Procedure : 2014/0017(COD)
Document stages in plenary
Document selected : A8-0120/2015

Texts tabled :

A8-0120/2015

Debates :

PV 28/10/2015 - 18
CRE 28/10/2015 - 17

Votes :

PV 29/10/2015 - 10.2

Texts adopted :

P8_TA(2015)0387

REPORT     ***I
PDF 753kWORD 180k
9 April 2015
PE 544.170v01-00 A8-0120/2015

on the proposal for a regulation of the European Parliament and of the Council on reporting and transparency of securities financing transactions

(COM(2014)0040 – C8-0023/2014 – (2014)0017(COD))

Committee on Economic and Monetary Affairs

Rapporteur: Renato Soru

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
 ANNEX
 PROCEDURE

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a regulation of the European Parliament and of the Council on reporting and transparency of securities financing transactions

(COM(2014)0040 – C8-0023/2014 – 2014(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2014)0040),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8-0023(2014)),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Central Bank of 7 July 2014(1),

–  having regard to the opinion of the European Economic and Social Committee of 10 July 2014(2),

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0120/2015),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it intends to amend its proposal substantially or replace it with another text;

3.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Amendment    1

AMENDMENTS BY THE EUROPEAN PARLIAMENT(3)*

to the Commission proposal

---------------------------------------------------------

2014/0017 (COD)

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on reporting and transparency of securities financing transactions

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Central Bank(4),

Having regard to the opinion of the European Economic and Social Committee(5),

Having regard to the opinion of the Committee of the Regions(6),

[…]

Acting in accordance with the ordinary legislative procedure(7),

Whereas:

(1)  The ▌global financial crisis that emerged in 2007-2008 has revealed excessive speculative activities, important regulatory gaps, ineffective supervision, opaque markets and overly complex products in the financial system. The Union has adopted a range of measures in order to render the banking system more solid and more stable, including strengthening capital requirements, rules on improved governance and supervision and resolution regimes. The progress made on the establishment of the banking union is also decisive in this context. However, the crisis has also highlighted the need to improve transparency and monitoring not only in the traditional banking sector but also in areas where non-bank credit activities take place, called “shadow banking”, the scale of which is alarming, corresponding as it already does to half of the regulated banking system. Any shortcomings with regard to those activities, which are similar to those carried out by banks, have the potential to contaminate the regulated financial sector. Excessive leveraging of the financial system, in particular when that excess results in increased shadow banking activities, should be tackled in order to prevent another major financial crisis.

(1a)  It is important to recall in this context that the chief function of the financial sector should be to direct capital towards financing the productive economy, and not asset speculation.

(2)  In the context of its work to curb shadow banking, the Financial Stability Board (the "FSB") and the European Systemic Risk Board (the "ESRB") have identified the risks that securities financing transactions ("SFTs") pose. SFTs, including repurchase transactions, securities or commodities lending, securities or commodities borrowing, buy-sell back or sell-buy back transactions, liquidity swaps and collateral swap transactions, (allow for the build-up of leverage, pro-cyclicality and interconnectedness in the financial markets. In particular, a lack of transparency in the use of SFTs has prevented regulators and supervisors as well as investors from correctly assessing and monitoring the respective bank-like risks and level of interconnectedness in the financial system in the period preceding and during the financial crisis. Against this background, on 29 August 2013, the FSB adopted a policy framework for addressing shadow banking risks in securities lending and repos. This was subsequently endorsed in September 2013 by the G20 Leaders.

(2a)  Subsequently, on 14 October 2014, the FSB published a regulatory framework for haircuts on collateral posted in non-centrally cleared SFTs. In the absence of clearing, such operations raise major risks if they are not properly collateralised. While enhancing transparency on the re-use of collateral would be a first step towards facilitating counterparties' capacity to analyse and prevent risks, the FSB also considered it necessary to propose further reforms in the area of haircuts and margin requirements to the effect that market participants should apply haircuts on assets received as collateral for non-centrally cleared SFTs with non-banks. Those proposals are intended to prevent excessive leveraging and mitigate concentration and default risk. The FSB is due to complete its work on those collateral haircuts by 2016, with the development of a final set of recommendations on haircuts for collateral delivered in non-centrally cleared non-bank-to-non-bank STFs. The ESMA will monitor those developments and prepare a report to the Commission that would present appropriate ways for developing a European framework consistent with existing FSB recommendations on haircuts on non-centrally cleared SFTs. That report should also consider the quantitative impact of the FSB recommendations to assess the most appropriate way to introduce those recommendations in the Union. The Commission will then address the issue in a report to the European Parliament and to the Council, together with appropriate legislative proposals, if appropriate.

(3)  In March 2012, the Commission published a Green Paper on Shadow Banking. Based on the extensive feedback received and taking into account international developments, the Commission published on 4 September 2013, a Communication ▌ on Shadow Banking. The Communication stressed that the complex and opaque nature of SFTs makes it difficult to identify counterparties and monitor risk concentration. This also leads to the built-up of excessive leverage in the financial system.

(4)  A High-Level Expert Group chaired by Erkki Liikanen adopted a report on reforming the structure of the Union banking sector in October 2012. It discussed among other things the interaction between the traditional and the shadow banking systems. The report recognised the risks of shadow banking activities such as high leverage and pro-cyclicality, and it called for a reduction of the interconnectedness between banks and the shadow banking system, which had been a source of contagion in a system-wide banking crisis. The report also suggested certain structural measures to deal with remaining weaknesses in the Union banking sector.

(5)  Structural reforms of the Union banking system are dealt with in a separate legal proposal. However, imposing structural measures on banks could result in certain activities being shifted to less regulated areas such as the shadow banking sector. For these reasons, the legal proposal on structural reform of the Union banking sector should be accompanied by the binding transparency and reporting requirements for SFTs set out in this Regulation. Thus, the transparency rules of this Regulation complement the Union structural reform rules.

(6)  This Regulation responds to the need to enhance transparency of securities financing markets and thus of the financial system. In order to ensure equivalent conditions of competition and international convergence, this Regulation follows the FSB Recommendations. It creates a Union framework under which information on SFTs can be efficiently reported to trade repositories and investors. This need for international convergence is reinforced by the probability that following structural reform of the Union banking sector activities that are currently exercised by traditional banks might migrate to the shadow banking sector and encompass financial and non-financial entities. Therefore, even less transparency may arise for regulators and supervisors in respect of those activities, preventing them from obtaining a proper overview of the risks linked to securities financing transactions. This would only aggravate already well-established links between the regulated and the shadow banking sectors in particular markets.

(7)  In order to respond to the issues raised by the FSB Recommendations and the developments envisaged following structural reform of the Union banking sector, Member States are likely to adopt divergent national measures which could create obstacles to the smooth functioning of the internal market and be to the detriment of market participants and financial stability. In addition, the lack of harmonised transparency rules makes it difficult for national authorities to compare the micro-level data stemming from different Member States and thus to understand the real risks individual market participants pose to the system. It is therefore necessary to prevent such distortions and obstacles from arising in the Union. Consequently, the appropriate legal basis for this Regulation should be Article 114 of the Treaty on the Functioning of the European Union ("TFUE"), as interpreted in accordance with the consistent case law of the Court of Justice of the European Union.

(8)  The new rules on transparency therefore provide for the reporting of details regarding SFTs concluded by all market participants, whereas they are financial or non-financial entities, including the composition of the underlying collateral, if the underlying collateral is available for use or has been used, and the haircuts applied. With a view to minimising additional operational costs for market participants, the new rules and standards should build on pre-existing infrastructures and processes which have been introduced in the area of over-the-counter derivatives. For that reason, this legal framework is, to the extent possible, identical to that of Regulation (EU) No 648/2012 of the European Parliament and of the Council in respect of the reporting of derivative contracts to trade repositories registered for that purpose. This should also enable trade repositories authorised in accordance with that Regulation to fulfil the repository function assigned by the new rules, if they comply with certain additional criteria, including third-country trade repositories.

(8a)  The central banks of the ESCB are exempt from the obligation to report their SFTs to trade repositories but must cooperate with competent authorities, including by providing them directly with a description of their SFTs, upon request.

