Financial benchmarks play a key role in global financial markets and day-to-day activities of treasury departments of non-financial companies (NFC). They are an important part of the risk management strategies, for example to protect NFCs from exchange rate risks, commodity price risks or interest rates fluctuations. Deutsches Aktieninstitut1 therefore welcomes the initiative of the EU Commission to improve the Benchmark Regulation (BMR), on two key points: (1) the exemption of specific foreign ...
The new draft bill concerning the introduction of digital securities by the Federal Ministry of Finance and the Federal Ministry of Justice introduces a new era in the German capital market by establishing digital securities.The draft bill represents a shift away from the requirement of a physical document for securities under German securities law. Deutsches Aktieninstitut welcomes the initiative, but further clarifications are needed in the legislation.
In 2018, Deutsches Aktieninstitut discussed with the German Federal Financial Supervisory Authority to what extent the operation of centralized cash management systems by non-financial companies requires a license as a payment service provider. The reason for that discussion was a lack of clarity in the EU Payment Services Directive (PSD 2). In its reply on the consultation on the "EU retail payment strategy" Deutsches Aktieninstitut called for clarification.
In its answer to ESMA's consultation on transparency for non-equity instruments Deutsches Aktieninstitut asks for a preservation of waivers for hedging-derivatives under MiFID. These waivers are justified as the instruments in question are not traded on secondary markets.
In its position paper regarding the MiFID-review of the European Commission Deutsches Aktieninstitut considers improvements with respect to rules concerning investor protection, transparency, research, commodity derivative markets and FX-spot transactions.
Non-financial companies, using commodity derivatives, have to notify their competent authorities that this derivative business is ancillary to their main business. Complex calculations are often the consequence. Therefore, Deutsches Aktieninstitut supports a proposal submitted by several energy associations to introduce a qualitative exemption. This would mean a significant relief for non-financial companies as calculations and notification would not be required anymore.
In its consultation on the position limits regime ESMA discusses, wether specific gas and power contracts should be classified as derivatives under MiFID II. This would endanger many energy provider to become a bank which would increase energy costs for the economy as a whole. Furthermore, all companies using these contracts would be burdened by higher regulatory costs.
Digitization, climate change and global trade conflicts: only together will politics and the business community be able to solve the pressing issues of our time. On the occasion of the start of the new term of office of the EU Parliament and the upcoming inauguration of the new EU Commission, the paper "Restarting Europe" of Deutsches Aktieninstitut focuses on topics such as the Capital Market Union, strengthening the competitiveness of European companies and the path to a sustainable economy.
Commenting on the proposal for a law implementing the 5th EU Money Laundering Directive, Deutsches Aktieninstitut and Bundesverband der Deutschen Industrie ask to avoid higher legal uncertainty and bureaucracy for industrial companies. They name several topcis, for which the German legislator proposes far stricter rules compared to the EU provisions.
In accordance with EMIR-Refit intra-group transactions where at least one counterparty is a non-financial company are exempted from the reporting obligation. The national competent authority has to be notified about the exemption. The paper sets out a proposal for a lean and workable notification procedure.
Deutsches Aktieninstitut proposal takes up the initiative of the German government to evaluate the law regarding the general terms of business. Financial services' master agreements concluded by professional clients should be exempted from a potential court review.
Deutsches Aktieninstitut, the Association of German Chambers of Commerce and Industry (DIHK) and Verband Deutscher Treasurer composed recommendations concerning the consequences of a Brexit without withdrawal agreement on the derivate business of EU companies. These recommendations complement the position of 7th of February 2019 on the German Brexit-StBG. With Brexit, derivative business with counterparties in the United Kingdom based on EMIR and MiFID II/MiFIR will no longer be possible. The ...
Deutsches Aktieninstitut and The Association of German Chambers of Commerce and Industry (DIHK) commented on the proposal for the German Brexit-Steuerbegleitgesetz. They welcome that the provisions include a transition period for existing and directly linked business. Yet, the regulation falls short of the needs of business. In order to avoid a negative impact on the risk hedging of nonfinancial companies, the provisions should also inlcude new derivatives business. Moreover, they point out ...
Only one year before the EU Benchmark Regulation will be fully in force, there is a high level of uncertainty among non-financial companies, which financial instruments and services referencing to benchmarks will be possible as of 1 January 2020. Deutsches Aktieninstitut, thus, calls for extending transitional periods for critical, for non-critical and for non-EU benchmarks. The latter are for example used in hedging instruments for cash flows from imports and exports.
Deutsches Aktieninstitut together with BDI, BDEW, EFET, Energy UK, Eurelectric, IOGP and VCI welcomes very much the EU Commission’s Communication of 13 November 2018 on Brexit Preparedness. Especially, they appreciate that the EU Commission states that it will soon adopt temporary equivalence decisions in order to ensure that there will be no disruption in central clearing and depositaries services. This is an important measure but they wish to raise a concern that the EU Commission’s ...
