Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Markets And institutions > Financial Services and the EU > Flashcards

Financial Services and the EU Flashcards

1
Q

What is the aim of FSAP?

A

to create a single EU market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

How many levels of approach are recommended by the wise men to help Europe become the worlds most competitive economy?

A

4 levels

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is entailed within level 1 of the 4 level approach?

A
  • The commission propose framework which is then adopted by the EU council and EU parliament usually under ordinary legislative procedure
  • This directive or regulation specifies whether legislative power is delegated to the Commission to adopt level 2 measures
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is entailed within level 2 of the 4 level approach?

A
  • Secondary legislation is adopted by commission if level 1 says that it can be
  • on implementing measures the commission will often consult ESA
  • oversight by Council and Parliament of the exercise of delegated commission power, depends on committee system
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is entailed within level 3 of the 4 level approach?

A
  • Implementation of EU directives. The ESA advise the commission when it prepares detailed level two requirements
  • Time permitting there is consultation between ESA’s (EBA and ESMA) and EIOPA
  • ESA is empowered to adopt guidance on a comply or explain basis by national supervisors
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is entailed within level 4 of the 4 level approach?

A
  • Comission is responsible for enforcements, ensuring directives are poroperly transpossed and EU legal requirements are applied. There is a focus on the former
  • ESA provide additional resources and investigate alleged breaches of EU LAW
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the issue with trying to create a single market?

A
  • incorrect implementation of directives
  • delaying implementation
  • lack of censors for non compliant states
  • consumers don’t want to deal with foreign service providers
  • lack of intergrating settlement and clearing services
  • lack of full coverage of FSAP measures
  • Protectionism e.g. market-makers need a local presence
  • different laws languages and cultures
  • lack of understanding if what a single market is
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the 3 types of EU legislation?

A

Regulation
Directive
Decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What status does an EU regulation have?

A
  • becomes a law in every state without need of legislation
  • formulated by the commission authorised by council of ministers
  • passed by European commission or jointly by EU Council and European Parliament
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What status does an EU directive have?

A

2 year to implement

until it is given national statute it has no force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What status does an EU decision have?

A
  • made by European commission in Brussels

- made to a state/person/company and is immediately binding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the principle of Direct effect also called immediate applicability?

A

Enable firms to incorporate provision before it has been passed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

In what case will a directive have vertical direct effect and what does this mean?

A

Cases between the member state and a firm or individual. It means that the directive will take precedence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is horizontal direct effect?

A

this occurs between firms and individuals. The directive doesn’t take precedence but a court should interpret the law so as to achieve the result required by the directive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

On directives who may make suggestions?

A

The EU Council and EU Commission

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What were the causes of the crisis in 07?

A
  • credit growth
  • increased risk tolerance through lack if shocks
  • packaged securities
  • subprime mortgages
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When and from what entity did the FSB emerge?

A

in 2009 from the FSF

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What steps did the FSF take following the crisis?

A
  • monetary and fiscal stimulus
  • central bank liquidity operatins
  • promote asset market liquidity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What does the ESRB do and what is its membership structure?

A
  • issues warnings and recommendations about economic threats
  • voting members are central bank governors, ECB president and VP and chairman of three ESA’s, banking, insurance and securities market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is ESMA and what is it objective?

A

independent EU authority that helps safeguard stability of the EU financial system.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How does ESMA go about its objective?

A

by

  • ensuring integrity, transparency, efficiency and orderly functioning of securities markets
  • enhancing invvestor protection
22
Q

What are the purposes of the single European rule book that ESMA helped create?

A
  • promote equal competition conditions
  • ensure consistent treatment of EU investors, enabling adequate investor protection through effective regulation and supervision
23
Q

What else does ESMA do?

A
  • strengthens international supervisory co-operatin
  • if european law requests ESMA can supervise a pan european entity
  • Through its contribution to the ESRB, ESMA helps short, medium and long term financial stability
  • The ESRB identifys and advises on potential risks
  • Also ESMA is responsbile for a co-ordinating actions of securities supervisor or adopting emergency measures in crisese
24
Q

What are ESMA’s competence and powers?