(8b)  In order to ensure the effective implementation of the reporting of securities financing transactions a phased implementation of the requirements by counterparty is necessary. This should consider the effective ability of the counterparty to comply with the reporting obligations.

(9)  As a result, information on the risks inherent in securities financing markets will be centrally stored and easily and directly accessible, among others, to the European Supervisory Authority (European Securities and Markets Authority) ("ESMA"), the European Supervisory Authority (European Banking Authority) ("EBA"), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) ("EIOPA"), the relevant competent authorities, the ESRB and the relevant central banks of the European System of Central Banks ("ESCB"), including the European Central Bank ("ECB"), for the purpose of identification and monitoring of financial stability risks entailed by shadow banking activities of regulated and non-regulated entities. ESMA should consider the existing standards established by Article 9 of Regulation (EU) No 648/2012 and regulating trade repositories for derivative contracts and their future developments when drawing up or proposing to revise the regulatory technical standards provided for in this Regulation and aim to ensure that the relevant competent authorities, the ESRB and the relevant central banks of the ESCB, including the ECB, have direct and immediate access to all the information necessary to perform their duties.

(10)  Without prejudice to the provisions of criminal or tax law, the competent authorities, ESMA, bodies or natural or legal persons other than the competent authorities, which receive confidential information, should use it only in the performance of their duties and for the exercise of their functions. However, this should not prevent the exercise, in accordance with national law, of the functions of national bodies responsible for the prevention, investigation or correction of cases of maladministration.

(11)  SFTs are used extensively by financial and non-financial counterparties, and can represent a risk for such parties. Fund managers use SFTs for efficient portfolio management. This use can have a significant impact on the performance of those funds. They can be used either to fulfil investment objectives or to enhance returns. SFTs may include total return swaps, liquidity swaps or collateral swaps. They are also extensively used by fund managers to get exposure to certain strategies or to enhance the returns. SFTs increase the general risk profile of the fund whereas their use is not properly disclosed to investors. It is crucial to ensure that investors in such funds are able to make informed choices and to assess the overall risk and reward profile of investment funds.

(11a)  In addition, SFTs are also used by other financial counterparties, such as credit institutions, and by non-financial counterparties, thereby creating specific risks for those who hold shares or who are clients of those counterparties. Credit institutions should therefore disclose their activities in SFTs. Likewise, listed companies are required to disclose any activities in SFTs to their shareholders, who should be able to make informed choices about the risk profile of the companies in which they invest. Consequently, those credit institutions and listed companies should also inform the public of their activities in SFTs as part of their regular public reports.

(12)  Investments made on the basis of incomplete or inaccurate information as regards a fund's investment strategy can result in significant investor losses. It is therefore essential that investment funds disclose all reliable and detailed information linked to their use of SFTs. In addition, full transparency is especially relevant in the area of investment funds as the entirety of assets that are subject to SFTs are not owned by the fund managers but by the fund investors. Full disclosure as regards SFTs is therefore an essential tool to safeguard against possible conflicts of interest.

(13)  The new rules on transparency of SFTs and other financing structures are closely linked to Directives 2009/65/EC(8) and 2011/61/EU(9) of the European Parliament and of the Council since they form the legal framework governing the establishment, management and marketing of collective investment undertakings.

(14)  Collective investment undertakings may operate as undertakings for collective investment in transferable securities ("UCITS") managed by UCITS managers or investment companies authorised under Directive 2009/65/EC or as AIFs managed by alternative investment fund managers ("AIFMs") authorised or registered under Directive 2011/61/EU. Those new rules on transparency supplement the provisions of those Directives. Hence, these new uniform rules on transparency of SFT and other financing structures should apply in addition to those laid down in Directives 2009/65/EC and 2011/61/EU.

(15)  In order to enable investors to become aware of the risks associated with the use of SFTs and other financing structures, fund managers should include detailed information on any recourse they have to these techniques in regular reporting intervals. The existing periodical reports that UCITS management or investment companies and AIF managers have to produce should be supplemented by the additional information on the use of SFTs and other financing structures.

(15a)  The guidelines for competent authorities and UCITs management companies issued by ESMA on 18 December 2012 (ESMA/2012/832) apply an optional framework to UCITs management companies regarding reporting obligations. In order to reduce the administrative burden of UCITs management companies and AIFs that have already adopted those guidelines, it is appropriate not to require the re-submission of any prospectus that already complies with the existing guidelines.

(16)  A fund's investment policy with respect to SFTs and other financing structures should be clearly disclosed in the pre-contractual documents, such as the prospectus for the UCITS funds and the pre-contractual disclosure to investors for the AIFs. This should ensure that investors understand and appreciate the inherent risks before they decide to invest in a particular UCITS and AIF.

(17)  Re-use is intended to provide liquidity and enable counterparties to reduce funding costs. However, it creates complex collateral chains between traditional banking and shadow banking, posing financial stability risks. The lack of transparency on the extent to which financial instruments provided as collateral have been re-used and the respective risks in case of bankruptcy can undermine confidence in counterparties and magnify risks to financial stability.

(18)  This Regulation seeks to establish stricter rules on information for counterparties on re-use. Therefore, the rules on re-use provided for in this Regulation should apply, for example, to funds and depositories only insofar as there are no more stringent rules on re-use laid down within the framework for investment funds constituting […] lex specialis and taking precedence over the rules contained in this Regulation. In particular, this Regulation should be without prejudice to any rule restricting the ability of counterparties to engage in re-use of financial instruments that are provided as collateral by counterparties or persons other than counterparties.

(18a)  The conditions subject to which counterparties have a right to re-use and to exercise that right do not diminish in any way the protection afforded to title transfer financial collateral arrangement under Directive 2002/47/EC of the European Parliament and of the Council(10).

(18b)  The definition of the term “re-use” in this Regulation is aligned with the meaning of the term in the FSB Recommendations. For the purpose of this Regulation, “re-use” encompasses the concept of re-use, without prejudice to the use of the term “re-use” elsewhere in legislative acts of the Union, such as in Directive 2014/91/EU(11).

(19)  In order to ensure compliance by counterparties, with the obligations deriving from this Regulation and to ensure that they are subject to similar treatment across the Union, administrative sanctions and measures which are effective, proportionate and dissuasive should be ensured. Therefore, administrative sanctions and measures set by this Regulation should satisfy certain essential requirements in relation to addressees, criteria to be taken into account when applying a sanction or measure, publication of sanctions or measures, key penalising powers and levels of administrative pecuniary sanctions. It is appropriate that measures and sanctions established under Directives 2009/65/EC and 2011/61/EU apply to infringements of the investment funds transparency obligations under this Regulation.

(20)  Technical standards in the financial services sector should ensure consistent harmonisation and adequate protection of depositors, investors and consumers across the Union. As a body with highly specialised expertise, it is efficient and appropriate to entrust the ESMA with the elaboration of draft regulatory technical and implementing standards, which do not involve policy choices. ESMA should ensure efficient administrative and reporting processes when drafting technical standards. The Commission should be empowered to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 of the Treaty on the Functioning of the European Union and in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council(12) in the following areas: the details of the different types of SFTs, the details of the application for registration of a trade repository, and the frequency and the details of publication of and access to trade repositories' data.

(21)  The Commission should be empowered to adopt implementing technical standards developed by ESMA by means of implementing acts pursuant to Article 291 of the Treaty on the Functioning of the European Union and in accordance with the procedure set out in Article 15 of Regulation (EU) No 1095/2010 with regard to the format and frequency of the reports, , the format of the application for registration of a trade repository, as well as the procedures and forms for exchange of information on sanctions with ESMA.

(22)  The power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of amending the list of entities that should be excluded from the scope of this Regulation in order to avoid limiting their power to perform their tasks of common interest; specific details concerning definitions; the type of fees, the matters for which fees are due, the amount of the fees and the manner in which they are to be paid by trade repositories, and of the amendment of the […] Annex in order to update information on SFT as well as other financing structures and information to investors. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(23)  In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission to take decisions on the assessment of rules from third countries for the purposes of recognition of third country trade repositories.

