 
 
 
 
                                                            
of  the  measures  is  available.  The  call  for  evidence  also  identified  a  number  of  other  issues 
which might require new policy action. These are indicated in this Communication.  

2. FOLLOW-UP ACTION 

In  setting  out  the  follow-up  actions  listed  below,  the  Commission  has  taken  due  account  of 
responses  received  from  a  wide  range  of  stakeholders,  including  financial  services  user 
groups,  public  authorities,  investors  and  the  industry.  A  more  detailed  description  of  the 
evidence received can be found in the accompanying Staff Working Document. 

2.1 

Reducing unnecessary regulatory constraints on financing the 
economy 

In  accordance  with  the  Commission’s  priority  of  stimulating  investment,  growth  and  job 
creation, the EU needs to pay attention to areas where EU rules may be impeding the flow of 
finance to the economy and explore whether the same prudential objectives can be achieved 
in a more growth-friendly way. As highlighted by the CMU Action Plan, the flow of finance 
to SMEs and long-term investments are particular policy challenges. In this context, feedback 
from stakeholders covered the following areas: 

Banks’ ability to finance the wider economy 

Firms  and  households  in  the  EU  remain  dependent  on  banks’  capacity  and  willingness  to 
finance their investments and activities. The Commission is working with the co-legislators to 
develop the CMU to broaden the sources of finance, but it is important that the bank funding 
channel also functions appropriately.  

Most respondents agreed that the post-crisis reforms were crucial in restoring the resilience of 
the  banking  sector.  Such  resilience  is  a  pre-condition  for  the  banks  to  play  their  role  in 
financing  the  economy.  However,  respondents  also  expressed  concern  about  the  impact  of 
upcoming prudential measures being finalised by the BCBS, and how they may interact with 
existing  rules  in  a  way  that  limits  the  financing  capacity  of  banks.  Banks  have  raised  over 
EUR 800 billion  in  capital  since  the  financial  crisis  and  undergo  regular  stress  testing.  The 
Commission’s  focus  is  now  on  implementing  the  remaining  BCBS  reforms  to  address 
remaining  risks  in  a  way  that  safeguards  financial  stability  and  ensures  that  banks  maintain 
their capacity to support the growth of the EU economy.  

SME financing 

SMEs  are  the  largest  contributor  to  jobs  and  growth  in  Europe.  The  Commission’s 
programme  of  actions  to  improve  capital  market  funding  opportunities  for  SMEs  was 
welcomed by respondents. However, they also noted that SMEs depend on bank loans for the 
vast majority of their funding and argued that more should be done to support this channel of 
financing as a complement to capital market funding.  

4 

 
 
Long-term sustainable investment 

Long-term financing allows investors to reap higher and less volatile returns  given the long 
maturity  of  such  investments.  High-quality  infrastructure  improves  economic  productivity, 
enables growth and helps interconnect the single market. Responses highlighted some pieces 
of regulation that were seen to hamper long-term investment. For example, it was argued that 
the risk framework laid down in the Solvency II Directive6 limits insurance companies’ ability 
to finance long-term investments and that the capital framework for banks does not provide 
sufficient incentives for long-term investments.  

Supporting market liquidity 

Market  liquidity  is  fundamental  for  a  well-functioning  financial  system  that  supports 
investment and growth by allocating capital in an efficient way. Recent evidence suggests that 
liquidity  in  some  markets,  including  the  markets  in  corporate  bonds  and  repurchase 
agreements,  has  declined  since  the  crisis.  Evidence  suggests  that  liquidity  is  affected  by  a 
range  of  factors.  Identifying  the  effects  of  regulatory  changes  is  difficult.  The  Commission 
will  continue  to  monitor  developments  in  this  area  and  carefully  assess  the  impact  that 
regulatory measures may have on market liquidity.  

Access to clearing 

Derivatives are an important means for corporates and financial firms to support the hedging 
and management of risks. The central clearing of derivatives, one of the major reforms agreed 
on  by  G20  leaders,  significantly  reduces  the  risks  involved  in  the  derivatives  market. 
However, not all firms are large enough to have direct access to central counterparty clearing 
houses  (CCPs),  and  many  use  banks  to  clear  derivative  transactions  on  their  behalf. 
Respondents  expressed  concerns  that  some  measures  would  prevent  banks  from  providing 
these essential clearing services to end users at a reasonable price.  