Deutsches Aktieninstitut comments on the German contingency plans for financial service providers and insurance companies. We welcome that the proposal creates legal certainty for existing contracts at the time of Brexit. The delegation of regulatory power to BaFin creates flexbility. However, the transition period is too short for insurance contracts. Moreover, the contingency plans of KWG should not only cover existing but also new business. In addition, German financial service providers ...
In a letter to BMF, Deutsches Aktieninstitut identifies issues, which should be considered in the upcoming national implementation of the 5th EU Anti-Money Laundering Directive. Industrial holdings should be excluded from the obliged parties under § 2 GwG. The same is true for in-house lawyers in companies. Further topics are the practical relevance of the transparency register as well as the supervisory work by the regional councils.
Non-financial companies use OTC derivatives to hedge against currency, interest rate and commodity price risks related to business operations. This position paper summarises why non-financial companies need derivatives that are not centrally cleared or collateralised for this purpose and underlines the necessacity of clearing exemptions. The paper is Deutsches Aktieninstitut's contribution to a consultation of the Financial Stability Board on the recent regulation of derivative markets.
At the start of trilogues on the risk reduction package Deutsches Aktieninsitut encourages co-legislators to agree an the amendment put forward by both the European Parliament and the Council to the so-called supervisory review and evaluation process (SREP). The amendment limit the discretion of supervisory authorities to countervail exemptions from formal own funds requirements through the back door - such as the credit valuation risks (CVA risks) exemption for derivatives with ...
Deutsches Aktieninstitut welcomes the EU Commission`s consultation on a fitness check of supervisory reporting requirements under European financial markets regulation. In its response, Deutsches Aktieninstitut illustrates with quantitative evidence costs for German as well as European companies for compliance with the requirements under the derivatives regulation EMIR. To reduce costs for non-financial companies, we suggest to exempt those companies from the obligation to report intragroup ...
The positon paper lays out the benefits of derivative transactions between a centralised treasury unit and the operative subsidiaries of a non-financial group. These transactions are risk-neutral. Therefore, exemptions from the reporting requirements under the EU derivative regulation EMIR, as proposed by the European Commission, are justified.
On the 25th of May 2017 a code of conduct for FX markets (“FX Global Code”) was published, which has been developed by an international cross-sectorial expert group led by major central banks. Deutsches Aktieninstitut supports the Code. Its principles aim at strengthening market integrity in the interest of all market participants and offer guidance for good conduct for the FX business while being proportionate to the size, the role and the importance of the various market participants. The ...
Deutsches Aktieninstitut welcomes the EU-Commission's proposal to amend the European derivative regulation EMIR. The proposal to retain the hedging definition as core of the clearing exemption for non-financial companies is of utmost importance. The proposed alleviations in the reporting regimes wait for certain clarifications.
Deutsches Aktieninstitut urges the EU Commission to reflect consequently the needs of companies seeking capital market finance and using derivates for risk management purposes in the Capital Markets Union. The current direction of the Capital Market Union still fails to meet this objective. This position paper has been contributed to the mid term review of the Capital Market Union project.
The Basel Committee on Banking Regulation suggests to constrain the use of internal model approaches by banks for calculatng credit risks. For example, banks shall be forced to apply the standardised approach only for large non-financial companies. From Deutsches Aktieninstitut's point of view the proposal discriminates against highly solvent large companies. Accordingly, this position paper urges the Basel Committee to evaluate carefully the potential negative impact on the economy.
Deutsches Aktieninstitut provides data for the impact study conducted by the EU Commission regarding EMIR. This data contains costs of a potential clearing or margining obligation and reporting.
With the fourth EU Anti-Money Laundering Directive and its current amendment, every EU member state has, among other changes for companies, to implement a beneficial ownership register. Deutsches Aktieninstitut wrote a letter to the responsible ministries emphasizing that this beneficial ownership register has to be based on existing registers, instead of creating a completely independent, new register. Moreover, Deutsches Aktieninstitut advocates that obliged entities can efficiently and ...
Deutsches Aktieninstitut comments on the proposal regarding technical rules of the Institut der Wirtschaftsprüfer in Deutschland e.V. - IDW (Institute of Public Auditors in Germany) for non-financial companies under the derivative regulation EMIR. In its comment Deutsches Aktieninstitut asks the IDW to provide more clarity regarding certain definitons and the scope of the auditing process.
