REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Follow up to the Call for Evidence - EU regulatory framework for financial services
Date: 2017-12-01
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, 1.12.2017  COM(2017) 736 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Follow up to the Call for Evidence - EU regulatory framework for financial services  
 
 
Commission report on the follow-up to the Call for Evidence: 
 EU regulatory framework for financial services 

1. INTRODUCTION 

On 30 September 2015, the European Commission  launched a Call  for Evidence on the EU 
regulatory framework for financial services. Its purpose was to check whether the more than 
40 pieces of EU legislation adopted since the financial crisis were working as intended.  

More than 300 stakeholders shared their experience of implementing EU financial regulations 
and provided their assessment of the individual and combined impact of EU rules. The Call 
for Evidence, which was the first example of such an exercise internationally undertaken in 
this sector following the response to the financial crisis, has demonstrated the Commission’s 
commitment  to  the  Better  Regulation  agenda,  which  aims  to  ensure  that  EU  legislation 
delivers  the  expected  results  for  citizens  and  businesses  effectively,  efficiently  and  at 
minimum cost.  

The Call for Evidence exercise has demonstrated that in general terms the financial services 
framework in the EU is working well and that the reforms made were necessary. The exercise 
has  also  proven  useful  to  maintain  support  for  a  robust  regulatory  stance  that  safeguards 
financial stability and supports jobs and growth in a more sustainable manner. 

The  Commission’s  commitment  to  monitor  the  implementation  and  functioning  of  the  new 
rules, and its readiness to consider appropriate changes if they are not delivering as intended, 
received broad support, particularly from the European Parliament and the Council. The Call 
for  Evidence  has  contributed  to  democratic  accountability  by  helping  to  ensure  that  those 
affected by the rules, including end-users, have confidence in them.  

In November 2016, the Commission adopted a Communication on the follow-up to the Call 
for  Evidence  ('Communication')  and  published  a  staff  working  document  accompanying  the 
Communication. The Commission concluded that whilst the financial services framework in 
the EU was generally working well, targeted follow-up measures were justified in four areas: 

1.  reducing unnecessary regulatory constraints on financing the economy; 

2.  enhancing the proportionality of rules while preserving prudential objectives; 

3.  reducing undue regulatory burdens; 

4.  making the regulatory framework more consistent and forward-looking. 

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Many of these follow-up measures fed into:  

 

 

 

reviews of individual pieces of legislation: for instance, next to consideration of input from 
the Call for Evidence in the Capital Requirements Regulation (CRR)1 / the 2013 Capital 
Requirements  Directive  (CRD  IV)2  proposals,  follow-up  actions  also  fed  into  the 
amendments  to  the  European  Market  Infrastructure  Regulation  (EMIR)3  and  the 
European Supervisory Authorities' (ESA) Review4;  

the  implementation  of  ongoing  policy  work  (e.g.  to  further  develop  the  Capital 
Markets Union (CMU));  

the calibration of ‘level 2’ technical standards and upcoming ‘level 1’ regulations and 
directives;  

 

the EU’s input in global fora.  

in 

the  Communication 

The  insights  gained  during  the  Call  for  Evidence  have  proven  valuable  even  beyond  the 
in  November  2016.  Recent 
follow-up  measures  presented 
developments at global and EU level have contributed to evolving priorities, such as greater 
focus on sustainable finance  and innovative technologies. The Call for Evidence has played 
an  important  role  in  formulating  and  fine  tuning  the  Commission’s  response  to  these 
developments.  It  has  also  highlighted  areas  in  the  Mid-Term  Review  on  the  CMU  Action 
Plan5 where a more proportionate approach to regulation would further strengthen EU capital 
markets. 

One year after the adoption of the Communication, this progress report provides an update on 
the  follow-up  to  the  Call  for  Evidence.  There  are  two  main  messages  to  emphasise  in  this 
context:  

1)  the Commission has been active in tackling the issues identified by stakeholders in the 
Call for Evidence process and continues to do so to ensure that EU legislation remains 
fit for purpose.  

2)  the Commission is working to ensure that the regulatory compliance framework is fit 
for  the  digital  age,  where  possible  through  automation  and  standardisation.  This 
should ultimately lead to reducing the burden for industry and result in better financial 
supervision. 

1 Regulation (EU) No 575/2013 
2 Directive 2013/36/EU 
3 Regulation (EU) No 648/2012 
4 Proposal for a regulation COM(2017)536/948972 
5 COM(2017) 292 final 

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More generally, the Call for Evidence process has helped to ensure that individual legislative 
proposals are put into a broader context. Moreover, developments in the financial sector and 
the economy more broadly, including rapid technological change, also need to be taken into 
account to ensure that the rules remain suited to the changing realities. Overall, the Call for 
Evidence  has  proved  to  be  a  significant  exercise  with  lasting  impact  that  should  lead  to 
improved law-making in the EU. 

Section  2  of  this  Report  discusses  the  progress  achieved  so  far,  with  almost  half  of  the 
measures  completed  in  the  12  months  following  the  adoption  of  the  Communication  on  the 
follow-up  to  the  Call  for  Evidence.  Section  3  provides  further  detail  on  the  Commission’s 
commitment  to  perform  a  comprehensive  assessment  of  the  overall  supervisory  reporting 
framework. This  was one  of the key concerns highlighted by respondents,  and it is the first 
time that the issue is tackled in a comprehensive manner. Section 4 concludes by confirming 
the Commission’s continued commitment to evidence-based policy-making. 

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2. FOLLOW-UP ACTIONS: PROGRESS ACHIEVED 

Since last year, the Commission has already delivered a large number of follow-up measures 
outlined  in  the  Communication.  Altogether,  the  measures  contribute  to  a  regulatory 
framework that:  

is more conducive to lending and investment;  

 
  acknowledges the unique characteristics of smaller and less risky firms;  
  aims to keep the compliance burden to a necessary minimum. 

Unintended  interactions  or  consequences  have  been  addressed  to  the  extent  possible  in  new 
legislative proposals and proposals to revise existing laws as well as in the implementation of 
the rules, while still preserving prudential objectives and securing the overall stability of the 
financial system. 

