EU Banking And Finance Regulatory Newsletter - May 2019

Author:Mr Michael Huertas

Europe has voted. 751 MEPs will now be taking their seats. The new Commission is in the process of being formed despite some spats on the Spitzenkandidat process including between the European Parliament and the Consilium - the two legislative fora in the EU. For an overview of the immediate political process and what it means for financial services please see our recent Client Alert that was published ahead of the elections here.

While the incumbent political party groupings, EPP and the S&D, fared poorly, losing votes to a wave of Green voters and the liberal ALDE alliance, the surge in right-wing or populist parties did not materialize - despite Nigel Farage's Brexit Party having roughly the same amount of seats as Angela Merkel's CDU/CSU. Even with the European Parliament elections having given way to a fall in various national governments, snap elections, further Italian instability and possibly a multi-billion euro fine for deficits as well as the end of May in the UK and the return of the No Deal Brexit along chaotic lines, this 2019-2024 period ahead presents opportunity.

While it may not be "peak populism" as of yet, but the shift away from a bi-party system that has shaped the European Parliament since the first direct elections in 1979 to a much more representative and mature parliament is welcome along with average voter turnout at its highest level in a quarter of a century. This change may be reflected in a very new and certainly more fragmented alliance of interests needing to be secured by the new Commission President to secure an absolute majority (376 parliamentary seats). With pro-EU parties holding ca. two-thirds of seats that may seem easy but this figure does not account for some of the UK or other "wild-card" members. Moreover, not all of those in any future alliance are as inclined to be supportive of financial services and/or pragmatic reforms.

Brexit's impacts on MiFIR have also been back in the news. This time the climb-down by ESMA on the Art. 23 MiFIR share trading obligation (STO) that was largely seen, including in legislative policymaker and not just market participant circles, as unworkable and detrimental for investors, has still left a tension between EU and UK financial supervisors that also highlight differing views and approaches to financial regulation once the divorce is over.

Even if ESMA has, in its May, 29 public statement, committed itself to, when applying the EU-27's STO requirements to look...

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