Follow-up action: 

Bank finance   

In  the  CRR2  package, the  Commission  is  proposing  adjustments  in 
key areas to safeguard banks’ capacity to finance the economy:  

o  the leverage ratio will be adjusted to reflect the diversity in 
the  EU  financial  sector  and  safeguard  access  to  clearing  and 
public development funding. The leverage ratio will continue 
to serve as a back-stop against excessive leverage;  

o  a  phase-in  will  be  introduced  for  the  fundamental  review 
of  the  trading  book  to  avoid  sudden  and  disproportionate 
capital increases for some banks; and 

o  the  net  stable  funding  ratio  will  be  phased  in  and  fine-
tuned  to  ensure  the  proper  functioning  of  EU  trade  finance 
activities,  derivative  markets  and  markets  in  repurchase 

6 Directive 2009/138/EC  

5 

 
 
                                                            
agreements.  

 

In light of progress made on the Banking Union, the Commission is 
proposing  in  the  CRR2  package  measures  that  have  the  potential  to 
foster  the  integration  of  cross-border  banking  in  the  Banking  Union 
area,  subject  to  appropriate  safeguards.  This  could  potentially 
improve  the  ability  of  cross-border  banks  to  manage  capital  and 
liquidity within the group, reduce fragmentation and enhance banks’ 
capacity to finance the economy. 

  To  support  credit  institutions  accessing  funding  from  non-EU 
creditors,  the  Commission  proposes  an  adjustment  to  the  Bank 
Recovery  and  Resolution  Directive  (BRRD7)  to  ensure  that  the 
requirement  for  contractual  recognition  of  bail-in  provisions  for 
non-EU creditors can be applied pragmatically.   

  Currently, bank loans below EUR 1.5 million to SMEs are subject to 
lower  capital  requirements  than  loans  to  larger  enterprises.  In  the 
CRR2  package,  the  Commission  proposes  to  extend  the  ‘SME 
supporting  factor’  to  all  SME  loans,  including  those  larger  than 
EUR 1.5 million.  

  As  part  of  the  broader  work  on  SME  financing  and  listing,  the 
Commission  will  assess  the  implementation  of  the  rules  under  the 
Markets in Financial Instruments Directive (MiFID II)8 on investment 
research in relation to SMEs.  While the changes overall are expected 
to  reduce  conflicts  of  interest  and  improve  the  functioning  of  the 
market, the effect of the rules on the provision of SME research needs 
to be monitored closely.  

  The  Commission  will  also  closely  monitor  market  developments  to 
make sure that the regime for SME growth market issuers under the 
Market  Abuse  Regulation  (MAR)9  strikes  the  right  balance  between 
supporting SMEs to list and protecting investors.  

  The Commission has adopted lower risk charges for insurers under 
Solvency II for qualifying infrastructure projects and will propose 
a  revision  to  the  calibration  of  risk  charges  for  infrastructure 
corporates  to  better  reflect  the  lower  risk  of  these  investments.  As 
part  of  the  CRR2  package,  the  Commission  will  also  reduce  credit 
risk capital requirements for banks’ investments in infrastructure 
projects.  

  The  future  reviews  of  Solvency  II  will  provide  an  opportunity  to 
assess  the  long-term  guarantees  package  in  order  to  further  explore 
incentives  for  long-term  investment  by  insurers  and  to  assess  the 
appropriateness  of  the  prudential  treatment  of  private  equity  and 

SME 
financing 

Long-term 
investment 

7 Directive 2014/59/EU  
8 Directive 2014/65/EU  
9 Regulation (EU) No 596/2014  

6 

 
 
                                                            
Market 
liquidity 

Access to 
clearing 

privately-placed debt. 

  Alongside  the  comprehensive  review  of  corporate  bond  markets  as 
part  of  the CMU Action Plan,  the  Commission  will  also  assess  the 
functioning of markets in repurchase agreements.  

  To  mitigate  specific  concerns  around  bond  market  liquidity,  the 
Commission has proposed that the new pre-trade transparency regime 
for  MiFID  II  be  phased  in  for  non-equity  instruments,  ensuring  that 
only the most liquid instruments are initially covered. 

  The  Commission  will  assess  the  definition  of  the  exemption  for 
‘market  making  activities’  from  the  Short  Selling  Regulation 
(SSR)10.  

  The Commission has proposed to introduce more proportionate rules 
for  less  liquid  instruments  in  the  Central  Securities  Depositories 
Regulation  (CSDR)11  delegated  acts  on  cash  penalties  and 
settlement discipline.  

  As  part  of  the  EMIR  review,  the  Commission  will  assess  concerns 
about  access  to  clearing  services  and  consider  whether  and  how 
corporates  and  small  financials  should  be  covered  by  clearing  and 
margining requirements.  

2.2 

Enhancing the proportionality of rules without compromising 
prudential objectives 

Regulation  must  be  applied  in  a  proportionate  manner  to  regulated  entities,  reflecting  their 
business  model,  size,  systemic  significance,  as  well  as  their  complexity  and  cross-border 
activity. More proportionate rules will help promote competition and enhance the resilience of 
the financial system by safeguarding its diversity without compromising prudential objectives, 
financial  stability  and  overall  resilience.  Lower  entry  barriers  will  allow  new  players  to 
substitute  for  services  lost  when  less  resilient  firms  exit  the  market.  At  the  same  time,  care 
must be taken to ensure that measures aimed at enhancing proportionality do not distort the 
level  playing  field.  The  Commission  will  look  at  ways  to  strengthen  the  proportionality  of 
financial services rules in an appropriate way.  

Follow-up action: 

Banking 

  The Commission is proposing, as part of the CRR2 package, to: 

o  further ease reporting burdens and provide for differentiated 
disclosure requirements for small and non-complex credit 
institutions;  
in  light  of  the  experience  with  the  application  of  the  current 
rules,  exempt  small  and  non-complex  institutions  and  staff 

o 

10 Regulation (EU) No 236/2012  
11 Regulation (EU) No 909/2014  

7 

 
 
                                                            
with  low  levels  of  variable  remuneration  from  the  rules  on 
deferred pay and pay-out in instruments.  

o  remove  unnecessary  complexity 

in  the  treatment  of 

trading book market risk and counterparty credit risk.  

 

  The European Banking Authority (EBA) intends to develop an IT tool 
that  should  help  small  banks  to  distinguish  the  rules  which  are 
relevant  to  their  size  and  activities  from  those  rules  which  should 
apply only to larger and more complex banks. 
In  2017,  the  Commission  will  carry  out  a  REFIT  revision  of  the 
prudential  treatment  of  investment  firms,  taking  into  account  the 
EBA recommendations on developing a prudential regime for smaller 
investment firms that pose no systemic threat.  In November 2016, the 
EBA launched a consultation in response to the Commission's call for 
technical  advice  on  the  design  of  a  new  prudential  regime  for 
investment firms. 

  As  part  of  the  EMIR  review,12  the  Commission  will  consider 
adjusting the scope of EMIR clearing and margin requirements to 
address  the  diverse  challenges  faced  by  non-financial  corporations, 
pension funds and small financial counterparties.  

 

  Pension funds currently benefit from a temporary exemption from the 
EMIR  clearing  obligation,  and  the  EMIR  review  will  assess  how  to 
deal with this matter in the most adequate way.  
In July 2016 the Commission issued a call for technical advice to the 
European  Insurance  and  Occupational  Pensions  Authority  (EIOPA) 
on  the  review  of  17  specific  items  in  the  Solvency  II  Delegated 
Regulation.  The  aim  is  to  simplify  the  methods,  assumptions  and 
calculations  of  certain  modules  in  the  standard  formula  and  develop 
the  framework  for  the  use  of  alternative  credit  assessments.  The 
technical advice will feed into the future review of Solvency II  
  Building  on  the  approach  set  out  in  the  CRR2  package,  the 
Commission will assess the proportionality of rules in the Alternative 
the 
Investment  Fund  Managers  Directive 
Undertakings  for  Collective  Investment  in  Transferable  Securities 
Directive (UCITS)14, for example in relation to aligning remuneration 
regimes and reducing reporting burdens.  

(AIFMD)13  and 

Derivatives 

Insurance 

Asset 
management 

Credit rating 
sector 

  The  Commission  will  assess  the  extent  to  which  the  Credit  Rating 
Agencies  (CRA)  Regulation15  could  be  applied  to  small  CRAs  in  a 
more proportionate manner so as to enhance competition in the sector. 

12 See the EMIR review report of 22 November 2016 for more details 
13 Directive 2011/61/EU.  Article 69 states that "By 22 July 2017, the Commission shall, on the basis of public 
consultation and in the light of the discussions with competent authorities, start a review on the application 
and the scope of this Directive"  
14 Directive 2014/91/EU  
15 Regulation (EU) No 462/2013 

8 

 
 
                                                            
This includes clarifying certain existing exemptions for smaller firms 
and  exploring 
requirements  and  other 
reporting 
proportionality measures.  

simplified 

2.3 

Reducing undue regulatory burdens 

Keeping the regulatory burden to the minimum that is required for the rules to achieve their 
objectives, while making full use of modern technological solutions, is one of the key aims of 
the  REFIT  programme  of  the  Commission  under  the  Better  Regulation  agenda.  The 
Commission  has  a  firm  commitment  to  a  continuing  process  of  evaluation  and  revision  of 
legislation to avoid unnecessary complexity or burdens.  

Reporting  requirements  provide  competent  authorities  and  supervisors  with  data  on  market 
players and their activities. Access to such data is essential to perform market oversight and 
ensure orderly markets, financial stability, investor protection and fair competition. It is also 
conducive  to  fostering  closer  capital  market  integration.  At  the  same  time,  respondents 
perceived  some  reporting  requirements  as  inconsistent  and  duplicative  across  legislation, 
excessively complex and not always fit for purpose. Responses highlighted the important role 
of  technology:  while  there  are  challenges  in  keeping  systems  up-to-date  with  the  latest 
requirements, technological developments can help firms by facilitating the reporting process. 

Most  pieces  of  legislation,  including  CRR  and  Solvency  II,  already  incorporate  lighter 
reporting requirements for smaller firms, but implementation varies across jurisdictions.  

There are examples of divergent transpositions of EU directives into national legislation and 
inconsistent  enforcement  of  EU  rules.  Moreover,  ‘gold-plating’  practices  in  national 
legislation or  supervision on top  of  the minimum requirements  set out  in  the  EU Directives 
have sometimes led to additional and/or overlapping requirements, which can create barriers 
to the cross-border activity of financial firms.  

Follow up action: 

Reporting 

  The  CRR2  package  proposes  a  reduction  of  the  frequency  with 
which smaller and less complex banks are required to report.  
  Before the end of the year, the EBA will consult on a set of concrete 
proposals  for  further  reducing  the  burden  stemming  from  reporting 
requirements in banking, through aligning supervisory, statistical and 
macro  prudential  reporting  requirements  as  well  as  enhancing 
consistency in definitions used across different pieces of legislation.  
In  2017,  the  EMIR  review  will  look  at  ways  to  reduce,  as 
for  non-financial 
appropriate,  existing 
corporations,  small  financial  corporations  and  pension  funds  given 
their lower systemic risk.  
In  order  to  address  the  concerns  around  compliance  costs  over  the 
medium 
the  Commission  will  undertake  a 
comprehensive  review  of  reporting  requirements  in  the  financial 

requirements 

reporting 

term, 

long 

to 

 

 

9 

 
 
 
sector, in the framework of REFIT. In this context, supported by the 
ISA2  programme16,  the  Commission  has  launched  a  financial  data 
standardisation  project  which  aims  to  develop  a  common  language 
on  financial  data.  The  project  will  address  the  compliance  burden  at 
source  and  prepare  the  ground  for  a  ‘once  for  all’  approach  to 
reporting.  By  performing  a  detailed  mapping  of 
reporting 
requirements in 20 key pieces of financial legislation, the project will 
explore  whether  data  fields  and  reporting  channels  can  be  reduced, 
consolidated  or 
their  objectives  being 
compromised.  

streamlined,  without 

  EIOPA 

is  expected 

the 
proportionate  reporting  requirements  for  small  insurers  under 
Solvency II by the end of 2016.  

implementation  of 

to  report  on 

the 

Public 
disclosure 
requirements 

Compliance 
costs 

  The  Commission  will  assess  the  possibility  of  introducing  a  single 
reporting  platform  on  short-selling  to  strengthen  the  information 
provided  to  regulators  and  examine  ways  to  reduce  burdens  on  the 
reporting of net short positions.   

  The  Commission  is  currently  assessing  the  national  transposition 
measures  for  the  Transparency  Directive17  and  the  Accounting 
Directive18.  This  includes  assessing  the  concern  that  there  are 
divergent rules on the notification of major holdings of voting rights. 
  The  Commission  will  review  the  national  options  in  the  Audit 
Regulation19,  with  a  specific  focus  on  the  cross-border  impact  of 
mandatory rotation and the blacklist of prohibited non-audit services. 
As part of the REFIT initiative, the Commission will also consult on 
the impact of diverging national options.  

  The  Commission  is  undertaking  a  mapping  exercise  of  national 
transposition  measures  to  identify  gold-plating  provisions  which 
create undue additional compliance costs. Currently, the Commission 
is assessing the national transposition of 17 directives. It will continue 
to monitor the progress of those to be transposed in 2017/2018. 

  The  Commission  is  also  reviewing,  via  the  Member  States'  expert 
group on barriers to free movement of capital as part of the CMU 
Action  Plan,  national  provisions  that  create  an  unjustified  or 
disproportionate burden to the cross-border movement of capital. The 
objective  is  to  prepare  a  joint  roadmap  with  the  Member  States  for 
possible actions to remove those national barriers. 

Reducing 
barriers to 

  Regarding  barriers  to  entry,  in  October  2016  the  Commission 
adopted  a  report  on  the  state  of  the  CRA  market.  The  report 

16 Decision (EU) 2015/2240/EU 
17 Directive 2013/50/EU  
18 Directive 2013/34/EU  
19 Regulation (EU) No 537/2014  

10 

 
 
                                                            
entry and 
market 
integration 

included  a  preliminary  assessment  of  competition  in  the  market, 
potential  barriers  and  disproportionate  costs  facing  smaller  CRAs. 
The Commission will continue to monitor developments in this area. 
  The  Commission  will  monitor  the  application  and  impact  of  the 
outsourcing  provisions  contained  in  the  Benchmark  Regulation20, 
under  which  benchmark  administrators  are  obliged  to  guarantee 
national competent authorities effective access to data.  

  Regarding barriers to market integration, as part of the CMU Action 
Plan, the Commission is consulting on cross-border barriers to fund 
management. Based on the results, it may propose legislative change, 
enforcement  or  guidance 
to  remove  barriers.  The 
in  order 
Commission  also  intends  to  explore  the  feasibility  of  simplifying 
the  range  of  authorisations  needed  to  provide  these  services 
across the single market.  

2.4  Making the regulatory framework more consistent and forward-

looking 

The call for evidence also underlined the need to ensure consistency in the overall regulatory 
framework; further enhance investor and consumer protection; address the remaining risks in 
the  financial  system  and  keep  the  regulatory  framework  up-to-speed  with  technological 
developments. 

Addressing inconsistent interactions 

The  call  for  evidence  revealed  several  unintended  interactions  between  individual  pieces  of 
legislation. For  example,  the reduced  risk  of  using  derivatives  following  EMIR  reforms  has 
not  been  adequately  reflected  in  the  prudential  rules  governing  insurance  companies  under 
Solvency II  or  in  the  rules  governing  UCITS.  Or  the  concern  that  the  leverage  ratio  might 
penalise banks that act as clearing members, as their exposures do not take into consideration 
the risk-reducing effect of (segregated) initial margins. At the same time, not all interactions 
justify intervention. For instance, there is not sufficient evidence to conclude that the leverage 
ratio  prevents  banks  from  holding  the  high-quality  liquid  assets  required  by  the  liquidity 
coverage ratio.  

Enhancing investor and consumer protection 

The  Commission  has  taken  significant  steps  to  improve  the  protection  of  investors  and 
consumers  of  financial  services.  However,  most  of  those  new  or  revised  laws  have  only 
recently  entered  into  force,  or  are  about  to  enter  into  force,  while  some  are  still  in  the 
transposition  phase.  Consumer  associations  highlighted  that  consumers’  trust  in  financial 
service  providers  was  still  low  and  called  on  the  Commission  to  take  further  action  in  this 
area.  This  opinion  of  consumer  associations  is  in  line  with  the  findings  of  the  Consumer 
Markets Scoreboard where financial services have ranked at the bottom for several years. A 

20 Regulation (EU) 2016/1011 

11 

 
 
                                                            
low  trust  of  consumers  in  financial  services  undermines  their  engagement  in  financial 
services, in particular with regards to cross-border sales. To restore this trust, it is important 
that Commission policies address consumer protection and enforcement aspects.  

Addressing gaps in the regulatory framework 

Gaps  in  the  regulatory  framework  may  become  evident,  for  example,  due  to  regulatory 
arbitrage, financial innovation and technological development, as both users and providers of 
financial services adapt their behaviour over time. One of the Commission’s stated priorities 
is to complete the financial reform agenda by addressing the remaining risks, including those 
linked to entities with a systemic footprint.  

Taking account of technological developments 

Technology  is  changing  business  models  for  financial-market  participants,  and  their 
interaction  with  clients  and  investors.  This  presents  important  opportunities  for  established 
market participants, but also for new market entrants. Customers should also gain from more 
diverse  and  efficient  financial  services.  At  the  same  time,  there  are  concerns  about  the 
potential risks that this could pose to the orderly functioning and stability of financial markets. 
These risks need to be monitored and mitigated. In particular, financial regulation should be 
flexible  enough  to  foster  rather  than  impair  technological  progress,  while  at  the  same  time 
ensuring a high level of consumer protection.   

Follow up action: 

 

Addressing 
interactions 
and 
inconsistencies 

In  order  to  safeguard  banks’  ability  to  provide  client  clearing 
services  under  EMIR,  in  the  CRR2  package  the  Commission 
proposes  adjusting  the  leverage  ratio  to  allow  banks  to  offset  the 
potential  future  exposure  of  the  relevant  derivative  transactions  with 
initial margin.  

  The  Commission  will  review  the  counterparty  credit  risk 
mitigation  framework  of  Solvency  II  to  account  for  adoption  of 
EMIR  in  the  future  review  of  the  Solvency  II  Delegated  Act.  The 
Commission  has  asked  EIOPA  to  propose  an  update  to  the 
Solvency II delegated act to take account of the reduced counterparty 
risk  introduced  by  EMIR.  The  future  review  will  also  address  the 
inconsistencies  between  Solvency  II  and  the  CRR  regarding  the 
treatment of regional governments and local authorities.  

  The  Commission’s  consultation  to  gather  evidence  on  whether  the 
current  Financial  Conglomerate  Directive  (FICOD)21  regulatory 
in 
framework 
September 2016.  As  part  of  the  2017  REFIT  work  plan,  the 
Commission  will  evaluate  the  relevance,  effectiveness,  efficiency, 
coherence and added value of the current FICOD framework.  

is  proportionate  and 

for  purpose  closed 

fit 

21 Directive 2002/87/EC  

12 

 
 
                                                            
  The Commission proposes as part of the CRR2 package to gradually 
phase  in  the  prudential  capital  effects  arising  from  the  new 
impairment  model  into  the  revised  International  Financial  Reporting 
Standards (IFRS 9) to prevent a sudden impact on lending by banks.  
  The Commission has asked ESMA to analyse the evidence submitted 
on  UCITS  restrictions  as  regards  the  use  of  over-the-counter 
derivatives.  

  As a follow-up to the Retail Financial Services Green Paper, in early 
2017 the Commission will publish an Action Plan setting out steps 
to  build  a  deeper  single  market  for  retail  financial  services.  The 
objective  of  the  Action  Plan  will  be  to  help  consumers  get  a  fairer 
deal and enable consumers and providers to take greater advantage of 
the single market’s potential. 