Some follow-up measures are still in progress. Most of them relate to legislation that is not yet 
fully implemented, while some were announced with specific reference to upcoming reviews. 
For  certain  issues,  the  Commission  will  continue  to  investigate  available  evidence  to  assess 
whether changes are necessary. 

2.1 

Reducing unnecessary regulatory constraints on financing the 
economy 

In line with its priority of stimulating job creation, growth and investment, the Commission 
pays  particular  attention  to  areas  where  EU  rules  may  be  impeding  access  to  finance  and 
explores  whether  the  same  prudential  objectives  can  be  achieved  in  a  different  way.  The 
Commission  has  also  focussed  on  situations  where  current  rules  could  potentially  be 
detrimental to investment and economic growth.  

Some  respondents  to  the  Call  for  Evidence  expressed  concerns  about  the  regulatory 
framework’s  impact  on  banks’  ability  to  finance  the  economy,  including  SME  finance, 
incentives  for  long-term  sustainable  investment,  market  liquidity  and  access  to  clearing.  In 
response,  the  Commission  presented  a  range  of  follow-up  measures  in  these  areas.  The 
feedback also fed into the Mid-Term Review of the CMU Action Plan, resulting in a range of 
measures to achieve a more proportionate approach to regulation, less friction for cross-border 
investment and the development of a Pan-European capital market ecosystem.  

The Commission has now delivered on most of these follow-up measures: 

  The Commission proposed a banking package in November 2016 as part of its general 
risk  reduction  agenda.  It  is  estimated  that,  as  a  result,  public  resources  required  to 

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support  the  banking  system  in  case  of  a  financial  crisis  of  the  size  similar  to  2007–
2008  would  decrease  by  32%  or  the  equivalent  of  EUR  17  billion.6  The  package 
includes key initiatives to preserve banks’ capacity to finance the economy, including 
SMEs and infrastructure: 

o  Adjustments and phase-in periods have been introduced for the implementation 
of the fundamental review of the trading book and the net stable funding ratio. 
This is to avoid disproportionate capital increases and ensure continuity in the 
functioning of EU financial markets. 

o  To  safeguard  banks’  ability  to  provide  clearing  services  under  EMIR,  the 
Commission proposed to adjust the leverage ratio to allow banks to offset the 
potential  future  exposure  of  the  relevant  derivative  transactions  against  the 
initial margin. 

o  The  regulatory  capital  reduction  for  loans  to  SMEs  (SME  supporting  factor) 
was  extended  to  provide  capital  incentives  for  banks  to  provide  lending  to 
SMEs. 

o  To  further  promote 

investment 

in 

infrastructure  projects,  risk  capital 

requirements for banks’ investments in eligible projects were reduced. 

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

o  The  Commission  proposed  measures  to  foster  the  integration  of  cross-border 
banking by enabling the competent authority to waive the application of own 
funds  and  liquidity  requirements  where  it  supervises  both  the  parent  and  its 
subsidiaries established in different Member States of the Banking Union. To 
safeguard financial stability, this is only possible where the parent guarantees 
the full amount of the waived requirement and where that guarantee is at least 
50% collateralised. 

 

In  May  2017,  the  Commission  adopted  a  proposal  in  the  context  of  the  EMIR 
REFIT7  to  simplify  and  improve  the  proportionality  of  some  of  the  EU  derivatives 
rules.  To  improve  access  to  clearing  services,  the  proposal  introduces  a  requirement 
for  clearing  services  to  be  offered  on  fair,  reasonable  and  non-discriminatory 
commercial  terms.  It  also  exempts  the  smallest  financial  counterparties  from  the 
clearing  obligation  and  introduces  a  more  proportionate  clearing  obligation  for  non-
financial counterparties. Estimates of potential savings for smaller financial and non-

6 MEMO/16/3840 
7 The Commission's Regulatory Fitness and Performance (REFIT) programme ensures that EU legislation delivers 
results for citizens and businesses effectively, efficiently and at minimum cost. REFIT aims to keep EU law 
simple, remove unnecessary burdens and adapt existing legislation without compromising on policy objectives. 

5 

 
 
                                                            
 

financial counterparties range from EUR 2.3 billion to EUR 6.9 billion in fixed or one-
off costs and from EUR 1.1 billion and EUR 2.66 billion in operational costs.8 
In June 2017, the Commission adopted a delegated act under the Solvency II Directive 
to  lower  the  calibration  of  risk  charges  for  insurers’  investments  in  entities  or 
corporate  groups  that  derive  the  substantial  majority  of  revenues  from  owning, 
financing,  developing  or  operating  infrastructure  assets  (infrastructure corporates). 
This  complements  an  earlier  amendment  introducing  lower  charges  for  qualifying 
infrastructure projects adopted in September 2015. As a result of this latest calibration 
amendment to capital requirements, insurance companies will be able to increase their 
investment in infrastructure corporates by about 30%9. 

  To  address  concerns  about  a  perceived  reduction  in  liquidity  in  corporate  bond 
markets, an expert group was established to provide the Commission with analysis of 
the  functioning  of  EU  corporate  bond  markets  and  recommendations  to  improve 
their  efficiency  in  financing  the  economy.  The  group’s  report  was  published  on  20 
November  2017,  with  recommendations  aiming  to:  (i)  facilitate  issuance  for 
companies;  (ii)  promote  a  diverse  and  experienced  investor  base;  (iii)  support  the 
traditional  model  of  intermediation  through  market  makers;  (iv)  take  account  of  the 
growing  importance  of  electronic  forms  of  trading  and  of  efficient  post-trade 
environment;  and  (v)  ensure  an  appropriate  level  of  information  and  transparency. 
Building on these recommendations, a public consultation is planned for early 2018, 
leading to the adoption of a Communication later in the year. 

  The  Commission  performed  an  initial  assessment  of  the  functioning  of  markets  in 
repurchase  agreements  as  part  of  a  report  on  securities  financing  transactions 
published  on  19 October  2017.  The  assessment  acknowledges  the  changing  market 
dynamics  over  the  last  few  years,  as  well  as  tension  in  the  supply  of  high-quality 
collateral owing to increased demand, especially around regulatory reporting dates. 

