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Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services
industry in Europe.
If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
UK Budget
The Chancellor delivered the UK’s July 2015 Budget this week, which included the following
measures: (i) a consultation on technical changes to limited partnership legislation to enable
private equity and VC investment funds to use an LP structure more effectively; (ii) an immediate
end to the ‘base cost shift’ on carried interest from 8 July 2015, which allows carried interest
holders to deduct some of the original amount that fund investors pay for fund investments to
reduce the carried interest holders’ chargeable gains; (iii) a consultation on legislation to
determine when performance fees may be treated as capital in nature and benefit from capital
gains with the aim of introducing legislation from 6 April 2016. The government also confirmed
that it will proceed with its reform of the loan relationships and derivatives rules, which will be
included in the Finance (No. 2) Bill 2015. In addition to the Finance (No. 2) Bill 2015 provisions,
further changes are to be made to the corporate debt and derivatives tax rules in 2015 through
secondary legislation. This will include updating the rules on foreign exchange hedging,
convertible instruments and property-based derivatives.
MiFID II: complex debt instruments and structured deposits guidelines
ESMA has published responses it has received to its consultation on draft guidelines on complex
debt instruments and structured deposits under MiFID II. Respondents include: the Association
for Financial Markets in Europe (AFME), the International Capital Market Association (ICMA),
ISDA and the London Stock Exchange Group. ESMA is required to develop the guidelines, by 3
January 2016, under Article 25(10) of MiFID II and intends to publish final guidelines in the
fourth quarter of 2015.

2. European framework for qualifying securitisations
The European Banking Authority has published its advice on the establishment of a European
framework for qualifying securitisations for the purpose of determining their regulatory capital
treatment. The opinion contains five recommendations for establishing a European framework for
qualifying securitisations, including a need to: (i) conduct a review of the entire regulatory
framework for securitisations and other investment products; (ii) create a framework for
qualifying securitisations; and (iii) establish criteria to define both qualifying term securitisations
and qualifying asset-backed commercial paper (ABCP). The report proposes a more risk-sensitive
approach to capital regulation for long-term securitisation instruments, as well as for ABCP, and
illustrates how the capital charges set out in the recent revision of the Basel Committee on
Banking Supervision 2014 securitisation framework should be lowered to recognise the relatively
lower risk of qualifying products, while at the same time maintaining restraints on regulatory
capital.
FSB progress on benchmark reform
The Financial Stability Board has reported on its progress on reforms to existing major interest
rate benchmarks and in the development and introduction of alternative near risk-free interest rate
benchmarks (RFRs). The FSB reports that since July 2014, the administrators of LIBOR,
EURIBOR and the Tokyo Interbank Offered Rate (TIBOR) have all made progress in
implementing the recommendations, including: (i) reviews of respective benchmark
methodologies and definitions; (ii) data collection exercises and feasibility studies; (iii)
consideration of transitional and legal issues; and (iv) broad consultations with submitting banks,
users and other stakeholders.
Assessment of implementation of principles for FMIs
IOSCO and the Committee on Payments and Market Infrastructure (CPMI) have started the first
assessment of the implementation of the principles for financial market infrastructures (PFMIs),
the international standards for financial market infrastructures (FMIs), which were published in
April 2012. The assessment will focus on a subset of requirements under the PFMIs that relate to
financial risk management by CCPs, including certain practices related to governance, stress
testing, margin, liquidity, collateral, and recovery. The assessment will then consider outcomes
achieved in this area by examining a number of globally and locally active CCPs that clear
derivative products, both exchange- traded and OTC. The results are due to be published in 2016.
Transaction tax update
According to EU Economic Affairs Commissioner Pierre Moscovici, negotiations over the
financial transaction tax could wrap up in the autumn and the levy could be in place by early
2017. Speaking at a financial sector conference in Paris, Moscovici said that the aim was to have
a widely applicable tax but at a low rate. French Finance Minister Michel Sapin thought that the
tax could be applied in a first phase as early as January 2016, as it would be too complicated to
have it fully up and running until later. He said that "We've made good progress on the basis
sought by France" which meant a widely applicable tax with a low rate that could be collected in a
way that would discourage financial firms from shifting business to countries where the tax did
not apply.
Chancellor abolishes non-dom status

3. ]
George Osborne has announced that permanent non-domicile status will be abolished in the UK
from April 2017. The non-domicile rule allows some wealthy UK residents to limit the tax paid
on earnings outside the country. The reform does not eliminate the tax status, but individuals who
have lived in the UK for 15 of the past 20 years will lose the right to claim it. The government
also announced that from April 2017, new rules would be introduced so that everyone who owns
UK residential property, and would otherwise pay inheritance tax on the property, cannot avoid
the tax by holding it in an offshore company. It said this would limit "abuses" of the rule by some
who have non-dom status. The chancellor said he had decided not to abolish the non-dom tax
status completely because it would cost the UK money and that many individuals that took
advantage of the tax status "make a considerable contribution to public life".
Greek bailout update
Greece submitted new bailout reform plans to the eurozone last night, two hours before the expiry
of the deadline. Details of the plan were not immediately available, but Prime Minister Tsipras
said that Greece would submit "credible reforms, for a fair and viable solution". Greece's
parliament is set to vote on the reform plan today and it will be considered by the Eurogroup of
finance ministers on Saturday, followed by a summit on Sunday, which is to be attended by all 28
EU leaders.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
10 July 2015