(23a)  In order to ensure an efficient regulatory framework for shadow banking, the progress on introducing and implementing coherent requirements on the international level remains vital. The Commission should submit regular reports to the European Parliament and to the Council on the G20 roadmap towards strengthened oversight and regulation of shadow banking and thereby also present a state of play of the measures taken by the Union and by major third-country jurisdictions.

(24)  In accordance with the principle of proportionality, it is necessary and appropriate to ensure the transparency of certain market activities such as SFTs, re-use and, where appropriate, other financing structures and to enable the monitoring and identification of the corresponding risks to financial stability. This Regulation does not go beyond what is necessary in order to achieve the objectives pursued in accordance with Article 5(4) of the Treaty on the European Union.

(25)  This Regulation respects the fundamental rights and observes the principles recognised in the Charter of Fundamental Rights of the European Union, in particular the right to the protection of personal data, the right to respect private and family life, the right to defence and the principle of ne bis in idem, the freedom to conduct a business, the right to property, the right to an effective remedy and to a fair trial. This Regulation must be applied according to these rights and principles.

(25a)  The European Data Protection Supervisor was consulted in accordance with Article 28(2) of Regulation (EC) No 45/2001 and delivered an opinion on 11 July 2014(13),

HAVE ADOPTED THIS REGULATION:

Chapter I

Subject, matter and scope

Article 1

Subject matter

This Regulation lays down rules on the transparency of securities financing transactions (SFTs) and re-use.

Article 2

Scope

1.  This Regulation shall apply to:

(a)  a counterparty to a SFT that is established:

(1)  in the Union, including all its branches irrespective of where they are located;

(2)  in a third country, if the SFT is concluded in the course of operations of an EU branch;

(b)  management companies of undertakings for collective investment in transferable securities ("UCITS") and UCITS investment companies in accordance with Directive 2009/65/EC;

(c)  managers of alternative investment funds ("AIFMs") authorised in accordance with Directive 2011/61/EU;

(d)  a counterparty engaging in re-use that is established:

(1)  in the Union, including all its branches irrespective of where they are located;

(2)  in a third country, in either of the following cases:

(i.)  the re-use is effected in the course of the operations of an EU branch;

(ii.)  the re-use concerns financial instruments provided as collateral by a counterparty established in the Union or an EU branch of a counterparty established in a third country.

2.  Articles 4 and 15 shall not apply to:

(a)  the members of the ESCB and other Member States’ bodies performing similar functions and other Union public bodies charged with or intervening in the management of the public debt;

(b)  the Bank for International Settlements.

2a.  Article 4 shall not apply to transactions to which the bodies listed in points (a) and (b) of paragraph 2 of this Article are a counterparty.

3.  The Commission shall be empowered to adopt delegated acts in accordance with Article 27 to amend the list of the derogation set out in paragraph 2 of this Article.

The Commission shall removal counterparties from the list in paragraph 2 of this Article only with regard to the application of Article 4 to that counterparty and shall do so only on the basis of compelling evidence that the exemption of a counterparty listed in paragraph 2 of this Article is harmful to the exercise of powers of competent authorities listed in Article 12(2) by preventing them from obtaining a full reporting of all securities financing transactions.

The Commission shall add counterparties to the list in paragraph 2 of this Article only with regard to third-country central banks and shall do so only where a comparative analysis of the treatment of central banks in the relevant third-countries provide compelling evidence that the exemption of those third-country central banks from Article 4 or 15 is necessary.

To that end, and before adopting such delegated acts, the Commission shall produce a report presenting the evidence referred to in this paragraph and analysing the potential effects of such a decision.

Article 3

Definitions

For purposes of this Regulation, the following definitions shall apply:

1.  "trade repository" means a legal person that centrally collects and maintains the records of security financing transactions;

2.  'counterparties' means 'CCPs', 'financial counterparties' and 'non-financial counterparties' as defined in points (1), (8) and (9) of Article 2 of Regulation (EU) No 648/2012 as well as ''CSDs' as defined in point (1) of Article 2 of Regulation (EU) No 909/2014;

3.  "established" means:

(a)  if the counterparty is a natural person, having its head office;

(b)  if the counterparty is a legal person, having its registered office;

(c)  if the counterparty has, under its national law, no registered office, having its head office;

4.  "branch" means a place of business other than the head office which is part of a counterparty and which has no legal personality;

5.  "securities or commodities lending" and "securities or commodities borrowing" mean any transaction in which a counterparty transfers securities or commodities subject to a commitment that the borrower will return equivalent securities or commodities at some future date or when requested to do so by the transferor, that transaction being considered as securities or commodities lending for the counterparty transferring the securities or commodities and being considered as securities or commodities borrowing for the counterparty to which they are transferred;

5a.  "buy-sell back transaction" or "sell-buy back transaction" means a transaction in which a counterparty buys or sells securities or commodities or guaranteed rights agreeing, respectively, to sell or buy back securities, commodities or guaranteed rights of the same description at a specified price on a future date, that transaction being a buy-sell back transaction for the counterparty buying the securities or commodities or guaranteed rights or a sell-buy back transaction for the counterparty selling them, such buy-sell back or sell-buy back transactions not being governed by a repurchase agreement or by a reverse repurchase agreement as defined in point (82) of Article 4(1) of Regulation (EU) No 575/2013;

6.  "securities financing transaction (SFT)" means:

–  "repurchase transaction" as defined in point (83) of Article 4 of Regulation (EU) No 575/2013;

–  "securities or commodities lending" and "securities or commodities borrowing;"

-  ▌ a buy-sell back or sell-buy back or collateral swap or liquidity swap transaction;

-  a margin lending transaction as defined in point (3) of Article 272 of Regulation (EU) No 575/2013. For the purposes of this Regulation, margin lending transactions are not limited to transactions governed by agreements between institutions as defined in Regulation (EU) No 575/2013 and their counterparties;

-  "total return swap" as defined in point (7) of Annex I to Commission Regulation (EU) No 231/2013(14). For the purposes of this regulation, total return swaps are not limited to transactions between counterparties as defined in Directive 2011/61/EU.

7.  "re-use" means the use by a receiving counterparty, in its own name and for its own account or for the account of another counterparty, including any natural person, of financial instruments received as collateral ▌;

7a.  "title transfer financial collateral arrangement" means a title transfer financial collateral arrangement as defined in point (b) of Article 2(1) of Directive 2002/47/EC;

7b.  "security financial collateral arrangement" means a security financial collateral arrangement as defined in point (c) of Article 2(1) of Directive 2002/47/EC;

8.  "financial instruments" means financial instruments as defined in section C of Annex I of Directive 2004/39/EC;

10.  "commodity" means commodity as defined in point (1) of Article 2 of Commission Regulation (EC) No 1287/2006.

Chapter II

Transparency of SFTs

Article 4

Reporting obligation and safeguarding in respect of SFTs

1.  Counterparties to SFTs shall report the details of such transactions to a trade repository registered in accordance with Article 5 or recognised in accordance with Article 19. The details shall be reported no later than the third working day following the conclusion, modification or termination of the transaction but as soon as the reporting is possible.

The reporting obligation shall apply to SFTs which

are concluded after the date of application of this paragraph referred to in Article 28(2(a).

A counterparty which is subject to the reporting obligation may delegate the reporting of the details of SFTs.

Where a financial counterparty concludes an SFT with a non-financial counterparty which on its balance sheet dates does not exceed the limits of at least two of the three criteria defined in Article 3(3) of Directive 2013/34/EU(15), the reporting obligations of both counterparties shall apply only to the financial counterparty.

2.  Counterparties shall keep a record of any SFT that they have concluded, modified or terminated for at least five years following the termination of the transaction.

3.  Where a trade repository is not available to record the details of SFTs, counterparties shall ensure that those details are reported to European Securities and Markets Authority (ESMA).

In those cases, ESMA shall ensure that all the relevant entities referred to in Article 12(2) have access to all the details of SFTs they need to fulfil their respective responsibilities and mandates.

4.  In respect of information received under this Article, trade repositories and ESMA shall respect the relevant conditions on confidentiality, integrity and protection of information and shall comply with the obligations set out in particular in Article 80 of Regulation (EU) No 648/2012, and be liable to the relevant fines set out in Article 65 of that Regulation. For the purposes of this Article, references in Article 80 of Regulation (EU) No 648/2012 to Article 9 thereof and to ‘derivative contracts’ shall be construed as references to this Article and ‘SFTs’ respectively.

