After ten months of intense negotiations, the 20 March trialogue discussion finally led to a political agreement on the CRR/CRD IV package. On 27 March, the Committee of Permanent Representatives (COREPER) also confirmed the political compromise. The European Parliament plenary vote of 16 April (in favour) and the expected subsequent approval by the Council will conclude the legislative procedure (excluding Level 2 measures). The UK remains the only Member State which has expressed its disapproval of the provisions accepted by the other 26 Member States on bankers' bonuses. However, the vote in the Council is to be taken by qualified majority rather than unanimity, leaving the UK with no potential to block the vote.

The soon-to-be-agreed text states that the package will apply from 1 January 2014, but if the publication in the Official Journal of the EU occurs after 30 June 2013, the implementation will be postponed until 1 July 2014 to allow Member States enough time to apply the changes.

In the meantime, the Basel Committee published on 1 April the Progress report on the implementation of the Basel regulatory framework. The report highlights that more than half of the countries that are members of the Basel Committee on Banking Supervision have failed to implement the Basel III regulatory framework, including several EU Member States (UK, France, Sweden, Spain, Netherlands, Luxembourg, Germany, and Belgium) and the United States.

Germany pushes for (limited) treaty changes 

The political agreement reached on 19 March on the Single Supervisory Mechanism (SSM), which requires further guarantees on the strict separation between the monetary tasks of the European Central Bank (ECB) and its bank supervision actions has yet to be fully accepted by Germany. The EU's largest Member State believes that, under the current treaties, the separation of the two tasks cannot be fully guaranteed. In fact, the supervisory board (to be established within the ECB) will not have the power to adopt official decisions as the Governing Council is the only body provided with such power.

During the 12-13 April informal ECOFIN meeting in Brussels, Germany received the requested guarantees in a declaration that claims: "Member States are ready to work constructively on a proposal for a Treaty change", which will give legal basis to the supervisory board to take official decisions without involving the Governing Council. It is expected that the procedure to change the Treaties could significantly slow down the creation of the banking union. Having agreed upon the declaration, Finance Ministers afterwards gave their political blessing so that the text can receive endorsement from the Committee of Permanent Representatives (COREPER). The vote in the European Parliament plenary is expected on 25 May 2013.

During the 12-13 April ECOFIN, Commissioner Barnier also announced that the Commission will publish in June 2013 a proposal for a common resolution mechanism including a fund for banks from the Eurozone area and from non-Eurozone states participating in the Single Supervisory Mechanism (SSM). The proposal, which is still undergoing changes, is expected to be highly controversial.

EU Framework for Bank Recovery and Resolution

Vote in ECON on 24 April

The European Parliament Economic and Monetary Affairs (ECON) Committee will vote on the report by Gunnar Hökmark (EPP, Sweden) on 24 April 2013.

The key point of discussion in the Parliament remains the bail-in resolution tool. MEPs are still debating which financial instruments will be used to bail out banks. In particular, discussions continue on whether derivatives should be among the financial instruments usable to absorb bank losses. Moreover, MEPs have seemed to agree on excluding bank deposits of less than €100.000 from the "bail-inable" instruments. On the sensitive issue of the solidarity clause, MEPs are expected to reject the "compulsory nature" of this clause as a majority of Member States have expressed their disapproval of the clause. On the role of the European Banking Authority (EBA), Rapporteur Gunnar Hökmark (EPP, Sweden) stated that the idea of binding mediation by the EBA in case of disagreements between national authorities over decisions on cross-border banking groups will not be supported.

On the Council side, Member States have yet to agree about which creditors will need to contribute in case of the bail-in of a failing bank or on the date of application of the resolution mechanisms. It is important to note that, during the 12-13 April informal ECOFIN, Finance Ministers discussed these sensitive issues, but no agreement was reached as these are highly controversial issues. However, Member States need to move faster to finalise the negotiations on this topic as the Commission is expected to present, in June 2013, a legislative proposal for a common resolution mechanism and fund for banks from the Eurozone area and from non-Eurozone states participating in the SSM.

On 27 March, the European Commission published a Frequently Asked Questions (FAQs) and answers document on the AIFMD. The questions relate to passport issues, the responsibility of Member States competent authorities, private equity, etc. The Commission has also created an online system for Q&As.

The technical Regulation with regards to exemptions, general operating conditions, depositaries, leverage, transparency and supervision was approved both by the European Parliament and the Council on 19 March. Therefore, the Regulation will apply as of 22 July 2013, which is also the deadline for transposition of the Directive by the Member States. Nonetheless, there will be the possibility to make use of a transitional period ending on 22 July 2014. Questions about the transitional period itself were not clarified by the FAQs.

In the meantime, the European Securities and Markets Authority (ESMA) has published its draft regulatory technical standards (RTS) to determine types of alternative investment fund managers (AIFMs), where relevant in the application of the AIFMD.

According to Council sources, the Irish Presidency has decided not to hold any meetings on IMD2 during their Presidency. The discussions on the dossier are thus likely to be postponed until Lithuania assumes the rotating Presidency of the Council which commences on 1 July. The Council has also put on hold until May 2013 all discussions on Key Information Document for PRIPs, which was originally published in the same 'consumer safety package' with the IMD2. In the European Parliament's ECON Committee, the vote on the draft report on IMD2 is scheduled for 27 May, with the plenary vote to follow on 10 September.

