From 22 to 25 April 2024, the European Parliament (Parliament) held is final plenary sessions before the Parliament elections taking place on 6-9 June 2024. During this session, the Parliament plenary adopted a large number of important financial services-related legislative proposals. This note provides an overview of these proposals, their main contents, as well as their stage in the EU legislative process.

  1. Retail Investment Strategy

    The Retail Investment Strategy (RIS) was proposed by the European Commission (Commission) on 24 May 2023 and intends to empower retail investors to take more informed investment decisions that would better correspond to their investment needs and objectives.

    The RIS comprises of a proposed Directive as regards the EU retail investor protection rules. This ‘Omnibus Directive’ amends the EU retail investor protection framework set out in the Markets in Financial Instruments Directive II (MiFID II); Alternative Investment Fund Managers Directive (AIFMD); Undertakings for Collective Investment in Transferable Securities Directive (UCITS Directive); Directive on the provision of insurance or reinsurance distribution services to third parties (IDD); and Directive on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). Accompanying the Omnibus Directive is a proposed Regulation which amends the Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs).

    The Commission proposals contain amendments to the above EU legislation to modernise disclosure rules, develop benchmarks against which the value of financial products need to be assessed, and to ban inducements for “execution-only” sales, among other things.

    In the plenary, the Parliament adopted its negotiating position on the RIS package. It will now have to wait for the Council of the EU (Council) to adopt its respective negotiating position before the co-legislators can engage in trilogue negotiations to reach a common position on the RIS package. The Belgian presidency of the Council wants to reach a negotiating position among the Member States before the end of its mandate on 30 June 2024. Trilogue negotiations would then commence after the summer recess, with a trilogue compromise expected in Q4 2024 and final adoption not to be expected before the beginning of 2025.

    Read more about the RIS package here.

    2. Anti-money laundering package

    The Anti-Money Laundering package was proposed by the Commission on 20 July 2021. The aim of the package is to strengthen the EU’s anti-money laundering (AML) and counter-terrorist finance (CTF) framework and to further harmonise these rules between Member States. The package includes the following proposals:

    • The EU ‘single rulebook’ regulation – with provisions on conducting due diligence on customers, transparency of beneficial owners and the use of anonymous instruments, such as crypto-assets, and new entities, such as crowdfunding platforms. It also includes provisions on so-called ‘golden’ passports and visas.
    • The 6th Anti-Money Laundering Directive – containing national provisions on supervision and Financial Intelligence Units, as well as on access for competent authorities to necessary and reliable information, e.g. beneficial ownership registers and assets stored in free zones.
    • The Regulation establishing the European Anti-Money Laundering Authority with supervisory and investigative powers to ensure compliance with AML/CFT requirements. The authority will be based in Frankfurt am Main, Germany.

    Following a long legislative process, the plenary adopted the final texts of the package on 24 April 2024. We expect the three legal texts to be published in the EU Official Journal in the coming weeks, with the amended framework starting to apply in Q2 2027.

    3. Implementing the final Basel III standards

    The plenary also adopted the trilogue agreements on the proposals amending the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD) to implement the final Basel III standards. Among other things, the new rules concerning prudential requirements for banks and very large investment firms will introduce an output floor to ensure that entities using internal models to calculate their risk weights do not have significantly lower capital buffers than entities using standardised approaches. In addition, the co-legislators agreed on a framework for access to the EU markets for third country banks. New provisions include a requirement for third country credit institutions to establish a branch in the EU and apply for authorisation unless they are subject to an exemption. To maintain legal certainty negotiators agreed that existing contracts with third country entities should not be altered.

    In terms of next steps, we expect the legal texts amending the CRR and CRD to be published in the EU Official Journal in the coming weeks. The CRR amended framework will become applicable on 1 January 2025, and the amended CRD framework approximately in Q4 2025.

    4. Crisis management and deposit insurance

    On 18 April 2023, the Commission published its crisis management and deposit insurance (CMDI) legislative package. The legislative package contains amending proposals to the EU regime for the recovery and resolution of credit institutions. The legislative package consists of the following legislative proposals:

    The main aim of the proposed amendments is to address a number of deficiencies that have been identified following a review of the framework and to improve the effectiveness of the resolution and deposit protection regimes for EU banks. Among other things, medium-sized banks will become in scope of resolution if they are deemed critical to financial stability in a regional market.

    In the plenary, the Parliament adopted its negotiating position on the CMDI package. It will now have to wait for the Council to adopt its respective negotiating position before the co-legislators can engage in trilogue negotiations to reach a common position on the CMDI package. The Belgian presidency of the Council wants to reach a negotiating position among Member States before the end of its mandate on 30 June 2024. Trilogue negotiations would then commence after the summer recess, with a trilogue compromise expected in Q4 2024 and final adoption not to be expected before the beginning of 2025.

    Read more about the CMDI package here.

