Dedicated support for the EU’s Single Rulebook and European System of Financial Supervision
For new or existing market participants operating in or from the EU-27 as well as the Eurozone, the pace and depth of Europeanisation and supervisory engagement poses a challenge, especially since rulemaking and supervision of financial services is now led by EU authorities rather than at the national level.
The European System of Financial Supervision (ESFS) is a multi-layered system of micro- and macro-prudential as well as conduct authorities that, collectively aim, to ensure consistent and coherent financial supervision in the EU through the EU’s Single Rulebook. The ESFS includes the European Systemic Risk Board (ESRB), the three European supervisory authorities (EBA, ESMA and EIOPA) and the national supervisors. The ESFS has continuously evolved to take account of the changing context in which it operates. Notably the introduction of the Banking Union and the powers of the European Central Bank and national competent authorities participating in the two existing pillars i.e., the Single Supervisory Mechanism (SSM) as well as the Single Resolution Board and the national resolution authorities (SRM) participating in the Single Resolution Mechanism have changed the way the ESFS operates. Further centralisation, expansion of powers and thus Europeanisation of EU level authorities taking a lead supervision role are being advanced partly due to the EU’s efforts to build a Capital Markets Union as well as proposals for an Insurance Union as well as more fundamentally as a result of a growing Single Rulebook.
The EU’s Single Rulebook for financial services is a backbone for EU financial sector regulation in the EU in general and equally for completion of the EU’s Single Market. It consists of legal acts and regulatory rulemaking instruments plus supervisory guidance that all financial institutions operating in the EU must comply with. The Single Rulebook is also supplemented by the EU-level authorities efforts in building a common Single Supervisory Culture and thus a common, often more intrusive tone of supervision.
Our EU RegCORE assists clients in navigating challenges and seizing opportunities in this new dynamic of rulemaking, supervision and monetary policy. In combining the EU RegCORE’s dedicated and specialist coverage of the EU bodies together with the extensive local market insights and specialist expertise across the PwC Legal and PwC network, clients can take a holistic pan-European view on their regulatory compliance, their operational issues, their risks and their threats from supervisory engagement.
Our brochure and video set out further detail on how our Frankfurt-based EU RegCORE, together with the wider Financial Institutions Regulatory Europe (FIRE) Team can empower your business by bringing together our local-market insight and capabilities with EU-27 and Eurozone regulatory, monetary policy and transaction experience.
Recent Thought Leadership from our EU RegCORE
Find out more about specific thematic areas and all our Thought Leadership Material from our EU RegCORE and from across the PwC Network:
The below presents a carefully curated selection of recent Thought Leadership contributions covering the EU’s efforts on completing a Banking Union as provided by our EU RegCORE and other teams across the PwC Network.
Background on the EU’s Banking Union efforts
Banks along with traditional financial institutions as well as nonbank financial service providers today face a plethora of challenges. In 2012, European leaders took the decision to deepen the Economic and Monetary Union i.e., the Eurozone, by creating a European Banking Union with the purpose of ‘breaking the vicious circle between banks and states’ and addressing the weaknesses affecting the Eurozone’s banking sector. Achieving this aim means that the pillars of the Banking Union seek to make European banking and supervised institutions (BUSIs) more:
- ‘transparent’ by consistently applying common rules and administrative standards for supervision, recovery and resolution of BUSIs through application of a Single Rulebook;’
- ‘unified’ by treating national and cross-border banking activities and by removing the link between location of BUSI and sovereign; and
- ‘safer within a stable and well-functioning financial system’ by intervening early if BUSIs face problems in order to help them prevent failing or, where necessary, ensuring they undergo an efficient resolution.
Banking Union was set up in 2014 initially around two pillars (supervision and resolution) both of which operate on a “hub and spoke” approach with supervisory responsibility apportioned between a centralised body (ECB-SSM on supervision and SRB on resolution) and the relevant national competent authorities (NCAs). Banking Union, and the regulatory framework has developed considerably since its inception, including major institutional reforms at the ECB-SSM in 2020 as well as extension of supervision to new types of firms. Both the ECB-SSM and SRB have rulemaking powers in addition to their supervisory mandate and these new powers and tone of supervisory engagement has supplemented as well as amended how individual elements of the EU’s Single Rulebook are applied to BUSIs operating in or from the Banking Union.
