US-EU Joint Financial Regulatory Forum examines reforms, initiatives

The recent U.S.-EU Joint Financial Regulatory Forum featured discussion among participants from the United States and European Union (EU) on the outlook for financial regulatory reforms and future priorities.

The forum, held March 28-29 in Brussels, Belgium, included representatives of the European Commission, European Banking Authority (EBA), European Securities and Markets Authority (ESMA), European Insurance and Occupational Pensions Authority (EIOPA), Single Supervisory Mechanism (SSM) and Single Resolution Board (SRB).

U.S. participants included staff from the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (FRB), Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC) and Securities and Exchange Commission (SEC).

Regarding recent legislative and regulatory developments, EU participants presented the banking package adopted by the European Commission on Nov. 22, 2016. The European Commission’s proposal addresses outstanding challenges to financial stability, while ensuring that banks can continue to support economic growth in the European Union.

EU participants also explained the newly proposed requirement to set up an EU intermediary parent undertaking for two or more banking subsidiaries with the same ultimate parent in a third country. The U.S. and EU participants discussed considerations and differences regarding intermediate parent undertakings and intermediate holding companies for cross-border resolution.

The U.S. Federal Reserve Board described its final rule related to Total Loss-Absorbing Capacity applicable to global systemically important banks, and the proposed rulemaking of the U.S. banking participants on early termination provisions of qualified financial contracts.

U.S. and EU banking participants highlighted their support for the work to finalize the Basel III framework without significantly increasing overall capital requirements across the banking sector, while promoting a level playing field.

On data protection, U.S. participants continued to raise issues related to the transfer of data for regulatory, supervisory and enforcement purposes and to data protection considering the entry into application of the new EU data protection framework in May 2018.

CFTC and EU participants also exchanged views on the appropriate timing for engaging in discussions regarding the equivalence of U.S. swaps trading platforms under the Markets in Financial Instruments framework. The EU participants reported that they intended to implement the G-20 commitment to trade standardized OTC derivatives contracts on exchanges or electronic trading platforms, where appropriate, by January 2018.

EU participants provided an update on the European Market Infrastructure Regulation equivalence assessment on derivatives transactions.  U.S. participants welcomed the EU rules for initial margin for uncleared derivatives effective in February.

Participants also provided updates on the progress of internal proceedings regarding the final legal text of the U.S.-EU bilateral agreement on prudential measures regarding insurance and reinsurance.  EIOPA provided a presentation on insurance and reinsurance in a low interest rate environment.

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