5.  A counterparty that reports the details of a SFT to a trade repository or to ESMA, or an entity that reports such details on behalf of a counterparty shall not be considered in breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision.

6.  No liability resulting from that disclosure shall lie with the reporting entity or its directors or employees.

In cases where the details of a SFT have to be reported to a trade repository in accordance with Article 9 of Regulation (EU) No 648/2012 and that report effectively contains the details referred to in paragraph 1 of this Article, the reporting obligation set out in paragraph 1 of this Article shall be considered to have been complied with.

7.  In order to ensure consistent application of this Article, ESMA, in close cooperation with the European System of Central Banks (ESCB) and taking into account its needs, shall develop draft regulatory technical standards specifying the details for the different types of SFTs that shall specify the following, adapted to the type of SFT and taking into account the option of position-level reporting where all details provided for in point (b) are not necessary:

(a)  the parties to the SFT and, where different, the beneficiary of the rights and obligations arising from it;

(b)  the principal amount, currency, type, quality and value of collateral, the method used to provide collateral, where it is available for re-use, if it has been re-used, any substitution of the collateral, the repurchase rate or lending fee, counterparty, haircut, value date, maturity date and first callable date.

(ba)  the date or dates from which the reporting obligation takes place, using a phased implementation by types of counterparty and taking into account that Article 4(1) shall apply to all financial counterparties six months from the date of adoption of those regulatory technical standards and to non-financial counterparties 12 months after the date of adoption of those regulatory technical standards;

Those draft technical regulatory standards shall take into account the technical specificities of pools of assets in order to facilitate reporting and shall ensure compliance with the most recent internationally agreed standards.

ESMA shall submit those draft regulatory technical standards to the Commission by [12 months after entry into forcethis Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010. The Commission shall adopt those regulatory technical standards by ... [OJ.: Please insert the date [...] months after the entry into force of this Regulation].

8.  In order to ensure uniform conditions of application of paragraph 1, ESMA shall, in close cooperation with the ESCB and taking into account its needs, develop draft implementing technical standards by specifying the format and frequency of the reports referred to in paragraphs 1 and 3 for the different types of SFTs; the format shall include global legal entity identifiers (LEIs) as required under Article 26 of Regulation No 648/2012, or pre-LEIs until the Global Legal Entity Identifier System is fully implemented, international securities identification numbers (ISINs), and a unique trade identifier for each transaction. That unique trade identifier shall be the Unique Trade ID agreed at the European level, which is provided by the reporting counterparty, or a unique code shall be generated and agreed with the other counterparty.

ESMA shall submit those draft implementing technical standards to the Commission by [12 months after entry into forcethis Regulation].

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010. The Commission shall adopt those regulatory technical standards by ... [OJ.: Please insert the date [...] months after the entry into force of this Regulation].

Chapter III

Registration and supervision of a trade repository

Article 5

Registration of a trade repository

1.  A trade repository shall register with ESMA for the purposes of Article 4 under the conditions and the procedure set out in this Article.

To be eligible to be registered under this Article, a trade repository shall be a legal person established in the Union and meet the requirements laid down in Articles 78 and 79 of Regulation (EU) No 648/2012. For the purposes of this Article, references to Article 9 of Regulation (EU) No 648/2012 shall be construed as references to Article 4 of this Regulation.

2.  The registration of a trade repository shall be effective for the entire territory of the Union.

3.  A registered trade repository shall comply at all times with the conditions for registration. A trade repository shall, without undue delay, notify ESMA of any material changes to the conditions for registration.

4.  A trade repository shall submit an application for registration or, in the case of a trade repository already registered under Regulation No 648/2012, an application for extension of services, to ESMA.

5.  ESMA shall assess whether the application is complete within 20 working days of receipt of the application. The technical standards may specify the procedures to be applied by trade repositories in order to verify the completeness and correctness of the details reported to them under Article 4(1), where ESMA considers such procedures necessary to ensure compliance with this Regulation. Where the application is not complete, ESMA shall set a deadline by which the trade repository is to provide additional information. After assessing an application as complete, ESMA shall notify the trade repository accordingly.

6.  ESMA shall develop draft regulatory technical standards specifying the details of the application for registration referred to in paragraph 4, taking into account the need to prevent duplication of procedures for those trade repositories applying for an extension of services already provided under Regulation (EU) 648/2012.

ESMA shall submit those draft regulatory technical standards to the Commission by [12 months after the publication of this Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

7.  In order to ensure uniform conditions of application of paragraph 1, ESMA shall develop draft implementing technical standards specifying the format of the application for registration referred to in paragraph 4.

ESMA shall submit those draft implementing technical standards to the Commission by [12 months after the publication of the Regulation].

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 6

Notification of and consultation with competent authorities prior to registration

1.  If a trade repository which is applying for registration is an entity which is authorised or registered by a competent authority in the Member State where it is established, ESMA shall, without undue delay, notify and consult that competent authority prior to the registration of the trade repository.

2.  ESMA and the relevant competent authority shall exchange all information that is necessary for the registration of the trade repository as well as for the supervision of the entity’s compliance with the conditions of its registration or authorisation in the Member State where it is established.

Article 7

Examination of the application

1.  ESMA shall, within 40 working days from the notification referred to in Article 5(5), examine the application for registration based on the compliance of the trade repository with this Chapter and shall adopt a fully reasoned registration decision or a decision refusing registration. That decision shall be published and shall be open to challenge before the corresponding specialist court, and failing that before the General Court within a maximum of 15 calendar days.

2.  A decision issued by ESMA pursuant to paragraph 1 shall take effect on the fifth working day following its adoption.

Article 8

Notification of ESMA decisions relating to registration

1.  Where ESMA adopts a registration decision or a decision refusing or withdrawing registration, it shall notify the trade repository within five working days with a fully reasoned explanation of its decision.

ESMA shall, without undue delay, notify the relevant competent authority referred to in Article 6(1) of its decision.

2.  ESMA shall communicate any decision taken in accordance with paragraph 1 to the Commission.

3.  ESMA shall publish on its website a list of trade repositories registered in accordance with this Regulation. That list shall be updated within five working days following the adoption of a decision under paragraph 1.

Article 9

Powers of ESMA

1.  The powers conferred on ESMA in accordance with Articles 61 to 68, 73 and 74 of Regulation (EU) No 648/2012 shall be exercised also with respect to this Regulation.

References to Article 81(1) and (2) of Regulation (EU) No 648/2012 shall be read as references to Article 12(1) and 12(2) of this Regulation respectively.

2.  The powers conferred on ESMA or any official of or other person authorised by ESMA by Articles 61 to 63 of Regulation (EU) No 648/2012 shall not be used to require the disclosure of information or documents which are subject to legal privilege.

Article 10

Withdrawal of registration

1.  Without prejudice to Article 73 of Regulation (EU) No 648/2012, ESMA shall withdraw the registration of a trade repository where the trade repository:

(a)  expressly renounces the registration or has provided no services for the preceding six months;

(b)  obtained the registration by making false statements or by any other irregular means;

(c)  no longer meets the conditions under which it was registered.

2.  ESMA shall, without undue delay, notify the relevant competent authority referred to in Article 6(1) of a decision to withdraw the registration of a trade repository. That decision shall, within 30 calendar days, be subject to review before the relevant specialist court, and, where appropriate before the General Court. The lodging of such an appeal shall not have the effect of suspending the withdrawal.

3.  The competent authority of a Member State in which the trade repository performs its services and activities and which considers that one of the conditions referred to in paragraph 1 has been met, may request ESMA to examine whether the conditions for the withdrawal of registration of the trade repository concerned are met. Where ESMA decides not to withdraw the registration of the trade repository concerned, it shall provide full reasons.

4.  The competent authority referred to in paragraph 3 shall be the authority designated under Article 22 of Regulation (EU) No 648/2012.