Other follow-up measures are ongoing and progressing in line with the foreseen timetable. 
Some follow-up measures concern legislation not yet in force or future reviews.  

  As  part  of  the  assessment  of  the  definition  of  the  exemption  for  ‘market  making 
activity’ from the Short Selling Regulation, the Commission sent a Call for Advice to 
the European Securities and Markets Authority (ESMA) in January 2017. The ESMA 
advice is expected in December 2017. 

  Following  the  agreement  between  European  Parliament  and  the  Council  on  a 
framework  for  simple,  transparent  and  standardised  (STS)  securitisation,  the 

8 Regulatory Fitness and Performance Programme REFIT Scoreboard summary (2017) 
9 SWD(2017) 219 final 

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Commission is preparing an amendment to the Solvency II implementing measures to 
ensure that insurers also can play their role as long-term investors in the STS market.10 
  The  Commission  is  also  advancing  with  its  preparatory  work  on  amendments  to  the 
Delegated  Regulation  supplementing  Solvency  II  in  2018.  The  work  focuses  on 
reviewing  the  prudential  treatment  of  private  equity  and  privately  placed  debt, 
where  prudentially  justified  from  a  risk-based  supervisory  perspective.  A  Call  for 
Advice  was  sent  to  the  European  Insurance  and  Occupational  Pensions  Authority 
(EIOPA) in July 2016, and EIOPA's response is expected by February 2018. 

  As  part  of  the  broader  work  on  SME  finance,  such  as  on  listing  requirements,  the 
Commission  will  monitor  the  implementation  of  the  rules  under  the  Markets  in 
Financial Instruments Directive (MiFID II) on investment research once they apply 
as of January 2018. As part of this, a study is envisaged to assess the impact on SME 
equity research. 
In  the  context  of  the  CMU  Mid-Term  Review,  the  Commission  committed  itself  to 
exploring  in  Q2  2018  whether  targeted  amendments  to  relevant  EU  legislation 
(including  the  Market  Abuse  Regulation  and  MiFID  II)  could  deliver  a  more 
proportionate  yet  prudent  regulatory  environment  to  support  SME  listing  on  public 
markets on the future ‘SME growth markets’.  

 

  The  2020  Review  of  the  Solvency II  Directive will  provide  an  opportunity to  assess 
the  long-term  guarantees  (LTG)  package  in  order  to  further  explore  incentives  for 
long-term investments by insurers. The first EIOPA report on this issue was published 
in  December  2016  and  served  to  map  the  use  of  LTG  measures  by  insurance 
undertakings. A second preparatory report will be published by EIOPA before the end 
of 2017.  

2.2  Making rules more proportionate while preserving prudential 

objectives 

Regulation  must  be  applied  to  firms  in  a  proportionate  manner,  reflecting  their  business 
model, size, systemic significance as well as their complexity and cross-border activity. More 
proportionate rules will help promote competition and increase the resilience of the financial 
system by safeguarding its diversity while preserving prudential objectives, financial stability 
and overall resilience. Respondents to the Call for Evidence identified various areas where the 
proportionality  of  rules  could  be  strengthened.  The  Commission  has  committed  itself  to 
addressing  these  concerns  through  various  follow-up  measures  in  the  area  of  banking, 
derivatives, insurance, asset management and the credit rating sector. 

10 As announced in the CMU Mid-term Review, COM(2017) 292 final 

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The Commission has delivered on several key follow-up measures in this area: 

 

  The  above-mentioned  banking  package  adopted  by  the  Commission  in  November 
2016  included  a  range  of  measures  with  the  aim  of  increasing  proportionality  in 
banking regulation, including by: (i) reducing the reporting and disclosure burden for 
small  and  non-complex  credit  institutions;  (ii)  exempting  small  and  non-complex 
institutions  and  staff  receiving  low  variable  remuneration  from  the  rules  on  deferred 
pay  and  pay-out  in  instruments;  and  (iii)  removing  unnecessary  complexity  in  the 
treatment of trading book market risk and counterparty credit risk. 
In the absence of specific solutions to the concern that pension funds may experience 
difficulties  in  accessing  the  necessary  cash  collateral,  the  Commission  proposed  in 
May  2017  as  part  of  the  EMIR  REFIT  to  extend  the  temporary  exemption  from 
central  clearing  for  pension  funds  by  another  3  years,  with  the  possibility  to 
exceptionally  extend  the  exemption  for  another  2  years  in  case  of  unforeseen 
circumstances.  It  is  now  urgent  that  the  various  parties  involved,  including  pension 
funds, central counterparties and the clearing members that provide clearing services, 
develop  appropriate  solutions  that  enable  pension  funds  to  participate  in  central 
clearing. 

  As  announced  in  the  CMU  Mid-term  Review,  the  Commission  intends  shortly  to 
adopt  a  legislative  proposal  that  will  introduce  a  new  and  more  proportionate 
prudential regime for smaller investment  firms that are of no systemic relevance. 
This addresses the concern that the current application of the CRR rules designed for 
banks  is  not  sufficiently  proportionate  to  the  lower  risks  posed  by  some  investment 
firms.  

A  number  of  other  follow-up  measures  are  ongoing  and  require  further  analysis  before 
changes may be introduced. 

  As proposed in the current banking package, the European Banking Authority (EBA) 
will  launch  an  IT  tool  to  promote  further  proportionality  in  banking  regulation. 
This IT tool will guide banks through the applicable regulatory provisions, standards 
and templates in view of their specific size and business model. 

  As  a  part  of  the  Alternative  Investment  Fund  Managers  Directive  (AIFMD)  review, 
the  Commission  is  currently  assessing  the  proportionality  of  AIFMD  rules  (for 
example,  in  relation  to  aligning  remuneration  regimes  and  reducing  reporting 
burdens). An external AIFMD study (to be finalised in 2018) has been commissioned 
and  will  also  cover  the  proportionality  issue.  The  Commission  will  report  to  the  co-
legislators on the outcome of the AIFDM review in 2018.   

  The  2018  Review  of  the  Solvency  II  Delegated  Regulation  will  explore  how  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, based 
on  the  technical  advice  from  EIOPA.  First  proposals  by  EIOPA  for  simplifications 

8 

 
 
 
were received in October 2017, with more to follow in February 2018.  

  The  Commission  is  currently  assessing  the  extent  to  which  the  Credit  Rating 
Agencies Regulation could be applied in a more proportionate manner so as to boost 
competition in the sector.  

2.3 

Reducing undue regulatory burdens 

Keeping the regulatory burden to the minimum required for rules to achieve their objectives is 
one of the key aims of the Commission’s REFIT programme as part of its Better Regulation 
agenda.  Some  stakeholders  nevertheless  felt  that  some  requirements,  for  instance  on 
reporting, were not proportionate or efficient. 

The  Commission  has  taken  a  range  of  measures  on  supervisory  reporting.  These  include 
actions  targeted  on  sectoral  legislation,  as  well  as  the  launch  of  a  comprehensive  Fitness 
Check  on  the  entire  EU  supervisory  reporting  framework.  Section  3  of  this  report  provides 
more  detail  on  the  Commission’s  approach  to  supervisory  reporting.  In  addition  to  the 
measures  focused  on  supervisory  reporting,  the  Commission  is  also  committed  to  action  on 
public  disclosure  requirements,  barriers  to  entry  and  market  integration,  as  well  as  on 
compliance costs more generally.  

The Commission has delivered on a number of follow-up measures, resulting in a reduction 
of regulatory burdens in various key areas: 

  As  part  of  the  CMU  Action  Plan,  the  Commission  adopted  a  report  on  national 
barriers to capital flows11 in March 2017, identifying national provisions that create 
an  unjustified  or  disproportionate  burden  to  the  cross-border  movement  of  capital. 
These  included:  (i)  discriminatory  and  burdensome  procedures  for  withholding  tax 
relief;  (ii)  barriers  to  the  cross-border  distribution  of  investment  funds;  and  (iii) 
residence  requirements.  In  May  2017,  a  Joint  Roadmap  of  actions  to  address  the 
identified  barriers  was  agreed  by  the  Commission  and  Member  States.  The 
Commission also set up a withholding tax project group tasked with drafting a Code of 
Conduct  on  its  simplification  and  standardisation  of  refund  and  relief  at  source 
procedures. The Code of Conduct on withholding tax will be published by the end of 
2017.  

  Many  respondents  to  the  Call  for  Evidence  also  highlighted  that  diverging  and 
inconsistent supervisory approaches contributed to unnecessary regulatory burdens. 
These  concerns  have  been  addressed  by  different  initiatives  intended  to  achieve 
greater  convergence  between  the  different  approaches  to  supervision  at  EU  level. 
These  initiatives  reduce  the  administrative  burden  of  doing  business  in  the  single 
market,  while  strengthening  supervision  and  ensuring  a  level  playing  field.  For 

11 https://ec.europa.eu/info/sites/info/files/170227-report-capital-barriers_en.pdf 

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example,  most  recently,  the  reflection  paper  on  the  deepening  of  the  Economic  and 
Monetary  Union12  and  the  Mid-Term  Review  of  the  CMU  highlighted  that  more 
effective  supervision  and,  ultimately,  the  creation  of  a  Single  European  Capital 
Markets Supervisor, are important for a truly functioning CMU. In  September 2017, 
the Commission proposed amendments to the regulations establishing the European 
Supervisory  Authorities  (ESAs) 
to  promote  a  more  consistent  supervisory 
framework across the EU. In targeted areas, the Commission proposed strengthening 
the ESAs’ powers with regard to supervisory convergence and granting specific new 
roles to ESMA as the direct supervisor to support a functioning CMU. 

Other follow-up measures in this area are still ongoing. Some follow-up measures concerned 
legislation  not  yet  in  force,  while  others  required  a  more  careful  assessment  to  avoid 
unintentionally increasing compliance costs by hastily changing requirements.  

  The  Commission  has  completed  the  mapping  exercise  of  national  transposition 
measures for 11 Directives13 and is working with Member States to address the issues 
identified.  These  measures  will  contribute  to  removing  some  of  the  divergences  in 
transposition  of  EU  directives  in  national  legislation.  For  10  other  Directives14,  the 
mapping  exercise  is  still  ongoing  and  should  be  completed  in  2018.  It  is  also 
envisaged  that  in  2018  the  mapping  exercise  will  cover  MiFID  II  and  its  Level  2 
implementing Directive15. 

  The  Commission  is  currently  assessing  the  national  transposition  measures  for  the 
Transparency Directive  and the  Accounting Directive. This  includes assessing  the 
concern that there are divergent rules as regards the notification of major holdings of 
voting rights.  The Commission  will address these issues as part  of a broader Fitness 
Check  of  the  EU’s  financial  reporting  and  transparency  legislation  that  will  be 
launched by the end of 2017. 

  Following a consultation on  cross-border barriers to distribution of funds, and as 
part of the CMU Mid-Term Review, the Commission is preparing a proposal for the 
first  quarter  of 2018.  The  initiative  aims  to  improve  the  functioning  of  the  single 
market for European investment funds by reducing the regulatory barriers to the cross-
border distribution of funds, while maintaining a high level of investor protection. The 

12 https://ec.europa.eu/commission/publications/reflection-paper-deepening-economic-and-monetary-
union_en. 
13 2010/78/EU Omnibus I; 2011/89/EU FICOD; 2011/61/EU AIFMD; 2013/36/EU CRDIV; 2014/59/EU BRRD; 
2014/49/EU DGS; 2013/14/EU CRAs. 
14 2009/138/EC Solvency II; 2014/51/EU Omnibus II; 2013/34/EU Accounting; 2013/50/EU Transparency; 
2014/91/EU UCITS; 2014/17/EU Mortgage Credit Directive; 2014/56/EU Statutory audit; 2015/2392 MAR 
implementing Directive; 2014/92/EU Payment Accounts Directive; 2014/95/EU on disclosure of non-financial 
information. 
15 2014/65/EU MiFID II; 2017/593 MIFID II implementing Dir; 03/07/2017. 

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relevant  areas 
requirements, regulatory fees, notification requirements and online distribution. 

include  marketing  requirements  and  practices,  administrative 

  The  Commission  will  monitor  the  application  and  impact  of  the  outsourcing 
provisions in the Benchmark Regulation once it has entered into full application on 
1 January 2018. 

2.4  Making the regulatory framework more consistent and forward-

looking 

The  Call  for  Evidence  also  underlined  the  need  to:  (i)  ensure  consistency  in  the  overall 
regulatory framework; (ii) enhance investor and consumer protection further; (iii) address the 
remaining risks in the financial system; and (iv) keep the regulatory framework up-to-speed 
with technological developments. Stakeholders also called on the Commission to help shaping 
definitions, promote best practices and set the incentives for long-term sustainable investment, 
and develop the market in sustainable finance.  

The Commission has delivered on several follow-up measures in this area: 

 

  The  November  2016  banking  package  seeks  to  gradually  phase  in  the  prudential 
capital effects arising from International Financial Reporting Standard 9 (IFRS9) 
to  prevent  a  sudden  impact  on  lending  by  banks.  In  June  2017,  the  Economic  and 
Financial  Affairs  Council  (ECOFIN)  adopted  a  general  approach  fast-tracking  the 
adoption of these transitional measures. 
In  November  2016,  the  Commission  adopted  a  proposal  for  a  recovery  and 
resolution framework for central counterparties (CCPs). The proposed Regulation 
will  implement  in  EU  law  the  international  standards  adopted  in  this  area  by  the 
Financial Stability Board (FSB) and CPMI-IOSCO16. It takes account of the growing 
importance of CCPs, resulting from the requirement that they clear standardised over-
the-counter  derivatives.  While  CCPs  in  the  EU  have  to  meet  high  standards  (under 
EMIR)  given  their  central  role  in  the  economy  and  the  risks  they  manage,  this 
proposal will introduce the necessary harmonised EU rules and powers for situations 
in which CCPs could face severe distress or failure.  
In  March  2017,  the  Commission  adopted  a  Consumer  Financial  Services  Action 
Plan, setting out steps to build a deeper single market for consumer financial services. 
The 12 actions set out in this document will:  

 

increase consumer trust and empower consumers;  

o 
o  make cross-border payments cheaper;  
o  reduce  legal  and  regulatory  obstacles  for  businesses  when  offering  services 

cross-border;  

16 BIS Committee on Payments and Market Infrastructures - International Organization of Securities 
Commissions. 

11 

 
 
 
                                                            
o  harness  the  opportunities  of  an  innovative  digital  world  for  a  deeper  single 

market for consumer financial services. 

 

 

In July 2017 the Commission published its evaluation of the relevance, effectiveness, 
efficiency,  coherence  and  added  value  of  the  current  framework  provided  by  the 
Financial Conglomerates Directive (FICOD).17 Its main conclusions were that it is 
important  to  keep  in  place  a  framework  for  supervising  mixed-activity  financial 
groups, and that overall FICOD has functioned well.  
In  December  2016,  the  Commission  established  a  high-level  expert  group  to  develop  a 
comprehensive European strategy on  sustainable finance. In June 2017, the Commission 
published  Non-Financial  Reporting  Guidelines,  supporting  greater  corporate 
transparency  with  regard  to  measures  taken  to  promote  sustainable  finance. 
Furthermore,  in  September  2017,  the  Commission  proposed  as  part  of  the  review  of 
the European Supervisory Authorities (ESAs) that the ESAs take on an important role 
in  promoting  sustainable  finance,  while  ensuring  financial  stability.  Notably, in  their 
tasks the ESAs will have to take into account risks related to environmental, social and 
governance (ESG) factors.  

Various other follow-up measures are still ongoing: 

  As part of the CMU Action Plan, the Commission has launched a study to assess the 
way investment products are distributed to retail investors across the EU, including: (i) 
conditions under which products are offered in different Member States; (ii) access to 
financial advice; (iii) the impact of online distribution; (iv) risks and benefits of new 
distribution models developed by FinTech. Final findings from the study are expected 
at  the  beginning  of  2018.  If  appropriate,  the  findings  will  feed  into  potential 
Commission policy decisions. 

  The  EU  macro-prudential  framework  relates  to:  (i)  governance,  (ii)  the  toolkit  in 

banking, and (iii) the toolkit outside the banking sector. 

i.  As  regards  governance,  the  Commission  put  forward  a  proposal  in  September 
2017  to  amend  the  European  Systemic  Risk  Board  (ESRB)  Regulation  in  a 
targeted manner as regards its governance and tools.   

ii.  As  regards  the  toolkit  in  banking,  the  Commission’s  review  has  shown  that  the 
macro-prudential  toolkit  is  broadly  effective,  hence  no  overhaul  of  the  toolkit  is 
proposed.  In  its  November  2016  banking  package,  the  Commission  proposed  to 
clarify that capital requirements imposed as part of the supervisory review process 
(Pillar 2) should be confined to micro-prudential purposes. 

iii.  As regards the toolkit outside the banking sector, the Commission aims to assess 
the effectiveness of the existing tools and provisions in sectoral legislation before 
deciding  whether additional initiatives are  needed. It supports ongoing efforts by 

17 SWD(2017) 272 final 

12 

 
 
 
                                                            
the  ESRB,  the  Financial  Stability  Board  and  the  ESAs  to  monitor  and  eliminate 
data gaps.  

  The  Commission  sent  a  Call  for  Advice  to  EIOPA  in  July  2016  ahead  of  the  2018 
Review  of  the  Solvency  II  Delegated  Regulation.  The  aim  is  to  assess  the 
counterparty  credit  risk  mitigation  framework  in  Solvency  II  and  its  possible 
interaction  with  EMIR.  This  Review  will  also  assess  any  inconsistencies  between 
Solvency  II  and  CRR  on  the  treatment  of  financial  instruments  issued  by  regional 
governments. 

  Following  the  public  consultation  on  FinTech18,  which  closed  in  June  2017,  the 
Commission is currently assessing what needs to be done at EU level to contribute to 
the deepening and broadening of the EU capital markets from a FinTech perspective. 
More  specifically,  the  Commission  is  currently  assessing  whether  new,  more 
proportionate  licensing  arrangements  for  FinTech  activities  and  firms  are  warranted, 
as well as whether FinTech firms doing cross-border business should benefit from EU-
wide passporting.  

  Based  on  the  recommendations  from  the  high-level  expert  group  on  sustainable 
finance, the Commission will present an ambitious Action Plan on sustainable finance 
with regulatory measures in early 2018.   

18 https://ec.europa.eu/info/finance-consultations-2017-fintech_en 

13 

 
 
 
 
 
 
                                                            
3. FOCUS ON REPORTING 

3.1   Context and problem description 

Supervisory reporting requirements provide competent authorities with data on market players 
and their activities. Access to data is essential to perform supervision of financial institutions, 
as  well  as  to  monitor  systemic  risk  and  ensure  orderly  markets,  investor  protection  and  fair 
competition.  The  financial  crisis  exposed  certain  weaknesses  in  some  supervisory  reporting 
requirements, which may not provide sufficient or useful information. As a result, legislators 
had to develop a large number of new and more detailed supervisory reporting requirements. 
While  these  additional  reporting  requirements  have  addressed  some  of  the  original 
shortcomings, the interaction among them is still unclear, and they increase compliance costs 
and reporting burdens on firms. 

Respondents to the Call for Evidence expressed some concerns about the compliance burden 
stemming from the reporting requirements in various pieces of EU legislation: 

1. 

2. 

3. 

Supervisory  reporting  requirements  are  perceived  as  too  numerous  and  too 
complex.  The  complexity  is  to  a  large  extent  due  to  duplications  and  overlap 
across different reporting frameworks, but also to insufficient standardisation and 
the lack of clarity on what needs to be reported (e.g. lack of harmonised financial 
data definitions, lack of references to existing international standards). 
Major  changes  to  EU  legislation  on  supervisory  reporting  often  result  in 
substantial  one-off  costs,  in  particular  where  IT  systems  or  internal  procedures 
need to be adapted. Stakeholders therefore stressed the importance of reducing the 
frequency  of  changes  to  supervisory  reporting  requirements,  and  of  allowing 
sufficient time to implement any such changes. 
Ad  hoc  requirements,  e.g.  requests  by  supervisors  that  go  beyond  the  regular 
reporting requirements, were perceived as particularly disruptive and costly.  

Supervisors  believe  that  the  quality  of  supervisory  reporting  could  be  improved  further  to 
make more informed and timely decisions on the risk profile of firms or sectors. This is partly 
due  to  remaining  gaps  between  existing  supervisory  reporting  frameworks.  Another 
contributing factor is the poor quality of the reported data. This in turn stems to a large degree 
from difficulties in aggregating data due to insufficient standardisation. 

As  a  follow-up  to  the  Call  for  Evidence,  the  Commission  has  concluded  that  a  twofold 
approach  is  necessary  to  address  the  problems  affecting  supervisory  reporting.  Firstly, 
immediate  and targeted action  should be taken to address the  most  problematic areas to the 
extent possible. Secondly, there is a need for a more comprehensive, long-term approach to 
address  the  costs  and  benefits  of  supervisory  reporting.  The  Commission  has  taken  and  is 
continuing to take action in both directions, as discussed below. 

14 

 
 
 
3.2   Action taken since November 2016 

Since the adoption of the Communication in November 2016, the Commission has introduced 
various  targeted  follow-up  measures  to  provide  immediate  response  to  the  problems 
highlighted  above.  These  measures  focus  on  the  most  obvious  inefficiencies  in  the 
supervisory  reporting  framework,  which  could  be  mitigated  without  creating  large 
administrative or compliance costs for firms. 

 

In May 2017, it was proposed in the EMIR REFIT-proposal to reduce the reporting 
burden  on  non-financial  corporations  (NFCs)  by  exempting  them  from  the  reporting 
obligation  on  intragroup  transactions  and  requiring  either  the  CCP  or  the  financial 
counterparty to report on behalf of both counterparties in the case of transactions with 
NFCs19. 

  As  part  of  the  banking  package,  the  Commission  has  proposed  to  reduce  the 

frequency with which smaller and less complex banks are required to report.   

  The  Commission  will  be  looking  into  the  reporting  obligations  in  the  course  of  the 
AIFMD  review  that  started  in  July  2017.  The  Commission  will  work  closely  with 
ESMA and  national supervisors,  as  appropriate. Furthermore, the external contractor 
tasked with reporting on the functioning of the AIFMD will also specifically analyse 
the efficiency and effectiveness of the reporting requirements. 

  At  the  Commission’s  request,  EBA  is  finalising  a  consultation  on  a  set  of  concrete 
proposals to reduce further the reporting burden in the banking sector. This would 
involve  aligning  supervisory,  statistical  and  macroprudential  reporting  requirements 
and making the definitions used across different pieces of legislation more consistent. 
  The  Commission  will  shortly  receive  ESMA’s  technical  advice  on  the  feasibility  of 
introducing a single reporting platform on short selling. A single reporting platform 
could  help  strengthen  information  provided  to  regulators,  while  reducing  the  burden 
on reporting net short positions. 

  Several technical standards on reporting (e.g. those related to EMIR) were revised in 
order  to  make  it  clearer  what  should  be  reported  and  how.  This  involved  trying  to 
ensure greater alignment between different reporting frameworks (e.g. EMIR with 
MiFID  /  the  Markets  in  Financial Instruments  Regulation (MiFIR)).  Where relevant, 
references to international standards were included20. 

  Respondents  to  the  Call  for  Evidence  mentioned  that  in  a  number  of  cases  Member 
States  introduced  additional  supervisory  reporting  requirements  on  top  of  those 
mandated by EU legislation (so-called ’gold-plating’). Following the adoption of the 
Commission’s  report  on  national  barriers  to  capital  flows  in  March  2017  (see  also 
Section  2.3),  the  expert  group  on  barriers  to  free  movement  of  capital,  which  is 

19 https://ec.europa.eu/info/law/better-regulation/initiatives/com-2017-208_en. 
20 E.g. ISO 2022, ISIN, the UTI, etc. 

15 

 
 
                                                            
composed  of  all  Member  States,  called  for  further  work  to  tackle  the  identified 
barriers, including avoidance of double reporting.  

