Documents considered by the Committee on 6 January 2016 - European Scrutiny Contents


18   Capital Markets Union and related financial services legislation

Committee's assessment Legally and politically important
Committee's decisionCleared from scrutiny (following resolution of the House on 7 December 2015)
Document details(a) Proposal for a Regulation concerning securitisation; (b) Proposal for a Regulation concerning prudential requirements
Legal baseArticle 114 TFEU, ordinary legislative procedure, QMV
DepartmentHM Treasury
Document Numbers(a) (37128), 12601/15 + ADDs 1-2, COM(15) 472;
(b) (37143), 12603/15, COM(15) 473

Summary and Committee's conclusions

18.1  In September 2015 two proposed financial services Regulations, concerning securitisation and prudential requirements, were presented by the Commission in the context of the Capital Markets Union. These proposals were cleared from scrutiny in December 2015, following debate in European Committee B. However, since then we have considered the proposals again in relation to a Government decision as to whether it will purport to opt into a Justice and Home Affairs provision in the securitisation proposal and whether there has been a breach of the Scrutiny Reserve Resolution in relation to both proposals.

18.2  The Government now clarifies that there has been no breach of the Scrutiny Reserve Resolution. It also reiterates its view that it is possible to opt into a Justice and Home Affairs provision in a proposal that does not have a Justice and Home Affairs legal base, tells us that it has asserted this view in Council consideration of the proposed securitisation Regulation and says that it intends to decide by 12 January on whether to exercise the purported opt-in option.

18.3  We are grateful to the Government for its clarification that there was no breach of the Scrutiny Reserve Resolution.

18.4  We note what it says about the Justice and Home Affairs issue in the securitisation proposal and remind it, yet again, that there is no opt-in option available if proposed legislation lacks a legal base from Title V of part Three TFEU relating to the Area of Freedom, Security and Justice. In the absence of a Title V legal basis the UK automatically participates in this proposal.

Full details of the documents: (a) Proposal for a Regulation laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No. 1060/2009 and (EU) No. 648/2012: (37128), 12601/15 + ADDs 1-2, COM(15) 472; (b) Proposal for a Regulation amending Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms: (37143), 12603/15, COM(15) 473.

Background

18.5  As part of the Capital Markets Union project, the Commission seeks development of a simple, transparent and standardised (STS) securitisation market in order to support jobs and growth. It has proposed a Regulation, document (a), which would update the legal framework for securitisations and develop the proposed STS regime.

18.6  The Capital Requirements Directives have, since 2007, introduced a supervisory framework in the EU which reflects the Basel Committee on Banking Supervision's rules on capital measurement and capital standards. The latest legislation, known as CRD IV, in force since July 2013, transposes into EU law the latest global standards on bank capital adequacy. So the Commission has also proposed a second Regulation, document (b), which would amend a CRD IV Regulation, by recalibrating the prudential requirements for credit institutions and investment firms either issuing or purchasing securitisations.

18.7  These proposals were cleared from scrutiny in December 2015, following debate in European Committee B. However, since then we have considered the proposals again. First, the Government informed us that it had belatedly concluded that the JHA (Justice and Home Affairs) opt-in applies to Article 19(2) of the proposed securitisation Regulation. It explained that this provision would put an obligation on Member States which have laid down criminal sanctions (instead of administrative sanctions) for breaches of elements of the proposal and that, as the provision would require cooperation involving law enforcement bodies, the Government believed there would be a JHA obligation, meaning that the Article 114 TFEU legal basis is not appropriate for the provision.

18.8  Secondly, we heard from the Government that "a Coreper discussion is expected on Wednesday 2 December which could set the scene for Council agreement at ECOFIN on 8 December", which seemed to imply a breach of the Scrutiny Reserve Resolution.

18.9  On the JHA issue we reminded the Government of our view that the UK opt-in could only apply to proposals with a JHA legal base and that purporting to opt into a proposal with a non-JHA legal basis is ineffectual. As for the possible breach of the Scrutiny Reserve Resolution, we asked the Government to confirm that UKRep did not commit Ministers, formally or informally, to UK support for the Council's negotiating stance in advance of the European Committee debate on 3 December 2015.

The Minister's letter of 17 December 2015

18.10  The Economic Secretary to the Treasury (Harriett Baldwin) first tells us that as expected a General Approach on the two proposed Regulations was agreed at the ECOFIN Council of 8 December 2015 and that this was supported by all Member States except the UK, which abstained on parliamentary scrutiny grounds. As for the Coreper meeting on 2 December 2015 she says that the UK had formally abstained, also on scrutiny grounds.

18.11  The Minister also tells us that at the Coreper meeting the Government asserted that the UK JHA opt-in applied to Article 19(2) of the proposed securitisation Regulation. She says that this was because the Government's position that the opt-in can be asserted in respect of JHA content in an EU measure with a non-JHA legal base. The Minister adds that it is still the Government's position to make and notify of its decision on whether or not to opt-in by the 12 January deadline.

18.12  Commenting on the present situation the Minister says that:

·  the General Approach was achievable in the proposed short timeframe, because of the extensive work undertaken pre-publication by the Commission, institutions such as the Bank of England, European Central Bank and European Banking Authority, and Member States (including significant consultation with market participants);

·  nevertheless she is sure that further technical work will be undertaken before and during trilogues; and

·  discussions in the European Parliament remain at a very early stage, though she understands that there will be two Rapporteurs appointed, one for each proposed Regulation, with confirmation of who those individuals will be expected early this year.

Previous Committee Reports

Seventh Report HC 342-vii (2015-16), chapter 2 (28 October 2015) and Thirteenth Report HC 342-xiii (2015-16), chapter 13 (9 December 2015).


 
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Prepared 15 January 2016