Article 11

Supervisory fees

1.  ESMA shall charge fees to the trade repositories in accordance with this Regulation and in accordance with the delegated acts adopted pursuant to paragraph 2 of this Article. Those fees shall be proportionate to the turnover of the trade repository concerned and fully cover ESMA’s necessary expenditure relating to the registration and supervision of trade repositories as well as the reimbursement of any costs that the competent authorities may incur carrying out work pursuant to this Regulation in particular as a result of any delegation of tasks pursuant to Article 9(1) of this Regulation in combination with Article 74 of Regulation (EU) No 648/2012. For the purposes of this Article, references to Article 72(3) of Regulation (EU) No 648/2012 shall be construed as references to paragraph 2 of this Article.

1a.  Where a trade repository has been registered under this Regulation and also under Regulation (EU) No 648/2012, fees charged by ESMA to the trade repository in accordance with this Regulation shall cover only ESMA's additional necessary expenses.

2.  The Commission shall be empowered to adopt a delegated act in accordance with Article 27 to specify further the type of fees, the matters for which fees are due, the amount of the fees and the manner in which they are to be paid.

Article 12

Data transparency and availability

1.  A trade repository shall regularly, and in an easily accessible way, publish aggregate positions by type of SFTs reported to it.

2.  A trade repository shall collect and maintain the details of SFTs and shall ensure that the entities referred to in Article 81(3) of Regulation (EU) No 648/2012, including the ECB in the context of carrying out its responsibilities and mandate under the Single Supervisory Mechanism pursuant to Council Regulation (EU) No 1024/2013, EBA and EIOPA have direct and immediate access to these details to enable them to fulfil their respective responsibilities and mandates.

3.  In order to ensure consistent application of this Article, ESMA shall, in close cooperation with the ESCB and taking into account the needs of the entities referred to in paragraph 2, develop draft regulatory technical standards specifying:

(a)  the frequency and the details of the aggregate positions referred to in paragraph 1 and the details of SFTs referred to in paragraph 2;

(b)  operational standards required in order to aggregate and compare data across repositories systematically;

(c)  the details of the information to which the entities referred to in paragraph 2 have access to, depending on their respective responsibilities and mandates;

(ca)  the arrangements subject to which the trade repositories are to grant direct and immediate access to the entities referred to in paragraph 2.

Those draft regulatory technical standards shall ensure that the information published under paragraph 1 is not capable of identifying a party to any SFT.

ESMA shall submit those draft regulatory technical standards to the Commission by [12 months after the publication of this Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

3a.  All transfers of data between trade repositories, whether located in the Union or in a third country, and entities referred to in paragraph 2 shall be made in accordance with Regulation (EC) No 45/2001.

Chapter IV

Transparency towards investors

Article 13

Investment fund's transparency in periodical reports

1.  Management companies of UCITS, UCITS investment companies and AIFMs shall inform their investors on the use they make of SFTs ▌:

(a)  UCITS management companies or investment companies shall include this information as part of their half-yearly and annual reports referred to in Article 68 of Directive 2009/65/EC;

(b)  AIFMs shall include this information in the annual report referred to in Article 22 of Directive 2011/61/EU.

1a.  Undertakings admitted to trading on a regulated market or on a multilateral trading facility shall include in their annual financial reports referred to in Article 5 of Directive 2004/109/EU(16) a description of their use of SFTs and of their re-use of collateral.

Credit institutions established in a Member State and authorized in accordance with Directive 2013/36/EU(17) shall include in their annual financial reports a description of their use of SFTS and of their re-use of collateral.

2.  The information on SFT ▌shall take account of the existing requirements under Directive 2009/65/EC and Directive 2011/61/EU and comprise, where appropriate, the data provided for in Section A of the Annex.

3.  ESMA shall develop draft regulatory technical standards specifying the details of Section A of the Annex as well as the circumstances under which they are applicable, taking into account administrative burden.

ESMA shall submit those draft regulatory technical standards to the Commission by ... * [OJ please insert date: 12 months after the entry into force of this Regulation].

Power is delegated to the Commission to adopt the regulatory standards referred to in the second subparagraph, in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 14

Investment fund's transparency in pre-investment documents

1.  The UCITS prospectus referred to in Article 69 of Directive 2009/65/EC, and the disclosure by AIFMs to investors referred to in Article 24 (1) and (3) of Directive 2011/61/EU shall specify the SFT and other financing structures which UCITS management companies or investment companies, and AIFMs respectively, are authorised to use and include a clear statement that these techniques are used.

2.  The prospectus and the disclosure to investors referred to in paragraph 1 shall take account of the existing requirements under Directive 2009/65/EC and Directive 2011/61/EU and comprise the data provided for in Section B of the Annex.

3.  The Commission shall be empowered to adopt delegated acts in accordance with Article 27 to amend Section B of the Annex in order to reflect the evolution of market practices and technological developments, taking into account administrative burden.

Chapter V

Transparency of re-use

Article 15

Re-use of financial instruments received as collateral

1.  Counterparties may re-use financial instruments received as collateral where at least all the following conditions are fulfilled:

(a)  the providing counterpart has been duly informed in writing by the receiving counterparty of the risks and consequences that may be involved in:

(i)  granting consent to a right of use of collateral provided under a security collateral arrangement in accordance with Article 5 of Directive 2002/47/EC; or

(ii)  signing a title transfer collateral arrangement.

In the circumstances laid down in this point, the providing counterparty shall at least be informed of the risks and consequences that may arise in the event of the default of the receiving counterparty.

(b)  the providing counterpart has granted its prior express consent as evidence by the signature of the providing counterparty to a collateral arrangement in writing or in a legally equivalent manner unless a counterparty has expressly agreed to provide collateral by way of a title transfer collateral arrangement.

2.  Counterparties may exercise their right to re-use only when at least all the following conditions are fulfilled:

(a)  re-use is undertaken in accordance with the terms specified in the written agreement referred to in point (b) of paragraph 1;

(b)  the financial instruments received as collateral are transferred from the account of the providing counterparty to a separate account opened in the name of or held by the receiving counterparty.

3.  This Article is without prejudice to stricter sectorial legislation, in particular to Directive 2011/61/EU and 2009/65/EC.

Chapter VI

Supervision and competent authorities

Article 16

Designation and powers of competent authorities

1.  For the purpose of this Regulation, competent authorities shall be:

(a)  for financial counterparties, the competent authorities designated in accordance with the legislation referred to in point (8) of Article 2 of Regulation (EU) No 648/2012;

(b) for non-financial counterparties, the competent authorities designated in accordance with Article 10(5) of Regulation (EU) No 648/2012;

(c)  for CCPs, the competent authorities designated in accordance with Article 22 of Regulation (EU) 648/2012;

(d)  for central securities depositories, the competent authorities designed in accordance with Article 11 of Regulation (EU) 909/2014(18);

(e) for UCITS and UCITS managing companies, the competent authorities designated in accordance with Article 97 of Directive 2009/65/EC;

(ea)  for AIFs and AIF managing companies, the competent authorities designated in accordance with Article 44 of Directive 2011/61/EU.

2.  The competent authorities shall exercise the powers conferred on them by the provisions referred to in paragraph 1 and supervise compliance with the obligations set out in this Regulation.

3.  The competent authorities referred to in point (e) of paragraph 1 of this Article shall monitor UCITS or AIFs established or marketed in their territories to verify that they do not use SFTs and other financing structures unless they comply with Articles 13 and 14.

Article 17

Cooperation between competent authorities

1.  The competent authorities referred to in Article 16 and ESMA shall cooperate closely with each other and exchange information for the purpose of carrying out their duties pursuant this Regulation, in particular to identify and remedy breaches of this Regulation.

2.  The competent authorities referred to in Article 16 and ESMA shall cooperate closely with the relevant members of the ESCB where relevant for the exercise of their duties, in particular in relation to Article 4.

2a.  The Members of the ESCB shall cooperate closely and exchange information with the relevant competent authorities referred to in Article 12(2).

The Members of the ESCB shall provide on a confidential basis the details of the securities financing transactions to which they are counterparty to the relevant competent authorities upon a justified request of those authorities, only with a view for those authorities to fulfil their respective responsibilities in accordance with Article 16.