Industry waiting for final results of LTGIA

The European Insurance and Occupational Pensions Authority (EIOPA) published on 8 April its Discussion Paper on "Standard Formula Design and Calibration for Certain Long-Term Investments". The consultation ends on 28 May, with the final report expected to be published by early July 2013. The European Commission had requested EIOPA to examine whether the calibration and design of regulatory capital requirements for insurers' long-term investments in certain asset classes under the envisaged Solvency II regime necessitates any adjustment or reduction under the current economic conditions, without jeopardising the prudential nature of the regime.

The consultation enables EIOPA to take full account of the results of the Long-Term Guarantee Impact Assessment (LTGIA), which ended on 31 March. The results of this consultation are scheduled for publication by the end of June 2013. EIOPA maintains that combining the results of the two workstreams allows for a full examination of whether the regulatory framework of Solvency II should be amended to facilitate long-term investments. Once EIOPA has published the final results of the LTGIA, the Council will have two months to reach an agreement between the Member States on the scope of the long-term guarantees. Only once the Council has reached an internal agreement can it re-start the trialogue negotiations on Omnibus II with the European Parliament. Due to the stretched timelines, the implementation of the Solvency II rules for insurance companies is not likely take place before 1 January 2016.

Proposal now expected in June

According to the European Commission's updated work programme for 2013, the proposal for a Directive on IORPs is expected to be adopted in June 2013. The European Insurance and Occupational Pensions Authority (EIOPA) published the preliminary results of the quantitative impact study (QIS) on IORPs on 9 April. EIOPA intends to publish the final report in June 2013. The document was prepared at the request of the European Commission and attempts to present comprehensive guidance on how to calculate solvency figures on a common and consistent basis for European defined benefit IORPs. EIOPA wishes to emphasise the preliminary nature of these results and that analysis and further consideration are needed before final results can be provided. The process of preparing the final report may thus lead to adjustments of the QIS figures.

Council decisions moving slowly

Member State experts held their second meeting on the Commission's proposal for the Directive on a Financial Transaction Tax under the "enhanced cooperation" rule on 16 April. According to Council sources, the meeting raised more questions on the proposal than it answered, as the Member States are still divided over the details of the tax, including its scope and collections mechanisms. It is also unclear whether the levy collected will contribute to the EU budget, or solely to the participating Member States' internal budgets. In the UK, the House of Lords EU Economic and Financial Affairs Sub-Committee recommends legal action against the Commission over the tax. Furthermore, Czech Prime Minister Petr Necas stated that the Czech Republic would not rule out action, hinting at potentially referring the Commission to the European Court of Justice. The Council was expected to adopt the Commission's proposal at the 14 May ECOFIN meeting of European Finance Ministers, but due to the on-going negotiations the decision date will be postponed. The next Member State meeting on the topic will be held at the end of May, though no decisions can be expected in several weeks. The implementation date of the tax in the Member States is likely to be postponed from the foreseen start date of 1 January 2014.

In the European Parliament, the ECON Committee held a debate on MEP Anni Podimata's (S&D, Greece) report on the enhanced cooperation on FTT on 11 April. During the debate, it became clear that Parliamentarians are divided over whether the tax should be set at a 'minimum level' so that the Member States may increase the tax if they wish, or at a harmonised level for all Member States. The amendments to the draft report are due on 23 April. The final report is expected to be voted on in the Parliament's ECON Committee on 27-28 May, and in the Parliament Plenary in July. The Council is not legally obliged to take into account the Parliament report on the tax.

Luxembourg changes its position. Austria?

The Commission proposal (13 November 2008) to amend the Savings Tax Directive and the re-negotiation of the savings tax agreement with third countries have so far been blocked by Luxembourg and Austria to preserve their bank confidentiality. However, on 7 April, Luxembourg Finance Minister Luc Frieden told Frankfurter Allgemeine Sonntagszeitung, that they do not reject "as strictly as before" an automatic information exchange. On 10 April, Prime Minister Jean-Claude Juncker confirmed that Luxembourg will begin automatic exchange of tax data in 2015. The reasons behind this sudden change of position are most likely a result of recent developments including the EU bail-out of Cyprus, which increased pressure on tax havens; the implementation of the Directive on administrative cooperation in the field of taxation, which contains the "most favoured nation" clause; and stronger pressure from Germany, the European Commission and the United States.

Moreover, on 9 April, the UK, Germany, France, Italy and Spain sent a joint letter to Commissioner Semeta announcing that they "are to develop and pilot a new multilateral tax information exchange agreement". The new information exchange agreement will be based on the model intergovernmental agreement for complying with the U.S. Foreign Account Tax Compliance Act (FATCA). During the 12-13 April informal ECOFIN meeting, the proposal was discussed with other Member States (Netherlands, Belgium, Poland and Romania) supporting the initiative.

The 12-13 April informal ECOFIN also showed that willingness amongst Member States exists to move forward on tax evasion. The revision of the Savings Tax Directive will now be formally discussed during the next ECOFIN meeting on 14 May and the next European Council meeting on 22 May as Council President Herman Van Rompuy decided to include tax evasion in the agenda.

Vote in the lead JURI Committee postponed