CAPITAL MARKET

Benchmarks

The regulation of benchmarks aims to govern the indices used as benchmarks in financial instruments and financial contracts or to measure the performance of funds: we want them to be accurate and honest. This is why the Regulation of June 8, 2016 (Reg. (EU) No. 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and contracts or to measure of the performance of investment funds and amending Dir. 2008/48/CE and 2014/17/UE and Reg. (EU) No 596/2014) regulates the actors who produce the indices, those who contribute to this production and those who use them: the professionals who produce the indices are called administrators. It should be noted that it is possible to use both the benchmarks provided by an administrator located in the European Union and those provided by an administrator located in a third country. But in the latter case, the benchmark index and the administrator must meet the conditions set out in Article 30 of the Regulation of 8 June 2016, one of which is the adoption of equivalence decisions by the European Commission.

By these decisions, the Commission assesses the legislation of a third country in the light of European legislation: the decisions of 29 July 2019 concern Australia (Commission Implementing Decision (EU) 2019/1274 of 29 July 2019 on the equivalence of the legal and supervisory framework for benchmark indices in Australia pursuant to Regulation (EU) 2016/1011 of the European Parliament and of the Council) and Singapore (Commission Implementing Decision (EU) 2019/1275 of 29 July 2019 on the equivalence of the legal and supervisory framework for benchmark indices in Singapore pursuant to Regulation (EU) 2016/1011 of the European Parliament and the Council). They are important for benchmark indices such as, for Australia, the Bank bill sap Rate and the S&P/ASX 200, for Australia, and for Singapore, the Singapore interbank Offered Rates (SIBOR) and the Singapore Dollar Swap Offer Rate (SOR) due to the expiry of the transition period.

Credit rating agencies

The equivalence decisions that the European Commission may take with regard to credit rating agencies must, under Article 5 § 6 of the Regulation of 16 September 2009, comply with three conditions. One of these conditions was strengthened in its content in 2013. As a result, the Commission has had to review previously granted equivalence decisions.

This new examination led the Commission to conclude that the States that benefited from equivalence continued to comply with the conditions initially required by European legislation. However, not all of them have taken into account the new requirements resulting from the Regulation of 21 May 2013. Consequently, for the States (United States, Brazil, Japan and Hong Kong) in accordance with the new requirements, the Commission has taken new equivalence decisions (Commission Implementing Decision (EU) 2019/1279 of 29 July 2019 on the recognition of the legal framework and supervisory framework of the United States of America as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and the Council on credit rating agencies; Commission Implementing Decision (EU) 2019/1281 of 29 July 2019 repealing Implementing Decision 2014/245/EU on the recognition of Brazil's legal and supervisory framework as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies; Commission Implementing Decision (EU) 2019/1283 of 29 July 2019 on the recognition of Japan's legal framework and supervisory framework as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies; Commission Implementing Decision (EU) 2019/1284 of 29 July 2019 on the recognition of Hong Kong's legal framework and supervisory framework as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and the Council on credit rating agencies). On the other hand, for those States (Argentina, Australia, Canada and Singapore) that are not in compliance, decisions to withdraw equivalence have been adopted (Commission Implementing Decision (EU) 2019/1276 of 29 July 2019 repealing Implementing Decision 2012/627/EU on the recognition of Australia's legal framework and supervisory framework as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and the Council on credit rating agencies;

Commission Implementing Decision (EU) 2019/1277 of 29 July 2019 repealing Implementing Decision 2012/630/EU on the recognition of Canada's legal framework and supervisory arrangements as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies;

Commission Implementing Decision (EU) 2019/1278 of 29 July 2019 repealing Implementing Decision 2014/248/EU on the recognition of Singapore's legal framework and supervisory arrangements as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies; Commission Implementing Decision (EU) 2019/1282 of 29 July 2019 on the recognition of Argentina's legal framework and supervisory framework as equivalent to the requirements of Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies) The European Commission's decisions entered into force 20 days after their publication in the OJEU on 30 July 2019.

Prudential regulation and credit rating

Can an External Credit Assessment Agency (ECAI) challenge and request suspension of a draft technical performance standard that results in a deterioration of its credit rating levels within the prudential regulatory correspondence scale? The answer is negative, according to the Joint Committee of European Supervisory Authorities, because the draft standards are a preparatory act which, with certain exceptions, cannot be the subject of an appeal independent from the final act (Board of Appeal of the European Supervisory Authorities (ESA), Decision of 13 September 2019, Creditreform Rating AG v. The European Banking Authority (EBA), BoA-D-2019-05).

Distance financial contract

The Directive of 23 September 2002 (Directive 2002/65/EC of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directives 90/619/EEC, 97/7/EC and 98/27/EC) provides for cases in which the right of withdrawal does not apply. Member States may not provide for any others. Thus, if a case law recognises derogations in addition to the legislation, in breach of European Union law, it is for the judge to adopt an interpretation in accordance with European Union law, "by amending, if necessary, established national case law if it is based on an interpretation of national law incompatible" with it (ECJ, 11 September 2019, Case C-143/18).

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