A
  • draft legally binding technical standards in EU member states
  • launch fast track procedures to ensure consistent application of EU law
  • resolve disputes between national authorities
  • consumers protection policies
  • emergency powers
  • participation in college of supervisors and on-site inspections
  • monitoring systematic risk of cross-border financial institutions
  • new supervisory role, in particular for credit rating agencies
  • The ability to enter admin arrangements with supervisory authorities, international organisations and the admin of third countries
25
Q

What are ESMA’s consumer protection policies?

A
  • prohibit products which threaten stability

- orderly functioning of financial markets for 3 months

26
Q

What is ESMA role within Level 1 of the 4 level approach?

A

-Level 1 directives and Regulations set high level political objectives on the area concerned by legislation. At this stage ESMA may be asked for advice by the commission

27
Q

What is ESMA role within Level 2 of the 4 level approach?

A

-Help in level 2 by drafting subordinate acts (known as delegated and implementing acts).

Delegated acts are concerned with substantive content of the legislative requirement e.g. setting out what authorisation info must be provided to competent authorities

Implementing Act give effort to substantive requirement e.g. standard forms, templates and procedures for communicating info or processes between competent authorities

28
Q

What is ESMA role within Level 3 of the 4 level approach?

A

-ESMA develops guidelines to try to establish consistent, efficient and effective supervisory practices within the European system of financial supervision and to ensure consistent application of EU law.

These Guidelines are addressed to competent authroity or finanical market participants . Whilst not binding, competent authorities must comply or explain.

Financial market participants can also be required to report publicly if it has complied

ESMA also trys to ensure supervisory convergence

29
Q

What is ESMA role within Level 4 of the 4 level approach?

A
  • Regulatin establishing ESMA created a fast track procedure. ESMA can be requested to enquire about and recommend to the national authority with 2 months of investigating if asked by competent authority, European Parliament or Council and the Comission or stakeholder group

ESMA can also investigate on its own initiative.

The commission can follow usual procedures for referring a case against a member state to the Court of Justice.

30
Q

MIFID forms part of what?

A

The European Financial Services Action Plan

31
Q

When did Mifid become active

A

eventual effective date of the 1st november 07.

mifid II is being drafted in 2015 which will extend the scope

32
Q

What are the key features of Mifid?

A
  • It replaced ISD and it applies to all investment firms

- It acts like an EU directive

33
Q

What are the rules about passporting under mifid?

A

firms may use a ‘tied agent’ in another country with no need for authorisation - they act on behalf of the firm
Firms use domestic authorisation to act abroad using a passport

34
Q

Who regulates what when passporting under mifid?

A

organisational matters are regulated by the home state e.g. authroisation

operational matters e.g. conduct of business which aren’t organisational matters

  • regulated by host state for activities of ‘branch’ within its territory
  • home state for cross border activity
35
Q

What is the scope of mifid?

A

it applies to all ‘core’ investment services and activities in relation to specified categories of financial instruments e.g.

  • investment firms doing the above - ancillary services are also regulated
  • credit institutions-banks and building societies aer regulated by Banking Consolidation Directive. Provisions apply, including organisational and conduct of business requirements, when EEA credit institutions provide investment services to clients and perform investment activities
36
Q

What are the ‘core’ investment services and activities?

A 
Operating an MTF
Dealing on own account 
Executing on behalf of client
Receipt and transmission of orders
Investment advice
Managing Portfolios
Underwriting/placing of financial instruments
37
Q

What are ancillary services?

A

Safekeeping and administration
Granting credit and loans
Corporate finance advice
Foreign Exchange Services
Investment Research + financial analysis
Underwriting or services associated with
Services and Activities related to the underlying of Derivatives

38
Q

What are the mifid exclusions?