3.3   The Commission’s comprehensive approach to supervisory 

reporting 

Although  the  short-term  follow-up  measures  described  above  can  improve  the  efficiency  of 
supervisory  reporting,  they  are  targeted  at  individual  pieces  of  legislation  and  do  not 
necessarily  address  the  interaction  between  the  different  supervisory  reporting  frameworks. 
Given the numerous interlinkages between reporting requirements across the different pieces 
of legislation, a more comprehensive approach to supervisory reporting is warranted. As set 
out in Section 3.1, stakeholders have stressed the importance of avoiding frequent changes to 
individual  reporting  requirements  given  the  large  one-off  costs  associated  with  changing  IT 
systems. For these reasons, the Commission intends to take a more comprehensive approach 
to  the  EU  supervisory  reporting  frameworks.  The  overarching  vision  is  to  ensure  that 
supervisory reporting requirements set out in EU law provide supervisors and regulators with 
high-quality  and  timely  information  to  help  them  safeguard  the  stability  of  the  financial 
system, while at the same time keeping the administrative and compliance costs and burden 
for firms to a necessary minimum.  

In line with this vision, the project has two main objectives: 

1.  To  identify  specific  areas  where  action  is  required,  i.e.  EU  legislation  where 
supervisory reporting requirements appear to overlap or create duplication and where 
there  is  insufficient  clarity  on  what needs  to  be reported,  insufficient  standardisation 
and gaps or inconsistencies. 

2.  To devise concrete measures that can help reducing compliance costs for firms, while 
improving  the  quality  of  information  provided  to  supervisors.  This  implies 
streamlining and simplifying supervisory reporting requirements, but also considering 
a  completely  new  and  innovative  approach  to  supervisory  reporting.  One  of  the  key 
parts of this is the ‘report once’ principle. The idea is that entities would report their 
information only once, with any relevant authority subsequently being able to access 
this data on an ‘as-needed’ basis.  

The  two  main  strands  of  this  approach  are:  (i)  a  Fitness  Check  of  supervisory  reporting 
requirements;  and  (ii)  a  ‘financial  data  standardisation’  project.  These  strands  are  taking 
place simultaneously to mutually reinforce each other. 

3.3.1 

Strand 1 — the Fitness Check 

The Fitness Check, launched in the summer of 2017, will provide a high-level comprehensive 
assessment  of  the  effectiveness,  efficiency,  coherence,  relevance  and  EU  added  value  of 

16 

 
 
 
supervisory  reporting  frameworks,  with  a  particular  focus  on  specific  products  or  areas  of 
reporting  (e.g.  derivatives).  It  will  include  a  comprehensive  overview  of  the  key  sources  of 
costs  and  burdens  of  supervisory  reporting.  The  Fitness  Check  will  identify  potential  areas 
where the compliance cost and burden stemming from supervisory reporting obligations could 
be  reduced  (for  example,  by  streamlining  or  simplifying  them)  without  compromising  the 
financial  stability,  market  integrity  and  consumer  protection  objectives  of  these  obligations. 
The work is scheduled for completion by the end of 2018, at which time the results will be 
published in a staff working document.  

As  an  important  input  to  the  Fitness  Check,  the  Commission  is  launching  today  a  public 
consultation  to  gather  evidence  on  the  cost  of  compliance  with  supervisory  reporting 
requirements as well as the consistency and efficiency of those requirements. The consultation 
will build on the findings of the Call for Evidence and other more focused reviews. It will aim 
to collect more specific information on, among others, any investments required to meet the 
reporting  requirements,  examples  of  duplicative  reporting  and  examples  of  reporting  of 
redundant or unnecessary data. It will also request input on how the use of more advanced and 
more efficient ICT tools in conjunction with data standards would help reduce the compliance 
cost, and whether there are any impediments to implementing and using such technology and 
standards.  The  consultation  will  be  open  for  3  months.  The  results  will  be  presented  and 
discussed during a dedicated workshop scheduled for 26 March 2018. 

Other aspects of this work include a study by an external expert to assess more in-depth the 
cost of compliance of supervisory reporting requirements in the financial sector.  

 In October 2017, the Commission set up a stakeholder roundtable group bringing together the 
relevant players in the field of reporting from the EU supervisory and regulatory community. 
The  members  of  the  group  will  support  the  Commission  in  its  assessment  of  the  costs  of 
compliance  with  supervisory  reporting  requirements.  The  work  will  complement  the  public 
consultation and study, and underscores the importance of a coordinated approach. 

3.3.2 

Strand 2 — Financial data standardisation 

The  financial  data  standardisation  (FDS)  project  was  launched  in  2016.  It  is  funded  by  the 
EU’s  ‘ISA2’  Programme  for  interoperability  solutions  for  European  public  administrations, 
businesses and citizens21. Its deliverables will feed directly into the Fitness Check, as it aims 
to: 

(1) map all existing supervisory reporting requirements down to the data element level with 

the aim of identifying gaps, overlaps, redundancies, and inconsistencies; 

21 The Programme also promotes the European Interoperability Framework (EIF) to: improve governance of 
interoperability activities; establish cross-organisational relationships; streamline processes supporting end-to-
end digital exchanges; and ensure that both existing and new legislation support interoperability efforts. 

17 

 
 
                                                            
(2) explore ways in which harmonised data definitions (a ‘common financial data language’) 
could be used to optimise supervisory reporting without compromising the objectives of 
the relevant legislation.  

More specifically, the FDS project will identify specific areas where further standardisation 
could bring benefits and make concrete proposals for streamlining and simplifying reporting 
requirements. The long-term objective is to have all reporting entities report their data only 
once,  while  providing  access  to  all  relevant  authorities  (the  ‘report  once  principle’).  The 
detailed examination of overlaps and inconsistencies across the reporting frameworks at the 
data element level will be completed by the end of 2018. It will serve as a basis for any later 
actions  to  address  these  in  a  coherent  and  long-term  manner.  Early  findings  of  the  FDS 
project  have  already  shown  that  one  of  the  prerequisites  for  greater  standardisation  is  the 
introduction  of  harmonised  data  definitions  (i.e.  a  common  financial  data  language).    This 
also appears to be necessary to make greater use of ICT in supervisory reporting. This work 
will  also  seek  to  achieve  consistency  with  parallel  developments  in  financial  reporting,  in 
particular  the  introduction  of  an  XBRL-based  European  single  electronic  format  under  the 
Transparency Directive. 

