1. 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
EC proposal for banking structural reforms provokes hostile response
The European Commission has published a proposed Regulation aimed at
banks that are deemed to be too big to fail because the consequences of their
failure are considered detrimental for the financial system as a whole. The
Regulation will apply to EU banks deemed to be of global systemic
importance or those exceeding certain specified thresholds. The EC is
proposing to introduce a ban on proprietary trading with effect from 1
January 2017 and a power for supervisors to require banks to separate
certain trading activities from a deposit-taking entity as of 1 July 2018. The
Regulation has provoked a hostile response in France, where it was attacked
by the central bank governor, who considers that the proposal is
‘irresponsible and contrary to the interests of the European economy”.
EU-US trade deal
The European Commission has proposed a framework for regulatory cooperation in financial services in the context of negotiations for an EU-US
trade deal, known as the Transatlantic Trade and Investment Partnership
(TTIP). The EU is proposing to establish, within the TTIP framework, a
transparent, accountable and rule-based process that would commit the two
parties to work together towards strengthening financial stability. The
regulatory co-operation would be based on a number of general principles
which would be backed up by specific arrangements for the governance of
the EU-US regulatory co-operation, guidelines on equivalence assessments

2. and commitments to exchange necessary and appropriate data between
regulators. The proposal includes the commitment to outcome-based
assessments of whether the other party's regulatory and supervisory
framework is equivalent, which could potentially lead to mutual reliance on
the rules of the other party.
IMF warns that big banks still pose a threat
An IMF executive, tasked with financial oversight, has said that more work
is needed to tackle the threat posed by big banks to the world financial
system. Mr Vinals criticised the amount of implicit subsidies currently
provided to systemically important financial institutions as too large and
considered that officials are ill-equipped to deal with a Lehmans-style
bankruptcy. Mr Vinals concluded that the G20 still had a great deal of work
to do to determine what would happen if a bank with major operations
abroad were to go under.
FSB re-confirms Cayman designation
The Financial Stability Board has confirmed its designation of the Cayman
Islands as a jurisdiction which demonstrates sufficiently strong adherence to
international standards on cooperation and information exchange. The
Cayman Islands first gained this recognition in 2012. The FSB was
established to coordinate the work of national financial authorities and
international standard setting bodies in the interest of financial stability and
began this initiative in 2010, in response to a call by the G20 leaders to
develop a toolbox of measures to promote adherence to prudential standards
and cooperation with jurisdictions. Cayman is listed among those countries
which meet its required standards in the areas of banking supervision,
insurance supervision and securities regulation.
ISDAfix benchmark
ICAP plc, a London based broker, is to be stripped of its function setting a
US benchmark for interest rate swaps by ISDA This comes amid
investigation by the FCA and the CFTC of alleged manipulation of ISDAfix.
ISDA has transferred the function to Thomson Reuters Corp., which will
calculate all ISDAfix rates in the future and all rates will be set based on
actual trades, rather than based on data reported from banks. Meanwhile, the
Financial Stability Board is expected to announce that it will scrutinise

3. benchmarks used in currency trading as part of its reforms of interest rate
benchmarks.
EMIR third country equivalence
ESMA has advised the European Commission that the Japanese regulatory
regime for commodity CCPs (including its legal provisions and approach to
supervision and enforcement) provides for an equivalent system for
recognition of CCPs authorised under third-country legal regimes. If the
Commission adopts such a decision, certain provisions of EMIR may be
disapplied in favour of equivalent third country rules. ESMA is permitted
under EMIR to recognise in the EU a CCP which is authorised outside the
EU.
MiFID protocol
ESMA has published an updated version of its protocol on the operation of
its MiFID database. The protocol relates to the practical co-operation
arrangements between the national competent authorities (NCAs) of the
member states and the staff of ESMA for the purposes of managing the
calculation and publication of market transparency calculations. Annex 1 to
the protocol contains an internal guidebook that is intended to facilitate the
NCAs' MiFID market transparency calculations. ESMA is entitled to change
or amend the protocol as it sees fit.
IOSCO final report on protection of client assets
IOSCO has published its final report on recommendations regarding the
protection of client assets. The report contains eight principles that provide
guidance to regulators on how to enhance their supervision of intermediaries
holding client assets by clarifying the roles of the intermediary and the
regulator in protecting those assets. The principles also outline the
intermediaries’ responsibility to ensure compliance with applicable domestic
rules and regulations (including in the areas of recordkeeping, providing
statements of account, and arrangements to safeguard client assets and
minimise the risk of loss and misuse), including through the development of
internal systems and controls to monitor compliance. IOSCO consulted on
the principles in February 2013.

4. EC reporting and transparency proposal
The European Commission has published a legislative proposal for a
Regulation on reporting and transparency of securities financing transactions
(SFTs). The proposed Regulation sets out proposals for requirements for: (i)
financial or non-financial counterparties of SFTs to report the details of SFT
transactions to trade repositories; (ii) UCITS management companies,
UCITS investment companies and AIFMs to provide information to
investors on their use of SFTs and other financing structures; and (iii)
counterparties seeking to engage in rehypothecation to ensure certain
conditions are satisfied before they have the right to rehypothecation. The
proposal stems from the Commission’s work on risks posed by shadow
banking.
CRD IV
The European Systemic Risk Board has published its decision on a
framework for national macro-prudential policy notifications and the
provision of opinions and the issuing of recommendations by the ESRB, as
required by CRD IV. ESRB must provide opinions and issue
recommendations on specific macro-prudential measures within one month
of receiving notification of such measures. The decision sets out the process
it will follow for assessing notified measures and delivering opinions or
recommendations. It also sets out the process notifying authorities must
follow when providing notifications, including the use of a specific template.
EMIR
ESMA has published its final report on procedural rules to impose fines and
periodic penalty payments on trade repositories. Under EMIR, where ESMA
finds that a TR has, intentionally or negligently, committed one of the
infringements listed in Annex I of EMIR, it must impose a fine. ESMA is
also required to impose periodic penalty payments in order to compel TRs or
other relevant persons to put an end to an infringement or respectively to
comply with their obligations in accordance with EMIR. In the meantime,
EMIR’s reporting obligation will come into full effect on 12 February 2014.

5. Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
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