    5. Clearing package

    The plenary formally adopted the trilogue agreement on the European Market Infrastructure Regulation (EMIR) clearing review that it reached with the Council on 7 February 2024. The main objective of the EMIR clearing review is to increase the competitiveness of the European central clearing framework, in particular vis-à-vis UK central counterparties (CCPs). In the light of this, the Commission proposed an active account requirement, which has been one of the most contentious and politicised issues in the negotiation. The Commission also proposed targeted measures intended to further improve the functioning of the overall EMIR framework. Following a contentious legislative review, the Council and the Parliament watered down the proposed active account requirement.

    Following formal adoption in the plenary, the EMIR clearing review still needs to undergo a language review before it is published in the EU Official Journal. Following this review, the Parliament and Council need to re-confirm the text ahead of official publication. We expect that this procedure will be finalised just after the summer recess, meaning that the EMIR clearing review will be published in the EU Official Journal in late Q3 or the beginning of Q4 2024. Nearly all amendments will become applicable upon its entry into force (20 days following Official Journal publication).

    Read more about the EMIR clearing review here.

    6. Listing package

    The plenary also adopted the Listing Package proposals following a trilogue agreement with the Council in February 2024. The Listing Package was published by the Commission in December 2022 to simplify the EU listing rules. The agreed listing package would streamline the listing process, balance regulatory and compliance costs for companies seeking to list, as well as for companies that are already listed, while at the same time protecting investors and market integrity. In addition, the rules on the provision of investment research by third parties will be amended to provide investment firms with more flexibility to choose the way in which they organise the payments of execution services and payments.

    In terms of next steps, we expect the legal texts to be published in the EU Official Journal in Q2 or Q3 2024. The new rules would start to apply in different stages following their entry into force (Official Journal publication + 20 days).

    7. Corporate Sustainability Due Diligence

    The proposed Corporate Sustainability Due Diligence Directive (CS3D) became one of the most politically contentious legislative files of this Parliament’s legislative term. CS3D lays down rules on obligations for large companies regarding actual and potential adverse impacts on the environment and human rights for their business chain of activities which covers the upstream business partners of the company and partially the downstream activities, such as distribution or recycling. The new rules will apply to EU and non-EU companies and their parent companies with a turnover of more than EUR 450 million and with more than 1,000 employees. Critically, financial undertakings that are in-scope to the CSDDD only need to apply the CSDDD for their upstream activities, the Directive does not apply to downstream business partners that receive services and products. Following a trilogue agreement in the beginning of 2024, the final text of the CS3D has now been adopted by the Parliament plenary.

    In terms of next steps, we expect the CS3D to be published in the EU Official Journal in the coming weeks. The CS3D framework will need to be transposed in the national laws of Member States. The deadline for this is Q2 or Q3 2026. The new rules would start to apply for the largest companies one year later.

    Read more about CS3D here.

    8. ESG ratings

    The Parliament has adopted the trilogue agreement on the Commission’s proposal for a Regulation on Environmental, Social and Governance (ESG) ratings. The main aim of the proposal is to improve the transparency of ESG ratings’ characteristics and methodologies and by ensuring increased clarity on the operations of ESG rating providers and the prevention of conflicts of interest.

    In terms of next steps, we expect the proposed Regulation to be published in the EU Official Journal in Q2 or Q3 2024. The new rules would start to apply nine months following entry into force (Official Journal publication + 20 days), meaning that the rules may start to apply in the first half of 2025.

    Read more about the ESG ratings Regulation here.

    9. Benchmarks Regulation review

    The review of the EU Benchmarks Regulation (BMR) has also reached its next stage in the legislative process with the plenary adopting the Parliament’s negotiating mandate. The BMR review was proposed by the Commission in October 2023 to rationalise reporting requirements for companies across various pieces of European financial services legislation. Among other things, the BMR review proposal would, once adopted, reduce the scope of the BMR to cover only significant and critical benchmarks, together with EU Climate Transition and EU Paris-aligned benchmarks. Threshold-based criteria would be introduced for assessing when benchmarks are significant and thus subject to the BMR.

    In terms of next steps, the Parliament and the Council are expected to engage in trilogue negotiations to reach a common position after the summer recess. Final adoption of the BMR review may be expected in Q4 2024.

    Read more about the BMR review here.

    10. Payment services package

      Finally, the Parliament adopted its negotiating positions on the legislative package amending the EU’s payment services framework. The package consists of a proposed Payment Services Regulation and a Directive amending the Second Payment Services Directive (PSD2). The aim of the package is to further harmonise payment and electronic money services regulation in the EU and to increase safeguards against fraud and misuse of user data.

      The Parliament will wait for the Council to adopt its respective negotiating position before the co-legislators can engage in trilogue negotiations to reach a common position on the payment services package. The Belgian presidency of the Council wants to reach a negotiating position on this package among Member States before the end of its mandate. Trilogue negotiations would then commence after the summer recess, with a trilogue compromise expected in Q4 2024 and final adoption not to be expected before the beginning of 2025.