The  FDS  project  will  be  assisted  in  its  efforts  by  the  stakeholder  roundtable  and  by  close 
interaction with the Fitness Check. 

3.4 

Looking ahead: technology at the service of supervisory reporting 

The Commission will report on the results of the Fitness Check and the main findings of the 
FDS project by summer 2019, as well as set out some ideas on possible ways to address any 
identified  overlaps  and  inconsistencies  and  to  optimise  supervisory  reporting  requirements. 
These  will  include  ways  to  achieve  greater  standardisation  and  to  exploit  the  potential  that 
automation and innovative ICT technology could offer in further streamlining and simplifying 
the reporting process. 

Standardisation is the first and indispensable stage towards streamlining supervisory reporting 
requirements and ultimately creating a ‘common language’ in reporting. Automation goes one 
step  further:  having  developed  a  standardised  reporting  regime,  initiatives  to  promote 
automation  using  innovative technology  could minimise  the  need  for  human  intervention  in 
both  reporting  and  data  analysis.  This  will  greatly  simplify  and  speed  up  the  reporting  and 
processing of data, and as a result dramatically reduce both the cost and burden of supervisory 
reporting. 

Under the standardisation process, there are a range of initiatives already set in motion by 
the FDS project: 

  The  Commission  could  take  the  lead  in  ensuring  the  implementation  of  a  common 
financial  data  language.  A  common  language  will  address  the  issue  of  unclear 
definitions, which is emerging as one of the main causes of the reporting burden. 

18 

 
 
 
  The  Commission  will  also  explore  the  merits  of  launching  a  ‘European  Reference 
Data  Repository’  to  further  and  accelerate  the  harmonisation  of  financial  data 
identifiers  and  reference  data  models  used  across  the  financial  industry.  This  would 
make  it  easier  for  firms  to  report  data  to  various  different  supervisors,  and  help 
supervisors aggregate and analyse the reported data more quickly and efficiently. 

Under the automation process, the Commission will explore the merits of possible initiatives 
that  would  enable  firms  to  fulfil  reporting  requirements  with  no  or  minimum  human 
intervention  and  therefore  reduce  compliance  costs  further.  This  will  include  looking  at 
innovative  ICT  technologies,  which  will  play  a  key  role  in  this  next  phase,  for  example  by 
upgrading and where necessary harmonising data transport infrastructure to ensure seamless 
data flows. This could, among other things, lead to the automatic reporting of trades entered 
into on financial markets, which would reduce compliance costs still further. For supervisors, 
such automation would allow for more effective monitoring of risk in the financial system. 

Overall, this extensive and comprehensive assessment of supervisory reporting requirements 
will  lay  a  very  solid  groundwork  for  the  Commission  to  launch  coordinated  future  action 
which  could  help  revolutionise  reporting  and  significantly  improve  the  quality  and 
accessibility of data. 

19 

 
 
 
 
4. CONCLUSIONS 

The Call for Evidence has demonstrated the Commission’s commitment to better regulation 
as its basic working method. It has confirmed that developing and adjusting policies based on 
factual  evidence,  consideration  of  possible  interactions  with  existing  legislation  and 
stakeholder involvement can create better and more effective regulation. This in turn fosters 
job creation, growth and investment, while safeguarding financial stability and protecting both 
consumers and investors. 

One year after the adoption of the Communication, the Commission has delivered on many of 
its  commitments  and  remains  committed  to  the  remaining  actions,  together  with  additional 
measures  the  need  for  which  has  emerged  over  the  past  year.  In  this  work,  the  Better 
Regulation principles will continue to be applied rigorously, and in their entirety, including in 
relation to potential environmental and social impacts of EU financial legislation, in line with 
ongoing  work  to  integrate  sustainability  considerations  more  fully  into  the  EU's  financial 
system.  When  developing 
to 
systematically  evaluating  and  assessing  options  and  their  potential  impact  in  order  to 
minimise  compliance  costs  and  ensure  proportionality.  Moreover,  the  Commission  will 
continue to engage with the general public and other relevant stakeholders through its various 
consultation mechanisms, giving them the opportunity to provide further robust evidence and 
contribute to policy development. 

legislative  proposals, 

the  Commission 

is  committed 

Furthermore,  as  confirmed  by  President  Juncker  in  his  State  of  the  Union  address  in 
September  2017,  the  Commission  is  strongly  committed  to  interaction  with  the  European 
Parliament and the Council, as well as with the EU national Parliaments under the Framework 
Agreement  on  relations  between  the  European  Parliament  and  the  Commission  and  the 
Interinstitutional  Agreement  on  Better  Law-making.  On  14  November  2017,  the  President 
officially established the Task Force on Subsidiarity, Proportionality and "Doing Less More 
Efficiently".22  It  will  report  to  the  President  by  15  July  2018,  making  recommendations  on 
how to better apply the principles of subsidiarity and proportionality, identifying policy areas 
where, over time, decision-making and/or implementation could be re-delegated or definitely 
returned to Member States, as well as ways to better involve regional and local authorities in 
EU policy making and delivery. 

Finally,  the  Commission  is  also  committed  to  inject  Better  Regulation  principles  in  global 
standard-setting. It has actively contributed to and shaped the FSB’s initiative to evaluate the 
effect of the G20 post-crisis reforms. An FSB evaluation framework inspired by the European 
experience  has  recently  been  endorsed  by  the  G20  leaders.  The  Commission  will  take  an 
active  role  in  the  first  evaluation  within  this  framework,  namely  to  assess  the  impact  of 
financial  intermediation  on  sustainable  economic  growth  and  infrastructure  finance.  The 
Commission’s Call for Evidence on the EU regulatory framework for financial services is a 

22 C(2017)7810 

20 

 
 
                                                            
convincing  example  of  its  commitment  to  using  viable  and  rigorous  factual  evidence  as  a 
foundation for its policy-making. 

21