The final votes were a victory for the EU legislators who have been working since the financial crisis on a wide framework of rules covering banking, wholesale and securities markets, fund management and investor protection. Key pieces of legislation that were voted through include:
Some proposals came too late to make it through the final negotiations such as structural reform of banks, shadow banking, financial benchmarks and long term investment funds and insurance brokering and several major pieces had already cleared the hurdles including capital requirements, OTC derivatives clearing audit reform and Eurozone bank supervision. In what became a very political exercise MEPs also were able to introduce additional reforms including bank remuneration, short selling and electronic trading.
While a key milestone has been reached, the work now begins on the thousands of pages of technical standards and ‘level 2’ implementing measures which will develop the specific details that firms will have to comply with. The bulk of this work will fall to the European Supervisory Authorities, who will work with national authorities on technical texts. ESMA in particular has the daunting task over the coming months to take the broad trading and market rules under MiFID2, MAD and CSD to create a coherent regulatory framework compatible with the global markets operation.
Despite regulators’ assurances that the EU and US rules are broadly consistent there is evidence for example on derivatives and trade reporting that even small differences can add considerable cost and complexity to banks’ data and IT systems. The coming months will be critical for the industry to engage in getting the technical details right.
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