OVERVIEW OF REGULATORY ISSUES EACT BOARD MEETING 23-24 May 2014 Bratislava

1. OVERVIEW OF REGULATORY ISSUES EACT BOARD MEETING 23-24 May 2014 Bratislava

2. REMINDER OF TIMELINE • 22-25 May: European elections to be held in all 28 member countries • 27 May: EU leaders meet for extraordinary summit to take stock of the elections results • 26-27 June: Nomination of Commission president at the European Council summit • 1-3 July: Plenary session of the newly constituted European Parliament; Parliament President and Committee Chairs to be elected (ECON likely to be chaired by EPP or S&D). Informal negotiations with EU Council and possible bilateral or multilateral negotiations with heads of state. • 14-17 July: Parliament votes on European Council’s nomination of Commission president in its plenary session. • 1 Nov.: Target date for new Commission to take office.

3. CURRENT ISSUES EMIR: • FX instruments – Commission to issue an implementing act during the summer • Clearing obligation (NFC+) • ESMA proposes frontloading requirements to be eased • Consultation on draft RTSs still to come – once finalised by ESMA the RTSs require approval from Commission and non-objection from the Parliament and the Council • Clearing obligation to start at the earliest end of this year • NFC+s will have a phase-in period • Ongoing consultation on RTSs for risk mitigation for non-cleared OTC derivatives • EMIR 2: • Review report by August 2015 by the Commission • EACT lobbying likely to concentrate on the need for one-sided reporting and getting intra-group transactions out of scope

4. CURRENT ISSUES BANK STRUCTURE REFORM • Follows up on the Liikanen report recommendations on retail / investment banking split – Commission proposal January 2014 • Aimed at European banks deemed to be of global systemic importance or if their trading activities exceed certain thresholds; the Commission estimates that this would impact about 30 biggest banks in Europe • The proposal was not discussed by the Parliament and the initial reactions from the Member States indicate reservations about the proposal ; will probably discussed for the next years • Commission proposal foresees implementation of prop trade banning in 2017 and the separation of activities in 2018 • Existing national initiatives (Vickers (UK), Volcker (US), France, Germany)

5. CURRENT ISSUES BANK STRUCTURE REFORM • Main elements of the proposal: • Ban on proprietary trading • Possible separation of trading activities into a separate legal entity • At this stage the most evident problems we see with the proposal from corporate treasurers’ perspective are the following: • Prohibition for the retail part of the bank to offer OTC derivatives to their customers – how would this impact especially the smaller companies’ hedging abilities? • Impacts on market making • The proposal was accompanied by proposals for the reporting of securities financing transactions (e.g.repos) – would put EMIR-like reporting obligation on NFCs

6. CURRENT ISSUES COMMISSION COMMUNICATION ON LONG-TERM FINANCING • Questions related to the impact on the real economy of de-leveraging by banks and improving access to funding: • Missing pieces of Basel III and implementing measures of CRD IV • Securitisation • Capital market financing • EACT view?

7. CURRENT ISSUES MONEY MARKET FUNDS REGULATION • Key provisions of the draft proposal include e.g.: • CNAV funds would be required to establish a cash buffer of at least 3% of total value of their assets (this is expected to make CNAV funds unviable in practice) • Would prohibit MMFs from soliciting credit ratings • Limits on the types of instruments in which MMFs can invest • EACT position focuses on: • The ban on external credit ratings which would be extremely difficult to investors most of which cannot do their own credit assessment • The importance of preserving choice for investors (continued availability of CNAV funds) • Need of certainty regarding the accounting treatment of VNAV funds • The increase of systemic risk due to the concentration of funds if MMFs become less available as a result of the Regulation • Recent developments: • Parliament could not agree on the text; discussions will continue in the autumn • Council not currently discussing this file; will be left for the Italian Presidency

8. CURRENT ISSUES FINANCIAL TRANSACTION TAX (FTT) • Beginning of May an agreement signed between 10 of the participating Member States; agreed to introduce a first phase of the tax by the latest 1 January 2016 • This would cover equity and some derivatives • The ain is to finalise the technical discussions by the end of this year • First UK appeal to the EU Court was recently rejected but likely to appeal again once the final text has been agreed; other countries might join the UK

9. CURRENT ISSUES BAIL-IN: • Directive on Bank Recovery and Resolution adopted by the Parliament and the Council; Member States have until end of this year to transpose the Directive into national law. • Bail-in provisions will enter into force in January 2016 • Bail-in will allow authorities to write down or convert into equity claims of shareholders and creditors when a bank is failing or likely to fail • Impact of bail-in on corporate treasury?

10. CURRENT ISSUES BENCHMARK REGULATION • Commission proposal for Regulation: • Addresses the governance and methodology of the existing financial benchmarks • Would prohibit the use of non-EU benchmarks which are not compliant with the IOSCO principles – could be problematic for some corporates • FSB work on the potential replacement of existing benchmarks

11. CURRENT ISSUES MiFID 2 / MiFIR: • Consultation on level 2 measures launched ESMA MARKETS AND SECURITIES STAKEHOLDER GROUP: • Complaint on composition issued to the EU Ombudsman