PwC’s EU RegCORE Team has followed the development of and advised clients on the operation of the Banking Union since its inception and includes professionals with deep knowledge and specialist experience of the financial services industry and regulatory authorities who are thus able to offer clients direct insight into the EU’s legislative efforts and their impact on financial markets, firms as well as their counterparties and clients enabling stakeholders to anticipate issues, manage their risks and prepare them for success.
Recent Thought Leadership
- In the (European) eye of the storm – securing clarity and certainty in times of crisis and market turmoil
- EBA laments slow growth amongst banks diversity practices and the gender pay gap at management body level
- Key impacts for EU traditional and cryptoasset based financial services following FATF’s publication of its February 2023 Plenary Session
- Revisiting the European Banking Authority’s Loan Origination Guidelines and the road ahead to 2024
- European Banking Authority publishes final guidelines on the use of remote customer onboarding solutions
- ECJ judgment pushes transparency and UBO registers into the dark and presents new obstacles for AML obligations
- Podcast “Following the Rules”
- Financial Services: Revisiting the ECB-SSM’s supervisory guides on license applications for various Banking Union supervised institutions
- ECB-SSM updates its supervisory expectations for prime brokerage services
- ECB-SSM provides an update on its “Commercial Real Estate on-site inspection campaign” (the CRE Campaign) and communicates best practices on CRE risk management
- Revisiting the ECB-SSM Guide on On-site Inspections and Internal Model Investigations (the OSIIMI Guide)
- Revisiting the ECB-SSM Guide to setting administrative pecuniary penalties (the SAPP Guide)
- Financial Services: ECB-SSM: Updated report – Guidance on climate and environmental risks
- Financial Services: The EU’s Credit Servicers Directive – the outlook ahead
- Financial Services: Catching up on the EU’s proposal for a Directive for Resilience of Critical Entities
- Financial Services: ECB-SSM publishes its 2021 SREP findings setting the tone for supervisory dialogue for 2022
- Financial Services: EU financial markets regulators publish their supervisory expectations in the context of the Ukraine conflict
- Financial Services: Revisiting the ECB-SSM’s Final Guide on its supervisory approach to consolidation
- Financial Services: Revisiting the Banking Union’s Common Ethics Culture – revised SSM Guideline on harmonised ethics regimes
- Financial Services: ECB-SSM publishes its supervisory expectations on use of leverage and high-levels of risk taking in the context of risk appetite frameworks
- Financial Services: ECB-SSM decision on total amount of annual supervisory fees for 2021 published
- Redefining the three lines of defence (3LoD) model during a time of prolonged pandemic preparedness and location independent working
- Planning for prolonged pandemic preparedness
- Remote working: planning for beyond the COVID-19 pandemic
The below presents a carefully curated selection of recent Thought Leadership contributions covering the EU’s efforts on building a Capital Markets Union as provided by our EU RegCORE and other teams across the PwC Network.
Background on the EU’s Capital Markets Union efforts
On 24 September 2020 the European Commission adopted a new and relaunched capital markets union action plan aiming to further advance the original Capital Markets Union (CMU) plan published in 2015. At its core CMU aims to support the domestic and cross-border flow of investments and savings across the EU to the benefit of investors, consumers and companies regardless of where they are located. CMU therefore aims to introduce the legislative and regulatory framework that supports a fully harmonised EU-wide capital market as opposed to capital markets that are still largely drawn along national lines.
There are certainly a number of further legislative building blocks and institutional reforms required to build a fully functioning CMU, and certainly one in a manner that reinforces a completed Banking Union, however the EU’s CMU efforts more generally serve to support the deepening and completion of the EU’s Single Market both for financial services and more generally.
PwC’s EU RegCORE Team has followed and advised clients on the development of the CMU since its inception and includes professionals with deep knowledge and specialist experience of the financial services industry and regulatory authorities who are thus able to offer clients direct insight into the EU’s legislative efforts and their impact on financial markets, firms as well as their counterparties and clients enabling stakeholders to anticipate issues, manage their risks and prepare them for success.
Recent Thought Leadership
- EBA clarifies application of strong customer authentication requirements to digital wallets, ESAs publish draft Guidelines
- An (almost) comprehensive guide to the new ELTIF regulation
- European Commission proposes EU-wide “Listing Act” to simplify company listings and capital raises
- Revisiting ESMA’s supervisory expectations on reverse solicitation
- EBA calls for more proactive engagement between supervisors in AML/CTF supervisory colleges
- Financial Services: Joint ESA Response to the EU Commission on Digital Finance
- Financial Services: ESMA publishes final Guidelines on appropriateness and execution-only requirements under MiFID II
- Financial Services: ESMA steps in to support European Commission’s report on asset managers’ use of reverse solicitation
- Financial Services: ESMA publishes supervisory briefing on the use of tied agents under MiFID II
- Financial Services: Revisiting the risk from “Fallen Angels”– when bonds go bad and wider corporate zombification risks
The below presents a carefully curated selection of recent Thought Leadership contributions covering the EU’s efforts on implementing an Insurance Union as provided by our EU RegCORE and other teams across the PwC Network.
