Barnier buoyant on single market initiative

As the European single market turns 20, a number of key financial initiatives are due to be finalised this year, including interoperability guidelines and a new-look UCITS.

By Bruce Love February 27, 2012 2:54 PM GMT

As the European single market turns 20, a number of key financial initiatives are due to be finalised this year, including interoperability guidelines and a new-look UCITS.

Adopted in April 2011, the Single Market Act is Europe’s attempt to “re-launch” the single market for 2012, improving growth, competitiveness and social progress.

Ranging from worker mobility to SME finance and consumer protection, the European Commission’s Single Markets Act, aims to make life easier for businesses, citizens, consumers and workers in the region.

Regulation of central securities depositories (CSDs) is expected to be published within the next month, providing uniform requirements for the performance of services by CSDs as well as for their access and interoperability.

Under the proposals CSDs would fall under the supervision of the European Securities and Markets Authority, the pan-European regulatory body, which would be charged with maintaining a list of CSDs and keeping track of the activities they are licensed to carry out.

The new regulation will work in unison with MiFID II and the European market infrastructure regulation (EMIR), which support full interoperability between exchanges and clearing houses for equities and listed and OTC derivatives.

Speaking in Brussels today, European Commission single market commissioner Michel Barnier said he had made considerable progress on rules which would better govern financial markets in Europe.

The latest re-engineering of the UCITS regime is due out in Q2, providing rules on UCITS depositary functions, manager remuneration policy, and administrative sanctions. The aim of UCITS V is to create a regulatory regime which provides for robust investor protection and further strengthens the internal market efficiency in the investment fund sector while ensuring UCITS does not impair financial stability.

Also due in Q2 are the packaged retail investment products (prip) guidelines, aimed at levelling the playing field for originators and distributors of retail investment products in Europe and increasing efficiency in the cross-border funds business.

According to Barnier, the Securities Law Directive, due in Q3, will reduce the divergence between national substantive laws on book-entry securities, simplifying financial markets operations.

Yet a legislative initiative on a framework for bank recovery and resolution has not been given a firm date for adoption by the European Commission. According to the Commission, the main objective of the proposal will be to provide a more effective, efficient and harmonised crisis management structure for member states to resolve failing banks without the need to engage bailout tactics.

The Commission is also yet to provide details on the adoption of a legislative initiative on close-out netting, the risk mitigation tool used to reduce counterparty credit risk by giving priority over unsecured creditors to the non-defaulting counterparty in the case of insolvency.

The objective of the initiative is to increase legal certainty and safety of bilateral and multilateral netting agreements, but also to empower national authorities to impose a temporary stay on the rights to close-out netting.