A
  • Insurance companies including reinsureres
  • Pension funds and collective investments and their depositories or managers-however UCITS managers providing advice or discretionary management to non fund clients will be subject to Mifid.
  • group treasury activities
  • persons administering own assets
  • professional investors investing only for themselves
  • commodity producers and traders
  • investment services relating to admin of employee share schemes
  • business in the course of professional activity bound by legal, ethical or regulatory provisions
  • not providing services or activites
39
Q

What is mifid article 3?

A
  • Firms whose investment services are only in transferable securities or collective investment schemes, plus related advice can be excluded
  • These firms may not hold client money or securities, nor put themselves in debt to clients
  • orders must be transmitted only to investment firms, credit instituions, EEA regulated collective investment schemes or close-ended funds traded on a regulated market in the EEA
  • firms of financial advisers and retail investment product institutions will meet these criteria but can opt out in order to benefit from mifid.
40
Q

What is the common platform with regard to mifid?

A

Organisation and systems and control requirements of Mifid and CRD are implemented through a single set of organisational requirements in the FCA handbook known as the common platform’

  • it originally applied to firms subject to both or one of CRD/Mifid
  • scope was extended beyond Mifid in April 09
  • remaining outsiders are insurers, managing agents and lloyds
41
Q

What is UCITS?

A

a number of directive relevnt to CIS’s

42
Q

What is the aim of UCITS?

A
  • To create a passport throughout EEA for collective investment schemes that meet UCITS criteria
  • promote free movement of services
43
Q

What are the key features of UCITS?

A
  • CIS must be authorised in the home state and receive confirmation from its home state regulator that it complies with UCITS
  • Confirmation is then given to the host state regulator and the fund manager notifies them of the ish to market the fund there
  • CIS must comply with host state marketing rules and requirements of the directive
44
Q

What were the features of the first UCITS?

A

It had a narrow definition of permitted investments meaning schemes could only invest in transferable securities. e.g.

  • securities funds
  • warrant and umbrella funds where each sub fund is either a securities or a warrant fund

It also contained various categories of scheme with different rules for each scheme

45
Q

What were the features of UCITS III Product Directive?

A

launched in 2002

  • expanded range of assets which could be invested in
  • created single UCITS scheme to replace all previous categories
46
Q

What were the features of UCITS IV

A

it enhanced the regime with

  • simplified notification procedure for funds
  • procedures for fund mergers
  • cross-border ‘master-feeder’ structures
  • a new standardised KII document
47
Q

As a result of ICITS III Product Directive what can now be invested in?

A
  • transferable securities
  • money market instruments
  • forward contracts and financial derivatives
  • deposits
  • units in other Collective Investment Schemes
48
Q

For UCITS III product directive, what is included in transferable securities?

A
  • shares
  • instruments creating or acknowledging indebtedness e.g. loan stock or bonds
  • certificates representing certain securities

commodity derivatives are excluded but derivatives based on commodity indices could be eligible as financial derivatives

49
Q

What does EMIR do?

A
  • enhances stability in OTC and Derivatives
  • it implements standardised OTC derivatives cleared through CCP
  • it covers OTC derivatives, central counterparites and trade repositories
50
Q

What are the aspects of EMIR?

A

-Counterparties to all derivatives contracts must report transactions to a registered trade repository
-clear OTC derivatives through CCP if above threshold
-risk management procedures for OTC derivatives not centrally cleared
-common rule for trade repositories and CCP’s - all derivative contracts must be reported by financial and non financial counter parties to trade depository next working day
-Rules on the establishment of interoperability between CCP’s
EMIR was effective in 2012 but not fully until 2013/2014
All OTC derivatives contracts should be traded on exchange or electronic trading platforms
EMIR was implemented through FSMA 2000(OTC derivatives, CCP’s and trade repositories) regulations 2013

51
Q

What are the thresholds for EMIR?

A

Individual thresholds of

  • 1bn gross notional value for OTC credit and equity derivatives
  • 3bn gross notional value for Interest rate a d foreign exchange

combined threshold of
-3bn gross notional value for commodities and other-

Transactions reducing risk to commercial activity or treasury finance are exempt from threshold as determined by ESMA

Financial Markets And institutions (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions