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European Parliament adopted the Directives on the Solvency II and Credit Rating Agencies with the Commission to provide a legislative initiative in July 2010 to establish a genuine European supervision on CRAs.
Parliament also voted on the e-money directive and the cross border payments directive, and adopted a resolution to the G20 meeting in particular drawing on remuneration and tax haven issues.
Parliament adopted Solvency II Directive
Parliament adopted the directive on Solvency II with 593 votes in favour, 80 against with 3 abstentions. As Parliament and the Council have already reached an agreement on a common text the legislative procedure ended with Parliamentary vote and a consequent formal go-ahead by the Council.
The new legislation shifts the focus of supervisory authorities from merely checking compliance with a "tick-the-box" approach based on a set of rules to more pro-actively supervising the risk management of individual companies based on a set of principles.
Colleges of supervisors will be established to improve supervision and risk management, to facilitate co-operation, exchange of
The SCR will be calculated according to a risk-based approach: when capital falls below this level, supervisory intervention will be needed. The MCR is lower – the point at which the company’s license would need to be withdrawn.
The new legislation indicates that the MCR should be between 25 and 45 per cent of the company’s SCR, with the exact amount being a calculation based on variables which indicate the company’s ability to remain operational.
Member States will have to transpose the new directive by at the latest
Two years after entry into force, the Commission is requested to put forward a legislative proposal to improve, if necessary, the application of some aspects of the Directive, including the co-operation of supervisory authorities within the colleges.
Three years after entry into force, Commission will have to propose legislation to enhance group supervision and capital management within a group of insurance. This would also include the provision, proposed by Parliament representatives, on group support.
Parliament adopted report on CRAs
Credit Rating Agencies will be registered, monitored and supervised in
As a rule, all credit rating agencies that would like their credit ratings to be used in the EU will need to apply for registration. The applications will be submitted to CESR and decided upon in a consensual manner by the relevant securities regulators grouped in a college. The college of regulators will also be involved in the day-to-day supervision of credit rating agencies.
Specific, albeit sufficiently exacting, treatment is envisaged and may be extended, on a case-by-case basis, to credit rating agencies operating exclusively from non-EU jurisdictions provided that their countries of origin have established regulatory and supervisory frameworks as stringent as the one now put in place in the EU.
New rules include the following:
The new legislation will put in place a single point of entry for the registration of agencies. The European Commission will have, before a legislative initiative in July 2010, to establish a genuine European supervision.
G20 Summit
Parliament adopted a resolution on the outcome of the G20 summit welcoming the pledge to reform remuneration schemes in a more sustainable way as part of the financial regulatory review. The resolution is also calling on the next Summit to agree on co-ordinated and concrete action both to close down all tax and regulatory havens and to close 'onshore' tax and regulatory loopholes which permit widespread tax avoidance even in major financial centres.
The House rejects any form of protectionism both in the real economy and in the financial sector as a reaction to the economic downturn and falling world trade.
E-Money and Cross-Border Payments
The new E-Money Directive will introduce proportionate prudential requirements facilitating market access to newcomers. This includes a reduction of initial capital from the current EUR 1 million to EUR 350.000 and new rules on the calculation of own-funds. The Directive sets high standards of consumer protection, both in terms of protection and redemption of consumer funds.
The new rules will offer a second chance to the e-money market to take off. Its expected volume could reach up to EUR 10 billion by 2012.
The new Regulation on cross-border payments in the Community extends the principle of equal charges for national and cross-border payments to direct debits, in addition to credit transfers, electronic payments (including card transactions) and ATM cash withdrawals, which are already covered by the current version of the Regulation.
It strengthens the supervisory and complaint-solving role of the competent national authorities and provides for the establishment of out-of-court redress procedures. It also removes, up to EUR 50.000, the payments-based statistical reporting obligations that hinder the smooth flow of cross-border transactions.
In order to facilitate the launch of the SEPA direct debit scheme on 1st November 2009, the Regulation introduces temporary rules on multilateral interchange fees and reachability for direct debit transactions.