Background on the EU’s Insurance Union efforts
Following on the footsteps of the EU’s efforts on completing the Banking Union, building the Capital Markets Union comes proposals to implement an Insurance Union. At its core an Insurance Union would see a further Europeanisation and thus centralisation of supervision of (re-)insurers as well as a specific recovery and resolution regime. Other elements of such an Insurance Union include the legislative proposals and individual efforts of regulators to introduce a common and harmonised recovery and resolution framework for (re-)insurers as well as a pragmatic yet comprehensive approach to supporting safe uses of InsurTech as well as an “open insurance” framework for accessing and sharing insurance-related data.
PwC’s EU RegCORE Team has followed and advised clients the proposals for an Insurance Union since its inception and includes professionals with deep knowledge and specialist experience of the financial services industry and regulatory authorities who are thus able to offer clients direct insight into the EU’s legislative efforts and their impact on (re-)insurance markets and policyholders, enabling stakeholders to anticipate issues, manage their risks and prepare them for success.
Recent Thought Leadership
The below presents a carefully curated selection of recent Thought Leadership contributions covering the EU’s efforts on shaping a Digital Single Market and a comprehensive harmonised regulatory framework on digital and crypto-assets on monetary policy activities of the Eurosystem as provided by our EU RegCORE and other teams across the PwC Network.
Background on the EU’s Digital Single Market, financial services and regulation of Crypto-Assets
In 2020 as part of the EU’s Digital Finance Strategy Package the European Commission in an bid to harmonise regulatory standards across the EU adopted its proposal for an EU Regulation on Markets in Crypto-Assets (MiCA), an EU Regulation for a pilot distributed ledger technology market infrastructure regime and related sandbox structure (PDMIR), an EU Regulation on Digital Operational Resilience (DORA) as well an EU Directive introducing targeted amendments to existing EU financial services regulation to give affect to the new rules introduced above (Amendment Directive). While rulemaking on these new legislative frameworks are still in a period of review and amendments, once finalised they collectively will transform the EU-27 into the world’s largest single regulatory regime for crypto-assets.
These changes have a number of impacts on traditional financial services firms, including those looking to enter the crypto-assets space as well a number of challenges and licensing requirements for crypto-natives and other FinTech firms. Our EU RegCORE lawyers advise on the breadth of regulatory, supervisory and contractual issues that apply to institutions, markets and transactions. From ICOs, STOs, digital asset margin lending through to license applications and crypto-custody questions as well as counterparty client facing documentation, we have you and your clients covered.
Recent Thought Leadership
- TIBER-EU – Purple Teaming Best Practices: Can the “truth” be found in the middle between red and blue teams?
- Revisiting the ECB’s 2018 framework on testing cyberresilience and combatting digital financial crime
- Revisiting the European Central Bank’s cyber-resilience oversight expectations (CROE)
- Revisiting the ECB’s rules for selecting service providers for cyber-resilience testing
- Shoring up the defences – the EU’s new cybersecurity competence centre (ECCC)
- Financial Services: EU agrees new financial crime tracing and prevention rules for cryptoassets
The below presents a carefully curated selection of recent Thought Leadership contributions on the EU’s priorities beyond Brexit as provided by our EU RegCORE and other teams across the PwC Network.
Background on EU financial services policymaking since Brexit
Brexit may have been completed but it still presents a host of challenges, uncertainty but equally opportunities. In relation to regulatory compliance, whether a firm is relocating to the EU-27 from the UK or whether EU firms are looking to expand or set up new “anchor” presences in the UK or other non-EU jurisdictions that are, when viewed from the EU, “Third Countries”, there are a wealth of issues that require pragmatic regulatory advice on both sides. This applies not only to mapping divergences in rulemaking and supervisory priorities but equally on how the UK-EU’s Trade and Cooperation Agreement is being implemented in the UK but equally across the EU.
