The Brussels legislative programme for the financial sector will be as frenetic as ever from now until early 2013. It is a race to achieve as much as possible before electoral canvassing by MEPs starts ahead of the parliamentary elections in May 2014.
These may be over 18 months away but parliamentary scrutiny of European Commission proposals can easily take this long.
From the Commission’s point of view, the target is to meet the requirements of G20 decisions reacting to the financial crisis. Commissioner Michel Barnier commented in a speech at the beginning of September that this will “put Europe at the forefront of the global effort to positively transform the financial sector”.
The major focus for pension funds during the coming months is the quantitative impact study (QIS) on revision to IORP legislation covering occupational pensions, currently under assessment by the European Insurance and Occupational Pensions Authority (EIOPA).
Here, the European Federation for Retirement Provision (EFRP) is concentrating on the EIOPA’s main QIS, expected to run from mid-October to mid-December.
This will lead to “final advice” of technical specifications to the Commission, due at the year end. The Commission plans to time its proposal for a revised workplace-based pension Directive by next summer.
Principal issues concern EIOPA’s proposed holistic balance sheet (HBS) approach. A main contention concerns the application of Solvency II-type rules to pension investments.
EIOPA says the intention of the HBS is to “enable IORPs to take into account the various adjustment mechanisms (conditional indexation, reduction of accrued rights) and security mechanisms (regulatory own funds, sponsor support, pension protection funds) in an explicit way”.
However, EFRP objects that the HBS would be “unworkable” for IORPs, due to “the huge complexity and subjectivity of the chosen assumptions” involved. The federation is asking the Commission for (yet) more time. It wants a coherent, “free of time pressure” status to enable there to be a “suitable prudential framework for IORPs”.
Another topic is the de-blocking of the Omnibus II directive. This updates Solvency II to bring it into line with the Lisbon Treaty and empowers EIOPA. Referring to IORPs, the spokesman for Peter Skinner MEP, rapporteur (co-ordinator) for Solvency II, refers to “rigorous” testing in the Commission. He adds that “it is not certain that any new legislation will be forthcoming”.
Not to be forgotten are the proposals for EU banking union. Such “bold” steps would relieve risk exposure to investments in banks. This could affect the investments’ value, says Agnès Le Thiec, the CFA Institute’s director of capital markets policy for Europe.
A lesser, but nevertheless crucial issue, is the progress of the proposed regulation on packaged retail investment products (PRIPS). Here the final measures could threaten market shares of financial products, such as life insurance. EuroFinuse, one of many lobby voices, will appeal to Parliament’s economic and monetary affairs committee (ECON) against IORPs’ exemption from the proposals. The body represents financial retail consumers,
Further activity, mainly in ECON, will involve packages such as MiFID II, which includes measures on high frequency trading. Running in parallel will be the Market Abuse Directive (MAD). ECON will also process the insurance mediation directive (IMD), and UCITS IV affecting mutual funds.
On the Parliament’s legal affairs committee (JURI), 9 October is the deadline for MEPs to submit reactions to an “opinion” to the rapporteur on proposed legislation covering reform of the audit sector. Issues include a ban on companies providing management consultancy services to their audit clients, rotation of auditors, and steps to improve the status of second-tier firms. ECON will formally table its own input in November.
Another de-blocking exercise involves venture capital and the easing of access by pension funds to this sector. The European Venture Capital Funds Regulation, harmonising fundraising rules across the EU via a pan-EU marketing passport, has reached an impasse.
National ministers could not agree on one taxation element for funds domiciled outside the EU, which is relevant as many funds are domiciled in the Channel Islands. A current QIS may resolve matters. The European Venture Capital Association (EVCA) hopes that this would make VC investment more attractive, including to pension funds.