  The Retail Financial Services Action Plan will, among other things, 

consider ways to: 
(i)  improve  consumer  protection  when  buying  financial  services 
cross-border  and  online.  In  particular,  it  will  improve  awareness  of 
possibilities for settling cross-border disputes out of court; 
(ii)  reduce  the  legal  and  regulatory  obstacles  that  firms  face  when 
providing financial services abroad, including when taking advantage 
of the growing digitalisation of retail financial services; and  
(iii) make disclosure requirements fit for purpose in the digital world.  
  As  part  of  the  CMU  Action  Plan,  the  Commission  is  launching  a 
comprehensive  assessment  of  European  markets  for  retail 
investment  products 
look  at  distribution  channels, 
investment advice and the possibilities offered by technology.   

that  will 

  As part of the Retail Financial Services Action Plan the Commission 
may consider the merits of improving protections under the Investor 
Compensation  Scheme  Directive22, 
into  account  past 
experience gained in this area. 

taking 

  The Commission will shortly present a proposal for a recovery and 

resolution framework for CCPs.  

  The  forthcoming  review  of  the  EU  macro-prudential  framework 
will  assess  any  inconsistencies  in  the  macro-prudential  toolset,  and 
where  instruments  overlap  in  terms  of  risk  targeting,  calibration  and 
accumulation.  As  reflected  in  the  consultation  document,  the  review 
will  also  assess  the  merits  of  expanding  the  macro-prudential 
framework beyond banking.  

  An  internal  FinTech  task  force  has  been  set  up  to  monitor 
technological  developments  affecting  the  financial  sector  and  to 

13 

Enhancing 
investor and 
consumer 
protection 

Addressing 
gaps in the 
regulatory 
framework 

Taking account 
of technological 
developments 

22 Directive 97/9/EC 

 
 
                                                            
 

develop appropriate responses where necessary.  
In  July  2016,  the  Commission  published  a  proposal  to  amend  the 
Anti-Money Laundering Directive23 to protect emerging innovative 
technologies, such as virtual currencies, from illicit uses.   

  The Commission services will also exchange views with stakeholders 

on how to share information on cyber threats.  

  The  Retail  Financial  Services  Action  Plan  will  consider  ways  to 
encourage  remote  ID  recognition  and  signing  of  contracts  in  a  safe 
and secure way 

23 Directive (EU) 2015/849  

14 

 
 
 
 
 
                                                            
3. NEXT STEPS 

The  input  gathered  as  part  of  the  call  for  evidence  has  been  valuable  in  shaping  ongoing 
policy  initiatives.  While  the  overall  framework  remains  sound,  certain  adjustments  will  be 
taken forward through:  

  Fitness  checks  and  legislative  reviews  as  part  of  REFIT,  including  on  reporting 

requirements in the financial sector;  

  Calibrating of the measures at both the legislative and implementation levels;  
  Ongoing  policy  work,  e.g.  to  refine  and  accelerate  measures  under  the  CMU  Action 

Plan; and 

  Commission input into work at the global level to measure and evaluate the combined 

effect of reforms. 

This Communication sets out a number of specific policy measures the Commission intends 
to  take  to  follow  up  on  this  exercise.  The  Commission  will  monitor  progress  in  the 
implementation  of  the  respective  areas  and  will  publish  its  findings  and  possible  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.  The  Commission  will  continue  to  engage  with  all  relevant  stakeholders 
through its various consultation mechanisms, giving them the opportunity to provide further 
evidence  and  contribute  to  policy  development.  The  Commission  is  particularly  looking 
forward  to  receiving  quantitative  evidence  showing  the  impact  of  EU  legislation  on 
consumers,  economic  operators  and  the  economy  as  a  whole.  This  would  reinforce  the 
Commission’s ability to deepen its analytical capacity to measure the efficiency, effectiveness 
and EU added value of the reforms and contribute to the relevant work streams at global level.  

The  call  for  evidence  illustrates  the  Commission’s  commitment  to  REFIT  and  Better 
Regulation.  It  has  confirmed  that  developing  and  calibrating  policies  based  on  factual 
evidence,  consideration  of  possible  interactions  with  existing  legislation,  robust  monitoring, 
evaluation and impact assessments, ensuring transparency, stakeholder involvement and open 
public consultation can create better and more effective regulation, and prevent unnecessary 
burdens – while meeting fundamental objectives in relation to financial stability, protection of 
consumers/investors and fostering jobs, growth and investment. Better Regulation principles 
should  also  be  promoted  at  the  global  level.  It  is  therefore  encouraging  that  international 
bodies, such as the G20, the Financial Stability Board and the BCBS are starting to assess the 
overall coherence of the reforms. The Commission looks forward to contributing to this work.  

15