To that end, the Members of the ESCB shall keep a record of any SFT that they have concluded, modified or terminated for at least five years following the termination of the transaction.

The Members of the ESCB and the relevant competent authorities shall take any necessary administrative and organisational measures to facilitate the exchange of information provided by this paragraph.

2b.  ESMA shall publish an annual report on aggregate SFT volumes by type of counterparty and transaction based on data reported in accordance with Article 4.

Article 18

Professional secrecy

1.  The obligation of professional secrecy shall apply to all persons who work or have worked for the entities referred to in Article 12(2) and the competent authorities referred to in Article 16, for ESMA, EBA and EIOPA or for auditors and experts instructed by the competent authorities or ESMA, EBA and EIOPA. No confidential information that those persons receive in the course of their duties shall be divulged to any person or authority, except in summary or aggregate form such that an individual counterparty, trade repository or any other person cannot be identified, without prejudice to cases covered by criminal or tax law or to this Regulation.

2.  Without prejudice to cases covered by criminal or tax law, the competent authorities, ESMA, EBA, EIOPA, bodies or natural or legal persons other than competent authorities which receive confidential information pursuant to this Regulation may use it only in the performance of their duties and for the exercise of their functions, in the case of the competent authorities, within the scope of this Regulation or, in the case of other authorities, bodies or natural or legal persons, for the purpose for which such information was provided to them or in the context of administrative or judicial proceedings specifically relating to the exercise of those functions, or both. Where ESMA, EBA, EIOPA the competent authority or another authority, body or person communicating information consents thereto, the authority receiving the information may use it for other non-commercial purposes.

3.  Any confidential information received, exchanged or transmitted pursuant to this Regulation shall be subject to the conditions of professional secrecy laid down in paragraphs 1 and 2. However, those conditions shall not prevent ESMA, EBA, EIOPA, the competent authorities or the relevant central banks from exchanging or transmitting confidential information in accordance with this Regulation and with other legislation applicable to investment firms, credit institutions, pension funds, insurance and reinsurance intermediaries, insurance undertakings, regulated markets or market operators or otherwise with the consent of the competent authority or other authority or body or natural or legal person that communicated the information.

4.  Paragraphs 1 and 2 shall not prevent the competent authorities from exchanging or transmitting confidential information, in accordance with national law, that has not been received from a competent authority of another Member State.

Chapter VII

Relationship with third countries

Article 19

Equivalence of supervisory arrangements and recognition of trade repositories

1.  The Commission may adopt implementing acts determining that the legal and supervisory arrangements of a third country fulfil the conditions set out in Article 75 of Regulation (EU) No 648/2012 for the purposes of this Regulation. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 27a(2) of this Regulation..

When the Commission adopts an implementing act on equivalence for a third country, the counterparties entering into a securities financing transaction and located in that third country shall be deemed to have complied with Article 4 of this Regulation if, in respect of the transaction concerned, they comply with the relevant similar reporting obligations of that third country.

2.  A trade repository established in a third country may provide its services and activities to entities established in the Union for the purposes of Article 4 only after its recognition by ESMA in accordance with the requirements laid down in paragraph 3 of this Article.

3.  A trade repository referred to in paragraph 2 shall submit to ESMA its application for recognition together with all necessary information, including at least the information necessary to verify that the trade repository is authorised and subject to effective supervision in a third country which satisfies all the following criteria:

(a)  it has been recognised by the Commission, by means of an implementing act pursuant to paragraph 1, as having an equivalent and enforceable regulatory and supervisory framework;

(b)  it has entered into an international agreement with the Union pursuant to Article 75(2) of Regulation (EU) No 648/2012;

(c)  it has entered into cooperation arrangements pursuant to Article 75(3) of Regulation (EU) No 648/2012 to ensure that Union authorities, including ESMA, have immediate and continuous access to all the necessary information.

References to ‘derivative contracts’ in Article 75(2) of Regulation (EU) No 648/2012 shall be construed as references to ‘SFTs’ for the purposes of this Regulation.

International agreements that have been concluded between the Union and third countries pursuant to Article 75(2) of Regulation (EU) No 648/2012 shall be amended so that their scope extends to SFTs.

With respect to ongoing negotiations of international agreements between the Union and third countries pursuant to Article 75(2) of Regulation (EU) No 648/2012, the Commission shall request new negotiating directives from the Council in order to extend its negotiating directives granted by the Council in respect of Regulation (EU) No 648/2012.

4.  Within 30 working days of receipt of the application, ESMA shall assess whether the application is complete. If the application is not complete, ESMA shall set a deadline by which the applicant trade repository has to provide additional information.

5.  Within 180 working days of the submission of a complete application, ESMA shall inform the applicant trade repository in writing with a fully reasoned explanation whether the recognition has been granted or refused.

6.  ESMA shall publish on its website a list of the trade repositories recognised in accordance with this Article.

7.  By way of derogation from points (b) and (c) of paragraph 3, where direct, continuous and immediate access by the authorities referred to in Article 12(2) to the data they need to fulfil their respective responsibilities and mandate available at trade repositories registered or established in third countries is ensured by an international agreement or a legal disposition of the third country as a non-reversible, binding and enforceable obligation against those trade repositories, the Commission may, after consulting ESMA, conclude cooperation arrangements with the relevant third country authorities regarding mutual access to, and exchange of information on, SFTs held in trade repositories which are established in that third country, provided that professional secrecy, including the protection of business and trade secrets shared by the authorities with third parties, is guaranteed. Those arrangements may take the legal form of a Memorandum of Understanding.

8.  ESMA may establish cooperation arrangements with relevant authorities of third countries under the conditions set out in Article 76 of Regulation (EU) No 648/2012 with a view to establishing cooperation arrangement to access information on SFTs held in Union trade repositories. References to ‘derivative contracts’ in Article 76 of Regulation (EU) No 648/2012 shall be construed as references to ‘SFTs’ for the purposes of this Regulation.

Chapter VIII

Administrative sanctions and measures

Article 20

Administrative sanctions and measures

1.  Without prejudice to Article 25 and the right of Member States to provide for and impose criminal sanctions, Member States shall, in conformity with national law, provide for competent authorities to have the power to impose administrative sanctions and other administrative measures in relation to at least the following breaches:

(a)  breach of Article 4;

(b)  breach of Article 15;

(ba)  breach of Article 18.

Where the provisions referred to in the first subparagraph apply to legal persons, in case of a breach Member States shall provide for competent authorities to be able to apply sanctions, subject to the conditions laid down in national law, to members of the management body, and to other individuals who under national law are responsible for the breach.

2.  The administrative sanctions and measures taken for the purpose of paragraph 1 shall be effective, proportionate and dissuasive, and the loss avoided or profit gained as a consequence of the infringement shall be taken into account when calculating the sanction.

3.  Where Member States have chosen to lay down criminal sanctions for the breaches of the provisions referred to in paragraph 1 of this Article, they shall ensure that appropriate measures are in place so that competent authorities have all the necessary powers to liaise with police and criminal justice authorities within their jurisdiction to receive specific information related to criminal investigations or proceedings commenced for possible violations of Articles 4, 15 and 18, and to provide the same to other competent authorities and ESMA to fulfil their obligation to cooperate with each other and, where relevant with ESMA for the purposes of paragraph 1 of this Article.

Competent authorities may also cooperate with competent authorities of other Member States and of third countries with respect to the exercise of their sanctioning powers.

