EU-flash: The European Semester Autumn Package, Payments Services Directive & agreement on creditor hierarchy & IFRS9


On November 22nd, the European Commission presented its autumn package of economic and social priorities for the EU, the euro area and the EU Member States, in the context of the European Semester. A few days later, the European Commission set out the rules governing electronic payment transactions that aim to modernise payment services in Europe. On November 30th, the European Parliament reached an agreement on creditor hierarchy, IFRS 9 and large risk exposures, in light of measures aiming to reduce risk in the financial sector.

Below you will find a summary of the work programme.

The European Semester Autumn Package

On 22 November, the European Commission presented the European Semester Autumn Package.  This Package sets out economic and social priorities for the EU, the euro area and the Member States' levels. 

The package includes the annual growth survey, an alert mechanism report, a draft joint employment report, Proposals for the Amendment of Employment Guidelines, Recommendations for the Euro Area and an assessment of Euro area members states’2018 budgetary plans.

Recommendation on the economic policy of the euro area

The Commission recommends a broadly neutral fiscal stance and a balanced policy mix for the euro area as a whole. In line with the Commission's priorities, Member States are also asked to step up their efforts to implement measures to fight aggressive tax planning.

The Commission urges Member States to achieve significant progress towards completing the Single Market, particularly in services.

The recommendation calls for continued work to complete the Banking Union, with regard to risk reduction and risk sharing, including a European Deposit Insurance Scheme and making the common backstop for the Single Resolution Fund operational. European supervision of financial institutions should be strengthened to prevent the accumulation of risks. The reduction of the levels of non-performing loans should also be accelerated and EU capital markets further integrated and developed to facilitate access to finance, especially for small and medium sized-enterprises (SMEs).

Opinions on the euro area Draft Budgetary Plans

For five countries (Belgium, Italy, Austria, Portugal, and Slovenia), the Draft Budgetary Plans (DPBs) pose a risk of non-compliance with the requirements for 2018 under the Stability and Growth Package. For Belgium and Italy, non-compliance with the debt reduction benchmark is also projected.

To read the full release, click here.

To read the fact sheet and the full report, click here.

PSD2 – Technical standards published by the European Commission

On 27 November, the Commission published the technical standards for the Payment Services Directive or PSD2, making changes to the first Directive on electronic payments. This should  allow consumers to access innovative solutions offered by payment providers and to use innovative services offered by third party providers, also known as FinTech companies.

The rules specify the requirements for common and secure standards of communication between banks and FinTech companies.

Following the adoption of the Regulatory Technical Standards by the Commission, the European Parliament and the Council have three months to scrutinise them. Subject to the scrutiny period, the new rules will be published in the Official Journal of the EU. Banks and other payment services providers will then have 18 months to put the security measures and communication tools in place.

To read the Fact Sheet, click here.

Full details.

European Parliament agreement on creditor hierarchy & IFRS9

The EU is reforming its regulations for financial services, more in particular its rules on capital requirements and recovery and resolution. Under the EU’s new bank recovery and resolution legislation, and because national rules on unsecured debt holders and creditors diverge, differences in the ranking of unsecured debt instruments in insolvency hierarchy have emerged. On 30 November, the European Parliament voted on a proposal to ensure that the legislation applies uniformly in the EU to rank bank creditors when banks fail.

On day earlier, the Parliament already voted on proposed transitional arrangements for mitigating the impact of IFRS 9. The international financial reporting standard 9 seeks to encourage financial institutions to greater prudence when estimating future credit losses on their financial assets.

As the standard requires banks to hold more capital, a proposed five-year phase-in period should allow EU banks to add a portion of this provision onto their regulatory capital, as well as a three-year phase-out for banks with large exposure to public-sector foreign currency debt.

After a formal agreement in the Council, which is expected in the coming weeks, the texts will be published in the Official Journal.

Following the 2008 financial crisis, G20 leaders called for new high-quality standards for financial organisations. 

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