OVERVIEW OF REGULATORY ISSUES EACT BOARD MEETING May 2014 Bratislava

22-25 May: European elections to be held in all 28 member countries 27 May: EU leaders meet for extraordinary summit to take stock of the elections results June: Nomination of Commission president at the European Council summit 1-3 July: Plenary session of the newly constituted European Parliament; Parliament President and Committee Chairs to be elected (ECON likely to be chaired by EPP or S&D). Informal negotiations with EU Council and possible bilateral or multilateral negotiations with heads of state July: Parliament votes on European Council’s nomination of Commission president in its plenary session. 1 Nov.: Target date for new Commission to take office. REMINDER OF TIMELINE

EMIR: FX instruments – Commission to issue an implementing act during the summer Clearing obligation (NFC+) –ESMA proposes frontloading requirements to be eased –Consultation on draft RTSs still to come – once finalised by ESMA the RTSs require approval from Commission and non-objection from the Parliament and the Council –Clearing obligation to start at the earliest end of this year –NFC+s will have a phase-in period Ongoing consultation on RTSs for risk mitigation for non-cleared OTC derivatives EMIR 2: –Review report by August 2015 by the Commission –EACT lobbying likely to concentrate on the need for one-sided reporting and getting intra-group transactions out of scope CURRENT ISSUES

BANK STRUCTURE REFORM Follows up on the Liikanen report recommendations on retail / investment banking split – Commission proposal January 2014 Aimed at European banks deemed to be of global systemic importance or if their trading activities exceed certain thresholds; the Commission estimates that this would impact about 30 biggest banks in Europe The proposal was not discussed by the Parliament and the initial reactions from the Member States indicate reservations about the proposal ; will probably discussed for the next years Commission proposal foresees implementation of prop trade banning in 2017 and the separation of activities in 2018 Existing national initiatives (Vickers (UK), Volcker (US), France, Germany) CURRENT ISSUES

BANK STRUCTURE REFORM Main elements of the proposal: –Ban on proprietary trading –Possible separation of trading activities into a separate legal entity At this stage the most evident problems we see with the proposal from corporate treasurers’ perspective are the following: –Prohibition for the retail part of the bank to offer OTC derivatives to their customers – how would this impact especially the smaller companies’ hedging abilities? –Impacts on market making The proposal was accompanied by proposals for the reporting of securities financing transactions (e.g.repos) – would put EMIR-like reporting obligation on NFCs CURRENT ISSUES

COMMISSION COMMUNICATION ON LONG-TERM FINANCING Questions related to the impact on the real economy of de-leveraging by banks and improving access to funding: Missing pieces of Basel III and implementing measures of CRD IV Securitisation Capital market financing EACT view? CURRENT ISSUES

MONEY MARKET FUNDS REGULATION Key provisions of the draft proposal include e.g.: –CNAV funds would be required to establish a cash buffer of at least 3% of total value of their assets (this is expected to make CNAV funds unviable in practice) –Would prohibit MMFs from soliciting credit ratings –Limits on the types of instruments in which MMFs can invest EACT position focuses on: –The ban on external credit ratings which would be extremely difficult to investors most of which cannot do their own credit assessment –The importance of preserving choice for investors (continued availability of CNAV funds) –Need of certainty regarding the accounting treatment of VNAV funds –The increase of systemic risk due to the concentration of funds if MMFs become less available as a result of the Regulation Recent developments: –Parliament could not agree on the text; discussions will continue in the autumn –Council not currently discussing this file; will be left for the Italian Presidency CURRENT ISSUES

FINANCIAL TRANSACTION TAX (FTT) Beginning of May an agreement signed between 10 of the participating Member States; agreed to introduce a first phase of the tax by the latest 1 January 2016 This would cover equity and some derivatives The ain is to finalise the technical discussions by the end of this year First UK appeal to the EU Court was recently rejected but likely to appeal again once the final text has been agreed; other countries might join the UK CURRENT ISSUES

BAIL-IN: Directive on Bank Recovery and Resolution adopted by the Parliament and the Council; Member States have until end of this year to transpose the Directive into national law. Bail-in provisions will enter into force in January 2016 Bail-in will allow authorities to write down or convert into equity claims of shareholders and creditors when a bank is failing or likely to fail Impact of bail-in on corporate treasury? CURRENT ISSUES

BENCHMARK REGULATION Commission proposal for Regulation: –Addresses the governance and methodology of the existing financial benchmarks –Would prohibit the use of non-EU benchmarks which are not compliant with the IOSCO principles – could be problematic for some corporates FSB work on the potential replacement of existing benchmarks CURRENT ISSUES

MiFID 2 / MiFIR: Consultation on level 2 measures launched ESMA MARKETS AND SECURITIES STAKEHOLDER GROUP: Complaint on composition issued to the EU Ombudsman CURRENT ISSUES