4.  Member States shall, in conformity with national law, confer on competent authorities the power to apply at least the following administrative sanctions and other measures in the event of the breaches referred to in paragraph 1 of this Article:

(a)  an order requiring the person responsible for the breach to cease the conduct and to desist from a repetition of that conduct;

(b)  the disgorgement of the profits gained or losses avoided due to the breach, in accordance with the estimate made by the competent authority;

(c)  a public warning which indicates the person responsible and the nature of the breach;

(d)   ▌suspension of the authorisation;

(e)  a temporary or, for serious or repeated breaches, a permanent ban against any person discharging managerial responsibilities or any natural person who is deemed responsible, from exercising management functions;

(f)  a temporary ban or, for serious or repeated breaches, a permanent ban against any person discharging managerial responsibilities or any natural person who is deemed responsible, from dealing on own account;

(g) maximum administrative pecuniary sanctions of at least three times the amount of the profits gained or losses avoided because of the breach, in accordance with the estimate made by the competent authority;(h)  in respect of a natural person, a maximum administrative pecuniary sanctions of at least EUR 5 000 000 or in the Member States whose currency is not the euro, the corresponding value in the national currency on the date of entry to force of this Regulation;

(i)  in respect of legal persons, maximum administrative pecuniary sanctions of at least 10% of the total annual turnover of the legal person according to the last available accounts approved by the management body; where the legal person is a parent undertaking or a subsidiary of the parent undertaking which has to prepare consolidated financial accounts according to Directive 2013/34/EU(19), the relevant total annual turnover shall be the total annual turnover or the corresponding type of income according to the relevant accounting regime according to the last available consolidated accounts approved by the management body of the ultimate parent undertaking.

Member States may provide that competent authorities may have powers in addition to those referred to in this paragraph and that they may provide for a wider scope of sanctions and higher levels of sanctions than those established in this paragraph.

The powers conferred on competent authorities as set out in this paragraph are without prejudice to the exclusive competence of the ECB, pursuant to Article 4(1)(a) of Council Regulation (EU) No 1024/2013, to withdraw authorisations of credit institutions for prudential supervisory purposes.

5.  A breach of the rules laid down by Article 4 or Article 15 shall not affect the validity of the terms of a SFT or the possibility of the parties to enforce the terms of a SFT. A breach of the rules defined under Article 4 shall not give rise to compensation rights from a party to a SFT.

6.  By [12 months after entry into force of this Regulation] Member States shall notify the rules regarding paragraphs 1, 3 and 4 to the Commission and ESMA. They shall notify the Commission and ESMA without delay of any subsequent amendment thereto.

Article 21

Exercise of supervisory powers and sanctions

Member States shall ensure that, when determining the type and level of administrative sanctions and other measures, competent authorities shall take into account all relevant circumstances, including, where appropriate:

(a)  the gravity and duration of the breach;

(b)  the degree of responsibility of the person responsible for the breach;

(c)  the financial strength of the person responsible for the breach, by considering factors such as the total turnover of a legal person or the annual income in the case of a natural person;

(d)  the importance of the profits gained or losses avoided by the person responsible for the breach, insofar as they can be determined;

(e)  the level of cooperation of the person responsible for the breach with the competent authority, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that person;

(f)  previous breaches by the person responsible for the breach;

(g)  measures taken by the person responsible for the breach to prevent its repetition.

Article 22

Reporting of breaches

1.  The competent authorities shall establish effective mechanisms to enable reporting of actual or potential breaches of Articles 4 and 15 to competent authorities.

2.  The mechanisms referred to in paragraph 1 shall include at least:

(a)  specific procedures for the receipt of reports of breaches and their follow-up, including the establishment of secure communication channels for such reports;

(b)  appropriate protection for persons working under a contract of employment, who report breaches or who are accused of breaches, against retaliation, discrimination or other types of unfair treatment;

(c)  protection of personal data both of the person who reports the breach and the natural person who allegedly committed the breach, including protection in relation to preserving the confidentiality of their identity, at all stages of the procedure without prejudice to disclosure of information being required by national law in the context of investigations or subsequent judicial proceedings.

3.  Member States shall require employers to have in place appropriate internal procedures for their employees to report breaches of Articles 4 and 15.

4.  Member States may provide for financial incentives to persons who offer relevant information about potential breaches of this Regulation to be granted in accordance with national law where such persons do not have other pre-existing legal or contractual duties to report such information, and provided that the information is new, and it results in the imposition of an administrative sanction or other measure for a breach of this Regulation or a criminal sanction.

Article 23

Exchange of information with ESMA

1.  Competent authorities shall provide ESMA every six months with aggregated and granular information regarding all administrative measures, sanctions and fines imposed by them in accordance with Article 20. ESMA shall publish that information in a half-yearly report.

2.  Where Member States have chosen to lay down criminal sanctions for the breaches of the provisions referred to in that Article 20, their competent authorities shall provide ESMA annually with anonymised and aggregated data regarding all criminal investigations undertaken and criminal sanctions imposed. ESMA shall publish data on criminal sanctions imposed in an annual report. Where the competent authority has disclosed administrative sanctions, fines and other measures, as well as criminal sanctions to the public, it shall simultaneously notify ESMA thereof.

3.  Where the competent authority has disclosed an administrative measure, sanction or criminal sanction to the public, it shall, at the same time, report that information to ESMA.

4.  ESMA shall develop draft implementing technical standards to determine the procedures and forms for exchange of information as referred to in paragraphs 1 and 2.

ESMA shall submit those draft implementing technical standards to the Commission [by 12 months after the publication of the Regulation].

Power is conferred to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 24

Publication of decisions

1.  Subject to the third subparagraph competent authorities shall publish any decision imposing an administrative sanction or other measure in relation to a breach of Articles 4 and 15 on their website immediately after the person subject to that decision has been informed of that decision.

2.  The information published pursuant to the first subparagraphs shall specify at least the type and nature of the breach and the identity of the person subject to the decision.

The first and second subparagraphs do not apply to decisions imposing measures that are of an investigatory nature.

Where a competent authority considers, following a case-by-case assessment, that the publication of the identity of the legal person subject to the decision, or the personal data of a natural person, would be disproportionate, or where such publication would jeopardise an ongoing investigation or the stability of the financial markets, it shall do one of the following:

(a)  defer publication of the decision until the reasons for that deferral cease to exist;

(b)  publish the decision on an anonymous basis in accordance with national law where such publication ensures the effective protection of the personal data concerned and, where appropriate, postpone publication of the relevant data for a reasonable period of time where it is foreseeable that the reasons for anonymous publication will cease to exist during that period;

(c)  not publish the decision in the event that the competent authority is of the opinion that publication in accordance with point (a) or (b) will be insufficient to ensure:

(i.)  that the stability of financial markets is not jeopardised; or

(ii.)  the proportionality of the publication of such decisions with regard to measures which are deemed to be of a minor nature.

3.  Where the decision is subject to an appeal before a national judicial, administrative or other authority, competent authorities shall also publish immediately on their website such information and any subsequent information on the outcome of such an appeal. Moreover, any decision annulling a decision subject to appeal shall also be published.

4.  Competent authorities shall ensure that any decision that is published in accordance with this Article shall remain accessible on their website for a period of at least five years after its publication. Personal data contained in those decisions shall be kept on the website of the competent authority for the period which is necessary in accordance with the applicable data protection rules.

Article 25

Sanctions for the purpose of Articles 13 and 14

Sanctions and other measures established in accordance with Directive 2009/65/EC and Directive 2011/61/EU shall be applicable to breaches of the obligations set in Articles 13 and 14 of this Regulation.

Chapter IX

Review

Article 26

Reports and review

1.  By …* [OJ please insert date: 9 months after ESMA report/15 months after entry into force of this Regulation], the Commission shall submit a report to the European Parliament and to the Council on the effectiveness and efficiency of this Regulation and on further international efforts to enhance the transparency of SFTs markets as well as to further mitigate the risks associated with SFTs, including the FSB recommendations on haircuts on collateral posted in non-centrally cleared SFTs. The Commission shall submit that report together with any appropriate legislative proposals.

For the purposes of the Commission report, ESMA shall assess, in cooperation with EBA and the ESRB, and submit to the Commission a report on appropriate solutions to tackle the build-up of excessive leverage via the use of SFTs, and to consider reducing the pro-cyclicality of that leverage, including the ways for developing a European framework consistent with existing FSB recommendations on haircuts on non-centrally cleared SFTs. That report shall also consider the quantitative impact of the FSB recommendations and shall be submitted to the Commission by…* [OJ please insert date: six months after the entry into force of this Regulation]. The report shall also be submitted by to the European Parliament and to the Council.

1b.  On an annual basis, the Commission shall prepare a report on the application of Article 11 and shall fully account for all fees that have been charged to trade repositories to ensure that they are used solely to cover the necessary expenditure under this Regulation and that under Regulation (EU) No 648/2012.