To further complicate matters the run up to Brexit saw a wave of new rulemaking and changes to supervisory scrutiny of third country firms. The ECB-SSM, the European Supervisory Authorities (EBA, ESMA and EIOPA) as well as range of national competent authorities that together make up the European System of Financial Supervision, all have published very strict and detailed “Supervisory Principles on Relocations” (SPoRs). In short, the SPoRs amend and/or supplement a range of existing EU rules, including as applied in the Banking Union and will require careful consideration by third country firms if they wish to comply with these new requirements. The same also applies to EU firms wishing to rely on third-country domiciled financial market infrastructure as well as services such as central counterparty clearing arrangements.
Our EU RegCORE lawyers advise on the breadth of regulatory, supervisory and contractual issues that apply to institutions, markets and transactions. From legal entity and target operating model optimisation through to counterparty client facing documentation, we have you and your clients covered.
Recent Thought Leadership
- Risk & Regulation Rundown podcast – Series 4 Episode 4 – A view from the continent: A year of regulatory reform and the European perspective
- CJEU rules EU lawmakers must be involved in choice of location of new EU authorities – what does this mean for AMLA?
- European Securities and Markets Authority (ESMA) publishes its assessment of the Brexit relocation process
- Swedish Presidency of Council of EU for 2023 announces work programme
- European Political Community holds its first meeting
- Summary of 2021 EU State of the Union Policy Announcements
The below presents a carefully curated selection of recent Thought Leadership contributions on monetary policy activities of the Eurosystem as provided by our EU RegCORE and other teams across the PwC Network.
Background on ECB and Eurosystem monetary policy
The Eurosystem’s monetary policy activities are diverse and wide-ranging in how the impact markets and participants. Comprised of the ECB and the national central banks of the Eurozone, the Eurosytem and its rules, notably the “General Documentation”, set what types of activity and in respect of what types of assets, transactions and counterparties can be undertaken and by whom.
Our EU RegCORE lawyers advise on the breadth of structuring issues, interpreting the General Documentation and related rulebooks of the Eurosystem and on monetary policy tools and activity more generally. From routine collateral eligibility to structuring new types or otherwise complex collateral assets, we have you and your clients covered.
Recent Thought Leadership
The below presents a carefully curated selection of recent Thought Leadership contributions covering regulatory developments in Germany as provided by our EU RegCORE and other teams across the PwC Network.
Background on German Regulatory Developments
The national competent authority in Germany is the Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). BaFin is headquartered in Bonn and in Frankfurt, the latter which is also the home of EU authorities relevant for the banking, capital market and insurance sector. The German national central bank is the Deutsche Bundesbank, which works in close-cooperation with the BaFin and the ECB.
PwC’s EU RegCORE Team closely advises clients on the regulatory requirements and supervisory expectations set by the BaFin and the Bundesbank and includes professionals with deep knowledge and specialist experience of the financial services industry and regulatory authorities who are thus able to offer clients direct insight into legislative efforts and their impact on financial markets, firms as well as their counterparties and clients enabling stakeholders to anticipate issues, manage their risks and prepare them for success.
Recent Thought Leadership
- German Federal Financial Supervisory Authority shines spotlight on social media and reverse solicitation breaches
- Refund of fees and charges following the ruling of the German Federal Court of Justice (BGH) on financial services providers’ general terms and conditions
- BaFin goes mystery shopping – revisiting this tool ahead of the 2023 supervisory cycle
- German regulator consults on seventh update to MaRisk Circular
- Revisiting Germany’s due diligence requirements for the transfer of cryptoassets
- New rules for BaFin employees on private financial transactions in force
- Stepping up the fight against financial crime – transforming Germany from money laundering paradise into a high-security system?
- The German Federal Ministry of Finance (BMF) publishes an update on the modernisation of the BaFin
- Follow the money! German Federal Finance Minister announces plans for new Federal Financial Crime Authority
- Financial Services: Overview of relevant points from the German Coalition Agreement 2021
- The incoming German government’s “coalition agreement” and the focus on ESG: A real move forward?
- Germany’s 2021 Bundestag Elections – Key considerations for financial services firms
- Financial Services: BaFin updates its warnings on investments in crypto-assets
- Financial Services: BaFin to focus on six main risks and two future risks in 2022
- Financial Services: BaFin proposes rules banning the marketing, distribution and sales of futures with additional payment obligations to retail investors
- Financial Services: BaFin issues warning for investment advice and tips using social media or messenger services
- Germany’s BaFin updates its supervisory expectations on ICT use by financial services firms