The Net Stable Funding Ration (NSFR) shall ensure that banks have sufficient midterm funding. This position paper is Deutsches Aktieninstitut's comment to a targeted consultation of the EU Commission on the implementation of the NSFR in the EU, which will be due in 2018. Deutsches Aktieninstitut urges the EU Commission to evaluate carefully the impact of the NSFR on the availability and prices of derivatives used for hedgings purposes of non-financial companies.
Starting with Juli 2016 the ECB reference rates for the FX markets will published at 4pm which is two hours after the fixing is calculated. The main objective of this change is to prevent manipulation of the fixings. This position paper questions the necessitiy of the changes and summarizes the practical problems that will result from it for non-financial companies.
Deutsches Aktieninstitut asks the legislator to use the proposed MiFID-delay to fix shortcomings of the level-1-text. Besides others this applies for the treatment of emission allowances within the ancillary activity exemption and the introduction of a waiver for the suitability report.
EBA consults whether banks should face additional own funds requirements for the so called CVA-risks resulting from derivative positions with non-financial companies (NFCs). The position paper shows that the EBA proposal would erode the exemption for exactly these risks granted by the Capital Requirements Regulation. If the EBA proposal for a supervisory guideline became effective the legislator's will would be countervailed and risk management of NFCs would become more costly.
Deutsches Aktieninstitut opposes jointly with five other important German associations (BDI, BGA, DIHK, EFET und VDT) the proposal of ESMA to abandon the hedging exemption for non-financial companies under the derivative markets regulation EMIR. This would force larger companies into the clearing obligation or the obligation to collateralise derivative transactions bilaterally.
Deutsches Aktieninstitut is concerned that EBA is about to requalify all non-financial companies with centralised treasury or finance activities as shadow banks for regulatory purposes. This will be the outcome of a defintion that EBA proposes for the treatment of credit exposures of banks with the shadow banking sector. The main shortcome of the definition is that internal financial tranactions are not excluded. This position paper summarises Deutsches Aktieninstitut's concerns.
In its comments Deutsches Aktieninstitut supports the European Commission’s initiative on building a Capital Markets Union. Further to the steps proposed by the Commission the demand-side of capital markets should, however, be addressed more precisely. This applies especially to the aspect of corporate finance. In addition, a cumulative impact-assessment of the regulatory initiatives launched in the aftermath of the financial crisis is necessary in order to identify and remove barriers for ...
The position paper of Deutsches Aktieninstitut, BDI and DIHK on ESMA's consultation "Call for Evidence" regarding the rating market aks for an appropriate framework that should not impede corporate financing by bonds. This applies especially for the external rotation of rating agencies and the issuer pays model.
In its answers to ESMA's consultation on draft technical standards regarding MiFID II/MiFIR Deutsches Aktieninstitut points out that the risk management by non-financial companies should not be negatively affected by the rules. This applies especially for the ancillary activity exemption, the position limits/position reporting and the transparency requirements for the derivative markets.
In its position papers regarding the "technical advice" of ESMA on MiFID II/MiFIR Deutsches Aktieninstitut states that the new rules should not impact equity culture in Europe negatively. This applies especially for the offering of share investment advice in banks and the availability of research for SMEs. Besides, an appropriate definition should ensure that contracts for the delivery of commodities used by the real economy are not classified as derivatives. The comment from 16 January 2015 is ...
In order to enhance data quality under EMIR Deutsches Aktieninstitut recommends in its position regarding the ESMA consultation on EMIR reporting to decrease complexity. Perspectively, the introduction of an one-sided reporting regime and the abolition of the intra-group reporting should improve data quality on trade repository level as well.
The third country provision according to the proposed EU Benchmark Regulation will have negative consequences for non-financial companies. As long as the home countries of the relevant benchmark providers do not enact a similar regulation it is highly likely that a number of important benchmarks will not be available anymore for European banks and thus their customers. This briefing note explains the concerns in detail and supplements a previous position of Deutsches Aktieninstitut.
The third position paper of Deutsches Aktieninstitut on the exit negotiations between the European Union and the United Kingdom illustrates based on the examples customs and product authorisations as well as data protection and derivatives, what companies can do to solve the problems arising from Brexit. However, it makes also clear that companies especially in the case of a hard Brexit depend on the involvement of regulators and supervisors and cannot mitigate all problems alone. Without ...
The current position paper of Deutsches Aktieninstitut on the exit negotiations between the European Union and the United Kingdom complements the first position paper from February 2017 and covers further relevant topics, e.g. clearing, benchmark and rating. The analyses of financial and capital market legislation and concrete examples from practice illustrate which topics deserve particular attention due to their significance for business and society in connection with the Brexit ...
Kurvenlage - Semi-Annual Report of Deutsches Aktieninstitut, 1st Term 2016 (in German)
Focus: Retirement Planning
Focus: Capital Markets Union
Focus: 50 years German stock corporation law
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