2a.  The Commission shall, in cooperation with the Member States and ESMA, draw up an annual report assessing any possible circumventions of the obligations of this Regulation that any transaction with an equivalent object or effect to a securities financing transaction may allow. ESMA shall monitor and report any critical developments in the evolution of market practices in this respect.

2b.  ESMA shall present an annual report to the European Parliament, the Council and the Commission on the relevance of allowing single-sided reporting of transactions, in order to assess on the basis of reporting experiences whether duplication transaction reporting can be avoided or managed.

Chapter X

Final provisions

Article 27

Exercise of delegated powers

1.  The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.  The delegation of power referred to in Articles 2(3), ▌ 11(2) ▌and 14(3) shall be conferred on the Commission for an indeterminate period of time from the date referred to in Article 28.

3.  The delegation of power referred to in Articles 2(3), ▌ 4, 11(2) ▌and 14(3) may be revoked at any time by the European Parliament or by the Council. A decision of revocation shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

5.  A delegated act adopted pursuant to Articles 2(3), ▌4, 11(2) ▌and 14(3) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or the Council.

Article 27a

1.  The Commission shall be assisted by the Committee for [...]. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.  Where reference is made to this paragraph, Article 4 of Regulation (EU) No 182/2011 shall apply.

3.  Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 28

Entry into force and application

1.  This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

2.  This Regulation shall apply from the date of entry into force, with the exception of:

(a)  Article 4(1), which shall apply to all financial counterparties by six months from the date of adoption of the regulatory technical standards referred to in Article 4(7) and to non-financial counterparties by 12 months after the date of adoption of the regulatory technical standards referred to in Article 4(7);

(b)  Article 13, which shall apply from …* [OJ please insert date: 18 months after the entry into force of the Regulation];

(c)  Article 14, which shall apply from …* [OJ please insert date: six months after the entry into force of the Regulation].

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at …

For the European Parliament  For the Council

The President  The President

(1)

OJ C 451 of 16.12.2014, p. 56.

(2)

OJ C 271 of 19.8.2014, p. 87.

(3)

* Amendments: new or amended text is highlighted in bold italics; deletions are indicated by the symbol ▌.

(4)

  OJ C 336, 26.9.2014, p. 5.

(5)

  OJ C 271, 16.12.2014, p. 59.

(6)

  OJ C 271, 19.8.2014, p. 87.

(7)

  Position of the European Parliament of …

(8)

  Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).

(9)

  Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1).

(10)

  Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2012 on financial collateral arrangements (OJ L 168, 27. 6. 2002, p. 43).

(11)

  Directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions (OJ L 257, 28.8.2014, p. 186).

(12)

  Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84).

(13)

  OJ C 328, …, p. 3.

(14)

  Commission Regulation (EU) No 231/2013of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (OJ L 83, 22.3.2013, p. 1).

(15)

  Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).

(16)

  Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38).

(17)

  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).

(18)

  Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1).

(19)

  Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC OJ L 182, 29.6.2013, p. 19.


ANNEX

Section A – Information to be provided in the UCITS half-yearly and annual reports and the AIF's annual report

Global data:

–  The amount of securities and commodities on loan as a proportion of total lendable assets;

–  The amount of assets engaged in each type of SFT and each other financing structure expressed as an absolute amount and as a proportion of the fund’s assets under management (AUM)

Concentration data:

–  Top 10 collateral securities and commodities received per issuer in regard of all types of SFT and other financing structure

–  Top 10 counterparties of each type of SFTs separately and other financing structure

Aggregate transaction data for each type of SFT separately and other financing structures – to be broken down according to the below categories:

–  Type and quality of collateral;

–  Maturity tenor of the collateral broken down in the following maturity buckets: less than one day, one day to one week, one week to one months, one month to three months, three months to one year, above one year, open maturity;

–  Currency of the collateral;

–  Maturity tenor broken down in the following maturity buckets: less than one day, one day to one week, one week to one month, one month to three months, three months to one year, above one year, open transactions;

–  Country of domicile of counterparties;

–  Settlement and clearing (e.g., tri-party, Central Counterparty, bilateral).

Data on re-use ▌of cash collateral:

–  Share of collateral received that is re-used ▌, compared to the maximum amount specified in the prospectus or in the disclosure to investors;

–  Information on any restrictions on type of securities and commodities subject to ▌ re-use;

–  Cash collateral reinvestment returns to the fund.

Safekeeping of collateral received by the fund as part of SFT and other financing structure

Number of custodians and the amount of collateral assets safe-kept by each

Safekeeping of collateral granted by the fund as part of SFT and other financing structure

The proportion of collateral held either in segregated accounts or in pooled accounts, or in any other accounts

Data on return and cost for each type of SFTs and each type of other financing structure broken down between the fund, fund manager and agent lender in absolute terms and as a percentage of overall returns generated by that type of SFT and type of other financing structure

Section B – Information to be included in the UCITS Prospectus and AIF disclosure to investors:

–  General description of the SFTs and other financing structure used by the fund and the rationale for their use

–  Overall data to be reported for each type of SFT and each type of other financing structure

•  Types of assets that can be subject to them

•  Maximum proportion of AUM that can be subject to them

•  Expected proportion of AUM that will be subject to each of them

–  Criteria used to select counterparties (including legal status, country of origin, minimum credit rating)

–  Acceptable collateral: description of acceptable collateral with regard to assets types, issuer, maturity, liquidity as well as the collateral diversification and correlation policies,

–  Collateral valuation: description of the collateral valuation methodology used and its rationale, and whether daily mark-to-market and daily variation margins are used.

–  Risk management: description of the risks linked to SFT and other financing structures, as well as risks linked to collateral management, such as operational, liquidity, counterparty, custody and legal risks.

–  Specification of how assets lent out and collateral received are safe-kept (fund custodian)

–  Policy on sharing of return generated by SFT and other financing structures: description of the proportions of the revenue generated by them that are returned to the fund, to the manager or retained by third parties (e.g. the agent lender).


PROCEDURE

Title

Reporting and transparency of securities financing transactions

References

COM(2014)0040 – C7-0023/2014 – 2014/0017(COD)

Date submitted to Parliament

29.1.2014

 

 

 

Committee responsible

       Date announced in plenary

ECON

25.2.2014

 

 

 

Committees asked for opinions

       Date announced in plenary

JURI

25.2.2014

 

 

 

Not delivering opinions

       Date of decision

JURI

3.9.2014

 

 

 

Rapporteurs

       Date appointed

Renato Soru

22.7.2014

 

 

 

Discussed in committee

4.11.2014

21.1.2015

23.2.2015

 

Date adopted

24.3.2015

 

 

 

Result of final vote

+:

–:

0:

49

2

6

Members present for the final vote

Gerolf Annemans, Burkhard Balz, Hugues Bayet, Pervenche Berès, Udo Bullmann, Esther de Lange, Fabio De Masi, Anneliese Dodds, Markus Ferber, Jonás Fernández, Elisa Ferreira, Sven Giegold, Neena Gill, Roberto Gualtieri, Brian Hayes, Gunnar Hökmark, Danuta Maria Hübner, Cătălin Sorin Ivan, Petr Ježek, Othmar Karas, Georgios Kyrtsos, Alain Lamassoure, Philippe Lamberts, Werner Langen, Sander Loones, Bernd Lucke, Olle Ludvigsson, Ivana Maletić, Fulvio Martusciello, Marisa Matias, Bernard Monot, Luděk Niedermayer, Stanisław Ożóg, Dariusz Rosati, Alfred Sant, Molly Scott Cato, Peter Simon, Renato Soru, Theodor Dumitru Stolojan, Kay Swinburne, Paul Tang, Michael Theurer, Ramon Tremosa i Balcells, Ernest Urtasun, Marco Valli, Tom Vandenkendelaere, Cora van Nieuwenhuizen, Jakob von Weizsäcker, Pablo Zalba Bidegain, Marco Zanni

Substitutes present for the final vote

Matt Carthy, Philippe De Backer, Jeppe Kofod, Thomas Mann, Morten Messerschmidt, Siegfried Mureșan, Michel Reimon, Miguel Urbán Crespo

Date tabled

9.4.2015

Last updated: 19 October 2015Legal notice